physical distribution 13
TRANSCRIPT
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Physical Distribution
Chapter 13
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"Wonder rather than doubt is
the root of knowledge."
--Abraham Joshua Heschel
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Physical Distribution The movement of materials from the producers
to the consumers
Two functions
Physical Supply
Physical Distribution
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Supply ChainS
U
P
PLI
E
R
Manufacturer
Distribution
System
C
U
S
TO
M
E
R
Physical
Supply
Manufacturing
Planning and
Control
Physical Distribution
Dominant Flow of Products and Services
Dominant Flow of Demand and Design Information
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Two Channels The Transaction Channel
Concerned with the transfer of ownership
Primary function is to negotiate, sell, and contract
The Distribution Channel
Concerned with the transfer or delivery of goods
or services
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FactorsA
ffecting Material Movement The channels of distribution
The types of Markets Served
The Characteristics of the Product
The type of transportation available to move
the product
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Activities in the Physical
Distribution System Transportation
Distribution
Warehousing
Material Handling
Protective Packaging Order Processing and Communication
(30 to 60% of Distribution Costs)
(25 to 30 % of Distribution Costs)
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Physical Elements of Transportation Carriers
Ways
Terminals
Vehicles
Weighing
Connection w/ other carriers and
routes
Routing
Dispatching
Maintenance
Administration
Paperwork
Rail
Road
Air
Water
Pipeline
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Total Cost Concept A company normally ships by rail. Transport by rail costs$200, and the transit time is 10 days. However, the goodscan be moved by air at a cost of $1000 and will take one
day to deliver. The cost of inventory in in transit for aparticular shipment is $100. What are the costs involved intheir decision?
Rail Air
Transportation Cost 200 1000
-In-Transit Inventory-Carrying cost 1000 100
Total 1200 1100
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Three Area of Economic
Regulations
Regulation of Rates
Regulation of routes and service levels
Control of market entry and exit
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Transportation Cost Elements Line Haul Cost
Pick up and Delivery Costs
Terminal Handling Costs
Billing and Collection
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Line Haul Cost Varies with distance not weight
Line Haul Cost varies with cost per mile and
distance moved Costs includes fuel, drivers wages, and depreciation costs, etc
Line Haul Costs = Cost/Mile x Miles Traveled
Line Haul Costs/Cwt Varies with cost per mile, distance moved, and weight
Line Haul Costs/Cwt = Line Haul Cost/Weight (Cwt)
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Line Haul Cost A company ships barbecues fully assembled. The average line-haul
cost per shipment is $12.50 per mile, and the truck carries 100
assembled barbecues. The company decides to ship the barbecues
unassembled and figures they can ship 500 barbecues in a truck.
Calculate the line haul cost per assembled and unassembled. If theaverage trip is 300 miles , calculate the saving per barbecue.
Line haul cost assembled = $12.50 / 100 = $0.125 per barbecue per mile
Line haul cost unassembled = $12.50 / 500 = $0.025 per barbecue per mile
Savings per mile = $0.125- $0.025 = $0.10
Trip Savings = 300 X $ 0.10 = $30.00 per barbecue
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Line-Haul Cost Example
Q: The line-haul cost for a raw material is $1.75 per mile. For a
trip of700 miles and a shipment of500 cwt., what is the cost of
shipping per cwt.?
A: Total line-haul cost = cost per mile x miles= $1.75 x 700 = $1225
Cost per cwt. = Total line-haul cost / cwt.
= $1225 / 500 = $2.45
Q: If the shipment cost is increased to 1000 cwt., what is thesavings?
A: Cost per cwt. = $1225 / 1000 = $1.225
Savings per cwt. = $2.45- $1.225 = $1.23
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Pick up and Delivery Costs
Similar to Line Haul Costs except depend on the
amount of time spent
Carrier will charge for each pick-up and weight
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Terminal Handling Costs Unload, sort, load onto highway trucks
Consolidates shipments into fewer parcels
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Carriers Rate The Value of the item
The density of the item (LTL vs. TL)
The perishability of the item
The packaging of the item
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Warehouse Roles
Terminal Consolidation (LTL to TL)
Product Mixing
Improved Service
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Distribution CentersAn increase will result in:
Increase Truckload shipping costs
Decrease LTL shipment costs
Decrease in Total Transportation costs
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0
Packaging Functions Identify the product
Contain and protect the product
Contribute to handling efficiency
Levels:
Hold the product
Shipping container
Unit Load
Basic = Pallet 40 x 48 x 4
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Material Handling Increase cube utilization
Reduce handling
Increase service level
Categories
Conveyors
Industrial Truck
Cranes and Hoists
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747200 Series
Aircraft loading
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3
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They can unload this
entire plane in 35
minutes.