Chapter 2 covers physical distribution, defining it as the planning and control of material flows from production to end use. It discusses the components of physical distribution, including order processing, transportation, warehousing, and inventory management, and highlights the importance of balancing cost and service. Additionally, it emphasizes the relationship between physical distribution and other marketing mix variables such as product, price, and promotion.

1. Chapter 2
• Physical Distribution
Chapter 2 Physical Distribution

2. Chapter Plan
• Concept & Definition
• Logistics
• Relation with other Marketing Mix
Variables
• Importance of Physical Distribution
• Components of Physical Distribution
Chapter 2 Physical Distribution

3. Definition
• Physical distribution ‘involves planning,
implementing and controlling the physical
flows of materials and final goods from
place of production to the place of end use
to satisfy buyers ‘ needs.’’
– Philip Kotler
Chapter 2 Physical Distribution

4. Logistics
• Logistics management includes both
physical distribution and physical supply
Chapter 2 Physical Distribution

5. Relation with Marketing Mix
A. Product-physical Distribution
• FMCG- Mass Distribution
• Perishable product- shortest distri.
B. Price-Physical Distribution
• Reciprocal Relationship
C. Promotion-Physical Distribution
– Grab the market potential
Chapter 2 Physical Distribution

6. Objectives of Physical
Distribution Process
1. Total Cost Concept
2. Customer Service Concept
a. Time
b. Dependability
c. Communication
d. Convenience
e. Accuracy
Chapter 2 Physical Distribution

7. Objectives of Physical
Distribution Process
3. Distribution Cost- service trade offs
• Achieve right balance between them
• Flexibility is important in balancing the cost
and service
Chapter 2 Physical Distribution

8. Component of Physical
Distribution
1. Order Processing
2. Transportation
3. Warehousing
4. Material Handling
5. Inventory Management and Control
Chapter 2 Physical Distribution

9. Order Processing
a. Verifying customers’ credibility
b. Checking for any outstanding payment
c. Monitoring stock level
d. Preparing invoice
e. Arranging transporter
f. Sending the consignment and
information
Chapter 2 Physical Distribution

10. Selection of the transportation
mode
1. Suitability or nature of product
2. Affordability
3. Availability
4. Customers’ specifications
5. Competitor’s transportation mode
Chapter 2 Physical Distribution

11. Warehousing
• Type of warehouse
1. Private warehouse
2. Public warehouse
3. Distribution warehouse
4. Bonded warehouse
5. Mother depot
– Number and Size of Warehouses
Chapter 2 Physical Distribution

12. Warehousing
• Location
– Availability of basic facilities such as
electricity, water, labour, transport etc.
– Space
– Roads
– Government rules and regulations
Chapter 2 Physical Distribution

13. Warehousing
• Layout
1. Proper lighting, ventilation, and fire
precaution
2. Protection from temperature, moisture, etc
3. Security arrangement
4. Space arrangement
Chapter 2 Physical Distribution

14. Warehousing
• Storage Methods
– Optimum use of space
– Ease in storing and picking
– Accurate identification of material
– Possible to follow FIFO
– Provision for fast moving items
Chapter 2 Physical Distribution

15. Material Handling
• Involves placing and positioning of
material to facilitate movement and
storage
• Common equipments are conveyors,
bucket Elevators, hoists, lifts, cranes,
forklifts, trolleys, dumpers, trailors, trucks
Chapter 2 Physical Distribution

16. Inventory Management &
Control
• Major tool to cost reduction objective
• Just –in –time
– Reliability of suppliers
– Close communication between suppliers and
customers
– Attention to quality
– Adequate storage facilities and transportation
options
Chapter 2 Physical Distribution

17. Economic Order Quantity
(EOQ)
• At EOQ Ordering Cost=Carrying Cost
• EOQ =Square route ( 2AP/CU)
– Where, A= annual demand in units
B= Ordering Cost per Order
C= Carrying Cost
U= Unit Price
Chapter 2 Physical Distribution

18. Summary
• Physical Distribution is highly co-related
with other variables of marketing mix
• Order processing, transportation,
warehousing, material handing and
inventory management and control are
important components of physical
distribution
Chapter 2 Physical Distribution

19. Summary
• Material handling involves decision on
placing and positioning of material to
facilitate their movement and storage.
• Inventory control is a major tool for cost
reduction, JIT and EOQ are useful
techniques
Chapter 2 Physical Distribution

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