MARKETING CHANNELS Physical Distribution Strategy Berman Chapter 6

MARKETING CHANNELS Physical Distribution Strategy Berman Chapter 6 Version 3. 0 1

Physical Distribution Activities • • • A. Transportation B. Facilities C. Inventory D. Materials handling E. Communication 2

• Transportation - inbound/outbound/ international carrier/ mode/ carrier • Facilities - warehouse mngt/ planning distribution center/ planning/ plant site • Inventory - purchasing/raw materials/ work-in-process/ finished goods/ parts- service support/return goods handling • Materials handling - salvage-scrap disposal/ materials handling/ packaging • Communication - order processing/ demand forecasting /production scheduling 3

Symptoms of a poor PD System • Transportation - unprofitable, peripheral hauls few backhauls • Facility Structure - uneven warehouse utilization • Inventory Mgnt - stockouts, emergency orders, inventory turns • Materials handling - goods received defective • Communication, Information - lost orders, status, inconsistent customer service 4

A. Transportation Decision Making • railroads • motor carriers • waterways • pipelines • air freight • third party providers • coordinating transportation modes 5

B. Facilities • Warehouse Decision Making • public vs private • private warehouses • distribution centers, direct store delivery • cross docking, store front system • public warehouses • bonded, custom, field • hub and spoke systems 6

C. Inventory Mgnt Principles • types of inventory • process stock • lot size (cycle stock) • safety stock • seasonal, smoothing stocks • Computing Inventory Turnover • unit inventory turnover • retail $ inventory turnover • cost $ inventory turnover 7

Inventory Decision Making • Just-in-time and Quick Response Systems • Characteristics of JIT • supplies, quantities, quality, shipping • Efficient Customer Response • Reorder Point Determination • order cycle time, floor ready mdse • usage rate, review period, accurate response • Economic Order Quantity Determination • inventory holding costs, order proc costs 8

ABC Inventory Analysis A. average inventory on hand = 1/2 order qty B. annual inventory holding costs C. annual order processing costs D. B + C = Total annual inventory costs • Service Levels % % Cus Co Sls Co Prods Serv. Lvl product group A= 80 20 98 product group B= 15 30 95 product group C= 5 50 80 9

D. Materials Handling • Salvage and Scrap Disposal • Materials Handling • Packaging 10

E. Communication and Information • Order Processing • Demand Forecasting • Production Scheduling 11