CHAPTER 22 Physical Distribution - Weebly · Transportation Modes Trucking Pipelines Advantages...

462 UNIT 7 — DISTRIBUTION

C H A P T E R 22

Chapter Objectives After reading this chapter, you should be able to:

• Describe the nature and scope of physical distribution

• Identify transportation systems and services that move products from manufacturers to consumers

• Name the different kinds of transportation service companies

• Explain the concept and function of inventory storage

• Identify the types of warehouses

• Discuss distribution planning for international markets

Market Talk Marine transportation is one of

the oldest methods of moving goods. Many

major cities developed next to bodies of

water because the ability to transport goods

facilitated the growth of commerce.

Quick Think Barges and container ships are

used to transport goods on bodies of water.

What are some other forms of transportation?

Physical Distribution

EXPLORE THE PHOTO

Spencer Grant/Photo Edit

Chapter 22 — Physical Distribution 463

ROLE PLAY Check your understanding of DECA performance indicators with the DECA activity in this chapter’s review. For more information and DECA Prep practice, go to the Marketing Essentials OLC through glencoe.com.

glencoe.com

DECA Events These acronyms represent DECA com-petitive events that involve concepts in this chapter:AAM* ADCASMBMDMBSM

EMDM*FMALFMML*HLMHMDM

MMSQSRM RFSMRMS*SEM

SMDMTMDM

Performance Indicators The performance indicators represent key skills and knowledge. Relating them to the concepts explained in this chapter is your key to success in DECA competitive events. Keep this in mind as you read, and write notes when you fi nd material that helps you master a key skill. In these DECA competitive events, you should follow these performance indicators:• Explain the nature and scope of distributionThe events with an asterisk also include:• Use an information system for order fulfi llmentSome events include these performance indicators:ADC Develop and implement order fulfi llment processesBMDM/EMDM Fulfi ll orders Select best shipping method Analyze capabilities of electronic business systems to facilitate order fulfi llment Assess order fulfi llment processesFMAL/FMML Select best shipping method Analyze shipping needsFMML Analyze capabilities of electronic business systems to facilitate order fulfi llment Assess order fulfi llment processesRMS Fulfi ll orders Select best shipping method

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TransportationModes

Pipe

linesTrucking

Advantages

Disadvantages


The Nature and Scope of Physical Distribution

After a company decides on which channels of distribtion to use, it plans for moving its products through those chan-nels. Physical distribution is the key link between a business and its customers. Physical distribution comprises all the

Go to the OLC through glencoe.com for printable graphic organizers, Academic Vocabulary definitions, and more.

READING GUIDE

THE MAIN IDEATo succeed in today’s business environment, a company must efficient-ly and effectively deliver its products to customers around the globe.

GRAPHIC ORGANIZERDraw this chart to list the advantages and disadvantages of each type of transportation system.

OBJECT IVES• Describe the nature and scope

of physical distribution

• Identify transportation systems and services that move products from manufacturers to consumers

• Name the different kinds of transportation service companies

KEY TERMS• physical distribution

• transportation

• common carriers

• contract carriers

• private carriers

• exempt carriers

• ton-mile •carload

• freight forwarders

ACADEMIC VOCABULARYYou will find these words in your reading and on your tests. Make sure you know their meanings.• regulate • option

Predict Why is distribution so important to the marketing concept of place?

SECTION 22.1

BEFORE YOU READ

Transportation Systems and Services

Read for Details

List government

agencies regulating

physical distribution.

ACADEMIC STANDARDSEnglish Language ArtsNCTE 1 Read texts to acquire new information.

ScienceNSTA Content Standard E Science and Technology: understandings about science and technology



shipments transported over moderate distances are generally handled by trucks—nearly 80 per-cent of those shipments weigh less than 1,000 pounds each. Businesses use trucks for virtually all intracity (within a city) shipping and for 26 percent of the intercity (between cities) freight traffic in the United States.

State and federal transportation agencies regulate motor carriers used for interstate (between states) commerce. They regulate the number of hours motor carrier operators can drive without stopping and the length of rest periods. State transportation agencies regulate fuel taxes, safety issues, and rates charged for intrastate (within a state) trucking.

Types of CarriersBusinesses that use trucks to move their

products have several different options. They can use for-hire carriers, private carriers, or a combination of both. For-hire carriers include common carriers and contract carriers.

