1.

Improve Customer Service

We all know that sellers are fighting for better offers to their customers. They used
promotional mix including advertisement, having sales and discount. Aside from that a business
firm can increase its competitive strengths by a systematic distribution network. Effective
distribution affects positively to services, availability, timing, price and other similar benefits.
Physical distribution can be a powerful means to fight with the competitors.

Example: If a dealer of an onion bought facilities and different kind of transportation to

be used on its physical distribution then they just not expand their business but they also
improved customer service. They can make onion which is usually harvested during March
available even after the harvesting period.

2. Reduce Distribution Costs

An effective Physical distribution may lead to cost reduction. How? By the used of
different inventory concept to have an effective Physical distribution including economic order
quantity and the just-in-time inventory concepts help to control the inventories. These help to
lower idle stocks and reduced damage or wastages.

Economic Order Quantity- the number of units that a company should add to inventory
with each order.
Just in Time Inventory (JIT)- an inventory strategy companies employ to increase
efficiency and decrease waste by receiving goods as they needed.

Example: After shoes has been sold, the owner of a shoe store will now add
inventories in proportion with the numbers of items that have been sold. If they sold 100
pairs, now theyre going to add additional 100 pairs to replaced items that been sold to
avoid too much cost in storing and even damage to products.

3. Create Time and Place Utility

There are times in which production and consumption collide. And this will lead to
imbalanced which consists of:
a) year-round consumption vs. seasonal production
b) year-round production vs. seasonal consumption

Year-round consumption- where those goods that are being use or consumed
throughout the year.
Seasonal Production- refers to production in which it is made or done only in a specific
period of time of the year.
Year-round Production- refers to production in which it is made or done all throughout
the year.
Seasonal Consumption- where those goods that are being use or consumed in a
specific period of time of the year.

In order to correct these imbalances, storage is used to create time utility.

 Time Utility refers to easily availability of the product.

For instances, the manufacturer of dried mangoes bought raw materials during the
harvesting period in the Philippines from March to June, after they manufactured numbers of
dried mangoes they will now store it in their warehouses to assure that there is a supply for the
whole year .

Meanwhile, place utility is created by transportation. For example, the pili nuts of the
Bicol region are being harvested during the months of May to October. And this only means that
there are lots of supply of pili during those months and this lead to selling to a much cheaper
amount. The farmers now transport Pili nuts to other places including Manila where value is
high.

Place Utility- refere primarily to making goods or services available at

convenient consumers

4. Stabilize Prices

Physical distribution plays an important role in stabilizing products prices. This is where
storage and transportation enters. Businesses store their product as the oversupply gives a
lower prices and sometimes they transported their goods on places where there is a higher
value for consumers to avoid jeopardizing the objective of having a higher profit.

5. Influence Channel Decision

Firms will be able to decide what is the best channel of distribution when they got an
effective physical distribution. They will make it easier choose among the channels because
they already have the ideas of how does their distribution network took place.

6. Control Shipping Costs

If there is no distribution standard that a firm follows they are exposed to incurring of
additional expenses that may arise during the shipment. And this shipping cost is against of the
objective of the firm of having an income.

For a physical distribution to be efficient, the following elements must be properly managed:

1. Inventory planning and control

2. Transportation
3. Warehousing
4. Order processing
5. Material handling
An essential aspect of managing any business that sells physical goods is determining how
many goods to produce and how large of a stock of goods to keep on hand for sale. Goods that
are available for sale are referred to as a firm's inventory or stock. INVENTORY CONTROL
Keeping a large amount of inventory on hand can be advantageous in that it reduces the
chance of running out of a product, but a large inventory can also have several notable
disadvantages such as it will more storage cost, deterioration, obsolescence and shift on
demand. While having less, on the other hand, also have its advantage that you would get to
spend less for insurance premiums (since there will be less exposure to loss) and materials
maintenance. Its primary disadvantage is that if you run out of a certain product, you could miss
out on potentially profitable sales, and this could cause customers to give their business to your
competitors.

Inventory Planning
What is Inventory Planning? Inventory planning refers to the process that any organization
adopts to determine the optimal quantity as well as timing, with the sole aim of aligning such
plans with the organizations capacity to produce and make sales. With inventory planning, your
company could have higher profit because if proper inventory planning is maintained in a
company, such that all its accounts are equal, the company will record bigger gross profits,
which in effect, leads to higher profits. Proper inventory planning involves the purchase,
production and sale of goods that are within the demand of the customer. If an organization or
company supplies the demanded products, it will realize high business profits. Another is that
inventory planning will prevent stealing of goods. If a business adopt some of the latest
technologies currently available in managing the inventory , it is hard for employees to steal any
products, and all produced, manufactured or traded inventory will reach the final consumer and
company won't have to incur further losses.

The Economic Order Quantity (EOQ) is the number of units that a company should add to
inventory with each order to minimize the total costs of inventorysuch as holding costs, order
costs, and shortage costs. It can be a valuable tool for small business owners who need to
make decisions about how much inventory to keep on hand, how many items to order each
time, and how often to reorder to incur the lowest possible costs.

