Physical distribution of goods / it’s various functions
Physical Distribution of Goods
Physical distribution involves management of physical flows of raw materials, finished products from the points of origin to the points of consumption to meet the customer needs at profit. It covers all activities in the flow of goods between producer and consumer.
Elements: Planned and integrated management of physical distribution has assumed unique importance in marketing management since a customer gives top preference to reliable and punctual delivery of goods and expects minimum time interval between the date of placing an order and the date of receipt of goods. A large consumer goods company having all India marketing network spends following percentages of market price of goods on:
(1) Transport 1.5-2.0%
(2) Warehousing and handling 2-2.5%
(3) Inventory carrying 3-3.5% and
(4) Order processing 4-4.5%.
Marketers now feel that physical distribution should be the new major frontier for cost minimization without of course, adversely affecting customer satisfaction. The elements constituting customer service are now given greater emphasis.
A slight improvement in customer service can produce accelerated sales. The physical distribution policy assumes unique importance in offering desired level of customer service at a reasonable cost. The distribution policy attempts to optimise time and place utility (through storage, transport and physical handling of products) for marketable products, while minimizing the total cost of physical distribution.
The management of physical distribution activities emphasizes the system approach designed to achieve a trade-off between optimum customer service and operating costs in physical distribution. Under the system approach, marketers have to recognise the integrated and interrelated character of all components of physical distribution. The costs of transport, warehousing inventories, packaging, order processing etc. are closely interdepen ‘ent and integrated. The total cost approach desirable in practice.
Function of Physical Distribution and Logistics
Marketing represents two different but closely interrelated distribution functions:
(i) Demand Oriented Functions: These are concerned with the search for and stimulation of consumer demand. The channels of distribution i.e… wholesaler, retailers and all types of mercantile agents, perform these demand oriented functions.
(ii) Supply-Oriented Functions: These are concerned with Physical Product flow. These activities “revolve around the notion of movement and they represent physical distribution as a planned movement (physical flow) products from the supplier to the firm and from the firm to the dealer or resellers economically, quickly and efficiently. Demand-oriented marketing functions (relating to the search for and stimulation of buyers) are quite risible to consumers.
Supply-oriented marketing activities (Relating to physical distribution) are not quite visible to average consumers. A marketer must recognise the importance of physical distribution in adding time, place and possession utilities to the products and delivering higher level of customer satisfaction at relatively lower cost.
Two types of Distribution functions are shown in the diagram below:
Marketing
- Product Mix
- Price Mix
- Promotion Mix
Customer
- Target Market
- Customer Service, Putting the product at desired place
Distribution Mix
- Demand-Oriented Functions
- Wholesaling, Retailing Facilitating Function
Supply Oriented Functions
• Order Processing
• Ware housing (field)
• Inventory control
• Transporation
• Protective Packaging
• In plant ware housing
The Demand-oriented functions represent the primary operations of marketing channels. The supply-oriented functions represent the area of physical distribution in charge of all channel members. Customer service means several things i.e., the speed of order execution and delivery of goods, safe delivery, quick replacement of damaged goods, prompt after-sale service etc..
