Physical Distribution

The concept of physical distribution basically states that the set of activities related to the efficient movement of ready-to-use goods from the end of the operations of production to the final consumer. It occurs within various retailing as well as wholesaling distribution channels. Moreover, it comprises essential decision areas like customer support, handling the materials, controlling the inventory, order procession, protective packaging, selecting warehouses, transportation, as well as warehousing at the same time. In addition, the physical distribution is a component of a huge process known as distribution, and the distribution comprises multiple functions such as retail and wholesale marketing and the physical movement of the products.

Understanding Physical Distribution

The physical distribution is an essential function of the marketing process which describes the activities of marketing concerned with the flow of raw materials from the supplier to the manufacturer and then from the manufacturer to the end consumer or user. The marketing agencies such as merchants, dealers, etc. manage to maintain the flow of the products and physically supply it to the home of the end consumer or to the stores.

This function is responsible for finalising the marketing transaction after the exchange function is completed. Notably, it is important to make the product available at the place and at the time a consumer wants it, in the adequate quantity demanded. Usually, the main objective of the physical supply is to complete the delivery of the finished goods at the right time and at the right place with the right quantity as well.

As Philip Kotler said, “physical distribution involves planning, implementing and controlling the physical flows of materials and final goods from place of production to the place of end-use to satisfy buyers’ needs.”

Steps of Physical Distribution

Step 1 – Establish Objectives

The primary objective of the physical distribution function states that the end product should be timely delivered to the final user in the right quantity and at the right place. The customer service level that is provided with this function can be good as well as bad at the same time. When it’s a 100 per cent level of satisfaction from the side of the consumer then it means that the consumer is happy as well as satisfied with the service and the quality of the final product.

Step 2 – Examining Cost Trade-Offs

The cost tradeoffs for the components of physical distribution should be evaluated for determining how each element will be used in the distribution and to what extent.

Step 3 – Identify and Choose Design Alternatives

A major problem in developing the design of the Distribution is how to include the customer service objective into the design process. Moreover, the management judgment, as well as experience, will often dictate an array of levels of customer satisfaction that are tolerable by the firm.

Importance of Physical Distribution

Designed and well-planned integrated management of all the physical distribution activities has assumed exclusive significance in the process of marketing since the year 1960. Moreover, it can provide a reasonable solution striking an optimum equilibrium between the physical distribution costs and the level of customer service that will be pleasing to the buyer as well as profitable to the seller at the same time.

Nowadays, marketers feel that the costs of physical distribution can be easily reduced without declining the level of customer satisfaction. Furthermore, the functions of marketing of inventory control, warehousing, transportation, order processing, physical handling, etc. are now managed as a whole and in an integrated manner as well. All the above-mentioned activities and functions are properly coordinated and the evolution of an effective physical distribution package takes place that offers consumers the service they are willing to get and insist on and at the same time to make sure that the marketer is in profit.

Key Features of Physical Distribution

•         Order processing
•         Inventory Control
•         Warehousing
•         Material Handling
•         Transport

The following methods must be considered and analysed for the proper management of the inventory:

Economic Order Quantity – Placing orders for the supply of commodities in the amount that declines total expense is known as the economic order quantity.

Reorder Point – Recurring orders must be placed for keeping stock of the commodities or inventory.

Safety Stock – Adequate stocks of commodities should always be present inside the warehouse.

Activity-Based Costing Analysis – Under analysis, the inventory goods are classified in ‘A’ ‘B’ ‘C’ groups according to their expenditure.

Just in Time – Receiving just in time procedure of inventory control is now way too popular. The tiny amount of commodities bought according to them is a just-in-time concept. They reach the perfect time of production or sale at the same time.

Conclusion

The concept of physical distribution concludes that every business has a manufacturing unit that needs supplies or the raw materials from the supplier and then it is processed and converted into the final product that can be sold in the market and then it can be used by the end consumer or user. Moreover, the process of maintaining the flow of all these goods and supplies is called physical distribution. The physical distribution makes sure that the end-user gets the final product on time at the right place and in the right quantity.