16 Questions
What is the primary reason why manufacturers extend their market?
To gain economies of scale in manufacturing and improve profitability
What does manufacturing add to a product?
Form value
What is the primary purpose of distribution?
To add place value and time value to a product
What is an example of a channel of distribution?
Producer to wholesaler to retailer to consumer
Why do market characteristics influence the logistics system?
Because they affect the location of distribution centers
What are the two main functions of material movement?
Physical supply and physical distribution
What is an example of a product characteristic that affects logistics?
Weight
Who is responsible for the physical distribution of goods?
The distribution department
What is the primary function of the transaction channel?
To negotiate, sell, and contract
Why does a florist selling a perishable product use their own trucks?
Because the product is perishable and needs to be delivered locally
What is the difference between moving iron ore and moving sheet steel?
The logistics problems are different
What is an example of an intermediary in the channel of distribution?
A wholesaler
What is the main difference between physical supply and physical distribution?
The bulk and physical condition of raw materials and finished goods
What is the channel of distribution?
The route taken by goods from the producer to the consumer
Who may pay for the cost of physical supply, depending on the conditions of sale?
Either the supplier or the customer
What is the primary function of the distribution channel?
To transport goods from the producer to the consumer
Study Notes
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.
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