Physical Distribution Part II

Physical Distribution-process of transporting, storing and handling goods n Must be coordinated with other business functions n Must have the products in the right place at the right time n Involves 3 marketing functions –Transporting(moving goods from seller to buyer) –storing –handling

Types of transportation n Motor Carriers(trucking) –Most frequently used –lightweight shipments over moderate distances –Four major types common carriers-charge a fee, usually specialize in a single commodity (good) Contracted carriers-negotiate rates with each business Private carriers-owned by business, transports own goods Exempt carriers-free from direct regulation of rates and operating procedures. Usually agricultural products

Types of transportation n Trucking advantages –convenient –reduces packaging costs –reduced inventory costs(rapid delivery) n Trucking disadvantages –traffic jams & accidents –equipment breakdowns –Not good for long distances(expensive)

Types of Transportation n Rail –Move heavy, bulky freight (coal) –Ton mile-movement of one ton of freight one mile –Carload-min. number of pounds of freight needed to fill a box car –Five specialized services Piggyback & Fishyback service Specialized services (refrigerator cars) Package cars(lower rate after reaching weight) Diversion-in-Transit(redirection when in route) Processing-In-Transit(processed in route) –Advantages-low costs, weather not a problem –Disadvantages-lack of flexibility(limited to station stops)

Types of transportation n Water Transportation –oldest method –Internal Waterways (river, lake ports) –Intracoastal Waterways (ports along east or west coast or from Atlantic to Pacific) –International Waterways-almost all international shipments due to low cost –Advantages-low cost –Disadvantages-slow, off-loading, bad weather

Methods of Transportation n Pipelines n Owned by company using them n Transport oil & natural gas n Carry same amount of ton-miles as trucking n Advantages-dependable n Disadvantage-high cost to construct, breakage

Methods of transportation n Air Transportation n Used for high-value, low-weight items n Perishable items (flowers) n Advantages-speed, reduces storage costs n Disadvantages-high cost, bad weather, breakdowns

Transportation Service Companies n US Postal Service-parcel post- packages weighing 16 ounces or less n Express carriers-door-to-door delivery, rates based on speed, weight, & distance n Bus Package companies-less than 100 lbs., must be on scheduled route n Freight Forwarders-combine shipments, use all methods, can obtain lower rates

Storage of Goods n Inventory=amount of goods stored n Storage(holding goods till they are sold) adds time and place utility to goods n Costs involve space, equipment, and personnel n Also the cost of money tied up in inventory

Reasons for storage n Production has outpaced consumption n Product is only available during certain times of the year (agricultural) n Items bought in quantity to get discount n Stored in convenient locations to get faster delivery to customers

Warehouses n Private warehouses(owned by business) –designed to meet needs of owner, often house offices too n Public warehouse(any business that will pay) –rent space and provide services(shipment consolidation, barcode labeling, receiving) n Distribution Center(designed to speed delivery of goods and min. storage costs) –consolidate large orders and redistribute them as separate orders n Bonded warehouses(store products that require the payment of federal tax) –hold until taxes paid, business save by taking out goods only as they need them

Types of Public Warehouses n Commodity warehouses-agricultural products n Bulk storage warehouses-bulk form such as chemicals n Cold storage warehouses-store perishables such as fruits n Household goods warehouses-personal property storage n General merchandise warehouse-any item that doesn’t require special handling