Physical distribution is defined as theprocess of physical movement of goods from the producer to the consumer. It is an important marketing function which describes marketing activities that involves flow of raw materials from the suppliers to the factories for production and also the movement of finished goods from production to the final user.
What is physical distribution in manufacturing?
Physical distribution includes all the activities associated with the supply of finished product at every step, from the production line to the consumers. Important physical distribution functions include customer service, order processing, inventory control, transportation and logistics, and packaging and materials.
What is the role of managing physical distribution?
Managing physical distribution is very vital function in the marketing of goods and services. The physical distribution considers many sales distribution channels, such as wholesale and retail, and includes significant decision areas like consumer service, inventory, materials, packaging, order processing, and transportation and logistics.
How can physical distribution become a competitive advantage to the product?
This can also become a competitive advantage to the product. The process of physical distribution involves co-ordination and integration of five components: 1. Order processing, 2. Inventory Control, 3. Warehousing, 4. Material Handling and 5. Transport. Most important components are warehousing, inventory and transport. 1. Order Processing:
What are the five components of physical distribution?
Physical Distribution – Components. The process of physical distribution involves co-ordination and integration of five components: 1. Order processing, 2. Inventory Control, 3. Warehousing, 4. Material Handling and . 5. Transport. Most important components are warehousing, inventory and transport. 1. Order Processing:
How is physical distribution managed?
Physical distribution is managed with a systems approach and considers key interrelated functions to provide efficient movement of products. The functions are interrelated because any time a decision is made in one area it has an effect on the others. For example, a business that is providing custom handbags would consider shipping finished products via air freight versus rail or truck in order to expedite shipment time. The importance of this decision would offset the cost of inventory control, which could be much more costly. Managing physical distribution from a systems approach can provide benefit in controlling costs and meeting customer service demands.
What is FIFO in warehouse?
First in-first out, or FIFO, is a method in which the new products coming into the warehouse replace existing products of the same SKU so that merchandise is cycled and does not expire or become old as more recent production is available. Flow through, on the other hand, is product that does not get processed in the warehouse. It is offloaded from an inbound trailer, pushed across the warehouse and onto outbound trailers for departure without being stored in the warehouse.
What is a handbag business?
For example, a handbag business has a direct ship on custom handbags, but also controls inventories for retail orders at a warehouse. The production considers what units are on hand and what demand is in the market. For higher demand, the products can move into the warehouse and be prioritized on store delivery trucks without being stored in the warehouse (the flow through approach). Another example would be the most recent production being stored into the warehouse and products already available pulled for store delivery, the FIFO approach.
What is customer service?
The customer service function is a strategically designed standard for consumer satisfaction that the business intends to provide to its customers. As an example, a customer satisfaction approach for the handbag business mentioned above may be that 75% of all custom handbags are delivered to the customer within 72 hours of ordering. An additional approach might include that 95% of custom handbags be delivered to the customer within 96 hours of purchase. Once these customer service standards are set, the physical distribution system is then designed to attain these goals.
What is order processing?
Order processing is designed to take the customer orders and execute the specifics the customer has purchased. The business is concerned with this function because it directly relates to how the customer is serviced and attaining the customer service goals. If the order processing system is efficient, then the business can avoid other costs in other functions, such as transportation or inventory control. For example, if the handbag business has an error in the processing of a customer order, the business has to turn to premium transportation modes, such as next day air or overnight, to meet the customer service standard set out, which will increase the transportation cost.
What is transportation and logistics?
Transportation and logistics costs are a large component of the marketing budget for a product. The system is what moves the products from the production line to the end consumer. This system includes transportation over land, sea, and air and the storage and processing of goods through warehouses and distribution centers. In the case of the handbag business, moving the products – whether they are consumer orders or retail supplies – requires some form of transportation and logistics. Moving the handbags from factory to consumer via some other supply chain entity and arranging the transit and storage of the products is a delicate cost component, which has a direct effect on the other functions of the system.
How to secure value of goods?
Putting freight on pallets or using bubble wrap or paper to hold the products in place are common approaches to securing the value of the goods. For example, the handbag business might stuff each bag with recycled paper to allow the bag to hold its shape while being packed for transit to the customer or retail store.
What is Physical Distribution?
Physical distribution involves each activity that is related to the movement of products to the consumer after production. Though the concept is simple, physical distribution can involve several links in the supply chain. In addition, physical distribution also involves various areas of expertise, including; inventory control, handling, packaging, shipping, delivery, and customer service.
How to improve shipping time?
It’s simple: Faster shipping time means more customers are likely to follow through with their online purchases as opposed to abandoning their cart. Storing inventory in several locations as opposed to one centralized warehouse can help to improve shipping times. 2. Reduce Physical Distribution Costs.
What happens if you change your PDS?
Therefore, if you choose to make changes to your PDS, you will be rearticulating the design of your day-to-day fulfillment processes. These redesigns can often lead to increased satisfaction among customers and boost revenue from online sales.
What are the two most important objectives of a physical distribution system?
The two most significant objectives of your physical distribution system should be customer satisfaction and low production cost. It’s important to continuously weigh the levels of customer service that your company wishes to maintain against your physical distribution processes and costs. When your brand’s entire range …
Why is it important to keep track of customer satisfaction?
