SDM/U4 Topic 1 Physical Distribution

System – Objective and Decisions Area

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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, such as trans-
portation, warehousing, material handling, inventory control, order processing,
market forecasting, packaging, plant and warehouse location and customer ser-
vice.
Philip Kotler has defined physical distribution as, “Physical distribution
involves planning, implementing and controlling the physical flow of materials
and final goods from the point of origin of use to meet consumer needs at a
profit.”
According to William J. Stanton, “Physical distribution involves the man-
agement of physical flow of products and establishment and operation of flow
systems.”
Physical distribution is thus, management of the physical flow of products and
management and operation of the flow system. It is a process of managing the
movement of the goods.
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. A firm can provide sat-
isfaction 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.
At the same time, by offering better service at lower price of the product, the
firm can attract additional consumers and make more profits. This can be done
by improving the efficiency and effectiveness of physical distribution activities,
firm can bring in economy which will have an effect on profit margin i.e. by
lowering the physical distribution costs, profit position can be improved.
Its importance can be judged from following
points:
(A) 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. Warehousing creates time utility by storing the goods and releasing
them when they are required.
(B) Helps in Reducing Distribution Cost:
Physical distribution cost account for a major part of the price of the product. If
these costs are handled systematically, decrease in costs of product can be
there. Proper and systematic planning of transportation schedules and routes,
warehousing location and operation, material handling, order processing, etc.
can easily bring in cost economies.
(C) Helps in Stabilisation of Price:
Physical distribution helps in maintaining stable prices. Even customers expect
price stability over a period of time. Proper use of transportation and
warehousing facilities can help in matching demand with supply and thus
ensure stabilisation of price.
(D) Improved Consumer Services:
Consumer service in physical distribution means making products in right
quantity available at right time and right place i.e. place where customer needs.

Topic 2 Customer Services Goals,

Logistics Planning
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Customer Services Goals

Customer service is all about establishing a good relationship with your
customer. If the representative is knowledgeable and pleasant to work with, it
can and will pay big dividends for the business. Here are several things that
need to be kept in mind when setting goals and objectives for your customer
service:
Be Specific: The goals set should be specific and strictly defined so that success
can be easily determined.
Don’t Make Goals Too Easy: The objective should be challenging. In order for
your company to grow, you need to continually be challenging to reach higher.
In the world of modern business, if you are not going forward, then you can be
assured that you are losing ground to your competitors.
Setting Realistic Goals: Goals should be challenging but they shouldn’t be
impossible. Set your customer service goals and objectives so that they are
achievable with work and effort. Start small and be practical. As your team
meets specific benchmarks, the goals can then be revised and raised to a higher
level.
Relationship-Focused: All goals in a company’s customer service area should
always focus more heavily on the customer relationship rather than on the
profit margin. If the degree of customer satisfaction is rated high, then it follows
naturally that the profit margin will increase. The opposite of this is,
unfortunately, true as well.
Quantifiable Goals: In the same way that goals should be specific is the same
way that they should be measurable. If your objectives aren’t quantifiable in
some way, then it’s difficult to define the success of your department.
Empower Employees: Customer service representatives should feel as they
are supported in reaching their goals. Organizations need to supply their
employees the information, resources and the authority to fulfill customer
needs in the majority of scenarios.
Logistics Planning
Logistics is the process that creates value by timing and positioning inventory;
it is the combination of a firm’s order management, inventory, transportation,
warehousing, materials handling, and packaging as integrated throughout a
facility network.
Logistics planning serves to link and synchronise the overall supply chain as a
continuous process and is essential for effective supply chain connectivity.
Figure 1-1 organises these components, or activities, as to where they are most
likely to take place in the supply channel.
Key Activities
Logistics management may be divided into materials management and physical
distribution as shown in Figure

