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Physical Distribution System

The document discusses various aspects of physical distribution including defining physical distribution, objectives of physical distribution, distribution channels and their characteristics, components of physical distribution like transportation and warehousing, decision areas related to inventory management, different modes of transport and their characteristics, trends in physical distribution, and concludes with a case study on Maxwell Corporation's distribution system and options being considered.

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8K views29 pages

Physical Distribution System

The document discusses various aspects of physical distribution including defining physical distribution, objectives of physical distribution, distribution channels and their characteristics, components of physical distribution like transportation and warehousing, decision areas related to inventory management, different modes of transport and their characteristics, trends in physical distribution, and concludes with a case study on Maxwell Corporation's distribution system and options being considered.

Uploaded by

shweta_46664
Copyright
© Attribution Non-Commercial (BY-NC)
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PPT, PDF, TXT or read online on Scribd
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PHYSICAL DISTRIBUTION

SYSTEM
Agenda
 Physical distribution definiation
 Objective of physical distribution
 Distribution Channels characteristic
 Physical Distribution components
 Decision area
 Warehousing Functions
 Different mode of transport in India
 Transportation characteristics
 Trends in physical distribution
 Conclusion
 Case study
Physical Distribution

Definition
Activities concerned with efficient movement of products and raw
materials from producers to consumers.It is the set of activity
concerned with the physical flow of materials,components and finish
goods producer to channel institution and consumer .
Distribution is one of the four aspects of marketing. A distributor is the
middleman between the manufacturer and retailer.After a product is
manufactured it is typically shipped (and usually sold) to a distributor.
The distributor then sells the product to retailers or customers ….
Objectives

 · To give an understanding of the institutional and


physical aspects of channels of distribution in
global marketing

 · To describe the different channels of distribution


and show their advantages and disadvantages and,
Distribution Channels Characterstic

 To reconcile the needs of producers and


consumers

 To improve efficiency by reducing the number


of transactions and creating bulk

 To improve accessibility by lowering


location and time gaps between producers and
consumers
Physical Distribution
 Three components:
Input, Processor and Output
 Input: Order from the Customer
 Processor: Transportation
 Output: Delivery to the Customer
Physical Distribution decision area

Inventory Management
Match quantity produced with quantity demanded
 holding costs
 ordering costs
 stockout costs
 When to reorder?
 How much to reorder?
 How much to keep as safety stock?

Key is accurate forecasting


 of demand
 order filling time
Physical distribution

Stock Zero safety stock model


on hand
time

place receive
order order

order filling time


Physical Distribution

Inventory Management (cont.)

stockout
If demand increases...
Stock
on hand
time

place safety stock


order
receive
order
Physical Distribution

Inventory Management (cont.)

If order filling time increases...


Stock stockout
on hand
time

place safety stock


order
receive
order
Warehousing (Functions)
 Receipt: unloading, inspection,
accounting
 Storing: Careful labeling, identification
& a/cing
 Handling
 Display
 Order Handling
 Information Processing: depository of
information across the organisation
MODES OF TRANSPORT
 PASSENGER LINER – This is normally used for carrying passengers, mail and some
express cargo. It has a regular time table and only calls at major ports.
 CARGO LINER – This mainly used for carrying a variety of cargo and sometimes a
few passengers.
 TRAMP – This is essentially a cargo ship . It carry a full load of any type to a
certain specified destination where it unloads whole bulk
 BULK CARRIER – This is a ship which is specially built to carry a particular type of
cargo for e.g. a bulk carries for iron ore.
 TANKER – This is special bulk carrier which carries liquids and gases such as oil or
liquified natural gases.
CONTINUES
 OBO SHIP – This is an oil-bulk-ore carrier which
uses different holds to transport at one time a
mixed bulk-cargo
 Roll - on, Roll – off or Ro - Ro ship – This is
highly specialized ship which allow loaded
vehicles like truck, trailer , cars, etc. to be driven
abroad through at the stern and sides.
 CONTAINER SHIP – This is built to carry large
standard sized containers.
 LINERS – Liners follow mixed routes and
timetables. It carry mixed cargo and belong to
shipping conferences.
CONTINUES
 COASTAL SHIIPING – Sometimes goods are
transported around the coast rather then inland.
These goods are carried by coastal ships.
 FERRIES – These are small boats that carries
passengers over very short distances.
 DELIVERY VANS - Mostly wholesalers and large
scale retailers make use of delivery vans for
short distances for small consignments.
CHARACTERISTICS OF MOTOR
TRANSPORT
 WATER TRANSPORT – Water transport is
cheaper than various modes of transport of
land transport.
 Advantages.
1.Transportation of water is cheaper means of
inland transport for heavy and bulky goods like
logs, grain, and metals.
2.Building material can be carried in large
quantities than by road or train.
3. Loading and unloading will be easy.
CONTINUES

 DISADVANTAGES
1.Its speed is lower than road ,a ir ir rail
transport.
2. It is not reliable.
3.It provide service to limited areas.

