PHYSICAL DISTRIBUTION

MANAGEMENT
 Physical distribution in supply chain management is how retailers make their
DISTRIBUTION products available to the consumer and it deals with the series of actions that
moves final products from production to the consumer.

Distribution is an important marketing function describing the marketing

activities relating to the flow of raw materials from the suppliers to the factory
and the movement of finished goods from the end of production line to the final
consumer or user.

Physical distribution is the main mid-look between manufactural and creation

of demand.
 “Physical distribution in supply chain management is how retailers make their products available to the
consumer and it deals with the series of actions that moves final products from production to the consumer.”
“Physical distribution is an important marketing function describing the marketing activities relating to the
flow of raw materials from the suppliers to the factory and the movement of finished goods from the end of
production line to the final consumer or user”
“Physical distribution is the main mid-look between manufactural and creation of demand”

• It’s the weakest link in the supply chain, and a major challenge for distribution managers,
warehouse coordinators, and customer service departments.
• The channels involved include warehousing, inventory control, order processing, materials
handling, transportation, and customer service.
• Physical distribution and the ability to get a product to a consumer quickly and economically has a
direct impact on customer satisfaction.
• By storing goods in convenient locations, and by creating fast, reliable means of moving those
goods, small business owners can help assure continued success in a rapidly changing,
competitive global market.
• Physical distribution is important because it comprises the final steps a business takes before they
put their product in the hands of their customer. That’s why so many businesses invest in a third
party logistics provider to ensure their physical distribution is handled with care.

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 COMPONENTS OF PHYSICAL DISTRIBUTION
Physical distribution is a supply chain forecasting and management term
best viewed as a system of distribution channels linked together for the
efficient movement of products.
These components are interrelated, meaning decisions made in one area
affect the relative efficiency of others.

• Customer Service

• Transportation

• Warehousing

• Order processing

• Inventory control

• Material handling

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 STAKEHOLDERS OF DISTRIBUTION

Distribution is a supply chain forecasting and management term best

viewed as a system of distribution channels linked together for the
efficient movement of products.
These components are interrelated, meaning decisions made in one
area affect the relative efficiency of others.
1. Producer: Producers combine labor and capital to create goods
and services for consumers.
2. Agent: Agents commonly act on behalf of the producer to accept
payments and transfer the title of the goods and services as it
moves through distribution.
3. Wholesaler: A person or company that sells large quantities of
goods, often at low prices, to retailers.
4. Retailer: A person or business that sells goods to the public in
small quantities for immediate use or consumption.
5. End Consumer: A person who buys a product or service.

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 ADVANTAGES OF A DISTRIBUTION MANAGEMENT STRATEGY

It keeps things organized. If there was no proper management system in place,

retailers would be forced to hold stock in their own locations—a bad idea,
especially if the seller lacks proper storage space.
A distribution management system also makes things easier for the consumer. It
allows them to visit one location for a variety of different products. If the system
didn't exist, consumers would have to visit multiple locations just to get what
they need.
Putting a proper distribution management system in place also alleviates any
potential for errors in delivery, as well as the times products need to be
delivered.

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 OBJECTIVES OF PHYSICAL DISTRIBUTION
Basically, physical distribution is aimed at availing the products to consumers smoothly
at low cost. It stresses on achieving the righteousness in all the significant aspects of
physical distribution, i.e., the right product, at the right time, at the right place, in the
right manner, for the right people, and at the right price/cost. It balances between the
price and the services.
The main objectives:
• To Ensure Consumer Convenience
• To Facilitate Continuous Production
• To Achieve Economy
• To Reduced Degree of Damage/Wastage
• To Increase Competitiveness
• To Lower Idle Stocks
• To Ensure Continuous Availability
• To Achieve Rapid Turnover of Stock

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 TYPES OF DISTRIBUTION

Intensive Exclusive Selective

Direct Distribution Indirect Distribution
Distribution Distribution Distribution

• Manufacturers sell and • Involves an • Companies place their • Manufacturers make a • This is a hybrid of
send their products intermediary that products in as many deal to sell their intensive and
directly to consumers. assists with the retail locations as product only to one exclusive distribution.
They may accept logistics and possible. specific retailer. (Ex: • Companies distribute
consumer orders placement of products • Products that require Litro Gas) their products to
through an e- to ensure they reach minimal effort to sell multiple locations, but
commerce website, customers in a timely typically perform the they are more
catalog or over the manner and at an best with this type of selective about which
phone. optimal location based distribution strategy. retailers they work
• Many companies on the consumer's (Ex: Panadol) with than companies
choose direct habits or preferences. who use the intensive
distribution because of (Wholesaler-Retailer- distribution strategy.
higher profit margins Franchisor- (Ex: Dialog Reloads)
than wholesale or Distributor) (Ex;
retail distribution. (Ex: Unilever)
Pizza Hut)
 DISTRIBUTION ACTIVITIES

Distribution concerns with the total activities involved in distributing products to ultimate users. It
joins two ends, producers and sellers.
Physical distribution involves various parties, such as producers, middlemen (wholesalers,
retailers, agents, etc.), owners of warehouses, bankers, insurance companies, transporters,
communication service providers, and many other similar parties, who can facilitate a smooth
flow to goods from producers to consumers.

Grading or Packing and

Processing, Ordering
Classifying Storing

Transporting Receiving Inspecting Storing

Insurance and Customer

Maintaining Selling
Banking Service
 SELECTING THE RIGHT DISTRIBUTION

1. Consider the type of product or service - the type of product or service your company provides
can impact how potential customers may prefer to make a purchase from you. There are three
main types of purchase decisions to consider: (Routine/ Limited/ Extensive.
2. Determine your target audience -a target audience is the portion of the population that is the
most likely to purchase your product or service. You can analyze your current customers to
help you determine what key demographics, beliefs, interests, values and goals your customers
have in common.
3. Assess your warehouse capabilities and logistics -assess your warehouse capabilities and
logistics. Consider your budget, inventory storage space, number of employees and the skill
sets of your current workforce. Understanding what your in-house capabilities are can help you
determine which distribution strategy may offer you the most benefits.
4. Define your business goals -review your business goals to identify which distribution strategy is
the best suited to help you reach them.
5. Track your progress- identify which key performance indicators (KPIs) you can use to track the
success of your distribution strategy.
• Total number of orders
• Order accuracy rate
• Average sales order price
• Distribution cost per unit shipped
• Revenue growth rate
• Percentage of on-time shipments
• Sales growth rate

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