PHYSICAL DISTRIBUTION

MANAGEMENT: AN OVERVIEW

NAME : HANUMAGOWDA BIRADAR

ADMISSION NO : HPGD/OC15/1665
 OBJECTIVES

• i-To utilize the available human and material resources to

the maximum extent at industry/regional/national level
• ii-To minimize the expenditure of resource and infrastructure
facilities are provided on a liberal scale
• iii-Exploit those areas of industrial development which have
hitherto been considered inaccessible,making availability of
new methods and resources.
 IMPORTANT LOGISTIC REQUIREMENT OF
MODERN INDUSTRIAL ENTERPRISE

• i-Sufficient Land for an Industrial Plant ,considering future

expansion,residence for workers staff/Executives
• ii-Enough availability of Water for Industrial Plant as well for
Workers/Staff during initial and regular phases.
• Iii-Sufficient Electric supply during construction/operation
stage as well as maintenance of the plant,colony and
supporting staff population.
 MANAGEMENT A DEFINATION

• The term Management implies as a function or a process

with an objective of to get things done and includes the sub
functions of planning,organizing,staffing,coordinating,
• controlling,budgeting,reviewing etc.It is also viewed as a
process of motivating others to work and influencing others
or exercising authority over others in order to achieve
objectives.
 IMPORTANT OF LOGISTICS MANAGEMENT

• Logistic management is a field of management which

primarily deals with the coordination of resources in an
organization.these resources may be in the form of
men,money,materials,machines and time and requires
most efficient use of existing organization
resources.many projects in developing countries do not
succeed due to lack of attention in coordination logistic
function.As such there are delays in completion of
projects.
 BUSINESS LOGISTICS- PHYSICAL
DISTRIBUTION

• Physical distribution management is specifically

concerned with the flow of goods through the economic
system.In the business firm,the logistician is concerned
with the inbound movement of goods to supply the
production processes of the firm.In this setting,the firm is
the customer and anticipates a certain level of
distribution services from the
 TOUR OF MATERIAL

• i-Transportation-Transportation is an essential
/important component of physical distribution and
the expenditure is also a very significant
component of physical distribution.
• ii-Inventory control-The total costs on inventory
must be minimized in order to control the total
costs,and maintains a minimal inventory level
consistent with the needs of production and sales.
TOUR OF MATERIAL(CONTD.)
• iii-Packaging-It is essential that latest
techniques and materials of packaging be
known and used.The physical distribution
has to work with sales and manufacturing
departments in order to develop and use
proper packaging and packaging material so
as to make it cheap and yet carry it safely
enough to the customer without damage.
 TOUR OF MATERIAL(CONTD.)

• iv-Warehousing-The optimal location of a

warehouse /s having regard to minimal
transportation costs,customer service,level of
inventories and company warehouse versus public
warehouses are the issues to be decided.
• v-Material handling-The benefits of material
handling are not only confined to the manufacturer
but to the consignee as well.Along with marketing
department c,the movement of goods can be
arranged so as to avoid damage.
 TOUR OF MATERIAL (CONTD.)
• vi-Location analysis-The plant location decision must be
arrived considering various factors such as market
area,existing transportation facilities/rates, and
warehousing.
• vii-Order processing-Order processing is closely related
to sales and production and the physical distribution
department has to be careful about the need of
interdepartmental coordination.credit check,paper
processing,retrieval from warehouse,assembling and
packing,dispatch by transporter ,Inventory levels and its
information to production planning are the important
functions.
PRODUCTION &MARKETING INTERFACE VS.
PHYSICAL DISTRIBUTION

• Production activities
• i-Production scheduling
• ii-quality control
• Production-Physical Distribution interface
• iPlant location & Design
• iiPurchasing
• iiiProduct scheduling
 PRODUCTION & MARKETING INTERFACE VS.
PHYSICAL DISTRIBUTION (CONTD.)

• Physical distribution activities

• I transportation
• Ii Material handling
• Marketing activities
• Iii Inventory control
• I Market research
• Ii Promotion
• Iii --Pricing
PRODUCTION & MARKETING INTERFACE VS.
PHYSICAL DISTRIBUTION(CONTD.)

• Marketing-Physical Distribution
interface
• i-Fixing Customer service levels
• Ii Order processing
• Iii Packaging
• Iv Fixing channels of distribution.
 NEGLECT OF PHYSICAL DISTRIBUTION
FUNCTION
• In India,the subject of physical distribution
management has been neglected by Industry,business
and Government , with consequent heavy losses in
Production,the occurrence of scarcities and distortions
in the distribution of goods and services,delays in
Project schedules and uneven distribution of goods
and services.
 NEGLECT OF PHYSICAL DISTRIBUTION
FUNCTION(CONTD.)

• Examples
• i-For projects requiring substantial investments,a
serious and detailed study of the storage and
distribution of the Product is required.Project
execution takes several years since through study
of market areas and directions of movement are
not considered.
 NEGLECT OF PHYSICAL DISTRIBUTION
FUNCTION(CONTD.)

