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In this presentation, we will discuss about the concept and definition of physical distribution, defining logistics, relation with other marketing mix variables. We will also talk about the objectives of physical distribution process, components of physical distribution, warehousing, inventory management and control.
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Chapter 2• Physical Distribution Chapter 2 Physical Distribution
Chapter Plan• Concept & Definition• Logistics• Relation with other Marketing Mix Variables• Importance of Physical Distribution• Components of Physical Distribution Chapter 2 Physical Distribution
Definition• Physical distribution ‘involves planning, implementing and controlling the physical flows of materials and final goods from place of production to the place of end use to satisfy buyers ‘ needs.’’ – Philip Kotler Chapter 2 Physical Distribution
Logistics• Logistics management includes both physical distribution and physical supply Chapter 2 Physical Distribution
Relation with Marketing MixA. Product-physical Distribution • FMCG- Mass Distribution • Perishable product- shortest distri.B. Price-Physical Distribution • Reciprocal RelationshipC. Promotion-Physical Distribution – Grab the market potential Chapter 2 Physical Distribution
Objectives of Physical Distribution Process1. Total Cost Concept2. Customer Service Concept a. Time b. Dependability c. Communication d. Convenience e. Accuracy Chapter 2 Physical Distribution
Objectives of Physical Distribution Process3. Distribution Cost- service trade offs • Achieve right balance between them • Flexibility is important in balancing the cost and service Chapter 2 Physical Distribution
Component of Physical Distribution1. Order Processing2. Transportation3. Warehousing4. Material Handling5. Inventory Management and Control Chapter 2 Physical Distribution
Order Processinga. Verifying customers’ credibilityb. Checking for any outstanding paymentc. Monitoring stock leveld. Preparing invoicee. Arranging transporterf. Sending the consignment and information Chapter 2 Physical Distribution
Selection of the transportation mode1. Suitability or nature of product2. Affordability3. Availability4. Customers’ specifications5. Competitor’s transportation mode Chapter 2 Physical Distribution
Warehousing• Type of warehouse 1. Private warehouse 2. Public warehouse 3. Distribution warehouse 4. Bonded warehouse 5. Mother depot– Number and Size of Warehouses Chapter 2 Physical Distribution
Warehousing• Location – Availability of basic facilities such as electricity, water, labour, transport etc. – Space – Roads – Government rules and regulations Chapter 2 Physical Distribution
Warehousing• Layout 1. Proper lighting, ventilation, and fire precaution 2. Protection from temperature, moisture, etc 3. Security arrangement 4. Space arrangement Chapter 2 Physical Distribution
Warehousing• Storage Methods – Optimum use of space – Ease in storing and picking – Accurate identification of material – Possible to follow FIFO – Provision for fast moving items Chapter 2 Physical Distribution
Material Handling• Involves placing and positioning of material to facilitate movement and storage• Common equipments are conveyors, bucket Elevators, hoists, lifts, cranes, forklifts, trolleys, dumpers, trailors, trucks Chapter 2 Physical Distribution
Inventory Management & Control• Major tool to cost reduction objective• Just –in –time – Reliability of suppliers – Close communication between suppliers and customers – Attention to quality – Adequate storage facilities and transportation options Chapter 2 Physical Distribution
Economic Order Quantity (EOQ)• At EOQ Ordering Cost=Carrying Cost• EOQ =Square route ( 2AP/CU) – Where, A= annual demand in units B= Ordering Cost per Order C= Carrying Cost U= Unit Price Chapter 2 Physical Distribution
Summary• Physical Distribution is highly co-related with other variables of marketing mix• Order processing, transportation, warehousing, material handing and inventory management and control are important components of physical distribution Chapter 2 Physical Distribution
Summary• Material handling involves decision on placing and positioning of material to facilitate their movement and storage.• Inventory control is a major tool for cost reduction, JIT and EOQ are useful techniques Chapter 2 Physical Distribution
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