Common carriers provide transportationservices to any business in their operating area for a fee. Carriers can change their rates or geo-graphical areas, as long as they do not charge rates that are different from their published rates. More than one-third of all motor freight is handled by common carriers. Less-than-truckload carriers provide shipments in which freight from multiple shippers are consolidated into a single truckload.

Contract carriers are for-hire carriers that provide equipment and drivers for specific routes, according to agreements between the carrier and the shipper. A contract carrier can provide services on a one-time basis or on a continuing basis.

Contract carriers usually transport goods for more than one business, and they can charge different rates to each business. However, they must file their contracts with the appropriate state or federal regulatory agency.

When using for-hire carriers, a business does not need to invest in transportation equipment. However, for-hire carriers offer less flexibility for special pick-ups or handling, rush deliveries, and direct shipments.

activities that help to ensure that the right amount of product is delivered to the right place at the right time.

Physical distribution is also known as logistics. It involves order processing, trans-porting, storing, stock handling, as well as inventory control of materials and products. Figure 22.1 on page 466 presents an over-view of these functions. Physical distribution is the third-largest expense for most busi-nesses. This expense is surpassed only by the costs of material and labor.

Businesses need to make the physical distri-bution system as efficient and cost effective as possible. At the same time, physical distribution needs to be coordinated with other business functions, such as purchasing, finance, pro-duction, packaging, and promotion. Suppose a business has planned to launch promotional ads for a new product available on a certain date. If the distribution system is unreliable, the product may not arrive at stores in time. This error will cost the business customers and cause the business to lose credibility.

Types of Transportation Systems Transportation is the marketing func-

tion of moving a product from the place where it is made to the place where it is sold. Transportation costs are a significant part of each sale; therefore, manufacturers, whole-salers, and retailers look for the most cost-effective delivery methods.

There are five major transportation sys-tems, or modes, which move products, includ-ing trucks, railroads, waterways, pipelines, and air carriers. Figure 22.2 on page 467 shows the percentage of freight carried by each trans-portation mode.

TruckingOn certain U.S. highways, such as the Ohio

Turnpike, about 30 percent of the miles driven are driven by commercial vehicles. Trucks, or motor carriers, are the most frequently used trans portation mode. They carry higher-valued products that are expensive for a business to keep in inventory. They also carry products such as produce with limited shelf life. Lightweight

466 UNIT 7 — DISTRIBUTION glencoe.com

The purchase of a product initiates the

movement of products through a physical

distribution system.

ORDER PROCESSING

Transportation involves the actual physical

movement of products. It is estimated that up to

eight percent of a company’s sales revenue is

spent on the transportation function.

TR ANSPORTATION

Proper inventory control ensures that products

are kept in sufficient quantities and available

when requested by customers.

INVENTORY CONTROL

The storage function facilitates the movement

of products through the distribution channel

as products are sold.

STOR AGE

22.1 Physical Distribution

Go to the Marketing Essentials OLC through glencoe.com to find a project on physical distribution.

• Moving and Counting Physical distribution involves the functions of order processing, transportation, storage, stock

handling, and inventory control.

How does physical distribution work?

Receiving, checking, and marking items for sale

are important steps in the physical distribution

system.

STOCK HANDLING

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1.9%

4%

1.3%

87.1%

5.6%Trucks

Railroads

Air

Pipelines

Waterways

Chapter 22 — Physical Distribution 467glencoe.com

Private CarriersPrivate carriers transport goods for an

individual business. The transportation equip-ment can be owned or leased to meet the specific transportation needs of the business. Significant capital investment is required, however, if a business decides to own and maintain its own private fleet.

Cost is a major factor in selecting trans-portation. Starting a private carrier operation requires a large investment in equipment and facilities. However, private carriers let a business maintain total control over equipment, main-tenance, availability, routes, delivery times, and handling procedures. This also allows a business to rapidly change schedules, routes, and delivery times to meet customers’ needs.

Many businesses use a combination of pri-vate and for-hire carriers. They may use their own trucks for local deliveries and common or contract carriers for shipments beyond their local service areas.

