CONTENTS

1. INTRODUCTION2. OBJECTIVES OF PHYSICAL

DISTRIBUTION3. IMPORTANCE OF PHYSICAL DISTRIBUTION

4. PHYSICAL DISTRIBUTION ACTIVITIES

5. TOTAL COST CONCEPT6. TRANSPORTATION COSTS7. TRANSPORTATION MODES

SUPPLY CHAIN

OBJECTIVES OF PHYSICAL DISTRIBUTION

1. To provide better customer service.

2. To increase sales.3. To reduce cost.

IMPORTANCE OF PHYSICAL DISTRIBUTION

Controlling distribution cost. Increase in sales volume. Co-ordination of demand supply. Effect on channel of distribution. Product planning. Effect on size of inventory.

Physical Distribution - Activities

1. Transportation

2. Distribution inventory

3. Warehouses

4. Materials handling

5. Protective packaging

6. Order processing

Transportation

Movement of goods Highest portion of distribution costs

30 - 60% Adds place value to the product

Distribution Inventory

Includes all finished goods anywhere in the distribution system

Second highest cost of distribution25 - 30%

Inventories add time value to the product

Warehouses

Used to store inventory improved customer service transportation efficiencies

Warehouse management concerned with: site selection, number of warehouses layout and methods of receiving, storing and

retrieving goods

Materials Handling

Movement and storage of goods within a distribution center

Type of equipment used affects the costs of operation

High capital cost Tradeoff between capital cost and

operating (labor) cost

Protective Packaging

Containment, protection and identification

Packages must fit in storage spaces and transportation vehicles

item package carton pallet container

Order Processing

“The activity required to administratively process a customer’s order and make it ready for shipment or production.” Represents an element of time in a customer’s order Important part of customer service May involve intermediaries

Total Cost Concept

Provide the required level of customer service at the least total system cost

Cost reduction should not involve only one area of cost

Changes in one activity will affect other activities, total system cost and customer service

Total Cost Concept

Cost trade-off a cost decrease in one area may incur a

smaller increase in another area

Total cost consider all of the costs increases in one area are offset by reductions

in other areas

Keep customer service in mind

Transportation Costs

Fixed Costs the costs that do not change with the volume

moved Eg. buildings, equipment, land

Variable Costs the costs that change with the volume

moved Eg. fuel, maintenance, wages

Transportation - Modes

Rail Road Air Water Pipeline

MADE BY:

RISHU CHOPRABBA- 3 ‘A’

Roll no. : 1720