Components of physical distribution: Physical distribution is an important element of marketing mix. It is concerned with the availability of the goods and services to the right people at the right place and at the right time. This is thus concerned with two factors.
- The movement of goods from production place to the consumption place.
- The channel through which the product will reach from the manufacturer to the consumer.
Physical movement of goods:
When a product is produced and manufactured then it is branded, labelled, packed, priced and promoted. The consumer will thus get to know about the product and they would want to buy the product and for this, the product should be available in the right quantity at the right place. Thus the physical movement of goods from the production place to the place where the consumers demands it, is known as physical distribution. There are various important activities which are required to be done so that the physical distribution can take place.
Components of physical distribution
The components or elements of physical distribution are as under:
A good physical distribution channel is an efficient one which will inform the manufacturer as soon as possible about the demand of the product or service and it will be quickly fulfilled by the manufacturer or provider. The order flows from the consumer to the producer while the product will flow from the producer to the consumer and this flow should be really quick so that the consumers can be gained and retained.
Transportation means the physical movement of the goods from one place to another i.e. from the place of production to the place of consumption. It is very important because unless there is proper transportation of goods the sale will not take place and the demand and need of the product will remain unfulfilled.
Warehousing means to store the goods at one place so that they can be transported when necessary. This creates the time utility. Not always the production and consumption time will be the same, sometimes, there is huge gap between the two activities and this can be fulfilled by pacing the goods at a safe place. Here, the sorting and assorting is done.
Warehouses should be placed at such a location that it is easy to transport the products from warehouses to the place where they are demanded. The location is also important for the kind of product the company is dealing in. When the products are perishable or very heavy, then the location should as close as possible to the market. For example: machinery, food products etc.
The number of warehouses also affects the fulfilment of demand. The more the number of warehouses the company has, the less will be the time taken to transport products to place of consumption. Another aspect about warehousing is its cost. When the firm has more warehouses and at the prime locations then the cost will rise up. Keeping all these factors in mind, a proper consideration should be taken and then number, place and size of warehouse should be decided by the firm.
Inventory control is an important decision regarding the physical distribution of the goods. This means that the level of inventory needs to be decided. The level of inventory decision is closely linked to the warehousing decision. This decision is very important for the products those have high cost for each unit. The cost will increase if we keep a large stock. The firm will produce in accordance to the demand of the product. But sometimes, to meet the demand as soon as possible, producing higher number of goods becomes important. This high level of inventory can lead to higher cost. While, with the improvement in technology, the requirement for high inventory has reduced to a certain extent and now Just – in – time inventory method is on rise.
Inventory should be maintained based on the demand of the product. Thus, prediction needs to be done for the same. While, there are other factors also to be kept in mind while taking an inventory control decision. These factors are as follows:
- The policy and procedures of the firm are also important to be considered regarding the satisfaction of the customer. When the high level of inventory is maintained then the customer can be satisfied in less time as the products will be available easily. If the firm wants to satisfy the customers and is ready to compromise lower costs, then the high level of inventory should be maintained. Otherwise, a balance should be stricken between the customer satisfaction and cost of the product.
- The demand forecasts are done to know the demand of the product and thus help in maintaining the inventory / stock. When the forecasts are more accurate then the need for maintaining a very high level of inventory can be reduced to a large extent.
- The distribution channel which the company chooses is also an important factor to be considered. When the response of the distribution channel is quick then the level of inventory can be maintained at low levels but when the channel is slow then the time taken to respond to the demand will be slow. Thus, a channel which is quick and is able to meet the demand in less time will be helpful in maintaining lower levels of inventory.
- The cost is also as important as other factors because keeping the cost low is very useful in keeping the prices low and it will ultimately affect the profits. The cost of warehousing and the capital that gets tied up should be kept low.