It’s crucial that your company keeps track of the revenue and cost changes that occur when customer satisfaction is increased. Even the boost of just a few percentage points could make a significant difference in your revenue stream, which may counteract any increased costs on the supply chain.
Why is customer satisfaction important?
When customer satisfaction is high, it increases brand loyalty, which tend s to drive sales and boost revenue.
What is warehouse management?
Warehouse Management. A poorly managed warehouse can slow down the process of distribution service and cost more money to run, which isn’t ideal for either the seller or the customer.
What is physical distribution?
Physical distribution refers to the movement of finished goods from a company’s distribution and fulfillment network to the end user. In ecommerce, physical distribution involves several ecommerce supply chain activities including warehousing, inventory control, order processing, retail fulfillment, and shipping.
Why is Shipbob important?
With ShipBob, you will save money on logistics, from carrying costs to fulfillment costs, to shipping. That’s because ShipBob offers the physical distribution infrastructure you need …
What is inventory control?
Inventory control focuses on optimizing operations and often involves the implementation of a WMS, from scanning in new items in real time on the warehouse floor to preparing units for kitting and assembly.
How does warehouse management work?
Warehouse management consists of receiving inventory, optimizing storage, tracking stock levels, and picking, packing, and shipping orders.
How to keep warehouse running efficiently?
To keep your warehouse running efficiently, consider adopting a warehouse management system (WMS) that will give you visibility into your warehouse operations, which SKUs are stored at which location, inventory forecasting data, and operational workflows.
Why is distributing products in different regions important?
For example, if your customers are scattered across the US, distributing products in different US regions can reduce the average shipping zone a package is sent to reach its destination. The higher the zone, the more expensive it will be, further building the case for optimized physical distribution.
What is data in supply chain?
Data is the foundation upon supply chain planning and how operations are built. When you outsource physical distribution to a tech-enabled 3PL like ShipBob, you will have access to data from across your entire supply chain.
Why is there a trade-off between having too much inventory on hand and not enough inventories on hand?
There is a trade-off between having too much inventory on hand, with its incurred additional costs, and not having enough inventories on hand to satisfy shifting customer demand. Another objective for physical distribution is to put in suitable inventory policies so as to bring down the total cost of the physical distribution function.
What are the dimensions of distribution?
There are two dimensions to physical distribution process, the flow of information from the individual customer or organizer to the producer and the flow of materials from the producer to the consumer or the user. A channel is a passageway that allows the happening of certain processes. Marketing is understood to be an exchange process.
How does physical distribution improve customer satisfaction?
If managed effectively, physical distribution can increase customer satisfaction by ensuring reliable, cost-efficient movement of goods through the supply chain. Physical distribution involves the handling and moving of raw materials and finished products from producer to consumer often via an intermediary.
What is the focus of logistics?
A major focus of logistics is physical distribution or marketing logistics, the tasks involved in planning, implementing, and controlling the physical flow of materials, final goods, and related information from points of origin to points of consumption to meet customer requirements at a profit. ADVERTISEMENTS:
Why is physical distribution important?
They consider physical distribution second in importance to product quality as a reason for buying from a certain firm. Better physical distribution services give higher overall customer satisfaction.
How does frequency affect purchase decisions?
The frequency of purchase influences purchase deliberations. Products, which are purchased frequently by consumers, have more buyer-seller contacts and middlemen are suggested.
How do manufacturers aid retailers financially?
In the process of sending the goods through the channels of distribution, it is found that manufacturers need to aid the retail dealers financially, either through, interest free loans, or other credit terms. Credit terms being competitive the willingness to extend credit is a determinant in channel acceptance. Retailers also sometimes finance their suppliers either directly or by investing in the company. Usually, government agencies are restricted from making advance payments.
Why is transportation important?
Being a major cost element, marketers must take keen interest in transportation decision as it will help in reducing cost and increasing customer satisfaction. Correct form of transportation mode is very essential as it directly affect the price of the product. Proper choice facilitates smooth movement of goods on time and in good condition. The transportation mode therefore needs to be adequate, regular and dependable.
What is the purpose of the term "to make available the right goods in right quantity at right time and right place at?
To make available the right goods in right quantity at right time and right place at least cost. ii. To achieve minimum inventory level and speedier transportation. iii. To establish price of products by effective management of physical distribution activities.
Why is the railway system considered an economical mode?
It is suitable for transporting bulk goods over long distances. It is an economical mode because large volume of traffic is handled over large network of railways. However, it is inflexible as it is unfit to transport goods to rural areas. Further, it involves huge maintenance expenditure.
How can a firm provide sat-isfaction to consumers?
A firm can provide satisfaction to consumers by making available right quantity of right goods at right place and time, at lowest costs. Prompt and dependable distribution enhances consumer satisfaction.
What is physical distribution?
Definition of Physical Distribution: Physical distribution is concerned with the physical movement of the goods from the producer to the consumer. It is an important part of marketing activity and a major component of marketing mix. It includes all those activities which help in efficient movement of goods from producer to consumer, …
How does physical distribution help in creating time and place utility?
Physical distribution activities help in creating time and place utility. This is done through transportation and warehousing. Transportation system creates place utility as it makes available the goods at the right place where they are required.
What are the two objectives of physical distribution?
Physical distribution has two broad objectives viz. consumer satisfaction and profit maximisation . Apart from these, there are other objectives too. A satisfied consumer is the biggest asset that a company has.