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.
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
Fulfill the demand of the product in the market so that business takes place
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.
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
Warehousing on field
Sub distribution of product
Management of inventory at various levels
Execution of order
Communication at different levels
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.
It can also be referred as the combination of materials management and product distribution of an enterprise.
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.
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.