Section M: Physical Distribution Flashcards
distribution
distribution (physical distribution)
The activities associated with the movement of material, usually finished goods or service parts, from the manufacturer to the customer.
These activities encompass the functions of transportation, warehousing, inventory control, material handling, order administration, site and location analysis, industrial packaging, data processing, and the communications network necessary for effective management.
It includes all activities related to physical distribution, as well as the return of goods to the manufacturer. In many cases, this movement is made through one or more levels of field warehouses.
Objectives of Physical Distribution
A primary objective of physical distribution is to add value to the product by moving it from a place where it is less in demand to a place where it is more in demand and thus increase the product’s utility or usefulness. In other words, distribution provides availability.
A second objective is to provide this increase in value in a profitable manner, meaning that the increase in price for offering the good at a time and place convenient to the customer is greater than the cost of offering this service.
Physical Supply
Physical supply is transportation and warehousing leading to the factory, and this may require specialized logistics to move and store bulk raw materials and so on.
Physical Distribution
Physical distribution is transportation and warehousing from the factory to the customer using one or more distribution channels, which are the specific network of distribution centers, wholesalers, and/or retailers the goods travel through to get to the customer.
Distribution channel
Distribution channel : The distribution route, from raw materials through consumption, along which products travel.
Transaction channel
Transaction channel : A distribution network that deals with change of ownership of goods and services including the activities of negotiation, selling, and contracting.
drop ship
drop ship
to take the title of the product but not actually handle, stock, or deliver it (i.e., to have one supplier ship directly to another or to have a supplier ship directly to the buyer’s customer).
Transportation
Transportation.
The physical movement of goods via road, air, water, rail, or pipeline. This is usually the largest part of distribution costs.
Managing distribution inventory
Managing distribution inventory
This is the value of all finished goods at any point in the physical distribution channel(s). It is often the second largest part of distribution costs.
Managing distribution centers (warehouses)
Managing distribution centers (warehouses)
These inventory storage locations may reduce net costs by reducing transportation costs and/or increase time and place utility for customers. The customer must be willing to pay more for this increase in one or both types of utility.
Inventory control
Inventory control
This involves securing distribution inventory, release procedures, and auditing inventory records
Materials handling
Materials handling
This is the movement of goods to and from storage locations and vehicles within and around a DC. It is one part of inventory carrying costs and is often the largest part of warehousing costs.
Investing more in equipment and automation can reduce labor costs. Choices in this tradeoff between labor and handling equipment relate to labor rates as well as the return on investment for the equipment. High volumes may be required to justify the investment. Subsets include picking, packing, sorting, etc.
Order administration
Order administration
These are the costs of customer orders, order status tracking, credit terms, billing, collections, and service. These add cost, and order-taking increases lead time.
Good communication with intermediaries and customers is a vital component of any distribution system.
protective packaging
protective packaging
Wrapping or covering of material that provides containment, protection, and identification of inventory in a warehouse. The material must be contained in such a way that will support movement and storage and will fit into the dimension of storage space and transportation vehicles.
Postponement
Postponement
Distribution centers may perform light manufacturing such as final assembly or perform other final differentiation activities such as adding country-specific packaging, documentation, power cords, etc.
third-party logistics (3PL)
third-party logistics (3PL)
A buyer and supplier team with a third party that provides product delivery services. This third party may provide added supply chain expertise.
4PL
A 4PL is like a 3PL, but this party manages the entire logistics function, possibly subcontracting work to other logistics providers but coordinating and supervising the work as a whole.
Incoterms
Incoterms ®
a set of rules established by the International Chamber of Commerce that provides internationally recognized rules for the interpretation of the most commonly used trade terms in foreign trade and is routinely incorporated in the contracts for the sale of goods worldwide to provide guidance to all parties involved in the transaction.
Advance ship notice (ASN)
Advance ship notice (ASN)
An electronic data interchange (EDI) notification of shipment of product.
Duty
Duty : A tax levied by a government on the importation, exportation, or use and consumption of goods.
Tariff
Tariff : An official schedule of taxes and fees imposed by a country on imports or exports.
Waybill
Waybill : A document containing a list of goods with shipping instructions related to a shipment.
Shipping manifest
Shipping manifest : A document that lists the pieces in a shipment.
A manifest usually covers an entire load regardless of whether the load is to be delivered to a single destination or to many destinations.
Manifests usually list the items, piece count, total weight, and the destination name and address for each destination in the load.
Bill of lading (uniform) (B/L)
Bill of lading (uniform) (B/L) : A carrier’s contract and receipt for goods the carrier agrees to transport from one place to another and to deliver to a designated person.
In case of loss, damage, or delay, the bill of lading is the basis for filing freight claims.
Freight forwarder
Freight forwarder : The “middle man” between the carrier and the organization shipping the product.
Often combines smaller shipments to take advantage of lower bulk costs.
Customs broker
Customs broker : A person who manages the paperwork required for international shipping and tracks and moves the shipments through the proper channels.
reverse logistics
reverse logistics
a complete supply chain dedicated to the reverse flow of products and materials for the purpose of returns, repair, remanufacture, and/or recycling.
remanufacturing
remanufacturing
1) An industrial process in which worn-out products are restored to like-new condition. In contrast, a repaired product normally retains its identity, and only those parts that have failed or are badly worn are replaced or serviced.
2) The manufacturing environment where worn-out products are restored to like-new condition.
green reverse logistics
green reverse logistics
the responsibility of the supplier to dispose of packaging materials or environmentally sensitive materials such as heavy metals.
The four Ps of marketing
The four Ps of marketing Product Price Place Promotion
Objectives of Distribution Inventory Planning Systems
The objectives of distribution inventory planning systems include providing the targeted level of customer service at the lowest cost and the smoothest interaction with supply chain partners.
What are two major controllable costs for distribution inventory planning ?
Two major controllable costs for distribution inventory planning are materials handling and inventory turnover. Finding ways to reduce the number of times materials need to be handled reduces carrying cost.
What are the three major types of distribution inventory planning systems?
Three major types of distribution inventory planning systems include:
- pull systems, which decentralize control,
- push systems, which centralize control,
- and distribution requirements planning (DRP) systems, which require integrating information systems to achieve some of the benefits of both push and pull.
decentralized inventory control
decentralized inventory control
“inventory decision making exercised at each stocking location for SKUs at that location.”
These are also called pull inventory planning systems because DC demand pulls inventory from suppliers.
However, this is usually just orders that are pulling inventory, not ultimate customer demand. Thus, decentralized pull systems use independent demand ordering systems.
order point system
a common method for regional or centralized DC reordering is an order point system. When an order point system is used, the orders will be for fixed amounts (possibly the economic order quantity), but the timing of when the order point occurs will vary.
What is the primary advantage of a pull system, like order point system?
The primary advantage of a pull system is that DCs have autonomy and can order or not order based on their knowledge of local demand. This also entails reduced expense for maintaining communications and relationships with other supply chain partners. A main disadvantage is that this is the primary cause of the bullwhip effect.
