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Physical Distribution

Explain the role of physical distribution in an effective marketing strategy.

      The goal of the physical distribution function is to produce a specified level of customer service while minimizing the costs involved in physically moving and storing the product from its production point to its ultimate purchase.

Identify and compare the major components of a physical distribution system.

      Physical distribution involves a broad range of activities concerned with efficient movement of finished goods from the end of the production line to the consumer. As a system, physical distribution consists of six elements: (1) customer service, (2) transportation, (3) inventory control (4) protective packaging and materials handling, (5) order processing, and (6) warehousing. These elements are interrelated and must be balanced to create a smoothly functioning distribution system and avoid suboptimization.

Outline the suboptimization problem in physical distribution.  

      Suboptimization refers to a situation in which each manager of a physical distribution activity attempts to minimize his or her costs, resulting in a negative impact on other physical distribution activities. The objective of the physical distribution function is to focus on total distribution costs to minimize the degree of suboptimization.

Explain the impact of transportation deregulation on physical distribution activities.

      Deregulation has had a profound effect on transportation in

recent years. Many transporters now are free to develop unique solutions to shippers' needs. Deregulation has been particularly important for motor carriers, railroads, and air carriers.

Compare the major transportation alternatives on the basis of factors such as speed, dependability, cost, frequency of shipments, availability in different locations, and flexibility in handling products.

            Railroads rank high on flexibility in handling products and availability in different locations; average on speed, dependability in meeting schedules, and cost; and low on frequency of shipments. Motor carriers are relatively high in cost but are ranked high on speed, dependability, shipment frequency, and availability in different locations. Water carriers balance their slow speed, low shipment frequency, and limited availability with very low costs. The special nature of pipelines makes them rank relatively low on availability, flexibility, and speed but also low in cost. Air transportation is high in cost but offers very fast and dependable delivery schedules.