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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