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Activities concerned with efficient movement of products and raw materials from producers to consumers
.this is where the box goes.
Physical Distribution
Why study in a marketing course?
Marketing loses the sale, not physical distribution managers.
Physical Distribution
Why study in a marketing course? (cont.)
Key interactions with marketing mix variables
Physical Distribution
Why is p.d.m. ignored in marketing courses?
Lack of glamour Quantitative nature of courses Not a major area of research interest for behavioral faculty
Physical Distribution
Total Cost Perspective
Minimize total cost of physical distribution for a given level of customer service. Cost-service orientation versus revenue enhancement
A different way of managing assets
Physical Distribution
Visible and hidden costs
warehouse, transportation, inventory carrying costs stockout - lost profits due to failure to deliver
Zero Sub-optimization
do not optimize one functional cost area to detriment of total costs
Physical Distribution
Customer Service Standards
Relate back to buyer behavior Must be specific
order processing and delivery time assortments order size constraints
Physical Distribution
Warehousing
Receive, identify, sort, store merchandise
Efficiency in production requires manufacturing operations to be centralized and continuous, but demand is decentralized and not continuous.
Physical Distribution
Warehousing (cont.)
What type?
Private versus public
How many?
Centralized or decentralized
Where?
Near factory or near customers
Physical Distribution
Warehousing (cont.)
Private
owned by firm that owns the inventory inside stable inventory levels peculiar handling requirements high volume
Physical Distribution
Warehousing (cont.)
Public
rented space highly seasonal demand low volume
Physical Distribution
Warehousing (cont.)
Centralized
customer
warehouse
customer customer
Physical Distribution
Warehousing (cont.)
Decentralized
customer
warehouse
field warehouse
customer
customer
Physical Distribution
Inventory Management
Match quantity produced with quantity demanded
holding costs ordering costs stockout costs
Physical Distribution
Inventory Management (cont.)
When to reorder?
Physical Distribution
Inventory Management (cont.)
Stock
on hand
Physical Distribution
Inventory Management (cont.)
stockout
If demand increases...
Stock
on hand
time
place order
receive order
safety stock
Physical Distribution
Inventory Management (cont.)
If order filling time increases...
Stock stockout time
on hand
place order
receive order
safety stock
Physical Distribution
Transportation Management
What mode?
What route?
Physical Distribution
Transportation Management (cont.)
Modes
water
bulk, low value, slow inland waterways heavily subsidized by government
rail
flexible, long-haul, bulk, still slow, rough (high damage) dominant mode in ton-miles
Physical Distribution
Transportation Management (cont.)
Modes (cont.)
Motor Carriers (trucks)
flexible, medium to short haul, high theft only true door-to-door mode dominant mode in number of shipments
Air
fast, high value, light weight flexible but expensive
Pipeline
liquids and near liquids, inflexible, high fixed cost, not vc
Physical Distribution
Transportation Management
Trends
increased use of air freight truck trains - double, triple bottoms rail making comeback
3:1 fuel efficiency advantage over trucks 10:1 + over planes
subsidies on inland waterways decreasing deregulation has led to increase in intermodal firms
Physical Distribution
Symptoms of Poor PDM
low inventory turnover
6-12 times a year minimum
stockout
inventory = 2 mos. Sales > 99% in stock inventory = 1 mo. Sales > 90% in stock
interwarehouse shipments
do not ship it to yourself
Physical Distribution
PD Management Trends
increasing importance relative to the rest of operations, marketing increasing fuel costs international complexity
rail traffic in Europe