Exempt carriers are free from direct regulation of rates and operating procedures. In most cases, they carry agricultural prod-ucts. Their rates are lower than those charged by common carriers because of their exempt status. Local transportation firms may also receive exempt status if they make short-distance deliveries within specified trading areas in cities.

Some disadvantages of trucks are that they cost more than rail and water carriers, and they are susceptible to delays due to traf-fic jams and road conditions. Trucks are also subject to size and weight restrictions, which can vary state-to-state.

Intermodal TransportationIntermodal transportation combines

two or more transportation modes to maxi-mize the advantages of each. Piggyback ser-vice is carrying loaded truck trailers over land on railroad flatcars. Trucks will then

22.2 Transportation Systems

Go to the Marketing Essentials OLC through glencoe.com to find a project on modes of transportation.

• The Importance of Single-Mode Transportation Systems This pie chart shows the percentage of freight in

ton-miles shipped by each mode of transportation.

Why do you think the percentage carried by trucks is so large?

Source: Bureau of Census




take the trailers to their destinations. Fishy-back service involves shipping loaded truck trailers over water on ships and barges. Pig-gyback and fishyback services combine all the advantages of truck transportationwith the lower costs of rail and marine transportation.

RailroadsRailroads are another major form of trans-

portation in the United States. Trains transport nearly six percent of the total intercity ton-miles of freight. A ton-mile is the movement of one ton (2,000 lbs) of freight one mile.

Trains are important for moving heavy and bulky freight, such as coal, steel, lumber, chemicals, grain, farm equipment, and auto-mobiles over long distances. Refrigerated cars keep perishable products such as milk or fresh fruit and vegetables from spoiling over long distances. Other specially designed freight cars haul combustible or hazardous materials, such as chemicals.

Pricing and Delivery Services Shippers pay lower rail transportation rates

if they fill an entire boxcar. A carload is the minimum number of pounds of freight needed to fill a boxcar. Carload weights are estab-lished for different classifications of goods. Once a shipment reaches the minimum weight, the shipper pays the lower rate, regardless of the physi cal size of the shipment. Rates charged for less-than-carload shipments are more expensive because partial carloads have to be unloaded at each destination.

Advantages and Disadvantages of Railroad Transportation

Railroads are one of the lowest cost transpor-tation modes because trains carry large quanti-ties at relatively low per unit costs. Trains need 50 to 70 percent less energy than a motor car-rier to transport freight, and they are seldom slowed or stopped by bad weather. This makes trains one of the safest modes of transportation.

The biggest disadvantage of rail transport is the lack of flexibility. Trains can pick up and deliver goods only at stations along designated rail lines.

Marine ShippingBarges and container ships transport mer-

chandise within the United States and around the world. Container ships carry their loads in either 20- or 40-foot-long standardized truck-size containers. The United States Maritime Commission regulates U.S. marine shipping.

Waterways Inland shipping is shipping from one port

to another on connecting rivers and lakes. The St. Lawrence Seaway, which is a combination of rivers, canals, and lakes, and the Missis-sippi and Ohio Rivers are all internal shipping routes that give ocean-going vessels access to the heartland of America.

Intracoastal shipping is the shipping of goods on inland and coastal waterways between ports along the same coast. For example, shipments can be sent from Virginia to North Carolina through the Great Dismal Swamp Canal.

• TWO IS BETTER THAN ONE Often, intermodal transportation is used to get goods to the customer.

Why might a company use both rail and road shipping methods?

Christian Lagereek/Getty Images


International waterways are the oceans and rivers that connect continents and countries. Almost all overseas nonperishable freight is transported by container ships and barges because of the low cost. Products com-monly shipped by international waterways include heavy equipment, steel, ore, forest products, grain, and petroleum.

Advantages and Disadvantages of Marine Shipping

The biggest advantage of marine trans-portation is the low cost: container ships and barges are the cheapest form of freight trans-portation. However, they are also the slowest form of transportation.

Marine shipping has other disadvantages. Buyers that are located far from the port city must have products off-loaded from container ships onto railroad cars or motor carriers to reach their destination. This added cost of dis-tribution reduces some of the cost advantages of marine shipping.

Marine shipping is affected by bad weather and seasonal conditions. Great Lakes ship-ping, for example, is closed for two to three months in the winter.

