chapter 8 physical distribution management strategy
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CHAPTER 8
PHYSICAL DISTRIBUTION MANAGEMENT STRATEGY
Important Topics of This Chapter
The Nature of Physical Distribution and Supply Chain Management.Traffic Management and its Functions.Customer Service in Physical Distribution.Warehousing and Inventory Control.
Physical DistributionPhysical distribution:
The process of planning, implementing, and controlling efficient, effective flow and storage of goods, services, and related information from point of origin to point of consumption for the purpose of conforming to customer's requirements.
The importance of physical distribution:Physical distribution cost can represent 20% or more of the selling price of a product. It is an integrated part of the entire company system:
Problems in other areas impact distribution and vice versa.
From customer’s perspective, supplier’s physical distribution function gets the right products to them, at the right place, at the right time. These are basic customer rights (along with right price and right condition).
Logistics ManagementLogistics involves more than physical distribution. In the science of logistics, the flow of materials is efficiently managed inbound-through and outbound of an organization.Two primary product flows:
Physical supply (materials management): Flows that provide raw materials, components, and supplies to the production process.
Physical distribution management: Flows that deliver the completed product to customers and channel intermediaries.
Supplier
Manufacturer Customer
Materials manageme
nt
Physical distribution
management
Logistics Management
Study Area Map
Supply chain management (a series of connected logistics flows)
Logistics management
Materials management Physical distribution
Incoming transportation Traffic managementReceiving ShippingPurchasing Customer serviceIncoming warehousing Finished goodsInventory control
Supply chain management: An integrated philosophy to manage the multidirectional flow of materials and information through an entire channel, from the first raw material supplier to the ultimate user of the finished product.
Supply Chain Management
Functions of Traffic Management
Mode and carrier selectionRoutingClaims processingOperation of private transportation
Many of the imported goods you purchase were shipped in 20-foot or
40-foot steel containers
Large cranes loaded the containers on a ship.
(Image courtesy of the Port of Charleston))
Larger container ships can hold 4,000 to 6,000 containers.
(Image courtesy of Maersk Sealand)
After unloading from the ship, the containers can be loaded onto a flatbed
rail car for additional intermodal shipping.
(Image courtesy of CSX Corp.)
Alternatively, a container can be attached to a set of wheels for
motor transport (as an 18-wheeler trailer).
Inter-modal container motor carrier
(Image courtesy of Maersk Sealand)
Rail freight carrier Barge/river freight carrier
(Image courtesy of CSX Corp.)
PipelineAir freight carrier
Container stack train Jumbo jet air freight
Major Advantages by Transportation Mode
MotorSpeed of deliveryDiversity of equipmentFlexibilityFrequency of movementTransfer of goods to other carriersConvenient to both shipper and receiver
RailMass movement of goodsLow unit cost of movementDependabilityLong-haul movingWide coverage to major markets and suppliersMany auxiliary services (i.e., switching) Transfer of goods to other carriersSpecialized equipment
WaterVery low unit cost of movementMovement of low-unit-value commoditiesLong-haul movementMass movement of bulk commodities
(continued)
PipelineLowest unit cost of movementMass movement of liquid or gas productsLong-haul movingLarge capacityMost dependable mode
AirFrequent service to major marketsLarge capabilityOvernight serviceMost rapid speed of any carrier
Inter-modalCost savings
Lower loss and damage claims due to containerization
Service extended to more shippers and receivers
Reduced handling and storage costs
Major Advantages by Transportation Mode
Controllable Elements in a Logistics System
Customer serviceLogistics communicationsWarehousingPackagingProduction planningOrder processingTransportationInventory controlMaterials HandlingPlant and warehouse location
Major Categories of Service Complaints
Traffic and transportation
Damaged merchandiseCarrier did not meet standard transit timeMerchandise delivered prior to date promisedCarrier failed to follow customer routingCarrier did not comply with specific instructionsErrors present on bill of ladingCondition or type of transport equipment not satisfactory
Warehousing and packagingMerchandise delivered lateProblem with containers in packaging plantsSpecial promotion merchandise not specified in deliveryErrors in warehouse release formsIncorrect types and quantities of merchandise shippedPapers not mailed promptly to headquartersField warehouse delivered damaged merchandise
(continued)
Inventory control
Stock-outsContaminated products receivedProduct identification errorsPoor merchandise shipped
Sales order service
Delayed shipmentsInvoice, sales coding, or brokerage errorsSpecial instructions ignoredNo notification of late shipments
Major Categories of Service Complaints
Inventory ControlCarrying costOrdering costTotal costEOQ levelJIT Inventory:
Small lot size.Frequent deliveriesExact quantities.Precise arrival time.Near perfect quality
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