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Physical Distribution: Marketing Management

The document discusses the topic of physical distribution, which involves delivering products to marketing channels and consumers. It involves transportation, warehousing, and inventory management. Physical distribution provides place and time utility to products, and is crucial when production and market locations are distant. It also helps expand markets by determining customer service levels. Transportation, warehousing, and inventory management are the three major components of physical distribution.

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Shajina Shyju
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188 views

Physical Distribution: Marketing Management

The document discusses the topic of physical distribution, which involves delivering products to marketing channels and consumers. It involves transportation, warehousing, and inventory management. Physical distribution provides place and time utility to products, and is crucial when production and market locations are distant. It also helps expand markets by determining customer service levels. Transportation, warehousing, and inventory management are the three major components of physical distribution.

Uploaded by

Shajina Shyju
Copyright
© Attribution Non-Commercial (BY-NC)
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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MARKETING MANAGEMENT

REPORT ON SEMINAR PRESENTATION


TOPIC:

PHYSICAL DISTRIBUTION

Submitted by Shajina M V Roll No: 21 2nd SEM MBA

PHYSICAL DISTRIBUTION

Physical distribution is the process of delivering the product to the marketing channels and consumers. It involves various activities involved in the physical flow of product from the producer to the consumer. Physical distribution takes of functions such as transportation, warehousing and inventory management and facilitates flow of product.

SIGNIFICANCE OF PHYSICAL DISTRIBUTION

1. Confers Place and Time Utility on Product


It is physical distribution that confers place utility and time utility to a product by making it available to the user at the right place and at the right time. Thereby it maximizes the chance to sell the product and strengthen the companys competitive position. Normally every product gets consumed at places and times that are different from those of their manufacture. They have to be carried to places of consumption, they have to be stored and they have to be distributed.

2. Where Production Location & Markets Are Distanced Physical Distribution Becomes More Crucial
In some cases production locations are totally dictated by considerations like proximity to source of raw materials. As a result the points of production might be far away from the markets for the product. In some cases huge production capacities get established at a given location on considerations of technology and economies of scale. In all such cases, product has to be marketed over an extended territory; it has to be transported over long distances, stored for a considerable length of time and sold. Eg: normally in automobile industry the production is done at one place but the market of the product is all over the world. In the case of seasonal production or the seasonal consumption of the product also Physical Distribution becomes crucial. It has to perform the balancing act between production and consumption.

3. Helps for the Expansion of Markets

It is physical distribution that determines the customer service level to a large extend. As a result, it serves as a vital tool in building clientele/market for the product. And conversely ineffective physical distribution leads to loss of customers and markets.

4. Promising Area for Cost Reduction Physical distribution is fertile area for cost saving. Over the years in most business physical distribution cost have grown into a sizeable chunk of the total cost and now ranks second among all cost elements, next only to material cost.

COMPONENT FUNCTIONS OF PHYSICAL DISTRIBUTION


The three major component functions of physical distribution are Transportation Warehousing Inventory management

1. Transportation
The importance of transportation in physical distribution emanates from a variety of factors. Transportation confers time and place utility to the product; it determines the companys customer service; it also has a crucial bearing on the other element of physical distribution and marketing; like warehousing, inventory control and channel management. Finally transportation is also a very important cost element in most business.

Basically transportation management involves decisions on: How to move? When to move? Where to move?

By what mode or combination of modes to move?

The considerations in making these decisions are: the lead time for stock replenishment sales expected in the territory in the intervening time the normal cycles of inventory build up at the warehouse /dealer points.

If a firm can estimate these factors fairly accurately, it can make basic decisions on transportation. In a fundamental sense transportation has to be based on the sales forecast. Decisions on when to move, how much to move and where to move will essentially depend on the sales forecast.

2. Warehousing
Warehousing is the second major component of physical distribution. warehousing management has two distinct and equally important parts: (1)the physical job of creating and running the network of storage points, and (2) the managerial task of controlling inventory levels without sacrificing service levels.

Designing warehousing system


In most cases product flow from the factory to the consumer through a long winding chain, consisting of multiple tiers of warehouses and multiple tiers of marketing intermediaries. In designing warehousing system, the following basic questions relating to this flow become significant.

How many warehouses should we have?

The optimum number will depend upon the nature of the product, the size and geographical spread of the market serviced by each warehouses, the current and potential sales in the territory, the extend of seasonality of demand if applicable, the level of peak demand, the trade pattern etc.

What should be the size or capacity of each warehouse?

Warehouse size and cost are inversely interrelated. So as a general rule, small sized warehouses are uneconomic compared to larger ones. At the same time, if the sales projected are small, warehouse size has to be small. Customer convenience and channel service will call for a large number of small sized warehouses spread all over the marketing territory.

Where should we locate warehouses?

Choosing the exact locations of the warehouses is as important as choosing their number and capacity. The locations must be suitable in terms of market factors and availability of transport facility. Recent rates, commercial suitability of the location, implication of local levies etc. have also to be looked into. Above all, availability of suitable godown space has to be considered.

3. Inventory management Inventory management is the third major component of physical distribution task. It will be obvious that without effective management of finished product inventory it is impossible to run any business efficiently and effectively.

Inventory is primarily a function of customer service level fixed by the firm. Here, customer service level means the ability to meet the demand at the retail level as and when it arises from available stocks without having to generate a back order.

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