PipelinesPipelines are usually owned by the com-

pany using them, and in these instances, they are considered private carriers. There are more than 200,000 miles of pipelines within the United States.

Pipelines are most frequently used to trans-port oil and natural gas. They move crude oil from oil fields to refineries, where it is pro-cessed. The refined products, such as gasoline, are then trucked to retail outlets such as your local gasoline station.

Advantages and Disadvantages of Pipelines The construction of pipelines requires a

high initial investment, but operational costs are relatively small. Pipeline transportation has the best safety record among all major trans-portation systems. Products carried through pipelines move slowly but continuously,

Scan and Bag as You ShopNational grocery chain, Albertsons, Inc.,

introduced a Shop ‘n’ Scan system for shoppers who can scan and bag their groceries while they shop. Here are Albertsons’ steps to using the system:

1. Take a Preferred Card to the Shop ‘n’ Scan display, scan the card, and wait for a handheld scanner to light up.

2. Use the scanner, store grocery bags, and a shopping cart while shopping.

3. Scan each item and place it in a bag. 4. If you return an item, scan it, and press

the minus key. 5. If you cannot remember whether you

picked up something, scroll your list with the up and down keys.

6. Press the “i” key to see offers available only to Shop ‘n’ Scan customers.

7. At checkout, point the scanner at the “end of trip” bar code at the register and pull the trigger. That transfers your grocery list and prints a receipt. Pay as you would otherwise. There is no need to take your groceries out of the bags.

8. Place the scanner in a return rack.

What are some store and customer advantages and disadvantages for self-scanning devices?

Go to the Marketing Essentials OLC through glencoe.com to find a project on scanning devices.




suffer minimal product damage or theft, and are not subject to delivery delays due to bad weather. The risk of a pipeline leak is low, but when a leak does occur, the damage to the environment can be extensive.

Air Cargo ServicesCurrently, air cargo services are less than

one percent of the total ton-miles of freight shipped. High-value, low-weight, time-criticalitems such as overnight mail are often shipped by air. Certain high-value products, such as emergency parts, instruments, and medicines may also be shipped by air. Air cargo has space restraints, so most products transported in smaller containers are well suited for this form of shipment.

The Federal Aviation Administration (FAA) regulates air transportation, but airlines and

air transport companies set their own rates. Air cargo service carriers offer such things as wide-bodied jets that can ship more goods and specialized packaging designed to help prevent damage.

Advantages and Disadvantages of Air Transportation

The greatest advantage for air transporta-tion is its speed. This fast delivery time allows businesses to satisfy customers who need something quickly. It also reduces inventory expenses and storage costs.

The greatest disadvantage of air transporta-tion is its cost. It is by far the most expensive form of distribution. Air cargo rates are at least twice as costly as truck rates. Other disadvan-tages of air cargo services include mechanical breakdowns and delays in delivery caused by bad weather.

Transportation Service Companies

Transportation service companies handle small- and medium-size packages. Some exam-ples of these companies are the U.S. Postal Service, express delivery services, bus package carriers, and freight forwarders.

U.S. Postal ServiceThe U.S. Postal Service ships small packages

by parcel post or first-class mail. For an extra fee, parcel post can be insured against loss or damage. Parcel post can also be express-mailed at higher rates to guarantee next-day delivery.

Express Delivery ServicesExpress delivery services specialize in deliv-

ering small, lightweight packages and high-priority mail usually weighing less than 150 pounds. Express delivery companies, such as FedEx, DHL, and United Parcel Service, can deliver nationally or internationally by air-plane, truck, bus, or train. Rates are based on speed of delivery, size and weight of package, distance to be sent, and type of service to be used. Regular service usually takes from two to three days; more expensive, next-day service is also available.

• IT WILL BE THERE TOMORROW Air transportation is a growing segment of the transportation industry.

What items are generally sent by air?

ASAP Ltd./Index Stock Imagery

Numbers and Operations:Computing Losses Determining losses is a matter of subtracting the smaller amount from the larger amount.1. To solve this problem, multiply the

cost per ton by the tonnage the ship carries, both before the lake level dropped and after, to determine the total cost.

2. Subtract the smaller amount from the larger to determine how much money is lost.

For help, go to the Math Appendix located at the back of this book.


