Chapter 2 Components of Distribution Management (B)

Chapter 2:
Components of Lecturer:
Distribution Puan Shamariza Binti Maarof
Management MBA, BBA (Hons) (Transport)

Jabatan Perdagangan
Politeknik Nilai
Negeri Sembilan
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Understanding the wholesale distribution

industry
 Wholesale distributors are one of the three primary
facilitators in the SCM process.
 The function of a distributors often misidentified

because it is sit in the middle between manufacturers
and retailers.
 There are some manufacturers and retailers engage in

more elaborate distribution activities.
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The Need For Wholesale Distribution

 The focus is to increase the efficiency of time, place and
delivery utilities.
 The intermediaries can reduce the number of transaction

between producers and customers, as illustrated in figure.
 The usage of second tier intermediaries also can increase the

distribution efficiency.
 Intermediaries also consolidate flows of information and

products through the supply network channels.
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 The creation of distribution arrangements can also decrease

overall channel complexity in other areas.
 Channel intermediaries also assists in routinization of business

functions and product sorting.
 Routinization refers to the policies and procedures that provide

channel members and new entrants with common goals, channel
arrangements, and expectations, and structures channel
exchange mechanisms to facilitate transactional efficiencies.
 Sorting refers to a group of activities associated with

transforming products and product quantities acquired from
producers into the assortments and lot sizes demanded by the
market place.
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 Sorting can be broken down into four primary functions:

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The Elements of Physical Distribution Flow

Management
 Most companies divide the physical flow of goods through the firm
into two separate but related phases.
 The first one is managing the flow of product and information into
the enterprise and called Materials Management.
 The secondly is concerned with the flow of products and

information out of enterprise and is called Physical Distribution.
 As this two management cycles combines in continuous flow, they

constitutes the logistics function.
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Incoming materials and information

 It consists of activities that associated with the planning and
control of all inbound materials (finished goods, materials and
component parts) into the enterprise.
 The major sub functions are briefly described as follows:
1. Material Planning and Control – to plan for inventory both in the short and long
term of the enterprise. Goal of this function is to develop marketing and sales
forecasts into detailed production and finished goods requirement, to project
resource requirements associated with capital, manpower, materials and physical
plant and to perform strategic simulation to validate overall enterprise goals.
2. Purchasing – Activities associated with the procurement of raw materials,

components and finished goods. It includes value analysis, supplier selection,
price and delivery negotiation, purchase orders and etc.
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Incoming Materials and information (Continued..)

3. Receiving - it involves the actual physical receipt of purchased
material into the firm. Such activities includes physical shipment
verification, receiving inspection of goods, claims and
documentation completion.
4. Warehousing and Storage - these functions are concerned with the

physical management of materials, components, finished goods and
MRO items. Such activities such as issuing and accepting material
returns, maintaining the physical accuracy of the inventory, etc.
5. Materials Handling - This function consists of two activities. First,

it involves analyzing, designing and improving the processes that
related with physical movement of inventory. Second, concerned
with the actual physical movement of products to and from storage
areas to the points where they will be used.
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Outgoing products and information

 This function can be defined as the management of the storage and
movement of finished goods originating from the supply source, and
concluding with delivery to customer.
 The objective is to provide superior customer service, optimizing total

distribution costs, minimizing finished goods inventories, minimizing
the order processing cycle and providing costs effective transportation.
 The major sub-functions of physical distribution consist of the

following:
1. Order processing - responsible for the timely, accurate, and efficient

processing of customer orders into the firm, which is order entry, inventory
allocation and picking, and order confirmation and shipping.
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(Continued..)
2. Warehousing – the purpose of warehousing is to satisfy the discrepancies

that arise between inventory availability and the time and place requirements
of the marketplace. The goal of warehousing is to have inventory available
for customer sale at the least possible cost. Storage warehouses are used to
house unsold or promotion goods for medium to long periods of time.
3. Finished Goods Management - Finished goods management- The control

of finished goods inventories covers a wide range of activities from
managing stocking level and order picking, to interbranch warehouse
transfer, and customer order shipment.
4. Material Handling and Packaging - consists of such activities as

containerization, vehicle loading, hazardous product handling and
packaging.
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(Continued..)
5. Shipping – the main functions of shipping consist of customer

order packing, vehicle loading, order confirmation and shipment
documentation.
6. Transportation – It is one of the most costly part of the business.

Distributor have the option of using five methods of transport:
motor carrier, railroads, pipelines, water and aircraft. The goals of
transportation are to provide continuous flow of product through
the supply channel, optimize vehicle capacities and loading
equipment during shipment, provide speedy and timely delivery,
and minimize shipment damage and theft.
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The Importance of Transportation in

Distribution
to provide continuous flow of product through the
supply channel
optimize vehicle capacities and loading equipment
during shipment
provide speedy and timely delivery
minimize shipment damage and theft
To satisfy customer needs
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Chapter 2:

Management MBA, BBA (Hons) (Transport)

Understanding the wholesale distribution

 The function of a distributors often misidentified

 There are some manufacturers and retailers engage in

The Need For Wholesale Distribution

 The intermediaries can reduce the number of transaction

 The usage of second tier intermediaries also can increase the

 Intermediaries also consolidate flows of information and

 The creation of distribution arrangements can also decrease

 Channel intermediaries also assists in routinization of business

 Routinization refers to the policies and procedures that provide

 Sorting refers to a group of activities associated with

 Sorting can be broken down into four primary functions:

The Elements of Physical Distribution Flow

 The secondly is concerned with the flow of products and

 As this two management cycles combines in continuous flow, they

Incoming materials and information

 The major sub functions are briefly described as follows:

2. Purchasing – Activities associated with the procurement of raw materials,

Incoming Materials and information (Continued..)

4. Warehousing and Storage - these functions are concerned with the

5. Materials Handling - This function consists of two activities. First,

Outgoing products and information

 The objective is to provide superior customer service, optimizing total

 The major sub-functions of physical distribution consist of the

1. Order processing - responsible for the timely, accurate, and efficient

Outgoing products and information

2. Warehousing – the purpose of warehousing is to satisfy the discrepancies

3. Finished Goods Management - Finished goods management- The control

4. Material Handling and Packaging - consists of such activities as

Outgoing products and information

5. Shipping – the main functions of shipping consist of customer

6. Transportation – It is one of the most costly part of the business.

The Importance of Transportation in

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