Nature and Importance of Physical Distribution and Marketing Logistics

Last Updated on Fri, 08 Dec 2023 | Sales Promotion

To some managers, physical distribution means only trucks and warehouses. But modern logistics is much more than this. Physical distribution or marketing logistics involves planning, implementing and controlling the physical flow of materials, final goods and related information from points of origin to points of consumption to meet customer requirements at a profit. In short, it involves getting the right product to the right customer in the right place at the right time.

Traditional physical distribution has typically started with products at the plant and tried to find low-cost solutions to get them to customers. However, marketing logistics thinking starts with the marketplace and works backwards to the factory. Logistics addresses the problem of outbound distribution (moving products from the factory to customers) and that of inbound distribution (moving products and materials from suppliers to the factory). It involves the management of entire supply chains, value-added flows from suppliers to final users, as shown in Figure 21.6. Thus the logistics manager's task is to co-ordinate the whole channel physical distribution system - the activities of suppliers, purchasing agents, marketers, channel members and customers. These activities include forecasting, purchasing, production planning, order processing, inventory management, warehousing and transportation planning.

Companies today are placing greater emphasis on logistics for several reasons:

physical distribution

(marketing logistics) The caskfi involved in planning, implementing and controlling the physical flats of materials and final goods from points of origin to points of use to meet the needs of customers at a profit.

Customer service and satisfaction have become the cornerstones of marketing strategy in many businesses, and distribution is an important

Figure 21.6

Figure 21.6

Supply chain depicting value-added flows from suppliers to final users customer service element. Companies are finding that they can win and keep more customers by giving faster delivery, better service or lower prices through more effective logistics. On the other hand, companies may lose customers when they fail to supply the right products on time. Logistics is a major cost element for most companies. About 15 per cent of an average product's price is accounted for by shipping and transport alone. Companies that do not take advantage of modern decision tools for coordinating inventory levels, transportation modes, and plant, warehouse and store locations make poor logistics decisions that result in higher costs. Improvements in physical distribution efficiency can yield tremendous cost savings for both the company and its customers.

The explosion in product variety has created a need for improved logistics management. For example, in the early part of the twentieth century, Che typical grocery store carried only 200-300 items. The store manager could keep track of this inventory on about ten pages of notebook paper stuffed in a shirt pocket. Today, the average store carries a bewildering stock of thousands of items. Ordering, shipping, stocking and controlling such a variety of products presents a sizeable logistics challenge. Finally, developments in information technology have created opportunities for positive gains in distribution efficiency. The increased use of computers, electronic point-of-sale scanners, uniform product codes, satellite tracking, electronic data interchange (EDI) and electronic funds transfer (EFT) has allowed companies to create advanced systems for order processing, inventory control and handling, and transportation routing and scheduling. These recent technological advances benefit not only manufacturers, but also members at other levels of the channel. Take EDI, for example: it speeds up the sending of business information, such as invoices and orders. With the need for fast response time, a retailer connected up to its suppliers could ensure that the lead time between order and supply is shortened as far as is possible. The manufacturers or suppliers have up-to-date information on retailer stocking levels and needs, and can respond faster than by using traditional manual methods. Consumers further down the line gain in that they can buy what they want at the right time and the right place. Indeed, in some industry sectors, such as retailing, certain companies are demanding EDI connections as a condition of trading.

Coals of the Logistics System

The starting point for designing a marketing logistics system is to study the service needs of customers. They may want several distribution services from suppliers: fast and efficient order processing, speedy and flexible delivery, presorting and pro tagging ot' merchandise, order-tracking Information, and a willingness to take back or replace defective goods.

Unfortunately, few companies can achieve the logistic objective of both maximizing customer service and minimizing distribution costs. Maximum customer service implies rapid delivery, large inventories, flexible assortments, liberal returns policies and a host of other services - all of which rai.se distribution costs. In contrast, minimum distribution cost implies slower delivery, small inventories and larger shipping lots — which represent a lower level of overall customer service.

Instead, the goal of the marketing logistics system should be to provide a targeted level of customer service at the leant cost by identifying the importance of various distribution services that customers require and then setting desired service levels for each segment, taking into account the level of service offered by competitors. The ultimate objective is to maximize profits, not sales. Therefore, the company must weigh the benefits of providing higher levels of service against the costs. Some companies offer less service than their competitors and charge a lower price. Other companies offer more service and charge higher prices to cover higher costs.