Over the last 35 years, express carriers have become a more important part of physical dis-tribution. FedEx, which began operations in 1971, transports about 3 million shipments daily. It has a worldwide fleet of 672 aircraft, 275,000 employees, and more than 1,300 ser-vice centers serving 220 countries.

DHL, a pioneering express delivery carrier, started shipping from San Francisco to Hono-lulu in 1969. It was the first carrier to introduce express international shipping via airplane to Eastern Europe in 1983 and to China in 1986. DHL is the largest company specializing in international express shipping. It sends pack-ages to approximately 120,000 destinations in more than 220 countries and territories.

Bus Package CarriersBus package carriers provide transporta-tion

services for packages weighing less than 100

pounds. Bus package carriers, such as Grey-hound, can provide same-day or next-day ser-vice to cities and towns along their scheduled routes. The cost of bus package transportation depends on the weight of the package and the distance it will travel.

Freight ForwardersFreight forwarders are private com-

panies that combine less-than-carload or less-than-truckload shipments from several different businesses and deliver them to their destinations. They gather small shipments into larger lots and then hire a carrier to move them, usually at reduced rates. By combining shipments, freight forwarders can often obtain truckload or carload rates and lower transpor-tation costs for shippers. Freight forwarders also provide logistical services that help busi-nesses select the best methods and routes.

Key Terms and Concepts 1. What is physical distribution? 2. Why is transportation important in marketing a product? 3. Which mode of transportation would you use to ship fresh flowers

from Hawaii to New York? Why?

Academic SkillsMath

4. The George A. Stinson is the second largest freighter on the Great Lakes. Normally, it carries 57,000 tons of taconite ore each voyage between Superior, Wisconsin, and Detroit, Michigan. Now, due to lower lake levels, it can only carry 55,000 tons per trip. At an average cost of $5 per ton, how much revenue is lost per trip?

Social Studies

5. The Transportation Security Administration (TSA) was established to protect the U.S.transportation systems. Research and write a 200-word paper about security measures used to balance safety and security with freedom of movement for people and commerce.

Check your answers at the Marketing Essentials OLC through glencoe.com.



PrivateWarehouse

PublicWarehouseStores

productsuntil

needed


The Storage of Goods Some products, such as books, need to be manufactured in

large quantities in order to be cost effective, and those products need to be kept safe and clean until they are sold. Storage is a marketing function and refers to the holding of goods until they are sold. The amount of goods stored is called an inventory. We will talk more about inventories in Chapter 24.

There are many reasons why storing goods is an essential activity for most businesses. First of all, products are stored until

READING GUIDE

THE MAIN IDEAInventory storage allows a business to keep its products in a safe location until they are needed or ready to be sold.

GRAPHIC ORGANIZERDraw this chart to take notes about various types of warehouses.

OBJECT IVES• Explain the concept and

function of inventory storage

• Identify the types of warehouses

• Discuss distribution planning for international markets

KEY TERMS• storage

• private warehouse

• public warehouse

• distribution center

• bonded warehouse

ACADEMIC VOCABULARYYou will find these words in your reading and on your tests. Make sure you know their meanings.• ensure

• restrict

Predict How does inventory storage relate to a product’s price?

SECTION 22.2

BEFORE YOU READ

Inventory Storage

ACADEMIC STANDARDSEnglish Language ArtsNCTE 1 Read texts to acquire new information.

ScienceNSTA Content Standard E Science and Technology: Understandings about science and technology

Go to the OLC through glencoe.com for printable graphic organizers, Academic Vocabulary definitions, and more.

Analyze Think about

products that need to be

stored and others that

do not. What are the

differences between

these goods?



orders are received from customers. Products might also need to be stored because produc-tion has exceeded consumption or demand decreases. Sometimes, agricultural commodi-ties such as corn, wheat, and soybeans may only be available during certain seasons. Commodity storage makes these products available year-round and ensures that their price remains relatively stable. Some purchas-ers buy in quantity to get discounts on their purchases and then store the items until they are needed. Finally, products may be stored at convenient locations to provide faster deliv-ery to customers.

The costs involved in storing products include space, equipment, and personnel. Stor-age also means spending money (or capital) on inventory rather than investing it in another activity that could provide a larger return.

Most products are stored in warehouses, or facilities in which goods are received, identified, sorted, stored, and dispatched for shipment.

