Physical Distribution process (Distribution Budgets)
5 likes3,939 views
The document outlines the physical distribution process and budgeting within supply chains, highlighting various roles such as carrying & forwarding agents, stockists, and wholesalers. It discusses factors affecting distribution strategies, benefits and costs of intermediaries, and logistics strategies aimed at optimizing transportation costs and improving response times. Additionally, it emphasizes the importance of distribution budget planning and inventory management in responding to customer demand.
Physical Distribution process (Distribution Budgets)
- 1. Chapter-02 Physical Distribution Process Distribution Budgets Physical Distribution Process Distribution Budgets
- 2. Typical Supply Chain RM Factory CWH C & FA Factory PM C & FA C & FA 3rd Party Distributor Distributor Distributor Retailer RM-Raw Material Retailer Retailer PM-Packing Mat. Customers CWH-Central Warehouse C&FA Carrying & Forwarding Agent Physical Distribution Process Distribution Budgets
- 3. In real life linkage can have various combinations • From the factory direct to C&FA • From the factory to and industrial buyer • From the CWH to large distributor • From the C&FA or from the CWH to large retailer • From the distributor to wholesaler to retailer and so and so on. Physical Distribution Process Distribution Budgets
- 4. Chain take various size and shapes depending upon • The nature of the product • The company’s distribution policy • The type of the market • The geographical spread • Size of the organization itself • Its scale of operations • The stage of the product life cycle Physical Distribution Process Distribution Budgets
- 5. Important terms • C & FA – Carrying & Forwarding agent . – An agent acting on behalf of the company, taking care of receipts, storage, handling, issues, of the product kept in charge. • Stockiest – Who would buy from the company, and sell to the retailers. Physical Distribution Process Distribution Budgets
- 6. Important terms • Important services rendered by stockiest – Stocking up the products – Supplying to the retailers as per their requirements – Selling them either against cash or on credit – Servicing the outlets in terms of proper stock availability – Stock rotation Physical Distribution Process Distribution Budgets
- 7. Important terms • Super Stockiest/Super Distributor – They would service small distributors, and for that the company will part with an additional margin to the super distributors/ Super stockiest – Important intermediary in a chain Physical Distribution Process Distribution Budgets
- 8. Important terms • Wholesalers – Are also intermediaries in the chain, and they too buy form the company and sell to others viz. retailers, but the distinction of a wholesaler from Distributor is that he does not render any follow up service in the market – Principally works on bulk deals – Plays an important role in rural market Physical Distribution Process Distribution Budgets
- 9. Important terms • Institutional buyers – Customers who may be buying in large loots for their own consumptions, use by their constituents, or resale to their internal customers. – E.g. services’ canteen stores Physical Distribution Process Distribution Budgets
- 10. Benefits of intermediaries • Increased outlet coverage at lower cost • Stock holding shared by intermediary • Better market coverage • Improved market information • Credit extension to retailers Physical Distribution Process Distribution Budgets
- 11. Cost of having intermediaries • Loss of direct control • Dilution of central focus on company’s product lines • Limited and biased information • Customer service can be at risk • Vulnerability to intermediary’s pressure tactics Physical Distribution Process Distribution Budgets
- 12. Sources and sinks • Sources – Are facilities from which freights originate such as company plants,3rd party manufacturing units, outside contractors, raw materials sources, vendor warehouses, etc. • Sinks – Are facilities that service freight, like customer locations, factory warehouse ,plants etc. Physical Distribution Process Distribution Budgets
- 13. Sources and sinks Raw Material Central Warehouse RM CWH Distributor Factory Factory C&FA Retailer Source Carrying & Forwarding Agents Physical Distribution Process Sink Distribution Budgets
- 14. Logistics strategy requires • Reduction of overall transportation costs • Improve response time • Dispersing inventories across a wide spread of warehouses or sinks. Physical Distribution Process Distribution Budgets
- 15. Disadvantages of logistics strategy • Increase in overall inventory due to increase no. of stocking points • Warehousing costs moving up, because increased requirement of space, handling, storing, dispensing costs. Physical Distribution Process Distribution Budgets
- 16. Distribution Budgets • Budgeting is basically a tool for planning and control. • Distribution budget will have to consider – Activities required to be performed – Costs required to perform those activities – Period of time to which the activities will pertain Physical Distribution Process Distribution Budgets
- 17. Demand Management Forecasting Order Processing Sales Management Master Production Scheduling Physical Distribution Process Distribution Budgets
- 18. Distribution Requirement Planning • A tool for controlling inventory in the distribution system of the organization it enables allotment of inventory of finished goods from factory through the Central Warehouse to various distribution centers based on demands indents safety stocks frequencies of supplies and lead times Physical Distribution Process Distribution Budgets
- 19. Distribution Requirement Planning • Sales forecasting anticipated demand and the order processing system enters that demand, sales management takes decisions, where necessary, relating to that demand e.g. – Product substitution – Product upgrade – Order rotation Physical Distribution Process Distribution Budgets