Distribution (cont’d)

Physical Distribution Place: Customer Service Levels Inventory carrying Costs Transportation Costs Warehousing Costs Lot quantity costs Order Processing & Information Costs

Physical Distribution Outgoing product flow through defined network of transportation lines and distribution nodes This along with “material management” cycle would form the “logistics cycle” Outflow becomes inflow for another supplier in the value chain and is likely to be repeated Distribution costs could go from 10% to 40% of the total costs

Rising Importance Rising Cost of distribution In Rupee terms As a %age of the total costs Role in delivery satisfaction and value creation to the customer

Physical Distribution Three components: Input, Processor and Output Input: Order from the Customer Processor: Transportation Output: Delivery to the Customer

Customer Satisfaction Levels Most Critical Factor Function of: Waiting time for the customer (from order to receipt) Extent of fulfillment Condition of the delivery Inputs for the C.S.L.: Men, materials and money

Inventories Inputs for the production or use Intermediate stage between stage Finished Goods waiting shipment These help In Ensuring continuity and avoiding Stock outs Take care of Seasonality on Both sides Taking care of variation of demand and supply

Inventory Costs Order Processing Cost Inventory Carrying Costs Re ordering Costs

Warehousing (Functions) Receipt: unloading, inspection, accounting Storing: Careful labeling, identification & a/cing Handling Display Order Handling Information Processing: depository of information across the organisation

Order Processing A major contributor to the costs Helps in ensuring customer satisfaction Needs careful planning Function of the size and number of orders Necessary to systemise it across the organisation Information system can help in the process

Transportation Supply of Products in Sufficient Quantity Supply of Products in time Ease of Availability Economy of Operation Safety and Security of goods in transit Ensuring Customer Satisfaction

Modes of Transport Airways Railways Waterways Pipelines

Mode of Typical Products Examples 1. Airways High value and perishables emergency goods Perishable goods, documentation flowers 2. Railways Bulky Long hauls chemicals, Iron, Steel etc. Coal, sand, rice, 3. Roadways Short hauls and high value goods, fresh Clothing, textiles, fruits, vegetables paper, fish etc. 4. Waterways Bulky, low value and nonperishable Chemicals, sand, and agricultural products 5. Pipelines Fluids Petrol, Oil, Natural gas, Water, Chemicals

Current Trends Containerisation Multi modal modes of Transport Third Party Logistics Providers