• ii-The top executive of a Firm are unable to

forecast accurately the future destinations of the
finished products and movement of raw materials
from the supply centers to the processing center.
• iii-Only technical/economic feasibility reports of
project identify the sources of raw materials.Their
movement/storage are rarely planned at the time
of construction of the project.
 CUSTOMER SERVICE- ORIENTED
APPROACH

• Past
• 1-Manufacturer is the king.
• 2-Shortages/deficits are part of the operation.
• 3-Manufacturer decides what is to be
produced,how much and when.
• 4-In sellers market Manufacturer does not worry
about selling.
• 5-There is general scarcity of goods
 CUSTOMER SERVICE-ORIENTED
APPROACH(CONTD.)
• Now
• 1-Economy takes an upswing.
• 2-Additional manufacturing facilities and
additional mobilization of resources.
• 3-More goods and Services are produced.
• 4-Customer can choose from amongst the various
goods and services.
 REQUIREMENTS IN CHANGED MARKET
CONDITIONS
• 1-With the change in market condition,the
manufacturer,s goals have also changed.
• 2-The Firm has now to determine the Customer,s needs.
• 3-Manufacturer has to device ways and means of satisfying
customer.
• 4-While doing so ,he has to meet the desired level of Profit.
• 5-Hence a Firm can ill afford to neglect the Customer
wants.
• 6-Firms must ascertain and introduce certain
 FACTORS WHICH INFLUENCED ROLE OF
BUSINESS LOGISTICS.

• 1-The development of Mass Communication media

• 2-Alternate mode of Transport
• 3-Rise in standard of living
• 4-The complexity in the management of Personnel
 CURRENT MODEL OF PROVISION OF
GOODS\SERVICES
• Manager oriented model
• i-The chief Manager first determines the resources available
with the organization.
• ii-He determines based on his judgment as also of lower level
managers,the quality,type quantum and location etc of goods
\services which can be provided to Customer.
• iii-The constraints of organization are considered more
important than the demand of the customer.
• iv-The management never considers that with slight
change customer can be serviced better.
DEFICIENCIES OF MANAGER ORIENTED
MODEL

• i-Brings satisfaction to the Manager himself.

• ii-The Manager perceives that he has full authority
over Customer.
• iii-He may be genuinely,although erroneously
,satisfied that he providing the goods and services
with high degree of efficiency and effectiveness.
• iv-The customer in this process is least satisfied
and has to accept whatever is offered.
 PRINCIPAL OF NEED OF MAXIMUM
SATISFACTION TO CUSTOMER
• As per this model,the Chief Manager undertakes
following action
• i-He determines the level and quality of
goods\services as required by Customer.
• ii-Even if customer have extreme diverse
characteristics,a common denominator with a
certain commonly accepted level is determined
• iii-Thereafter resources available with the
organization are assessed
 MAIN FEATURES OF CUSTOMER-
ORIENTED APPROACH

• i-Orientation towards Customer is based on

positive attitude.
• ii-The satisfaction of the needs of Customer
triggers higher sales of the product as also
other products.
• iii-If the product gives satisfaction to
customer,He may come back for repeat
purchase and recommend to others.
 TOTAL COST APPROACH

• i-The cost of distribution involving all the the

move store activities of the product may be 60%
of the total cost.
• ii-The cost of distribution should take into account
not only on the cost incurred on moving the
product over different channels of distribution ut
also on other activities.
• iii-These activities have become inevitable with
the modern,customer oriented marketing
approach.
 TOTAL COST APPROACH(CONTD.)

• ii-Warehousing costs -The warehousing of raw materials

steps up the cost of their supply or of the cost of
distribution of finished product.

• iii-Production\Supply costs-Production costs decrease

with increase in volume of production.if the same product
is made at several plants,various other costs such as cost
of transportation,transit times,warehouses and inventory
costs have to be considered.proper analysis has to be
made of their effect on total cost of distribution.
 TOTAL COST APPROACH(CONTD.)
• iv-Channel of Distribution costs-A critical
assessment of the channels of of distribution calls
for examination of the use of or creation of
adequate facilities for storage at the Plant or in
field warehouses or with the Distributor or
Stockist.
• v-Communication and Data processing costs-
An effective distribution system requires
continuous monitoring of order pricing,Inventory
control,accounts receivable,dispatches etc.
 TOTAL COST APPROACH-
CONCLUSIONS
• i-The real impact of distribution costs on profits is
much higher than perceived.
• ii-Many of these costs are nobodys responsibility
because of compartmentalization of the
management function.
• iii-Costs incurred in these are do not respond to
cost cutting methods because of fragmented
approach to analysis.requires comprehensive
integrated approach taking into consideration all
relevant factors.
 STEPS REQUIRED TO IDENTIFY
DISTRIBUTION COSTS

• i-Separate and identify distribution costs

element wise.
• ii-accounting centers will need to be
developed to help identify\analyze
distribution costs.
• iii-Analyze the the results of the changes in
the performance.
 STEPS REQUIRED TO IDENTIFY
DISTRIBUTION COSTS(CONTD.)
• iv-Some of the changes which may become necessary after
application of total cost approach- examples
• a-Company,s distribution pattern may be changed by making
appropriate shifts in Production\warehouse loads.
• b-Shifting of some equipments at nominal cost
• c-savings may be achieved by persuading Customer
to change mode of transport.
• d-Add additional warehouse capacity to ensure better
customer service and also add profits.
NEGLECT OF PHYSICAL DISTRIBUTION
FUNCTION
• i-Low level of professional management duo
to lack of management development.
• ii-Evan with high level of development in
other areas ,the development of Physical
Distribution subject has been delayed.
• iii-Top managers have focused on
manufacturing and finance issues with little
attention on Physical Distribution.
 NEGLECT OF PHYSICAL DISTRIBUTION
FUNCTION(CONTD.)
• iv-In general there is a lack of a system approach to
problems,because the managers focus on individual subject
rather than on more difficult approach,leading to neglect of
interfaces,thereby avoiding development of smooth
systems.
• v-individuals focus attention on individual performances
and have not realized importance of time and ensure
completing a given task within a specified time.