Physical Distribution and Logistics Management physical distribution management (PDM) is concerned with ensuring the

product is in the right place at the right time.

Nature

and Importance of Physical Distribution

and Marketing Logistics

Physical distribution does not mean only movement and storage of goods. Now a days, physical distribution or marketing logistics encompasses planning, implementing and controlling the physical flow of materials, final goods and related information from points of origin to points of consumption to meat customer requirements for earning profit. Traditionally, physical distribution aimed at directing the flow of goods from the producer to consumer at a minimum cost. But modern marketers have reversed the idea and adopted market logistics thinking. It starts with the buyers and works backwards to the producer. Logistics seek solution to the problems of both outbound distribution ( moving products from producer to consumers) and inbound distribution (moving products and materials from suppliers to the producer). Thus, the logistics management coordinates the wholechannel physical distribution system which involves the activities of suppliers, purchasing agents, marketers, channel members, and customers. This is accomplish through forecasting information systems, purchasing, production planning, order processing, inventory, warehousing, and transportation planning. Today firms are giving greater emphasis on logistics for a number of reasons. First, efficient distribution through effective logistics contributes in earning customer service and satisfaction which is the prime goal of many firms. Better distribution attracts new customers; poor distribution brings in the opposite results. Second, logistics is a major cost element for most firms. So. they always try to keep it at a minimum level through .sound distribution system. Raising the level of physical distribution efficiency can result in cost savings for both the firm and its customers. Third tremendous expansion in product variety has increased the need and importance of improved logistics management. Ordering, shipping, stocking, and controlling a wide variety of products offers a big logistics challenge. Finally, advancement in information technology is being utilized for gaining distribution efficiency. The increased use of computers, point-of-sale scanners, uniform product codes, satellite tracking, electronic data interchange, and electronic funds transfer has enabled firms to build more efficient systems for order processing, inventory control and handling, and transportation routing and scheduling. Goals of the Logistics System

Designing a logistics system begins with the study of the service needs of customers. The customers expect various distribution services such as fast and efficient order processing, speedy and flexible delivery. presorting and presaging of merchandise, order tracking information, and a willingness to lake back or replace defective goods.

Some firms maintain that their logistics objective is to provide maximum customer service at the least cost. Interestingly enough, this seems to be a paradox since increased customer service raises distribution costs and lowering distribution costs result in poor customer Service. Ideally, the goal of the marketing logistics system should be to deliver a targeted level of customer service at the lower cost. A firm must first meticulously assess the importance of various distribution services to its customers, and then fix desired service levels for each segment. The firm usually will try to offer at least the same level of service as its competitor. Since the firms objective is to maximize profits, not sales, the firm must weigh the benefit of providing higher levels of service against the costs and be convinced that addition to costs brings higher profits. Finally, the firm must set logistics objectives to assist its planning.

distribution center
A distribution center for a set of products is a warehouse or other specialized building, often with refrigeration or air conditioning, which is stocked with products (goods) to be redistributed to retailers, to wholesalers, or directly to consumers. A distribution center is a principal part, the order processing element, of the entire order fulfillment process. Distribution centers are usually thought of as being demand driven. A distribution center can also be called a warehouse, a DC, a fulfillment center, a cross-dock facility, a bulk break center, and a package handling center. The name by which the distribution center is known is commonly based on the purpose of the operation. For example a "retail distribution center" normally distributes goods to retail stores, an "order fulfillment center" commonly distributes goods directly to consumers, and a cross-dock facility stores little or no product but distributes goods to other destinations. Distribution centers are the foundation of a supply network, as they allow a single location to stock a vast number of products. Some organizations operate both retail distribution and directto-consumer out of a single facility, sharing space, equipment, labor resources, and inventory as applicable. A typical retail distribution network operates with centers set up throughout a commercial market, with each center serving a number of stores. Large distribution centers for companies such as Wal-Mart serve 50125 stores. Suppliers ship truckloads of products to the distribution center, which stores the product until needed by the retail location and ships the proper quantity.
Third-party logistics Main article: Third-party logistics

Third-party logistics (3PL) involves using external organizations to execute logistics activities that have traditionally been performed within an organization itself.[4] According to this definition, third-party logistics includes any form of outsourcing of logistics activities previously performed in-house. If, for example, a company with its own warehousing facilities decides to employ external transportation, this would be an example of third-party logistics. Logistics is an emerging business area in many countries.

[edit] Fourth-party logistics Main article: Fourth-party logistics

The concept of Fourth-Party Logistics (4PL) provider was first defined by Andersen Consulting (Now Accenture) as an integrator that assembles the resources, capabilities and technology of its own organization and other organizations to design, build, and run comprehensive supply chain solutions. Whereas a third party logistics (3PL) service provider targets a function, a 4PL targets management of the entire process. Some have described a 4PL as a general contractor who manages other 3PLs, truckers, forwarders, custom house agents, and others, essentially taking responsibility of a complete process for the customer.

Logistics audit procedure

As logistics systems differ from company to company, Logistics Field Audit develops individual programs of the audit. LFA can be concentrated on any type of distribution and warehouse management, workforce management, resources and transportation management, control over supply chain, logistics function management, logistics scorecarding and analytics, or may study whole operations system within supply chain. The typical logistics audit procedure: 1. Preliminary observation of companys operations Logisticians auditors spend few days in a company studying operational functioning and interviewing responsible personnel in the frames of prior signed Confidentiality Agreement. The preliminary research and interviews, combined with the profound knowledge of the auditors, help to make a proposal for providing Logistics Field Audit, and prepare a draft agreement. 2. Positioning supply chain strategies to corporate objectives 2.1. The LFA Expert's goal is to tie logistics strategies and initiatives to specific corporate objectives, then define the operational metrics that need to be improved to achieve both supply chain goals and support these high-level objectives. 2.2. Relating of the Companies logistics requirements to the preferences of the companys customers 2.3. Positioning of supply chain management within the companys structure, review of relationships between interrelated departments 2.4. Quantification of key logistics sources across operational areas (distribution centers, transportation management, productivity management, global supply chain visibility and logistics integration) 2.5. Where necessary, developing proposals for involving logistics-auditors within the companys supply chain management process 3. Negotiation on the LFA Service Agreement and involvement of logistics-auditors within the supply chain management process

4. Logistics Field Audit process 4.1. Managing operations (any combination of warehouse and distribution management, labor and resource management, transportation, supply chain visibility, logistics command and control, or the entire Supply Chain execution function.) 4.2. Key metrics on current operations and performance are collected or derived during data collection. 4.3. Development of relevant information systems (KPIs), its implementation and methodology for data collection. 4.4. Structuring relationships between interrelated departments. 4.5. An analysis of current operations and potential process improvements. 4.6. Detailed analysis of the key sources of hidden logistics value that can be unlocked through process and technology change . 4.7. A comparison of current practices against potential levels of performance and results across a broad spectrum of key logistics system attributes. 5. LFA reporting 5.1. LFA analysis and conclusions. 5.2. Maintain result-focused technology deployment. 5.3. Planning of significant improvements of supply chain management. 6. Implementation 7. Post-implementation audit Logistics Field Audit methodology is an effective management tool, widely used by the leading companies in the world. It ensures significant cut of time period between gaining objective assessment of companys logistic system functioning, developing of recommendations, introducing innovations. It is all achieved via involvement of auditors into the supply chain management process.