Key and support activities are separated because certain activities will
generally take place in every logistics channel, whereas others will take place,
depending on the circumstances, within a particular firm.
The Strategic Importance of Logistics
Planning
The key objective of logistics is to provide customer satisfaction by having the
correct product in the correct place at the correct time. Competition worldwide
is increasing. Creating customer satisfaction is important to most companies.
The concept of satisfaction has multiple dimensions. These dimensions
contribute to a feeling of overall satisfaction and are made up of:
 Cost – what customers receive for what they paid
 Convenience – the effort expended to achieve the purchase
 Confidence in the support services both included and promised
Logistics planning is the ability to satisfy and retain customer.
Consider Amazon.com, which provides books selected from the internet store
delivered to your door (within a stated period). The marketing proposition is
simple and based on convenience. The same product could be purchased from
a bookshop.
If the back-office operation of Amazon either takes six weeks to deliver the book
once ordered, or fails to meet a promised delivery date, then the probability is
that the customer would be dissatisfied.
The same applies to FedEx with its delivery next day before 10am promise.
Speed is becoming an important aspect of service provision.
McDonald’s controls its supplies along the entire length of its supply chain from
meat purchasing and paper cups to 28,000 franchise outlets worldwide.
For major companies operating in global markets, the stakes are high.
Managing the logistics of supply chain offers the capability to create and reach
markets before competitors, and achieve competitive advantage by providing
increased customer satisfaction through delivering the right product at the
right time at greater value for money because of reduced overall cost.
Logistics is the primary conduit of product and service flow within a supply
chain arrangement. Each firm engaged in a supply chain is involved in
performing logistics. Such logistical activity may or may not be integrated
within that firm and within overall supply chain performance.
Achievement of logistical integration is the focus and desire for organizations
to achieve competitive advantage in the market place in which the organisation
is competing.
Topic 3 An Overview of Transportation,
Warehousing and Inventory Decisions
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An Overview of Transportation
Transportation as a component of physical distribution is concerned with the
movement of goods from the warehouse to customer destination. It includes
loading and unloading of goods and their movement from one place to another.
In doing so it provides time and place utility. Transport accounts for a major
portion of the distribution cost and of the total price of the product.
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.
Different modes of transportation are there like Road transport, railways,
Airways, Water transport and pipeline from which a choice has to be made.
Each has its own share of merits and demerits. Normally a combination of
different mode is chosen and integrated in a sequential order to move the
product economically and faster.
Choice of a particular mode of transportation depends upon various factors like
cost of the transport, availability of the mode of transport, speed, reliability,
frequency, safety and suitability of the mode to move the product.
Road Transport:
This is an ancient form of transport and plays an important role in marketing.
Road transport may be through different means like transport by animals (like
bullock, camel), transport by human beings (like coolies or porters), transport
by automobiles (like scooters, auto rickshaws, cars, truck buses etc.). Road
transport is flexible and economical. However, it is unsuitable for long
distances.
Railways:
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.
Water Transport:
Water way is an important mode of transport for heavy and bulky goods in
large quantities. It consists of inland water transport and ocean transport.
Inland water transport is used for transporting goods within county and ocean
transport is used to transport goods to other countries. Water transport is a
cheapest form of transport, having great carrying capacity and is highly suitable
for heavy and bulky goods, but it has low speed and higher degree of risk due
to seasonal difficulties.
Air Transport:
Of late air transport has assumed significant importance as a mode of transport.
Although it accounts for a small percentage of transportation, it is useful for
perishable items, overnight packages, emergency supplies etc. The main
disadvantage of air transport is that it has high freight charges, low carrying
capacity and too much dependence on climatic conditions.
Pipelines:
These are specialized carriers design to transport the crude and refined
petroleum and natural gas from wells to refineries and further to distribution
centre. It is an economical mode as it involves less handling and labour cost, but
it is the slowest mode of transportation and very limited in number.
Warehousing and Inventory Decisions
1. It Creates Utilities Of Time And Place:
By making available a product at the place where and when it is needed.
2. It Accounts For A Major Portion Of Marketing Costs:
According to one estimate, physical distribution costs constitute as much 60%
of the total marketing cost and range according to industries, from 10% to 30%
of sales revenues; for machinery these were 9.8% ; wood products 16.1% ;
paper and allied products 16.7% ; chemicals, petroleum and rubber 23.1% and
primary and fabricated metals, 26.5%.’
3. Bigger Share in the National Wealth:
It represents large share in the national wealth in the form of facilities—rail,
road, trucks, highways, aircrafts, ship, docking facilities, pipelines, storage
facilities and equipment.
4. Specialisation It Facilitates Geographic Specialization:
Each area produces goods that its natural resources, climate or pool of
manpower resources enable it to produce more efficiently.
5. Determines Standard Of Living:
This is so because proper distribution of products makes them available to a
large number of people, at a relatively lower cost. Thus it can be said that
physical distribution directly affects sales, customer service and satisfaction,
and costs.

Topic 4 Efficient Supply chain

Management (SCM)
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Supply chain management is the management of the flow of goods and services
and includes all processes that transform raw materials into final products. It
involves the active streamlining of a business’s supply-side activities to
maximize customer value and gain a competitive advantage in the marketplace.
SCM represents an effort by suppliers to develop and implement supply chains
that are as efficient and economical as possible. Supply chains cover everything
from production to product development to the information systems needed to
direct these undertakings.
Typically, SCM attempts to centrally control or link the production, shipment,
and distribution of a product. By managing the supply chain, companies are
able to cut excess costs and deliver products to the consumer faster. This is
done by keeping tighter control of internal inventories, internal production,
distribution, sales, and the inventories of company vendors. SCM is based on
the idea that nearly every product that comes to market results from the efforts
of various organizations that make up a supply chain. Although supply chains
have existed for ages, most companies have only recently paid attention to them
as a value-add to their operations.
A supply chain is the connected network of individuals, organizations,
resources, activities, and technologies involved in the manufacture and sale of
a product or service. A supply chain starts with the delivery of raw materials
from a supplier to a manufacturer and ends with the delivery of the finished
product or service to the end consumer. SCM oversees each touch point of a
company’s product or service, from initial creation to the final sale. With so
many places along the supply chain that can add value through efficiencies or
lose value through increased expenses, proper SCM can increase revenues,
decrease costs, and impact a company’s bottom line.
Example of SCM
Understanding the importance of SCM to its business, Walgreens Boots Alliance
Inc. placed focused effort on transforming its supply chain in 2016. The
company operates the second largest pharmacy chain in the United States and
needs to efficiently manage and revise its supply chain so it stays ahead of the
changing trends and continues to add value to its bottom line.
As of July 5, 2016, Walgreens has invested in the technology portion of its
supply chain. It implemented a forward-looking SCM that synthesizes relevant
data and uses analytics to forecast customer purchase behavior, and then it
works its way back up the supply chain to meet that expected demand. For
example, the company can anticipate flu patterns, which allow it to accurately
forecast needed inventory for over-the-counter flu remedies, creating an
efficient supply chain with little waste. Using this SCM, the company can reduce
excess inventory and all of the inventories’ associated costs, such as the cost of
warehousing and transportation.