PIPELINES:
ADVANTAGES.
1.liquids and gaseous goods are are transported
over long distances from the place of production
to the refineries, and from their to consumers in
their homes via pipelines.
CONTINUES
2.Maintenance costs are low
3.It is not affected by weathery conditions.
4. There is less pollution of the environment
compared to vehicles.

DISADVANTAGES
1.High initial capital cost is involved in installing the
whole system.
2.It is rather limited in use, once built these pipes
can only be used for particular type of product
for which it was originally installed.
CONTINUES

 ROAD TRANSPORT

ADVANTAGES:
1. Flexibility.
2. Timetables.
3. Economy.
4. Motorways.
5. vehicles.
6. Suitability.
7. Containerization.
CONTINUES

 DISADVANTAGES
1. Bulk
2.Congestion and delays
3. Social costs.

RAIL TRANSPORT:
ADVANTAGES.
1.Cheap
2.Speed
3.Bulk commodities
4. Containerization.
CONTINUES

 DISADVANTAGES.
1.Transshipment
2.Delays.
3.Short journeys.
4.Timetables.
5. Changing outputs
6.High capital costs.

SEA TRANSPORT:
ADVANTAGES.
1. Cheap
CONTINUES

2. Bulk
3.Flexibility.
4. Facilities.
5. Short notice.
6. containerization.

DISADVANTAGES.
1.Slow speed.
2.Documentation.
3. Other costs.
CONTINUES

 AIR TRANSPORT:
ADVANTAGES.
1. Aircrafts are now built larger to carry more
goods.
2. Aircrafts are now available at short notice.
3. Mail , newspapers, medicine and perishable
goods can be transported quickly by air
4. Risks involved by transporting by air are less
the insurance charges are low.
5. Documents used in air transport are are less
complicated when compared to sea transport.
6. Aeroplanes can take the shortest route.
CONTINUES
 DISADVANTAGES.
1. Airfreight transport is very expensive because
of high capital investment and maintenance
costs.
2. Aircrafts have limited cargo capacity, bulky
goods cannot be sent.
3. Bad weather may restrict flights.
Trends in physical distribution

 Increase in road and decline in rail


transport.
 Growth in light goods vehicles
 Growth in heavy goods vehicles
 Growth in air and sea transport
 Growth in just in time produaction
 Changing role of distribution centers
 Restrictions on driver hours
Conclusion
 Along with price and promotion decisions, a decision has to be
made on the distribution system. There are two components to
this - the physical (order processing storage/warehousing and
transport) and the institutional aspects. The latter involves the
choice of agents, distributors, wholesalers, retailers, direct sales
or sales forces. Again, each has its own advantages and
disadvantages.
 However, it is in the channel of distribution that the
international marketer can encounter many risks and dangers.
These involve many transaction costs both apparent and hidden.
Risks include loss in transit, destruction, negligence, non-
payment and so on. So careful choice and evaluation of channel
partner is a necessity.
CASE STUDY
MAXWELL CORPORATION-DISTRIBUTION SYSTEM
The president of Maxwell Corporation was considering whether the
company should up its own distribution system or to outsource the
entire distribution and logistics function to a third party service
provider. The company had set up a manufacturing plant in vizag
where a wide range of orthopedic equipments viz., crutches, wheel
chairs, walkers back braces, heating pads, elastic bandage, canes, knee
braces, shoulder braces and so forth were manufactured. Presently, the
finished goods warehouse was located at Vizag itself and the product
were sent to all major towns in India as a point to point dispatch. The
company was supplying these equipments directly to retail stores at all
these locations. Marketing activity was headed by a general manager-
marketing based at Vishakhapatnam who was supported by a sales
team comprising of sales officers. The company was not resorting to
advertisement and publicity though the products of the company were
fairly well known. It was felt that all these customer wanted quick
responses to their orders as the products catered to emergency patient.
But, these retail outlets carried only very limited inventories. This was
due to the fact that most of the products came in a variety of styles,
shapes and sizes and the requirements was more customer driven.
Keeping even a moderate inventory of all types was not economically
viable and lead to dead stock in long run. The company was looking at
various option which included the following:
Setting up of hub and spoke type of a distribution network wherein it
was proposed to set up a stock point or mother warehouse in each zone
viz., East, West, North and South and respective retail outlets were to
be fed from the warehouse located in that zone.
Setting up of a central warehouse anywhere in Central India and
feeding retail outlets from this location.
Changing the distribution channel from the present numerous retail
outlet system to a more efficient system.
Outsourcing the entire distribution and logistics to a third
party wherein the entire activity of transportation and
distribution till the ultimate retail outlet would be taken
care of by this service provider and company could focus
more on activities of marketing and sales.
 Question for discussion
1.What in your opinion is of immediate importance for
Maxwell Corporation and why ?
2.What should be the distribution channel for Maxwell
and outline the advantages for having such a type of
a set up ? 3.What type of a marketing and sales set
up would you recommend for Maxwell Corporation ?

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