Private Warehouses A private warehouse is a facility designed

to meet the specific needs of its owner. A pri-vate warehouse is valuable for companies that move a large volume of products. Specialized conditions, such as a temperature-controlled environment, may be built into the facility. Private warehouses often house other parts of the business operation, such as offices.

A disadvantage is that private warehouses are costly to build and maintain. In a recent survey, large retailers reported spending 51 percent of their total physical distribution costs on warehouse expenses; transportation costs accounted for the remaining 49 percent. Private warehouses should be considered only when a significant amount of merchan-dise needs to be stored, thus making the total operating costs of private warehouses lower than the operating costs of public warehouses.

Public WarehousesA public warehouse offers storage

and handling facilities to any individ-ual or company that will pay for its use.

A major discount retailer with operations in multiple countries is trying to do more expanding at home. But it has seen fierce opposition. Some cities and counties have even enacted legislation banning stores that fit the retailer’s description: 200,000-square-foot stores that use more than 10 percent of the space for food.

Ask the VotersIn 2004, following months of controversy about building a store near a major city, the retailer went directly to the voters. If approved, the retailer could have built a store without going through normal envi-ronmental reviews, traffic studies, and public hearings. Even though the retailer spent nearly $1 million to persuade vot-ers to approve the construction, voters rejected the proposal.

Go to the Marketing Essentials OLC through glencoe.com to find a project on local government regulation of business development.

Do you think that it is ethical for a

city government to write ordinances

banning a type of business? Why or

why not?

Public warehouses not only rent space but also provide additional services to busi-nesses. Some of these services include ship-ment consolidation, receiving, unloading, inspecting, reshipping, order filling, and truck terminal operation services. Public warehouses are helpful to businesses that have low- to medium-volume storage needs or seasonal production.




Distribution CentersA distribution center is a warehouse

designed to speed delivery of goods and to minimize storage costs. The main focus in a distribution center is on sorting and moving products, not on storing them. Distribution centers are planned around markets rather than transportation requirements. They can cut costs by reducing the number of ware-houses and eliminating excessive inventory.

Some businesses such as paint companies Sherwin-Williams and Benjamin Moore use their distribution centers to physically change the product for the final customer. Their dis-tribution centers perform additional func-tions such as mixing ingredients, labeling, and repackaging for shipments to retailers.

Distribution centers also consolidate large orders from many sources and redis-tribute them as separate orders for individual

Trucking and Wireless Technology

When Schneider National signed a deal in 1988 to equip its fleet with a satellite tracking and communication system from Qualcomm, the trucking giant was taking a big gamble on new and unproven technology.

The gamble paid off. The lines of drivers who once waited to use pay phones to call the home office, wasting precious on-duty hours, disappeared. Instead, drivers use text messaging to communicate with the home office via an in-cab or handheld wireless device.

Hot Spots and Wireless Modems

Instead of phone banks, truck stops are installing hot spots enabled with Wi-Fi technology. Drivers can log on to the Internet with laptops and PDAs equipped with wireless modems just by entering one of the hot spots and registering.

Schneider National now also writes its own software programs to integrate vehicle-location data and driver communications into its dispatch process and fleet management. In addition to new uses for existing data, Schneider National is also looking to add a tracking system that will locate trailers when doing intermodal transport.

How do you think Schneider National’s customers benefit from this technology?

Go to the Marketing Essentials OLC through glencoe.com to find a research project on software and logistics.

Peter Walton/Index Stock Imagery



Problem Solving: Operations When a problem asks for the price “per” item, more often than not the operation you want to use is division. • To solve this problem, divide the

total cost of the items by the total number of items.



accounts or stores in a chain. Merchandise stays a short time in a distribution center.

Bonded WarehousesBonded warehouses, either public or

private, store products that require the pay-ment of a federal tax. Imported or domestic products cannot be removed until the required tax is paid. Although they are charged storage fees, businesses can save on taxes by taking goods out of storage only when needed.

Distribution Planning for International Markets

Selling to customers in the international marketplace requires more planning than sell-ing to domestic customers. Businesses that sell internationally must follow United States export laws as well as the import laws of the

countries to which they are selling. Some countries also have legal restrictions about how products may be transported. Businesses frequently have to handle bureaucratic regula-tions, language barriers, and negotiations.