Transportation

Transportation is the actual transfer or movement of goods and people from one pkace to
another. It moves goods to places or locations whee consumer will buy or use the goods. Forms
of transportation:

1. railroad

2. trucks

3. water vessels
4. pipelines
5. airplanes
RAILROAD. Less costly as a means of transportation and is used in some parts of Philippines.
It has the ability to handle bulky products such as wheat, grains and soy beans over a long
distance. Parcels are classed as bulky goods if their dimensions exceed the largest possible
standard parcel or if they are unpackaged or carry a tag.
TRUCK. The most reliable means of transporting good between two points inland through roads
and highways. It is characterized by the ability to move shipments economically. Trucks are less
desirable means of transporting goods.
WATER VESSELS. Provide a very important means of transportation especially in an
archipelago like Philippines. Its major advantage is low cost but the disadvantage is shipping in
a slow mode. Water vessels are mostly used for bulky, non perishable products such as
petroleum products, flour and all types of pasta. *Tramper is a ship that has no fixed routing,
itinerary or schedule and is available at short notice (or fixture) to load any cargo from any port
to any port. They are desirable for transporting logs, minerals and fertilizers. *Barge is a flat-
bottomed boat, built mainly for river and canal transport of heavy goods. It can be used for
transportation of cars. *Tug is a small, powerful boat that is used for pulling and pushing ships
especially into harbors or up rivers.
PIPELINE. method of transportation in which liquid, gaseous, or solid products are moved over
long distances through pipelines. It is used mainly for conveying natural gas, oil and other liquid
products. They are not readily available for service by just any firm. The only ones using
pipelines in Philippines are oil companies like Caltex and Petron.
AIRPLANE. fast but expensive form of transportation. They are used in shipping perishables
such as meat, fish and flowers.
Special Transport Agencies. Deliver small quantities of goods for the sender and receiver to pay
minimal fees.

*Post Office is a facility in charge of sorting, processing, and delivering mail to recipients. They
are usually regulated and funded by the government. Each post office is assigned a specific
jurisdiction and is responsible for the delivery and receipt of mail for individuals or businesses
within the jurisdiction. Delivery by post office takes longer in areas not specified as key
distribution centers.
Parcel Services are offered by companies such as LBC, JRS Express and the like. They deliver
packages within 24 hours in specific areas and 48 hours in some other areas.
Freight forwarder is an agent who acts on behalf of importers, exporters or other companies to
organize the safe, efficient and cost-effective transportation of goods.0

Warehousing

The places where they are kept are called warehouse and the activity done is called
warehousing. It also includes storage functions of assembling, bulk breaking, and preparing
products for re-shipment.

Warehousing decisions must be made as to the type of warehousing required and the
number and location of warehousing facilities. Companies has to decide which of the two types
of warehousing will be used (1) private warehousing; or (2) public warehousing
 Private warehouses are those owned or lease by the company also includes third party
individuals or companies that offer storage and warehousing facilities and services. The
following conditions justify the use of private warehouses:

1. When the firm is able to adapt the rapidly changing market or product conditions;
2. When the firm has special storage and handling requirements; and
3. When the firm has a relatively constant high volume of goods moving into large
metropolitan areas.

Public warehouses are those operated by professional warehousers which provide

storage and related physical distribution facilities on a rental basis to other firms. It is
also owned by the manufacturer and are established specially if they move large volume
of products and there is very little fluctuation.

Number and location of warehousing facilities. Decisions must also be made on the number and
the location of the warehousing facilities. Ultimately, decisions would involve trade-offs between
many variables like:

1. Warehousing costs
2. Transportation costs
3. Change in inventory carrying cost
4. Obsolesces costs
5. Value of alternative facility use
6. Production or supply alternatives
7. Value of cost concessions
8. Communicating and data processing costs
9. Channels of distribution
10. Customer service cost

Order Processing

Order processing refers to receiving, recording, filling and assembling orders for
shipment. The steps undertaken from the time the customer makes an order up to the time the
ordered goods are delivered is called the order cycle.

It is also the activity that includes a set of procedures for handling and filling orders. To
efficiently serve the customers, procedures for processing orders must be established. The
objectives of such procedure is to reduce the average time of ordering goods. Improvements in
technology provided more efficient means of processing orders the use of computers cuts the
time spent for processing orders.
The major components of the order cycle. Four major components consists the order cycle.
These are follows:

1. Order placement
2. Internal order processing
3. Order preparation
4. Order shipment

Order placement refers to the time that elapses from the time the customer develops the
order until the order is received by the seller.

Internal order processing refers to the time required to process the customers order until
it is ready for shipment. It involves the following:

1. Customer credit checks

2. Transfer of information to sales record
3. Transfer of orders to the inventory unit
4. Preparation of shipping documents

Order preparation refers to all activities relating to the picking and packaging of
individual customer orders. Order preparation may be simple as a manual system

Order shipment refers to the time the order is placed upon a transport facility until the
goods ordered are unloaded and received by the customers.

Material Handling

Material Handling refers to the activities involved in moving goods over short distances
into, within, and out of warehouses and manufacturing plants. The proper equipment selection
for handling procedures is important to minimize losses from breakage, spoilage and theft. It
also reduces handling costs and the time requirement for handling. Effective materials
handling can be made to contribute cost reduction and the effective flow of goods.
The objectives of materials handling subsystems are as follows:

1. To increase the usable capacity of the warehouse facility.

2. To reduce the number of times goods are handled;
3. To minimize the possibility of danger to people who are working around the
warehouse;
4. To reduce, if not eliminate, the monotonous and heavy manual labor aspects of
short-distance movements in the warehouse; and
5. To respond quickly and efficiently to customers orders.