Explain the concept of Physical Distribution.
Physical distribution is a means by which product are made available to customers when and where they want them. Physical distribution includes the following:
- Order processing.
- Inventory management.
Activities relating to order processing provide information inputs that are critical in fulfilling a customer’s order. Order processing includes order entry, in which the order is actually entered into a company’s information system; order handling, which involves locating, assembling and moving products into distribution, order delivery, the process by which products are made available to the customer.
Warehouses are used to store goods until they are sold, another type of facility, the distribution center, is designed to efficiently receive goods from suppliers and then fill orders for individual stores. A company may have its own warehouses and distribution centers.
Proper inventory management ensures that a company neither runs out of manufacturing components or finished goods nor incurs the expense and risk of carrying excessive stocks of these items.
Finally, transportation decisions concern which of five methods a company should use to move its products: rail, truck, air, water or pipeline. When contemplating market expansion outside the home country, management’s inclination may be to configure these aspects of the value chain exactly as they are at home. However, this may not be the most effective solution because the organization may lack the necessary skill and experience to conduct all value chain activities in target markets.
A company with home market competitive advantages in both the Upstream activities and downstream activities manufacturing and distribution, For example: may be forced to reconfigure distribution activities to successfully enter a new global markets.