To deliver their goods successfully, businesses must understand other countries’ physical transportation systems. In some less developed nations, the postal system may not be reliable enough to assure delivery of packages by mail. Other countries may not have developed roads and highway systems to support dependable truck deliveries. In China, for example, many goods are transported by bicycle or carts.

It is important to understand how retail institutions in other countries differ from American retail institutions. In some parts of the world, retailers have little or no capacity for refrigeration. American-style supermarkets are rare in developing countries due to the lack of refrigeration and storage facilities. In Japan, the term supermarket refers to a retail outfit that sells food, clothing, furniture, and appliances.

Defi ne What is a distribution center?

Key Terms and Concepts 1. Give four reasons why merchandise is stored. 2. How does a distribution center differ from a warehouse? 3. What is a bonded warehouse?

Academic SkillsMath

4. One measure of warehouse productivity is the cost per order. Cost per Order 5 Total Ware-house Cost/Total Orders Shipped. What is the Cost per order for a company that has a total warehouse cost of $531,000 and shipped a total of 900 orders in a one-year period?

English Language Arts

5. Use the Web sites for the American Trucking Association (ATA), the Association of American Railroads (AAR), the National Transportation Library, and other business news sources to research the latest issues impacting the transportation industry. Summarize these issues in a one-page report.

Check your answers at the Marketing Essentials OLC through glencoe.com.




STEVE ROBERTSOWNER/OPERATORZNRCDS.COM MUSIC MAIL ORDER

What do you do at work?

My duties include logistics, inventory management, and Web site inventory maintenance. Logistics includes everything from the physical tasks of pulling orders, stocking new product, and maintaining the warehouse, to making sure that the processes are in

place and evaluated on a regular schedule for their effectiveness. Inventory management includes ordering product, re-ordering and re-stocking product as needed, and processing returns for defective or overstock products. Web site inventory maintenance means making sure that the site will allow the customer to order only those products currently in stock so as to minimize the occur -rence of out-of-stock and back-ordered items.

What skills are most important to you?

A background in inventory management and loss prevention is essential. Without these skills it would be impossible to manage a process during which you have no actual contact with the customer, such as an interactive e-commerce Web site. If customers have no confi dence their orders will be fi lled completely and in a timely manner, they will shop elsewhere.

What is your key to success?

First, put in place systems and processes that remove obstacles to customer service. Second, evaluate the effectiveness of the systems and processes on a regular schedule and make changes or adjustments as needed. Third, ask your customers what obstacles still exist, then, based on their input, revisit steps one and two.

Courses general business, logistics, management

Degrees High school, BS

Many on-the-fl oor warehouse jobs are entry level, while higher-level positions involve managing the overall process. Often, employees starting on the fl oor are promoted to managing positions as they stay with the company and develop new skills.

Growth to increase faster than average for the next ten years

Source: Occupational Outlook Handbook

Inventory management, time management, strong computer skills, and organizational ability

Go to the Marketing Essentials OLC through glencoe.com to fi nd a career-related activity.

Why would skills in loss prevention, typically associated with running a retail store, be help ful to someone operating an e-commerce Web site?




SECTION 22.1• Physical distribution links a business and its customers. Physical distribution comprises

all the activities that help to ensure that the right amount of product is delivered to the

right place at the right time. Physical distribution is also known as logistics. It involves

transporting, storing, order processing, stock handling, and inventory control of materials

and products. The different kinds of transportation include marine, air, pipeline, and land

transportation, which includes both trucking and railroads.

SECTION 22.2• Storage is the marketing function of holding goods until they are sold. Storing goods

is an essential activity for most businesses. Products are stored in warehouses or

distribution centers until orders are received from customers. Globalization is increasing

the importance of international distribution.

