Distribution Distribution (cont’d)(cont’d)

Physical DistributionPhysical Distribution

Order Processing &Information Costs

Place: CustomerService Levels

Inventory carryingCosts

Transportation Costs

Lot quantity costs Warehousing Costs

Physical DistributionPhysical 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 ImportanceRising Importance• Rising Cost of distribution

In Rupee termsAs a %age of the total costs

• Role in delivery satisfaction andvalue creation to the

customer

Physical DistributionPhysical Distribution• Three components:

Input, Processor and Output• Input: Order from the Customer• Processor: Transportation• Output: Delivery to the Customer

Customer Satisfaction Customer Satisfaction LevelsLevels

• Most Critical Factor• Function of:

Waiting time for the customer(from order to receipt)

Extent of fulfillmentCondition

of the delivery• Inputs for the C.S.L.:

Men, materials and money

InventoriesInventories• 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 CostsInventory Costs• Order Processing Cost• Inventory Carrying Costs• Re ordering Costs

Warehousing (Functions)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 ProcessingOrder 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

TransportationTransportation• 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 TransportModes of Transport• Airways• Railways• Waterways• Pipelines

Mode of Typical Products Examples 1. Airways High value and perishables emergency goods Perishable goods, documentation flowers2. Railways Bulky Long hauls chemicals, Iron, Steel etc. Coal, sand, rice, 3. Roadways Short hauls and high value goods, fresh Clothing, textiles, fruits, vegetables paper, fish etc.4. Waterways Bulky, low value and nonperishable Chemicals, sand, and agricultural products 5. Pipelines Fluids Petrol, Oil, Natural gas, Water, Chemicals

Current TrendsCurrent Trends• Containerisation• Multi modal modes of Transport

• Third Party Logistics Providers