Distribution (cont’d)
Physical Distribution
Place: Customer Service Levels
Inventory carrying Costs
Transportation Costs Warehousing Costs
Lot quantity costs
Order Processing & Information Costs
Physical Distribution
• Outgoing product flow through defined network of transportation lines and distribution nodes
• This along with “material management” cycle would form the “logistics cycle”
• Outflow becomes inflow for another supplier in the value chain and is likely to be repeated
• Distribution costs could go from 10% to 40% of the total costs
Rising Importance
• Rising Cost of distribution In Rupee terms As a %age of the total costs • Role in delivery satisfaction and value creation to the customer
Physical Distribution
• Three components: Input, Processor and Output • Input: Order from the Customer • Processor: Transportation • Output: Delivery to the Customer
Customer Satisfaction Levels
• Most Critical Factor • Function of: Waiting time for the customer (from order to receipt) Extent of fulfillment Condition of the delivery • Inputs for the C.S.L.: Men, materials and money
Inventories
• Inputs for the production or use • Intermediate stage between stage • Finished Goods waiting shipment These help In • Ensuring continuity and avoiding Stock outs • Take care of Seasonality on Both sides • Taking care of variation of demand and supply
Inventory Costs
• Order Processing Cost • Inventory Carrying Costs • Re ordering Costs
Warehousing (Functions)
• Receipt: unloading, inspection, accounting • Storing: Careful labeling, identification & a/cing • Handling • Display • Order Handling • Information Processing: depository of information across the organisation
Order Processing
A major contributor to the costs Helps in ensuring customer satisfaction Needs careful planning Function of the size and number of orders Necessary to systemise it across the organisation • Information system can help in the process • • • • •
Transportation
• Supply of Products in Sufficient Quantity • Supply of Products in time • Ease of Availability • Economy of Operation • Safety and Security of goods in transit • Ensuring Customer Satisfaction
Modes of Transport
• Airways • Railways • Waterways • Pipelines
ode of
Airways Railways Roadways Waterways
Typical Products
High value and perishables emergency goods documentation Bulky Long hauls chemicals, Iron, Steel etc. Short hauls and high value goods, fresh fruits, vegetables Bulky, low value and nonperishable
Examples
Perishable goods, flowers Coal, sand, rice,
Clothing, textiles, paper, fish etc. Chemicals, sand, and agricultural products
Pipelines
Fluids
Petrol, Oil, Natural gas, Water, Chemicals
Current Trends
• Containerisation • Multi modal modes of Transport • Third Party Logistics Providers