PHYSICAL DISTRIBUTION SYSTEM

Submitted by : Paawan Raina(05) Mahima Pabri(07) Akash Meena(10) Bhaskar Jorwal(11) Balendu Singh(16)

Physical Distribution
Definition

Physical distribution refers to the management of all activities which facilitate movement and coordination of supply and demand in the creation of time and place utility in goods. It is the set of activity concerned with the physical flow of materials, components and finish goods from producer to channel institution and finally to consumer. Physical distribution can be used strategically to strengthen a firms market position

Objectives
To give an understanding of the institutional and
physical aspects of channels of distribution in global marketing To describe the different channels of distribution and show their advantages and disadvantages

Distribution Channels Characterstic

To reconcile the needs of producers and consumers To improve efficiency by reducing the number of transactions and creating bulk To improve accessibility by lowering location and time gaps between producers and consumers

Physical Distribution
Three components: Input, Processor and Output Input: Order from the Customer Processor: Transportation Output: Delivery to the Customer

Physical Distribution decision area

Inventory Management
Match quantity produced with quantity demanded
holding costs ordering costs stockout costs

When to reorder? How much to reorder? How much to keep as safety stock?

Key is accurate forecasting

of demand order filling time

Physical distribution

Stock

Zero safety stock model

time place order receive order

on hand

order filling time

Physical Distribution
Inventory Management (cont.)

stockout

If demand increases...
Stock

on hand
time

place order
receive order

safety stock

Physical Distribution
Inventory Management (cont.)

If order filling time increases...

Stock stockout time

on hand

place order
receive order

safety stock

Warehousing (Functions)
Receipt: unloading, inspection, accounting Storing: Careful labeling, identification & accounting Handling Display Order Handling Information Processing: depository of information across the organisation

MODES OF TRANSPORT
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. CARGO LINER This mainly used for carrying a variety of cargo and sometimes a few passengers. 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 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. TANKER This is special bulk carrier which carries liquids and gases such as oil or liquified natural gases.

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OBO SHIP This is an oil-bulk-ore carrier which uses different holds to transport at one time a mixed bulk-cargo Roll - on, Roll off or Ro - Ro ship This is highly specialized ship which allow loaded vehicles like truck, trailer , cars, etc. to be driven abroad through at the stern and sides. CONTAINER SHIP This is built to carry large standard sized containers. LINERS Liners follow mixed routes and timetables. It carry mixed cargo and belong to shipping conferences.

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COASTAL SHIIPING Sometimes goods are transported around the coast rather then inland. These goods are carried by coastal ships. FERRIES These are small boats that carries passengers over very short distances. 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.

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DISADVANTAGES 1.Its speed is lower than road ,a ir ir rail transport. 2. It is not reliable. 3.It provide service to limited areas. PIPELINES: ADVANTAGES. 1.liquids and gaseous goods are are transported over long distances from the place of production to the refineries, and from their to consumers in their homes via pipelines.

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2.Maintenance costs are low 3.It is not affected by weathery conditions. 4. There is less 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.

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ROAD TRANSPORT
ADVANTAGES: 1. Flexibility. 2. Timetables. 3. Economy. 4. Motorways. 5. vehicles. 6. Suitability. 7. Containerization.

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DISADVANTAGES 1. Bulk 2.Congestion and delays 3. Social costs.
RAIL TRANSPORT: ADVANTAGES. 1.Cheap 2.Speed 3.Bulk commodities 4. Containerization.

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DISADVANTAGES. 1.Transshipment 2.Delays. 3.Short journeys. 4.Timetables. 5. Changing outputs 6.High capital costs.
SEA TRANSPORT: ADVANTAGES. 1. Cheap

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2. Bulk 3.Flexibility. 4. Facilities. 5. Short notice. 6. containerization.
DISADVANTAGES. 1.Slow speed. 2.Documentation. 3. Other costs.

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AIR TRANSPORT: ADVANTAGES. 1. Aircrafts 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 are less complicated when compared to sea transport. 6. Aeroplanes can take the shortest route.

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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

Increase in road and decline in rail transport. Growth in light goods vehicles Growth in heavy goods vehicles Growth in air and sea transport Growth in just in time produaction Changing role of distribution centers Restrictions on driver hours

Conclusion
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 latter involves the choice of agents, distributors, wholesalers, retailers, direct sales or sales forces. Again, each has its own advantages and disadvantages. However, it is in the channel of distribution that the international marketer can encounter many risks and dangers. These involve many transaction costs both apparent and hidden. Risks include loss in transit, destruction, negligence, non-payment and so on. So careful choice and evaluation of channel partner is a necessity.

CASE STUDY
MAXWELL CORPORATION-DISTRIBUTION SYSTEM

The president of Maxwell Corporation was considering whether the company should up its own distribution system or to outsource the entire distribution and logistics function to a third party service provider. The company had set up a manufacturing plant in vizag where a wide range of orthopedic equipments viz., crutches, wheel chairs, walkers back braces, heating pads, elastic bandage, canes, knee braces, shoulder braces and so forth were manufactured. Presently, the finished goods warehouse was located at Vizag itself and the product were sent to all major towns in India as a point to point dispatch. The company was supplying these equipments directly to retail stores at all these locations. Marketing activity was headed by a general managermarketing based at Vishakhapatnam who was supported by a sales team comprising of sales officers. The company was not resorting to advertisement and publicity though the products of the company were fairly well known. It was felt that all these customer wanted quick responses to their orders as the products catered to emergency patient.

But, these retail outlets carried only very limited inventories. This was due to the fact that most of the products came in a variety of styles, shapes and sizes and the requirements was more customer driven. Keeping even a moderate inventory of all types was not economically viable and lead to dead stock in long run. The company was looking at various option which included the following: Setting up of hub and spoke type of a distribution network wherein it was proposed to set up a stock point or mother warehouse in each zone viz., East, West, North and South and respective retail outlets were to be fed from the warehouse located in that zone. Setting up of a central warehouse anywhere in Central India and feeding retail outlets from this location. Changing the distribution channel from the present numerous retail outlet system to a more efficient system.

Outsourcing the entire distribution and logistics to a third party wherein the entire activity of transportation and distribution till the ultimate retail outlet would be taken care of by this service provider and company could focus more on activities of marketing and sales.
Question for discussion 1.What in your opinion is of immediate importance for Maxwell Corporation and why ? 2.What should be the distribution channel for Maxwell and outline the advantages for having such a type of a set up ? 3.What type of a marketing and sales set up would you recommend for Maxwell Corporation ?