The management of logistics or physical distribution functions as an important instrument for getting success in marketing. Its significance can be understood well from the example of world-famous “McDonald’s restaurant chain”. This restaurant chain is having its marketing operations in more than hundred countries with about 31000 branches across the world.
The Unique Selling Point (USP) of this restaurant chain is identical teste of every dish in every branch across the world. This requires strict control over the supply of raw materials and perfect training to hefs. Under the practice of McDonald’s, the branches have no authority of local purchase, except very few items.
Each and every required raw material and other things are directly dispatched by the parent company from America. This restaurant chain follows the policy of Central buying of all essential materials and other things.
Strict quality control measures are followed by the company to keep the uniformity of quality standards.
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The significance or advantages of management of Logistics or physical distribution could be understood effectively by the study of practices of this company in this regard.
It is not an easy task to manage an efficient, smooth, economical and regular supply of required raw materials and other things to about 31000 selling points with vast geographical distances. It is an ideal example in this regard.
Advantages of Logistics or Physical Distribution
The advantages and significance of management of logistics or physical distribution can be discussed as under:
1. Reduction in Distribution Cost
It is an important thing to note in marketing management that distribution cost does not increase the saleability of the product. It should be minimized. Japanese marketing firms have done enough homework in this regard.
They have developed “just in time (JIT)” Keeping in view of the rapid development of quality transport infrastructure and speedy Modes of transport the goods can be dispatched quickly from centers of production to centers of consumptions.
There is no need to keep bulk stocks at distribution points.
Under this system, goods are dispatched in small quantities, with short time intervals to different distribution points. By adopting this method, distribution cost can be reduced up to a reasonable level.
Related: Top 5 Types of Distribution Channels in Marketing (Explained).
2. Optimum Use of Financial Resources
When the firm is keeping a reasonable stock of products at distribution centers, it will require small capacity warehouses.
The financial resources of the firm will not block in the form of huge idle stocks in warehouses.
Therefore, the financial resources of the firm may be utilized effectively by sound Logistic management.
3. Exploitation of Market Opportunities
There may be a sudden upsurge in the demand for the company’s products in markets due to several reasons. If the company is having very sound.
The efficient and effective physical distribution system, it would be in a position to quickly dispatch required goods in desired quantities at the right time.
Market opportunities generally remain temporary and the company may take full advantages with the help of its sound logistics system.
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4. Price Stabilisation
The role of price stabilization becomes important for the company when the high demand for its products is prevailing.
The task of judicious physical distribution becomes so vital for the company in this situation because if the product is in short supply at some places, the channel members may take undue advantages of the situations and may hike prices unofficially.
Thus, in price stabilization in a specific situation, the physical distribution system may provide enormous help.
5. Market Expansion
When the company’s product is in the growth cycle, the firm’s total market expands rapidly.
If the physical distribution remains to fail to keep pace with market expansion, all Mega expenditures in the form of an aggressive promotional campaign in the introductory stage May prove futile.
By advanced planning regarding the opening of new distribution points and capacity expansion of existing distribution points, where it is necessary, the firm will be in a strong position to take full advantages of market expansion.
6. Boost the Moral and Motivation of Middleman
If the marketing company is adopting the indirect channels of distribution, the role of middleman becomes vital in getting product settled in target markets.
The firm can boost morale and motivation of its channel members by delivering the goods in desired quantities, at the required time and at required places.
7. Maintenance of Market Share
Global markets are highly competitive. In the situation of cut-throat competition, the firm cannot expect to expand market share, even it will be an achievement, if the firm keeps the present market share intact.
In this situation, the firm has to keep a close eye on its Logistics. The firm should identify the week point of distribution and should take corrective action immediately.
Therefore, by effective management of physical distribution, the firm can maintain its market share.
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8. Elimination of Middlemen
The middleman does not play an important role in the value addition of firms products.
If the marketing company is having a sound network of physical distribution and having spare financial resources, then it can set up its own selling points.
As a result, the firm may attain twin objectives elimination of middleman and optimum use of financial resources.
9. Maximum Customer Satisfaction
By providing desired products at required places at an appropriate time, with the help of the physical distribution system, the firm may provide maximum customer satisfaction. 9 Advanced Strategies for Building Maximum Customer Satisfaction.
It may be also very supportive in the retention of customers.
Thus, now you know the Advantages of Logistics or Physical Distribution.
Jeffrey Bohlin says
It looks like whoever wrote this article forgot to finish their thought on #3. Exploitation of Market Opportunities. The second sentence just states “If the company is having very sound.”
Jennifer theron says
how can I help you