Physical Distribution Marketing Co-Op. What is Physical Distribution? The key link between a...
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Transcript of Physical Distribution Marketing Co-Op. What is Physical Distribution? The key link between a...
Physical DistributionMarketing Co-Op
What is Physical Distribution?
The key link between a business and its customers – also known as logistics
Logistics – the process of physically delivering goods to customers
Comprises ALL activities that help to ensure the right amount of a product is delivered to the right place at the right time
Distribution Careers
Supply Chain and Distribution Opportunities at Target
Inventory• Inventory – All the goods shipped
and stored by a business before it is sold
Distribution Activities o Ordering Processing – placing and
organizing product orderso Transporting - moving goods from sellers
to buyerso Storing - holding the goods while they
await transporto Stock Handling - shipping, receiving, and
checking goodso Inventory Control – controlling and
cataloging merchandise while in storage
It can be Costly!!
• Physical Distribution is
the 3rd largest expense
for most businesses
• Surpassed only by the
cost of material and
labor
Types of Transportation Systems
TruckingRailroadsMarine ShippingPipelinesAir Cargo
Services
87.1%
5.6%
1.3% 1.9%
4%
Distribution Breakdown
TrucksRailroadsMarinePipelineAir
TruckingTypes of CarriersCommon Carriers – Provide
transportation services to any business for a fee– Accounts for 1/3 of all motor freight
Ex: UPS, Fed ExContract Carriers – for-hire carriers
that provide equipment and drivers for specific routes between the carrier and the shipper
Ex: Estes, Pitt Ohio
How UPS Works
Trucking
Types of Carriers
Private carriers – transport goods for an individual business- Businesses can lease equipment or own their own fleet
Trucking
• Mostly commonly used mode
of transportation
• Carry high value products that
are expensive or impossible to
keep in inventory
Ex: Produce
Trucking
Intermodal Transportation – combines two or more transportation modes to maximize the advantages of each
Interstate Transportation – when distribution crosses over state lines
RailroadsMost useful for delivering bulky freight
Coal Chemicals
Grain Lumber
SteelFarm Equipment
Shippers pay a lower rate if they fill an entire
boxcar
Carload – the minimum number of pounds of
freight needed to fill a boxcar
Railroad Transporting
Advantages
• Very low cost • Use 50-70% less
energy than trucking
• Seldom slowed or stopped by bad weather
Disadvantages
• Lacks flexibility• Can only be
delivered to stations along designated rail lines
• Require another form of transportation to get goods to storage location
Marine ShippingBarges and container ships transport
merchandise around the world
Regulated by The United States Maritime Commission
Marine Transporting
Advantages• Cheapest form
of transportation
Disadvantages• Slowest form of
transportation• Require another
form of transportation to get goods to storage location
• It is affected by bad weather and seasonal conditions
Pipelines
Advantages • Best safety record
among all major transportation systems
• Suffer minimal damage or theft
• Are not affected by bad weather
Disadvantages• High initial investment,
but lower operational costs
• Products move slowly
Most commonly used to transport oil and natural gas
The risk of a pipeline leak are low, but if one does occur, the damage to the environment can be extensive
Air Cargo Service
Advantages• The speediest form of
transport• Reduces inventory
expenses and storage costs
Disadvantages• Most costly form of
transport (twice as costly as motor transport)
• Can easily be delayed by bad weather and mechanical issues
Represents less than 1% of the total freight shipped
Mostly used for high-value, low-weight, time-sensitive items – like overnight mail
Transportation Service Companies
• U.S. Postal Service– Ships small packages by parcel post
or first class mail– For an extra fee, packages can be
insured against loss or damage
• Bus Package Carriers (Greyhound)– Provide transportation service for
packages under 100 pounds– Provide same-day or next-day
service to cities and towns along scheduled route
– Cost – based on weight of package and distance traveled
Transportation Service Companies
• Express Delivery Service– Specialize in delivering small, lightweight
packages and high priority mail (less than 150 pounds)
– Rates based on speed of delivery, size and weight of package, type of delivery required
• Freight Forwarders– Private companies that combine less-than-
truckload shipments and deliver them to the destination
– Combining multiple shipments helps to reduce rates for shippers
SHIPPING TERMSF.O.B. (free on board) destination
o the title of ownership remains with the seller until the goods reach destination
F.O.B. shipping pointo the buyer pays the shipping costs and is
responsible for losses
F.O.B. factory freight prepaido seller pays shipping chargeso goods become the property of the buyer at the factory
F.O.B. destination charges reversedo merchandise becomes the buyer’s only when goods
are receivedo buyer pays for shipping charges