C H A P T E R 22 R E V I E W

Key Terms• physical distribution (p. 464)• transportation (p. 465)• common carriers (p. 465)• contract carriers (p. 465)• private carriers (p. 467)• exempt carriers (p. 467)• ton-mile (p. 468)

• carload (p. 468)• freight forwarders (p. 471)• storage (p. 472)• private warehouse (p. 473)• public warehouse (p. 473)• distribution center (p. 474)• bonded warehouse (p. 475)

Academic Vocabulary• regulate (p. 465)• option (p. 465)• ensure (p. 473)• restrict (p. 475)

1. On a sheet of paper, use each of these key terms and academic vocabulary words in a written sentence.

2. Explain the components of physical

distribution. (22.1)

3. Name transportation systems and services

that are used to move goods. (22.1)

4. What are the different kinds of transportation

service companies? (22.1)

5. What is inventory storage? (22.2)

6. What are the different kinds of warehouses?

(22.2)

7. List reasons why planning is important for

distribution in international markets. (22.2)

8. Why is the storing of goods essential for

most businesses? (22.2)

9. List three services that might be offered at a

public warehouse. (22.2)

10. What is a distribution center? (22.2)

11. What do bonded warehouses require? (22.2)


12. Workplace Skills Human Relations You are a clerk in a

warehouse. A carton of snack items has been

damaged during a shipment. As you are fi lling

out a report for the damaged merchandise,

a coworker suggests you have some of the

snacks because the warehouse will never

miss them.

What would you say to your coworker? How

do you believe management would view your

coworker’s suggestion?

13. Technology ApplicationsPrepare an Oral Presentation Select one

of the vocabulary terms dealing with physical

distribution. Use presentation software to

develop a 10- to 15-minute presentation on

different aspects associated with the term

that you selected.

14. Math Practice Calculate Price A large manufacturer can

save 29 percent by using piggyback service.

The cost of shipping the manufacturer’s

products without the piggyback service will

total $75,255. How much money will the

manufacturer save by using the service?

Numbers and Operations:

Calculating Discounts A percent discount

is usually calculated as an amount off an

original price. To fi gure the amount of a

discount, convert fractions and percents to

decimals, and multiply.


15. Social Studies Transportation Regulations Companies

ship products to many different countries all

over the world. Research another country’s

regulations on distributing products within

their borders, and how they differ from

regulations in the United States. Write a few

paragraphs about how countries regulate

physical distribution and the reasons behind

these regulations.

16. The Rise of International Distribution Why is knowledge of international physical

distribution increasingly important? How has

the Internet infl uenced the importance of

international distribution? List three reasons

why these developments are limited to free

enterprise and the global economy.

17. Investigating Intelligent Transportation Systems (ITS) Perform an Internet search on the ITS

program initiative of the U.S. Department of

Transportation to add information technology

to commercial vehicle operation.

Activity Write a one-page report detailing

how technology is being used to improve

safety, transportation time, and fuel costs.



Role PlayCustomer Service RepSituation Assume the role of customer

service representative for a company that

produces and sells ice cream and other frozen

food. Representatives call customers at their

homes, sell these products, and deliver them

biweekly via trucks. The trucks are stocked

from a central warehouse. A potential new

customer (judge) wants to know about your

product deliveries and be assured that the

products are fresh and have not been allowed

to thaw.

Activity You are to assure the customer

(judge) by explaining the storing and handling

procedures that the company practices.

Evaluation You will be evaluated on how well

you meet the following performance indicators:

• Explain stock-handling techniques for

receiving deliveries.

• Describe the use of technology in the

distribution function.

• Rotate

products.

• Provide legiti -

mate responses

to inquiries.

• Handle

telephone calls

in a businesslike

manner.

18. Express Carriers Using an Internet search engine, investigate

a small-package express carrier (e.g. FedEx,

DHL, UPS) or the U.S. Postal Service.

Prepare a report on its online services and

technologies currently available to shippers.

What are the goals of these various online

services? How can shippers use online

technology and Web sites to market their own

products and services?

1. Directions Choose the letter of the best answer. Write the letter for the answer on a separate piece of paper.

How long would a cargo truck to travel 540 miles if its average speed was 60 mph?

A 8.0 hours B 8.5 hours C 9.0 hours D 9.5 hours

2. Directions Choose either True or False as the answer. Write the letter for the answer on a separate piece of paper.

Private carriers are free from direct regulation of rates and operating procedures.

T F

For more information and DECA Prep practice, go to the Marketing Essentials

OLC through glencoe.com.

When studying for a test, write important ideas, defi nition, and formulas on fl ash cards.

Test-Taking Tip




CHAPTER 22 Physical Distribution - Weebly · Transportation Modes Trucking Pipelines Advantages...

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