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Physical Distribution Decision Areas



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  • Amity Business School


  • 1. Amity Business School MBA Class of 2010, Semester II Distribution & Logistics Management Ms.Vandana Gupta
  • 2. Physical Distribution decision areas
    • Locating Warehouses
    • Number of warehouses
    • Types of warehouses
    • Materials Handling Equipments
    • Mode of Transportation
    • Routing
  • 3.
    • Size of shipments
    • Inventory Levels
    • protective Packaging
  • 4.
    • Broadly, all the above mentioned areas can be grouped into four categories:
    • Order Processing
    • Inventory Control System
    • Warehousing
    • Transportation
  • 5. Order Processing
    • It includes the activities of receiving, recording, filling and assembling the orders for shipment .
    • An order cycle is the period between the time of the placement of an order by the customer to the time of the arrival of the goods at his destination.
    • The cycle is made up of the transmission of the order, document processing in the department and shipment of the goods .
  • 6. Customer places An order Inventory on Hand checked Production Scheduled Goods packaged, Sorted, tagged And sent to Local warehouse Goods stored until enough orders are placed Orders shipped to individual customers Supplier Receives And enters order Sufficient goods In stock Insufficient goods In stock Physical Distribution activities involved in a typical order cycle
  • 7.
    • The following information is vital for accurate and timely order fulfillment:
    • Order number, delivery date and address
    • Product name and number, quantity and unit price of product
    • Customer number, address and industry branch
    • Sales and sales territory
    • Means of transport, freight costs
    • Special instructions, where necessary
    • The main objective in maintaining any inventory is to meet market demands i.e. to make sales and fulfill customers orders .
  • 9.
    • Basic elements of the Inventory Control System:
    • a) Ordering Cost
    • b) Inventory Carrying Cost
    • c) Cost of stock outs.
  • 10. Ordering Cost
    • This is the total ordering expenses for the ordering or purchasing department
    • This cost includes:
    • 1. Cost of staff posted for ordering of goods
    • 2. Inspection cost of incoming materials
  • 11.
    • 3. Expenses incurred on transportation of goods purchased
    • 4. Cost of stationary, typing, postage, telephone charges etc
  • 12. Carrying Cost
    • This is the total cost of all the expenses involved in maintaining inventory.
    • Such expenses include:
    • 1. The cost of capital invested in inventories. An interest will be paid on the amount of capital locked up in inventories
    • 2. The loss of material due to deterioration and obsolescence.
  • 13.
    • Cost of spoilage in handling the materials
    • Insurance cost
    • Cost of storage which could have been used for other purposes (Opportunity cost)