PHYSICAL DISTRIBUTION

PHYSICAL DISTRIBUTION
Physical distribution is a marketing activity that concerns the handling and the movement of goods. Physical distribution is a major component of marketing mix and cost area of business. It includes all those activities connected with the efficient movement of goods from the place of production to the place of consumption. Physical distribution involves the handling of raw-materials, fabricated parts, supplies and finished products from producers to consumers via intermediaries. It is the process of strategically managing the movement and storage of materials, parts and finished inventory from supplier, between enterprise facilities and to customers.
According to William J. Stanton, “Physical distribution involves the management of physical flow of products and establishment and operation of flow systems.”
According to Philip Kotler, “Physical distribution involves planning, implementing and controlling the physical flow of materials, and final goods from the points of origin of use to meet customer needs at a profit.”
The physical distribution encompasses the wide range of interrelated activities such as transportation, warehousing, materials handling, packaging, inventory control, plant and warehouse location, order processing, marketing forecasting and customer services. Broadly, these activities can be grouped into four major functions namely, order processing, inventory management, transportation and material handling.
OBJECTIVES OF PHYSICAL DISTRIBUTION
Physical distribution has two broad objectives- consumer satisfaction and profit maximization. Physical distribution is concerned with getting the product to the right place at right time at the lowest costs. It involves the coordination of activities to place the right quantity of right goods at the desired place and time. Consumer satisfaction is improved upon by delivering the products to the consumers at the point and time required. Similarly, profit margin for the manufacturers can be increased by making this physical distribution more effective and efficient. Effectiveness and efficiency will bring in economy and that has salutary effect on profit margins.
ROLE OF PHYSICAL DISTRIBUTION SYSTEM
The physical distribution arrangement or system designed to move the goods from producers and manufacturers to the users has a definite role. That is why; all wise business firms have forged ahead with investment of good deal of time, treasure and talent in physical distribution system improvements to get best to others. It provides a new orientation for marketing.
Physical distribution contributes in the following ways:


Creation of utilities:
The physical distribution function of a firm provides the place and time dimensions which contribute a basic element of marketing mix. The major components of physical distribution are transportation and warehousing. Transport system creates place utility making goods more useful by bringing them from the places where they are not needed to the places where they are badly needed. Warehousing system is known for creating time utility. By holding the goods from the time they are produced till their consumption, and making them available during shortages creates time utility. This results in maximizing customer satisfaction and profits to the firm.

Improved consumer services
Consumer services are the services provided to the customers from the time of order placed till the product is delivered. Customer service in physical distribution function consists of providing products at the time and location corresponding to the customer needs.

Cut in distribution cost
The prices paid by customers consist of not only production cost but also delivery cost. Experts have estimated that the physical distribution cost is in range of 20 to 25 percent of the price.

Increased market share
A new look and approach to physical distribution can contribute beyond the attainment of the twin objectives of improving customer satisfaction and dealer profit margins. Physical distribution system contributes to increased market share in many ways like a well designed physical distribution frame can decentralise its ware housing option, devise the combination of efficient and economic means of transport to penetrate into the areas untapped so far, planning inventory operations to avoid stock outs.

Price stabilization
Physical distribution can contribute considerably to the attainment of the situation of price stabilization. Physical distribution components are capable of bringing out price stabilization. Through the best use of available transport and warehousing facility and adjustment between demand and supply, price fluctuations can be prevented.

COMPONENTS OF PHYSICAL DISTRIBUTION
Physical distribution management is that part of general management which is responsible for the design, administration and operation of the systems to control the movement of raw materials and processed goods. The structure of physical distribution system or arrangement of any marketing organization is made up of four broad components namely, order processing, inventory management, materials handling and transportation.

