Physical Distribution System

 

Physical Distribution System

 

 

Introduction

 

◦          Physical Distribution activities and decisions are important for many kinds of manufacturers, wholesalers, and retailers, affecting both customer satisfaction and bottom-line profit performance.  The management of Physical Distribution provides an exciting opportunity for improving customer services and reducing costs.  

 

Meaning

 

            Physical Distribution involves planning, implementing, and controlling the physical flows of materials and final goods from points of origin to points of use to meet customer needs at a profit.

            The broad range of activities concerned with efficient movement of finished products from the end of the production line to the consumer.

            Mc Carthy states that Physical Distribution is the actual handling and moving of goods within individual firms and along channel systems.

 

Objectives

 

            Like other components of the marketing-mix, physical distribution, too strikes to achieve two broad marketing objectives, viz, Consumer satisfaction and profit maximization.

            The Specific objectives of Physical Distribution are:-

1. Minimizing inventory level.
2. Speedier transportation.
3. Minimum Handling.

Minimum trans-shipment.

 

Importance

 

1. A well-devised Physical Distribution system helps to minimize cost of marketing.
2. Physical Distribution system helps to attain the objective of utmost customer satisfaction.
3. P.D.S. creates time & place utilities.
4. P.D.S. form a major part of national wealth.

 

 

Components of P.D.S.

 

1.     Transportation.

There are several modes of transport such as:-

v    Land/Road Transport (Road & Railway).

v  Water Transport.

v  Air Transport.

 

            Transport:-  Some of the factors determining the choice of selecting transport medium may be pointed out here.

1. Cost
2. Performance Criteria.

Ø  Speed

Ø  Reliability

Ø  Frequency

Ø  Availability

Ø  Safety

            3. Product Suitability

 

2.     Inventory Management

 

            Inventory Management means the laying down of the policy to be followed regarding the holding of stocks of raw materials and finished products and the implementation of this policy in the business.

            Inventory control means holding balanced stock of materials and/or finished goods.  It aims at three objectives:-

1. Never run out of anything (out of stock).
2. Never build up a very large inventory.
3. Never send out too many small orders for more.

            Standards in Inventory Control:-  There are four important standards in inventory control.

1. The Maximum.
2. The Minimum
3. The ordering Point.
4. The Standard Order.

 

3.     Storage and Warehousing

 

            Storage and warehousing is one of the important physical distribution functions of marketing.  The word storage means holding the stock of goods for a relatively longer period.  Thus, storage is a function that helps in preserving the goods at one place until they are needed at another place.  Warehousing, on the other hand, involves more that storage.  Warehouse, perform many of the usual functions of  wholesalers e.g. breaking bulk, dispatch of smaller consignments to retailers, providing market intelligence and many other merchandising services of manufacturers.

 

Managing Physical Distribution

 

The major steps in designing the P.D.S. are:-

1. Establish P.D.S. objectives:- The principal objective was to provide better customer service.
2. Measure customer service.

 

 

3. Examine cost trade offs.
4. Identify and select design alternatives:-  Key issue in designing the PDS is how to incorporate the customer service objective into the design process.