CHAPTER 8 PHYSICAL DISTRIBUTION MANAGEMENT STRATEGY Important Topics

CHAPTER 8 PHYSICAL DISTRIBUTION MANAGEMENT STRATEGY

Important Topics of This Chapter The Nature of Physical Distribution and Supply Chain Management. Traffic Management and its Functions. Customer Service in Physical Distribution. Warehousing and Inventory Control.

Physical Distribution Physical distribution: The process of planning, implementing, and controlling efficient, effective flow and storage of goods, services, and related information from point of origin to point of consumption for the purpose of conforming to customer's requirements. The importance of physical distribution: Physical distribution cost can represent 20% or more of the selling price of a product. It is an integrated part of the entire company system: Problems in other areas impact distribution and vice versa. From customer’s perspective, supplier’s physical distribution function gets the right products to them, at the right place, at the right time. These are basic customer rights (along with right price and right condition).

Logistics Management Logistics involves more than physical distribution. In the science of logistics, the flow of materials is efficiently managed inbound-through and outbound of an organization. Two primary product flows: Physical supply (materials management): Flows that provide raw materials, components, and supplies to the production process. Physical distribution management: Flows that deliver the completed product to customers and channel intermediaries.

Materials management Supplier Physical distribution management Manufacturer Customer Logistics Management

Study Area Map Supply chain management (a series of connected logistics flows) Logistics management Materials management Incoming transportation Receiving Purchasing Incoming warehousing Inventory control Physical distribution Traffic management Shipping Customer service Finished goods

Supply Chain Management Supply chain management: An integrated philosophy to manage the multidirectional flow of materials and information through an entire channel, from the first raw material supplier to the ultimate user of the finished product.

Functions of Traffic Management Mode and carrier selection Routing Claims processing Operation of private transportation

Many of the imported goods you purchase were shipped in 20 -foot or 40 -foot steel containers

Large cranes loaded the containers on a ship. (Image courtesy of the Port of Charleston)

Larger container ships can hold 4, 000 to 6, 000 containers. (Image courtesy of Maersk Sealand)

After unloading from the ship, the containers can be loaded onto a flatbed rail car for additional intermodal shipping. (Image courtesy of CSX Corp. )

Alternatively, a container can be attached to a set of wheels for motor transport (as an 18 -wheeler trailer).

Inter-modal container motor carrier (Image courtesy of Maersk Sealand)

Rail freight carrier (Image courtesy of CSX Corp. ) Barge/river freight carrier

Air freight carrier Pipeline Container stack train Jumbo jet air freight

Major Advantages by Transportation Mode Motor Speed of delivery Diversity of equipment Flexibility Frequency of movement Transfer of goods to other carriers Convenient to both shipper and receiver Rail Mass movement of goods Low unit cost of movement Dependability Long-haul moving Wide coverage to major markets and suppliers Many auxiliary services (i. e. , switching) Transfer of goods to other carriers Specialized equipment Water Very low unit cost of movement Movement of low-unit-value commodities Long-haul movement Mass movement of bulk commodities (continued)

Major Advantages by Transportation Mode Pipeline Lowest unit cost of movement Mass movement of liquid or gas products Long-haul moving Large capacity Most dependable mode Air Frequent service to major markets Large capability Overnight service Most rapid speed of any carrier Inter-modal Cost savings Lower loss and damage claims due to containerization Service extended to more shippers and receivers Reduced handling and storage costs

Controllable Elements in a Logistics System Customer service Logistics communications Warehousing Packaging Production planning Order processing Transportation Inventory control Materials Handling Plant and warehouse location

Major Categories of Service Complaints Traffic and transportation Damaged merchandise Carrier did not meet standard transit time Merchandise delivered prior to date promised Carrier failed to follow customer routing Carrier did not comply with specific instructions Errors present on bill of lading Condition or type of transport equipment not satisfactory Warehousing and packaging Merchandise delivered late Problem with containers in packaging plants Special promotion merchandise not specified in delivery Errors in warehouse release forms Incorrect types and quantities of merchandise shipped Papers not mailed promptly to headquarters Field warehouse delivered damaged merchandise (continued)

Major Categories of Service Complaints Inventory control Stock-outs Contaminated products received Product identification errors Poor merchandise shipped Sales order service Delayed shipments Invoice, sales coding, or brokerage errors Special instructions ignored No notification of late shipments

Inventory Control Carrying cost Ordering cost Total cost EOQ level JIT Inventory: Small lot size. Frequent deliveries Exact quantities. Precise arrival time. Near perfect quality