Physical Distribution and Supply

Physical Distribution

• Physical distribution is the movement and storage of finished goods from the end of production to the customer.
• It involves the movement of materials from the producer to the consumer through distribution centers, wholesalers, and retailers.
• The path in which the goods move is called the channel of distribution.

Channels of Distribution

• A channel of distribution is one or more companies or individuals who participate in the flow of goods and/or services from the producer to the final user or consumer.
• Intermediaries are companies or individuals who distribute some or all of a company's products to the final consumer.
• Examples of intermediaries include wholesalers, agents, transportation companies, and warehousers.

Transaction and Distribution Channels

• The transaction channel is concerned with the transfer of ownership, negotiating, selling, and contracting.
• The distribution channel is concerned with the transfer or delivery of the goods or services.
• The same intermediary may perform both functions, but not necessarily.

Physical Distribution vs. Physical Supply

• Physical supply is the movement and storage of goods from suppliers to manufacturing.
• Physical distribution and physical supply have different logistics problems, particularly in terms of bulk and physical condition of raw materials and finished goods.

Importance of Physical Distribution

• Physical distribution is vital in our lives, as it allows manufacturers to extend their market and gain economies of scale in manufacturing.
• A well-run distribution system is necessary to extend markets, reduce the cost of purchases, and improve profitability.
• Distribution adds place value and time value by placing goods in markets where they are available to the consumer at the time they want them.

Factors Affecting Physical Distribution

• The channels of distribution used by the firm.
• The types of markets served.
• Market characteristics, such as geographic dispersion, number of customers, and size of orders.
• Product characteristics, such as weight, density, fragility, and perishability.
• The type of transportation available to move the material.

Learn about the movement of materials, including physical supply and physical distribution, and how costs are passed on to customers.