The task of Logistics or physical distribution is more challenging and complicated in the present marketing scenario. The important topic relating to Logistics or physical distribution may be studied effectively under the following headings:
Definitions of Logistics or Physical Distribution
Eminent marketing authorities have defined the logistics are under:
- Physical distribution is the management of physical flow of products and the establishment and storage of goods after they are produced and before they are consumed.
- Physical distribution is the actual handling and moving of goods within individual firms and along with the channel system.
From the above definitions, it is clear that it is the movement of goods from producing centres to centres of consumption.
Logistics or physical distribution is closely related to the channel management of the company.
Characteristics of Logistics or Physical Distribution
Analysis of above-mentioned definitions indicates the following important characteristics or features of logistics or physical distribution:
- It is the science of supply.
- Logistics is closely related to the management of channels of distribution.
- It functions as an important linking pin between the centres of productions and centres of consumption.
- The blood supply system is very important in the human body. Logistics play the same role in the marketing system.
- It is the management of flow and movement of products or goods.
- It is a management activity. It involves management of storage of products at specified centres, their movement at the desired time in the right quantities and to the desired destinations.
Objectives of Logistics or Physical Distribution
The prime objective of Logistics or physical distribution may be described as under:
1. The prime objective of Logistics is to provide maximum customer satisfaction by delivering goods or product to target customers at desired places, at the right time and in desired quantities.
Customers feel unhappy when they do not get their desired products at the right time.
2. An important objective of physical distribution is to ascertain the smooth flow of goods or products.
3. Profit maximization is another important objective of logistics or physical distribution. By making available the product at selling points in desired quantities, the firm can get maximum sales.
By effective management of logistics, the seasonal demand can be met and the firm earns good profits. Therefore, profit maximization becomes an important objective of Logistics.
4. Another objective of physical distribution or logistics is to strike the optimum balance between distribution cost and maximum customer satisfaction.
To attain the objective of maximum customer satisfaction the firm has to keep goods in sufficient quantities at its various distribution points, but it will increase distribution cost.
Therefore, the reduction of distribution cost and maximum customer satisfaction objectives seems contradictory to each other. Eminent marketing “Guru Philip Kotler” suggests following this equation to strike the optimum balance between the two contradictory objectives.
The formula in this record is as under:
D = T + Fw + Vw + S
The meaning of the above words is as under:
- D = Total cost of the physical distribution system
- T = Total transportation cost
- Fw = Fixed cost of warehouses
- Vw = Variable cost of warehouses
- S = The quantum of profit and loss due to the average delay in supply.
5. Creation of place utility and time utility is the objective of logistics or physical distribution.
Logistics or physical distribution system make available the goods or products to wholesalers and retailers at different destinations, thus, creates place utility.
Supply of product or goods before the demand occurs is the creation of time utility and this is done by effective management of the physical distribution system.
Thus, now know the Logistics or Physical Distribution: Definitions Characteristics Objectives.