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Readers' Questions

  • wanda
    What implies physical distribution of goods?
    1 year ago
    • Physical distribution of goods refers to all activities related to the delivery of a product, from the manufacturer to the end customer. It involves all the steps needed to ensure that an item arrives safely at its intended location. This includes packaging, shipping, inventory management, customer service, returns management and customer support. Physical distribution is also sometimes referred to as logistics.
    • reagan
      What are the importance of marketing logistics?
      1 year ago
      • Marketing logistics is the process of planning, implementing, and controlling the flow and storage of goods, services, and information from the point of origin to the point of consumption. Here are some of the reasons why marketing logistics is important:
      1. Customer satisfaction: Effective marketing logistics ensures that products or services are delivered to customers in a timely and efficient manner. By ensuring that the right products are available at the right time and in the right quantity, it helps in meeting customer demands, leading to customer satisfaction.
      2. Cost reduction: Efficient logistics management can help in reducing costs associated with the movement, storage, and handling of goods. It enables companies to optimize their supply chain, reducing inventory holding costs, transportation costs, and associated labor costs.
      3. Competitive advantage: Marketing logistics provides companies with a competitive advantage by allowing them to deliver products faster and more reliably than their competitors. This can create customer loyalty and help in driving sales and market share.
      4. Supply chain optimization: Logistics management allows companies to streamline their supply chain operations, improving the overall efficiency and effectiveness of the supply chain. It helps in coordinating activities between suppliers, manufacturers, distributors, and retailers, leading to better coordination and collaboration.
      5. Market expansion: Effective marketing logistics can enable companies to enter new markets and expand their geographical reach. By developing efficient distribution networks, companies can penetrate new markets and reach potential customers more effectively.
      6. Product availability: Logistic activities ensure that products are available when and where they are needed. This is crucial for companies as it enables them to meet demand fluctuations and avoid stock-outs or excess inventory situations.
      7. Information management: Marketing logistics involves managing and communicating information throughout the supply chain. This helps in coordinating activities, sharing relevant data, forecasting demand, and making informed business decisions.
      8. Sustainability: Logistics management plays a significant role in adopting environmentally friendly practices by optimizing transportation routes, reducing energy consumption, and minimizing waste generation. This contributes to the sustainability goals of businesses and society.
        9. In conclusion, marketing logistics is crucial for businesses as it helps in achieving customer satisfaction, reducing costs, gaining a competitive edge, optimizing the supply chain, expanding market presence, ensuring product availability, managing information, and promoting sustainability. It is an essential component of overall marketing strategy and organizational success.
      • sophia
        What is physical distribution and its importance to marketeers?
        1 year ago
        • Physical distribution is the delivery of products from a manufacturer or wholesaler to retailers and consumers. It is an important part of the marketing process, as it is necessary to get the product to the end customer. It is important to marketers because it helps them to get their products in the hands of the right customers and can have a huge impact on the success of the product. It is important to consider the costs associated with physical distribution, as well as the most efficient methods of delivering the product.
        • donald
          What are the importance of physical distribution in logistics to day?
          1 year ago
          • Physical distribution is an important part of the logistics process as it enables the goods to arrive in the desired location in the desired condition, on time and at the right cost. Physical distribution includes activities such as warehousing, product packaging, order processing, inventory management, returns management, freight forwarding, transportation, and distribution. It is a critical function for achieving customer satisfaction and for helping companies remain competitive. Physical distribution allows companies to deliver products in a timely and cost effective manner, reducing the potential for damage or theft of products. By optimizing transportation routes, companies are able to improve their cost efficiencies and reduce their environmental impact. Additionally, physical distribution helps companies to identify issues in their supply chain which may lead to improvements later down the line. Overall, physical distribution is essential to ensure goods arrive safely, securely, and on time.
          • zula mewael
            What is physical distribution and its importance?
            1 year ago
            • Physical distribution is the process of storing, selling, and delivering physical products from a warehouse to the customer's doorstep. It is an essential part of the supply chain process because it ensures that the right products are delivered to the right customer at the right time. Physical distribution is important because it enables businesses to gain a competitive edge by providing the highest level of customer service, meeting the customer's needs quickly and efficiently, and ensuring that their products are in stock and available when needed. Additionally, physical distribution helps to reduce costs associated with storage, inventory costs, and shipping costs.
            • evan
              What is the nature of physical distribution?
              1 year ago
              • Physical distribution is the transportation and storage of goods from the point of production to the point of final consumption. It involves the movement and storage of raw materials, work in process inventory, and finished goods both to and from the manufacturer. It is a critical part of the supply chain and is responsible for getting the right product, in the right quantity, to the right place, and at the right time.
              • rosarmosario
                What are physical distribution funds in marketing?
                1 year ago
                • Physical distribution funds in marketing refer to the budget allocated to cover all costs related to the storage and transportation of goods from the point of purchase to their final destination. This includes costs of shipping, warehousing, handling, and any other services that are necessary to ensure the product gets to its desired location. Additionally, physical distribution funds can be used to cover costs related to packaging, labeling, and other necessary logistical services.
                • Athos
                  What are the nature and importance of marketing element?
                  1 year ago
                  • The nature and importance of marketing elements are essential to the success of any business venture. Marketing comprises a range of activities that a company undertakes in order to connect with potential customers and convince them to buy their product or service. It is a key to a business' success as it allows them to create awareness, build relationships and generate leads and sales. Marketing elements include pricing, branding, advertising, promotions, customer service, public relations, and market research. Each of these elements helps a business build brand loyalty and attract new customers. They all work together to create an overall strategy that will ultimately drive sales.
                  • Debra Lee
                    How can companies track the physical distribution of products?
                    1 year ago
                    • Companies can track the physical distribution of products by using barcode scanning technology, GPS tracking systems, and radio frequency identification (RFID) tags and readers. Barcode scanning technology allows companies to monitor the movement of products from warehouses to individual customers. GPS tracking systems can be used to monitor the precise location of products as they are transported from warehouses to customers. RFID tags and readers can be used to track the movement of products from the manufacturer to the warehouse and all the way to the customer. Companies can also use warehouse and inventory management software to track the physical distribution of products.