Physical Distribution

PHYSICAL DISTRIBUTION SYSTEM

PRESENTED BY GROUP- SUMMER OF 69

Arijit Das Atanu Ghosh Eshita Sadhukhan Prakram Majumdar Sayak Ghosh Tithi Sahoo

AGENDA : § PHYSICAL DISTRIBUTION DEFINITION § OBJECTIVE OF PHYSICAL DISTRIBUTION § DISTRIBUTION CHANNEL CHARACTERISTIC § PHYSICAL DISTRIBUTION COMPONENTS § ELEMENTS OF PHYSICAL DISTRIBUTION

SYSTEM § PHYSICAL DISTRIBUTION EXPENDITURES § IMPORTANCE OF PHYSICAL DISTRIBUTION

SYSTEM § DECISION AREA § WAREHOUSING FUNCTIONS § TRANSPORTATION COST ELEMENTS: § DIFFERENT MODE OF TRANSPORT OF INDIA § TRANSPORTATION CHARACTERISTICS § TRENDS IN PHYSICAL DISTRIBUTION § CONCLUSION

PHYSICAL DISTRIBUTION Defination Activities concerned with efficient movement of products and raw material from producers to consumers. It is the set of activity concerned with the physical flow of materials, components and finish goods producer to channel and consumer . Physical distribution refers to the actual physical flow of products. It means the movement of materials from the producers to the consumers. Dominant Flow of Products and Service

Dominant Flow of Demand and Design Information

SUPPLIER

MANUFACTURER

DISTRIBUTION SYSTEM

CUSTOMER

Physical Supply

Manufacturer Planning

and Control

Physical Distribution

OBJECTIVES : ü To give an understanding of the institutional and physical

aspects of channels of distribution in global market. ü To describe the different channels of distribution and show

their advantages and disadvantages. DISTRIBUTION CHANNEL CHARECTARISTICS

ü To reconcile the needs of producers and consumers ü To improve efficiency by reducing the number of

transactions and creating bulk ü To improve accessibility by lowering location and time gap

between Producers and Consumers.

PHYSICAL DISTRIBUTION COMPONENTS Three components: ü Input: Order from the customer ü Processor: Transportation ü Output: Delivery to the customer

ELEMENTS OF PHYSICAL DISTRIBUTION SYSTEM A company’s physical distribution system contains the following elements: ü Customer Service ü Transportation ü Inventory Control

ü Protective packaging and materials handling ü Order Processing ü Warehousing

PHYSICAL DISTRIBUTION EXPENDITURES

IMPORTANCE OF PHYSICAL DISTRIBUTION SYSTEM Physical distribution forms a pivotal part of the marketing task. ü It 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 company’s competitive position.

ü Helps in carrying the goods to the places of consumption; then storage & finally in distribution

ü Helps build clientele ü Acts as a balance between production & consumption in case

of those products which are impacted by the seasonability factor.

PHYSICAL DISTRIBUTION AREA Inventory Management

Match quantity produced with quantity demanded Holding costs Ordering costs Stock out costs ü When to recorder ? ü How much to recorder ? ü How much to keep as safety stock ?

Forecasting Area: ü Demand ü Order filling time.

PHYSICAL DISTRIBUTION

PHYSICAL DISTRIBUTION Inventory Management(cont.)

PHYSICAL DISTRIBUTION Inventory Management(cont.)

WAREHOUSING ü Receipt :

Unloading , Inspection, Accounting ü Storing :

Carefully labeling , Identification & a/cing ü Handling ü Display ü Order Handling

Information Processing : Depository of information across the organization

TRANSPORTATION COST ELEMENTS ü Line Haul Cost ü Pick up and Delivery Costs ü Terminal Handling Costs ü Billing and Collection

MODES OF TRANSPORT ü Road Transport ü Rail Transport ü Water Transport ü Air Transport ü Sea Transport ü Pipelines

v 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 .

v Cargo Liner – This mainly used for carrying a variety of

cargo and sometimes a few passengers. v 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.

v 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. v Tanker – This is special bulk carrier which carries liquids and

gases such as oil or Liquefied natural gases.

v OBO SHIP : This is an oil-bulk –ore carrier which uses different holds to transport at one time a mixed bulk-cargo.

v Roll-on, Roll-off or Ro- Ro ship – This is highly specialized

ship which allow loaded vehicle like truck , trailer , cars , etc . to be driven abroad through at the stern and sides .

v Container ship – This is built carry large standard sized

containers. v Liners – Liners follow mixed routes and timetables .It Carry

mixed cargo and belong to shipping conferences. v Coastal shipping – Sometimes goods are transported around

the coast rather than inland . These goods carried by coastal ships.

v Ferries – These are small boats that carries passengers over

very short distances. v 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.

DISADVANTAGES: 1. Its speed is lower than road, air and rail transport. 2. It is not reliable. 3. It provide service to limited areas.

PIPELINES ADVANTAGES:

1. Liquids and gaseous goods are transported over long distances from the place of production to the to the refineries, and from their to consumers in their homes via pipelines.

2. Maintenance cost are low. 3. It is not affected by weather conditions. 4. There is less amount of 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 .

ROAD TRANSPORT ADVANTAGES:

1. Flexibility 2. Timetables

3. Economy. 4. Motorways 5. Vehicles 6. Suitability 7. Containerization

DISADVANTAGES:

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

RAIL TRANSPORT

ADVANTAGES:

1. Cheap 2. Speed 3. Bulk Commodities 4. Containerization

DISADVANTAGES:

1. Transshipment 2. Delays 3. Short Journeys. 4. Timetables. 5. Changing Outputs. 6. High Capital Costs.

SEA TRANSPORT

ADVANTAGES:

1. Cheap

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

DISADVANTAGES: 1. Slow speed 2. Documentation 3. Other Costs.

AIR TRANSPORT

ADVANTAGES:

1. Aircraft 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 less complicated when

compared to sea transport. 6. Aeroplanes can take the shortest route.

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 ü Increase in road and decline in rail transport. ü Growth in light goods vehicle. ü Growth in heavy goods vehicle . ü Growth in Air and Sea transport. ü Growth in just in time production . ü Changing role of Distribution centers. ü Restrictions on driver hours.

CONCLUSION

In the physical distribution system, distribution channel is an important part so proper decisions has to be made on the distribution system . However, it is in the channel of distribution that the marketer encounters risk & dangers. It involves transaction cost both apparent & hidden . Risk includes destruction, negligence, non-payment, loss of transit etc. Therefore careful choice & evaluation of the channel partner is a necessity. 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 letter involves the choice of agents , distributors , wholesalers, retailers, direct sales or sales forces. Again, each has its own advantages and disadvantages .

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