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Question:

Explain the major activities involved in the physical distribution of products.

Answer:

The physical handling and movement of goods from place of production to the place of distribution, is called physical distribution. It covers all the activities required to physically move the goods from the manufacturing to the customers.

The major activities involved in the physical distribution of products are:

  1. Order processing: A good physical distribution system should provide for an accurate and speedy processing of orders. In the absence of this, goods would reach the customers in wrong quality or quantity, resulting in dissatisfaction of customers.

  2. Transportation: It means carrying raw materials and finished goods from one place to another. It helps in creating ‘place utility’, by making available the goods where they are required.

  3. Warehousing: It refers to the act of storing and assorting products in order to create ‘time utility’. It helps in proper placement of goods and providing facilities to store them, so that they can be made available as and when demanded by the market.

  4. Inventory control: An important decision in physical distribution is deciding about the level of inventory. Higher the level of inventory, higher will be level of service and cost of carrying the inventory and vice-versa. Various factors which are considered for determining inventory levels are:

      i. Firms’ policy regarding level of customer service.
      ii. Degree of accuracy of sales forecast.
      iii. Responsiveness of distribution system.
      iv. Cost of holding inventory.

A good inventory decision aims at timely fulfillment of demand at minimum cost.


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