7.02 Classify the activities of physical distribution

Physical distribution is…• The activities in the distribution process

that organizes and moves the products through the channels.

• This movement (also called logistics) includes ordering, transporting, storing, handling, and inventory control.

Transportation is…• The physical movement of the product from one

place to another.

• Place A Place B

• Methods include:– Trucking or motor carriers – Railroads – Marine shipping – Pipelines – Air cargo services

Transpiration Methods

• Trucking or motor carriers. – Tractor trailers are most frequently used.

• Ex: tractor-trailer trucks deliver most of Wal-Mart’s products.

• Railroads– Move heavy and bulky freight.

• Ex: Coal, steel, lumber, grain, and equipment.

Transpiration Methods• Marine shipping.

– Transporting goods within the US and around the world.

• Ex: barges transport steel, iron ore, and grain along the Mississippi River.

• Pipelines. – Move oil and natural gas. The companies using the

pipelines own them. • Ex: BP owns pipelines that move crude oil from the oil field

to the refineries.

• Air cargo services. – High value, low-weight, and time-critical products.

• Ex: the owner of an exclusive floral shop might order flowers from France. The order will be shipped by air.

A transportation company…

• Transportation service companies are additional means of moving small to medium-sized packages.

• Ex: US Postal service, express delivery services, bus package carriers, and freight forwarders (private companies that combine shipments from several businesses to help reduce costs to those businesses) would deliver these smaller parcels.

Methods to store merchandise…

• Storage – The holding of products until they are sold.

Products produced in large quantities require storage.

– Ex: A new Harry Potter book is published and must be stored until book retailers place their order.

• Various way to store merchandise

Methods to store merchandise… (con’t)

• Private warehouse: A facility designed to meet the needs of the owner. It may be based on size, temperature control, or refrigeration.

– Ex: Carol’s Linens has its own private warehouse to replenish inventory when needed.

• Public warehouse: Storage and handling facility that may be provided for any business willing to pay for the space.

– Ex: Singletary Warehouse Company has a variety of rental spaces to lease business owners. They can select refrigerated or temperature controlled space.

Methods to store merchandise… (con’t)

• Distribution center: A storage facility used to centralize and speed up the delivery of goods and reduce the cost of storage – JC Penny’s has a distribution center in Atlanta

to reach all stores in the southeast• Bonded warehouse: Private or public

warehouse used to store products until federal taxes have been paid on the product(s). – U.S. Customs stores imported products until

duties have been paid

Methods of handling inventory include…

• Products ordered are received, checked, marked (priced), and transferred

• Receiving record: a document used by a business to keep track of its incoming inventory.

Methods of handling inventory include… (con’t)

• Check the received merchandise– Blind check method: Writing a detailed list of the

merchandise and its quantity. This list is then compared to the actual invoice. This method is time consuming but is considered the most accurate.

– Direct check method: The merchandise is verified against the invoice or purchase order.

– Spot check method: Merchandise is randomly checked for quality and quantity.

– Quality check method: Merchandise is inspected for workmanship and making sure there is no damage to merchandise.

Methods of handling inventory include… (con’t)

• Check the received merchandise– Blind check method: Writing a detailed list of the

merchandise and its quantity. This list is then compared to the actual invoice. This method is time consuming but is considered the most accurate.

– Direct check method: The merchandise is verified against the invoice or purchase order.

– Spot check method: Merchandise is randomly checked for quality and quantity.

– Quality check method: Merchandise is inspected for workmanship and making sure there is no damage to merchandise.

Methods of handling inventory include… (con’t)

• When merchandise has been received and checked, other information must be marked on the merchandise.

– The most common form of marking is placing the selling price on the merchandise.

– The most common method of marking is UPC (universal product codes). UPCs are scanned at check out.

• Once marked, merchandise must be transferred to the selling floor.

Inventory Control Methods• Inventory: The storing of merchandise before

it is sold. – Perpetual inventory control: Tracks inventory on

a continuous basis. A company can track and know the value and quantity of products on hand at any time.

• Ex: Harris Teeter may use perpetual inventory control of products. As an item is sold, the scanner communicates to the warehouse that the item is in need of restocking.

– Physical inventory control: Stock is physically counted periodically and verified for accuracy.

• Ex: Sam’s Club physically counts each item in each warehouse once each year.