Physical Distribution Marketing CoOp What is Physical Distribution

Physical Distribution Marketing Co-Op

What is Physical Distribution? The key link between a business and its customers – also known as logistics Logistics – the process of physically delivering goods to customers Comprises ALL activities that help to ensure the right amount of a product is delivered to the right place at the right time

Distribution Careers Supply Chain and Distribution Opportunities at Target

Inventory • Inventory – All the goods shipped and stored by a business before it is sold

Distribution Activities o Ordering Processing – placing and organizing product orders o Transporting - moving goods from sellers to buyers o Storing - holding the goods while they await transport o Stock Handling - shipping, receiving, and checking goods o Inventory Control – controlling and cataloging merchandise while in storage

It can be Costly!! • Physical Distribution is the 3 rd largest expense for most businesses • Surpassed only by the cost of material and labor

Types of Transportation Systems Trucking Railroads Marine Shipping Pipelines Air Cargo Services

Distribution Breakdown 1. 3% 5. 6% 1. 9% 4% Trucks Railroads Marine Pipeline Air 87. 1%

Trucking Types of Carriers Common Carriers – Provide transportation services to any business for a fee – Accounts for 1/3 of all motor freight Ex: UPS, Fed Ex Contract Carriers – for-hire carriers that provide equipment and drivers for specific routes between the carrier and the shipper Ex: Estes, Pitt Ohio

How UPS Works

Trucking Types of Carriers Private carriers – transport goods for an individual business - Businesses can lease equipment or own their own fleet

Trucking • Mostly commonly used mode of transportation • Carry high value products that are expensive or impossible to keep in inventory Ex: Produce

Trucking Intermodal Transportation – combines two or more transportation modes to maximize the advantages of each Interstate Transportation – when distribution crosses over state lines

Railroads Most useful for delivering bulky freight Coal Chemicals Grain Lumber Steel Farm Equipment Shippers pay a lower rate if they fill an entire boxcar Carload – the minimum number of pounds of freight needed to fill a boxcar

Railroad Transporting Advantages Disadvantages • Very low cost • Use 50 -70% less energy than trucking • Seldom slowed or stopped by bad weather • Lacks flexibility • Can only be delivered to stations along designated rail lines • Require another form of transportation to get goods to storage location

Marine Shipping Barges and container ships transport merchandise around the world Regulated by The United States Maritime Commission

Marine Transporting Advantages • Cheapest form of transportation Disadvantages • Slowest form of transportation • Require another form of transportation to get goods to storage location • It is affected by bad weather and seasonal conditions

Pipelines Most commonly used to transport oil and natural gas Advantages Disadvantages • Best safety record among all major transportation systems • Suffer minimal damage or theft • Are not affected by bad weather • High initial investment, but lower operational costs • Products move slowly The risk of a pipeline leak are low, but if one does occur, the damage to the environment can be extensive

Air Cargo Service Represents less than 1% of the total freight shipped Mostly used for high-value, low-weight, time-sensitive items – like overnight mail Advantages • The speediest form of transport • Reduces inventory expenses and storage costs Disadvantages • Most costly form of transport (twice as costly as motor transport) • Can easily be delayed by bad weather and mechanical issues

Transportation Service Companies • U. S. Postal Service – Ships small packages by parcel post or first class mail – For an extra fee, packages can be insured against loss or damage • Bus Package Carriers (Greyhound) – Provide transportation service for packages under 100 pounds – Provide same-day or next-day service to cities and towns along scheduled route – Cost – based on weight of package and distance traveled

Transportation Service Companies • Express Delivery Service – Specialize in delivering small, lightweight packages and high priority mail (less than 150 pounds) – Rates based on speed of delivery, size and weight of package, type of delivery required • Freight Forwarders – Private companies that combine less-thantruckload shipments and deliver them to the destination – Combining multiple shipments helps to reduce rates for shippers

SHIPPING TERMS F. O. B. (free on board) destination o the title of ownership remains with the seller until the goods reach destination F. O. B. shipping point o the buyer pays the shipping costs and is responsible for losses F. O. B. factory freight prepaid o seller pays shipping charges o goods become the property of the buyer at the factory F. O. B. destination charges reversed o merchandise becomes the buyer’s only when goods are received o buyer pays for shipping charges