ORDER PROCESSING
Physical distribution sets in motion with a customer. Order processing includes the activities of receiving, recording, filing and assembling the orders for shipment. Each customer expects that the order placed by him should be implemented without any delay on one hand and that the goods dispatched match perfectly to his order placed. This leads to quality control that ensures upright execution of orders. Hence, marketers and distribution managers are very much concerned about the order cycle time and every effort is made to keep it rigged.
An order cycle is the period between the time of the placement of an order by the customer to the time of eth arrival of goods at his destination. This cycle is made up of the transmission of the order, document processing in the department and shipment of goods. As this is a time consuming and tedious activity, full advantage of electronic data processing is to be taken to guarantee accurate and timely service.
The order processing procedures followed in a firm have dual impact on customer service level, namely;
Ø Order time that is the time interval between two orders of a customer, and
Ø The consistency and uniformity of delivery time i.e. regular and dependable deliveries.

INVENTORY MANAGEMENT

Inventory management means and includes the management of products on the move. Inventory management is the basic task of planning and controlling of finished goods after they have been brought out from production centers and before their deliveries to the users. Inventory management covers the most immediate aspects of warehousing and inventory controlling.

A. Warehousing
Warehousing or storage is an act of storing and assorting the finished goods so as to create maximum time utility at minimum cost. Warehousing covers two sub functions namely: movement and storage of finished goods. Movement refers to the actual receipt of products from the manufacturing centre(s), their transfer into warehouse and stocking at designated place, assorting according to customers orders and transferring them to common carriers on their way to consumers. The storage function is mainly concerned with holding and carrying the goods from the time they are placed in and till they are placed out in common carriers. It is mainly a safety and preservation function.
A warehouse may be centralized or decentralized. Centralized warehouse is near the manufacturing plant and the products are moved to the warehouse from the plant and later on distributed to different markets. Hence centralized warehousing firm have one dispatch point. Decentralised warehousing on the other hand is a warehouse built at or in the close vicinity of the market. The products are first moved in bulk from plant to different warehouses located in different markets where they are assorted according to the customers needs. Hence there are number of dispatch points.



B. Inventory controlling
Physical distribution management surrounds the inventory and its management. Inventory implies the stock of goods held over a period of time for meeting the customer needs – both business and final. Inventory acts as a link between the orders of the customers and the production or the procurement cycle of the firm. For a manufacturer, the inventories are made up of raw materials and parts, stocks of partly manufactured products nad finished goods. In case of distributors and retailers, it is mostly the finished stock meant for the final consumption.
Goals of Inventory management
v Providing adequate level of consumer service and
v Minimizing the firm’s investment in inventory.
Inventory can be controlled by adopting the following strategy:
· Setting stock levels
· Determining the economic order quantity
· Exercising control by importance and exception
· Keeping rack of inventory

MATERIAL HANDLING

Material handling as a human activity is as old as mankind. Material handing handling is undertaken at every stage of logistic activity namely- during production, storage, transport and packaging. Material handling, from the marketing perspective, stands for product movement after it gets out of manufacturing plant but before it is loaded on the transport mode to the destination of consumer. It represents product handling from plant to warehouse or warehouse location to another within the warehouse and from the warehouse to the place of loading.

Material handling is the subsystem of physical distribution system of a firm and is an agent of cost reduction and improved customer service. In effect, an efficient and effective materials handling system in a unit contributes to eth efficiency and effectiveness of the total physical distribution system. It is because, sound management of material handling avoids damage in product handling, prevents unnecessary and irrelevant movement, facilitates order processing and order picking and enables efficient product movement to match with inventory levels and transportation.

TRANSPORTATION

Transportation as the last component of distribution system is to do with the movement of products from warehouses to the customers destinations. Transportation involves loading and unloading of products and shipment between the places of dispatch and places of arrival. The major contribution of transportation management is cost reduction because cost of transportation is 35percent of total distribution cost and 15-20 percent of the total prices paid by the users. The point lies in cost reduction and creation of maximum of time utility.

The transportation mix comprises of railways, roadways, airways, waterways and pipelines.