Importance of physical distribution

Physical distribution / marketing logistics form a pivotal part of the marketing task. It is physical distribution that confers place-utility and time-utility to a product by making it available to the user at the right place and at the right time thereby it maximizes the chance to sell the product and strengthen the company’s competitive position.

If any product made in any place could be consumed in it’s entirely at the very place of production and at the very time of production, there would be no need for physical distribution of that product. But such products are very rare. In practice, almost every product gets consumed at places and times that are different fro those of their manufacture. They have to be carried to places of consumption; they have to be stored; and they have to be distributed.

Where Production Locations and Markets are distanced, Physical Distribution becomes more crucial. In some cases, production locations are totally dictated by considerations like proximity to sources of raw material. As a result, the points of production might be far away from the markets for the product. In some cases, huge production capacities get established at a given location on consideration of technology and economies of scale. In all such cases, the product has to be marketed over an extended territory; it has to be transported over long distances, stored for a considerable length of time and sold.

There are products, which are impacted by the seasonality factor- either production is continuous but demand is seasonal, or demand is continuous but production is seasonal. Here too, physical distribution becomes particularly crucial. It has to perform the balancing act between production and consumption.

Helps Build Clientele

It is physical distribution that determines the customer service level to a large extent. As a result, it serves as a vital tool in building clientele / market for the product. And conversely, ineffective physical distribution leads to loss of customers and markets.

A Promising Area for Cost Reduction

Physical distribution is a fertile area for cost savings. Over the years, in most businesses, physical distribution costs have grown into a sizeable chunk of the total costs and now ranks second among all cost elements, next only to material costs. And surprisingly, it has remained one of the neglected areas of cost control.

The Dark Continent:

Peter Drucker has rightly compared physical distribution to the ‘dark continent of Africa of napoleon’s days’. He said, ‘we know about physical distribution today just as much as what Napoleon’s contemporaries knew about the interior of Africa. We know it is there and we know it is big and that’s all’. The message is obvious. Physical distribution is the most promising area for cost control.

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