Physical distribution matters because it creates time and place utility, getting products where and when customers want them. It is also one of the largest costs in marketing, so coordinating transport, storage and stock as one system helps meet customer service standards while cutting total distribution costs and order cycle time.
Physical distribution management is concerned with transportation, materials handling, packaging, warehousing (and locations of depots), inventory policy, stock control, and order processing.
Physical distribution has become an important function of sales and marketing in this industrial age.
Need and Importance of Physical Distribution
The importance of this function can be discussed under the following headings:
1. Provides Time and Place Utility
The physical distribution provides time and place utility and makes possession utility possible.
A marketing manager may have to make many decisions to ensure that the physical distribution system provides utility and meets customers’ needs with an acceptable service level and cost.
2. Carries Large Costs
Physical distribution costs are very important to both firms and consumers.
Physical distribution costs vary from firm to firm and, from a macro marketing perspective, from country to country.
However, for many physical goods, firms spend half or more of their total marketing budget on PD activities.
The total amount of money involved is so large that even small improvements in this area can have a big effect on the whole consumer’s quality of life.
Advanced Strategies for Building Maximum Customer Satisfaction.
3. Customer Want Products – Not Excuses
Customers do not care how a product is moved or stored, or what some channel member has to do to provide it.
Rather, customers think in terms of the physical distribution customer service level- how rapidly and dependably a firm can deliver what they, the customers, want.
Marketing managers need to understand the customers’ point of view.
4. Invisible to Most Consumers
Physical distribution is a part of marketing that is not visible to most consumers. It only gets their attention when something goes wrong.
But performing at the time, it keeps consumers happy.
In countries where physical distribution systems are inefficient, consumers face shortages and inconvenient waits for the products they need.
Physical distribution function creates consumer satisfaction.
5. Focus on the Whole Distribution System
The physical distribution concept says that all transportation and storage activities of a business and a channel system should be coordinated as one system, which should seek to minimize the cost of distribution for a given customer service level.
This physical distribution function focuses on many factors such as trade-offs, distribution costs, customer service level, sales, lost sales and inventory cost, etc.
6. Meeting Customer Service Standards
Physical distribution activities satisfy customer needs and want by maintaining customer service standards.
Customers require a variety of services. At the most basic level, they need fair prices, acceptable product quality, and dependable deliveries.
In the physical distribution area, availability, timeliness, and quality are important dimensions of customer service and frequently determine whether customers are satisfied with a supplier.
Advantages of Logistics or Physical Distribution.
7. Reducing Total Distribution Costs
Physical distribution managers try to minimize the costs associated with order processing, inventory management, materials handling, warehousing, and transportation.
Managers prepare and implement a unified cost-effective distribution strategy.
8. Reducing Cycle Time
Another important goal of physical distribution involves reducing cycle time, the time it takes to complete a process, so as to reduce costs and increase customer service.
