Physical Distribution

Only available on StudyMode
  • Download(s) : 750
  • Published : March 13, 2013
Open Document
Text Preview
INTRODUCTION After products are produced and priced, they must be distributed to the marketplace. All organizations perform a distribution function. The distribution function is vital to the economic well-being of society because it provides the goods and services desired by the consumer. Economists often describe the value of distribution in terms of ownership, place, and time utility. The marketer contributes to the product's value by getting it to the right place at the time the consumer wants to buy it and by providing the mechanism for transferring ownership. Firms that do not perform the distribution function effectively usually fail. Distribution also provides employment opportunities. Salespeople, warehouse managers, truck drivers, stevedores, and forklift operators are all involved in distribution. Others service the products provided through a distribution network. Most people involved in distribution are classified as service personnel: Their role is to provide service to some other sector of the economy.

DEFINITION OF KEY TERMS.
Physical distribution
Is the actual movement of goods and services from the producer to the user. Physical distribution covers a broad range of activities. These tasks include customer service, transportation, inventory control, materials handling, order processing, and warehousing. Distribution channels

Define as paths that goods and services and title to them follow from producer to consumer. Distribution channels are composed of marketing intermediaries, the persons or firms that operate between the producer and the consumer or industrial user. The two main categories of marketing intermediaries are wholesalers and retailers. Marketing intermediaries

Channel members operating between the producer and the consumer or industrial purchaser. Wholesaling intermediaries
Channel members selling primarily to retailers, other wholesalers, or industrial users. Retailers
Channel members selling goods and services to individuals for their own use rather than for resale. STATEMENT OF THE ISSUE
THE ROLE OF THE PHYSICAL DISTRIBUTION FUNCTION.
Physical distribution is an important part of distribution strategy. Because its objective is to maximize the level of customer service, marketers must consider total costs. The various elements in physical distribution include customer service standards, transportation, warehousing, materials handling, inventory control, and order processing.

Physical distribution is important for two reasons. First, physical distribution activities account for, on average, one fifth the cost of a manufactured goods. In the past, businesses focused on improving the efficiency of production to lower product costs. In recent years, however, managers have begun to realize that reducing the costs of physical distribution activities is another key to improving productivity and gaining significant competitive advantages. Physical distribution is also important because customer satisfaction, to a large extent, depends on reliable movements of goods and service.

The study of physical distribution should include all factors involved in moving goods rather than concentrating on individual aspects of the process. Because the objective of physical distribution is to provide a specified level of customer service at the lowest possible overall costs, total costs should be considered. Sub optimization can occur if individual rather than total costs are considered.

Physical distribution costs are often interrelated; a change in one element may affect other elements. Low inventory levels may reduce warehousing costs, but they can result in increases in transportation and order-processing costs. The interrelationship of these costs should be emphasized in any physical distribution strategy....
tracking img