Marketing Mngmt - Physical Distribution


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The planning, implementation, and controlling of the physical flow of material or product from one point to another to meet the customer requirements in the market is known as physical distribution.

Importance of Physical Distribution

The importance of physical distribution becomes significant when the manufacturers and market are geographically far from each other. The following points highlight the importance of physical distribution −

  • Execute physical flow of product from the manufacture to the customers.

  • Grant time and place for the product

  • Build customer for the product

  • Cost reduction

  • Fulfill the demand of the product in the market so that business takes place

Steps in Designing a Physical Distribution System

To design a physical distribution system for a product, following steps need to be followed −

  • Step 1 − Defining distribution objective and services required for product distribution

  • Step 2 − Articulating customer requirement

  • Step 3 − Comparing the strategy with market competitors

  • Step 4 − Managing the cost of distribution to decrease cost without compromising on the quality of service

  • Step 5 − Building physical distribution system that is flexible for implementation of changes, if required

Designing of a physical distribution system involves these steps. It is necessary to consider all steps involved for smooth distribution of goods and services.

Components of a Physical Distribution System

Physical distribution can be controlled and monitored by its different components. Each component should be evaluated and managed in order to accomplish physical distribution without any problems.

The following are the different components of the physical distribution system −

  • Planning of physical distribution system

  • Storage planning in plant

  • Logistics

  • Warehousing on field

  • Receiving

  • Handling

  • Sub distribution of product

  • Management of inventory at various levels

  • Execution of order

  • Accounting transactions

  • Communication at different levels

Supply Chain Management (SCM)

Supply Chain Management (SCM) involves managing of goods and services. It includes different stages like storage of goods, logistics and supply of goods to the customer after manufacturing.

Supply Chain Management

It can also be referred as the combination of materials management and product distribution of an enterprise.

Advantages of SCM

Supply chain management increases the flexibility and efficiency for the logistics of a product. The following are the advantages of supply chain management −

  • It increases the efficiency to deliver on time by approximately 20 %.

  • It reduces inventory requirement by approximately 50 %.

  • It increases the sales of product from 3 to 6 %.

  • It provides integrated controlling for the function of logistics at the front and back end of business.

Disadvantages of SCM

The following are the disadvantages of supply chain management −

  • It considers material management important and customer requirement for logistics as superfluous for the supply cycle.

  • Consequently, customer requirement for logistics is not executed with high importance.

Thus, supply chain management has both advantages and disadvantages and both have to be considered for implementation in an organization.

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