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The Physical Movement of Goods

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The Physical Movement of Goods

  1. 1. The Physical Movement of Goods TRANSPORTATION The marketing principle that insists goods should be at the right place at the right time to satisfy the needs of the consumer often confronts the producer with a dilemma. Among the benefits consumers seek from the goods they buy, one of the most significant is price economy. Yet in order to bring goods to the right place at the right time (and secure an acceptable profit margin), the producer must maintain an economic level of costs. A major factor mitigating against such economy, however, is the ever-increasing cost incurred in the physical movement of goods. Free Powerpoint Templates Page 1
  2. 2. Despite regular improvement in the road system and also in the efficiency of road haulage vehicles, transportation costs continue to escalate. It is for this reason that physical distribution management (PDM) has become an important function within marketing- orientated companies supplying goods to nationwide markets. In very basic terms PDM seeks to find a point of balance between the cost of getting the goods to the right place at the right time and the benefit, expressed in terms Free Powerpoint Templates Page 2 of increased demand, that this
  3. 3. An equally important reason for marketing’s effect on the planning of physical distribution is that operational economy is only half the picture. To take a crude example, should a company decide to close its regional depots and make long-haul deliveries from a central warehouse, a considerable saving may be achieved in its distribution costs. But if this results also in falling regional demand due to customer dissatisfaction, because the quality of delivery service has declined, the firm’s longer-term marketing objectives may not Free Powerpoint Templates have been served. Alternatively, requests by3 Page
  4. 4. Transportation The United States' transportation system has long been a government-regulated industry, much like its telephone and electrical utilities. But in 1977 the deregulation of transportation began with the removal of federal regulations for cargo air carriers not engaged in passenger transportation. The deregulation movement has since expanded in ways that have fundamentally altered the transportation landscape for small business owners, large conglomerates and, ultimately, the consumer. Transportation costs are largely based on the rates charged by carriers. There are two basic types of transportation rates: class and commodity. The class rate, which is the higher of the two rates, is the standard rate for every commodity moving between any two destinations. The commodity rate is sometimes called aFree Powerpoint Templates is given by Page 4 special rate, since it
  5. 5. TRUCKING—FLEXIBLE AND GROWING. The shipping method most favoured by small business (and many large enterprises as well) is trucking. Carrying primarily manufactured products (as opposed to bulk materials), trucks offer fast, frequent, and economic delivery to more destinations in the country than any other mode. Trucks are particularly useful for shortdistance shipments, and they offer relatively fast, consistent service for both large and small shipments. AIR FREIGHT—FAST BUT EXPENSIVE. Because of the relatively high cost of air transport, small businesses typically use air only for the movement of valuable or highly-perishable products. However, goods that qualify for this treatment do represent a significant share of the small business market. Owners can sometimes offset the high cost of air transportation with reduced inventory-holding costs and the increased business that may accompany faster Free Powerpoint Templates customer service. Page 5
  6. 6. RAILROADS—LONG DISTANCE SHIPPING. Railroads continue to present an efficient mode for the movement of bulky commodities over long distances. These commodities include coal, chemicals, grain, nonmetallic minerals, and lumber and wood products. PIPELINES—SPECIALIZED TRANSPORTERS. Pipelines are utilized to efficiently transport natural gas and oil products from mining sites to refineries and other destinations. In addition, so-called slurry pipelines transport products such as coal, which is ground to a powder, mixed with water, and moved as a suspension through the pipes. INTERMODAL SERVICES. Small business owners often take advantage of multi-mode deals offered by shipping companies. Under these arrangements, business owners can utilize a given transportation mode in the section of the trip in which it is most cost efficient, and use other modes for other segments of the transport. Overall costs are often significantly lower under this Free than with single-mode transport. arrangement Powerpoint Templates Page 6
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  8. 8. Order Processing The small business owner is concerned with order processing— another physical distribution function— because it directly affects the ability to meet the customer service standards defined by the owner. If the order processing system is efficient, the owner can avoid the costs of premium transportation or high inventory levels. Order processing varies by industry, but often consists of four major activities: a credit check; recording of the sale, such as crediting a sales representative's commission account; making the appropriate accounting entries; and locating the item, shipping, and adjusting inventory records. Free Powerpoint Templates Page Technological innovations, such as 8

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