Physical distribution

Physical distribution makes goods available to customers at the right place, in the right quantity, and at the right time. No product on the shelf means no sale.

Its four components:

• Order processing: handling customers' orders accurately and quickly. Orders flow from customers to the firm; goods flow back.
• Transportation: carrying goods from where they are produced to where they are sold. It creates place utility.
• Warehousing: storing goods until they are needed. It creates time utility. More warehouses mean faster service but higher cost. Perishable goods (like bakery products) are kept near the market; goods stored for long periods (like some farm produce) are kept near where they are produced.
• Inventory control: deciding how much stock to hold. More stock means better service, but a higher cost of holding it.

So physical distribution is always a balance between customer service and cost.