Physical distribution is defined as the process of physical movement of goods from the producer to the consumer. It is an important marketing function which describes marketing activities that involves flow of raw materials from the suppliers to the factories for production and also the movement of finished goods from production to the final user.
The activities that are included in the efficient movement of goods from producer to end user or consumer include transportation, inventory control, warehousing, material handling, forecasting, customer service, plant and warehouse location and order processing.
According to the eminent marketing guru Philip Kotler “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.”
Objectives of Physical Distribution
The following are the objectives of physical distribution
1. Consumer satisfaction
2. Profit Maximisation
3. To ensure the availability of right goods at the right quantity at the right time and the right place with the least cost for the service.
4.To achieve speedier transportation of goods and maintaining minimum inventory level.
5. To establish the correct price of products by effective management of physical activities of distribution.
6. To achieve competitive advantage over the competitors by providing the best customer service.
Components of Physical Distribution
Following are the components of physical distribution
1. Order Processing: Order processing is the first point or in other words, the starting point of the distribution activity. The functions involved in order processing are receiving order, handling the received order, granting of credit for the item ordered, generating invoice, dispatching of order and collecting the bills.
Businesses should be making an effort to reduce the order cycle time which is the time between placing an order by the customer and delivery of the goods at the customer’s place.
2. Storage and Warehousing: Storage deals with the storing of goods in proper condition till the time it is ordered by the customer. Goods that cannot be generally made available throughout the year need to be stored.
Warehouses act as centres of storage and by providing the functionality it helps businesses meet the demands of customers. Apart from being a source of storage, a warehouse also acts as centres for assembling the goods.
3. Inventory Control: Inventory control refers to the process of efficient control of goods that are stored in the warehouses. Businesses need to maintain adequate levels of inventory in order to ensure uninterrupted fulfillment of orders.
The level of inventory needs to be optimal, it should not be too less or too more, as less inventory results in out of stock goods, lost business and unhappy customers, while a high level of inventory requires huge investment.
4. Material Handling: Material handling refers to the activities that are associated with the movement of goods from the site of manufacturing till it is loaded to the transport.
Proper material handling results in minimising the wastage of goods during transport, reduces unnecessary movement of goods, facilitates quick order processing and efficient goods movement.
5. Transportation: Transportation is a very essential component of physical distribution which plays a crucial role in movement of the stored goods from warehouse to the customers. The process of transporting involves loading and unloading of goods and their movement from one place to another.
Choosing the right transportation mode is of utmost importance as it determines the retail price of the product. Proper choice of transportation results in smooth movement of goods in proper condition.
The modes of transportation that are adopted by the businesses are road, railways, airways, water transport and pipelines. The choice of the mode of transportation depends on the type of goods being transported, their availability, reliability and the level of safety offered by the mode.
This concludes the topic of Physical Distribution, which is an important topic of Business Studies for Commerce students. For more such interesting articles, stay tuned to BYJU’S.