CONTENTS

1. INTRODUCTION
2. OBJECTIVES OF PHYSICAL
DISTRIBUTION
3. IMPORTANCE OF PHYSICAL DISTRIBUTION
4. PHYSICAL DISTRIBUTION ACTIVITIES
5. TOTAL COST CONCEPT
6. TRANSPORTATION COSTS
7. TRANSPORTATION MODES

SUPPLY CHAIN

OBJECTIVES
OBJECTIVES OF
OF PHYSICAL
PHYSICAL
DISTRIBUTION
DISTRIBUTION
1.

2.
3.

To provide better customer

service.

To increase sales.
To reduce cost.

IMPORTANCE
IMPORTANCE OF
OF PHYSICAL
PHYSICAL
DISTRIBUTION
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
Physical Distribution
Distribution -- Activities
Activities
1. Transportation
2. Distribution inventory
3. Warehouses
4. Materials handling
5. Protective packaging
6. Order processing

Transportation
Transportation

Movement of goods
Highest portion of distribution costs
30 - 60%
Adds place value to the product

Distribution
Distribution Inventory
Inventory

Includes all finished goods

anywhere in the distribution system
Second highest cost of distribution
25 - 30%
Inventories add time value to the
product

Warehouses
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
Materials Handling
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
Protective Packaging
Packaging

Containment, protection and

identification
Packages must fit in storage spaces
and transportation vehicles

item
package
carton
pallet
container

Order
Order Processing
Processing
The activity required to
administratively process a customers
order and make it ready for shipment
or production.
Represents an element of time in a
customers order
Important part of customer service
May involve intermediaries

Total
Total Cost
Cost Concept
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
Total Cost
Cost Concept
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
Transportation Costs
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
Transportation -- Modes
Modes

Rail
Road
Air
Water
Pipeline

MADE BY:

RISHU CHOPRA
BBA- 3 A

Roll no. : 1720