THE EFFECT OF PHYSICAL DISTRIBUTION ON THE SALES VOLUME OF BEVERAGE IN ENUGU METROPOLIS (A CASE STUDY OF SEVEN-UP BOTTLING COMPANY)
In this chapter the researcher will review some literature to get what others have about this subject.
2.1 DEFINITION OF PHYSICAL DISTRIBUTION
Different people hold different view of physical distribution such that various intellectuals and authors had contributed to physical distribution with different and numerous definitions both related and divest some of such definitions are disclosed below.
McCauley (2001) defines physical distribution as the focus transportation and storing of physical goods within individual firms along channel system. He further state that physical distribution is a term employed in manufacturing and commence that described the efficient movement of finished goods from the end production lien to the consumers.
According to Philip Kotler (1998) physical distribution is that which comprises the task involved in planning, implementing and controlling the physical flow of materials and finished goods from point of origin to point of uses to meet the need of customers at a profit.
He also indicated that many companies state their physical distribution objectives as getting the right goods to the right place and at the time of the least. But he argued that since physical distribution activities are highly inter-related decision must be made on a total system basis.
The starting point for designing the physical distribution system is to study what customer are interested in. this include on time delivery supplier with the willingness to meet customer’s emergency ends careful handling.
Merchandise, supplier willingness to take back defected goods and supplier willingness to carry inventory for the customers.
Peter F Drulker (2003) viewed physical distribution as a marketing function which involves the process of mailing and handling goods in their ultimate consumers. He went further to state that viewing physical distribution as a part of the new marketing concept, must consequently start with the consumer’s problem and demand derived. He also state that physical distribution function can be divided into the basic group: the introvert and the extrovert. The introvert realest to the function which are performed within the company i.e warehousing and transport etc. the extrovert function related to the customer the distribution and the acceptance some by the customers.
Nwokoye (1997) states that the task of physical distribution is to make goods physical available, bridges the gap between production and use or consumption. Distribution, according to her is concerned with making the product at the right place at the right time, it is an operation that creates time place and possession utilities through the movement of goods and persons from one location to another integrate and coordinate all the activities that will affect consumer satisfaction. These activities includes freight transportation, warehousing material, handling, protective packaging, inventory control, processing.
John Graham (2001), in his contribution stated that physical distribution management involves the integration of the six activities of physical distribution, transportation, warehousing, inventory control, materials handling, order processing and packaging into a couple distribution. In warehousing and other physical distribution strategy. He went further to say that decision activities to meet the states objective. Effective distribution management represents a balance between product delivery and capabilities and related cost.
However, from the above definitions, I am adopting PHILIP Kotler’s definition which views physical distribution as that which comprises the task involved in planning, implementing and controlling the physical flow of materials and finished goods from the point of origin to the point of use, to meet the need of customers at a profit.
2.2 PHYSICAL DISTRIBUTION OBJECTIVEA AND POLICIES
This first major take in facing any business enterprise to that of defining the objective tends to achieve. It also has to get the policies, procedures and guidelines for achieving the set of objectives.
A company that does not have clear objectives would certainly accomplish nothing, structured guide for achieving them will not be realizable.
Policies constitute definite course of action predetermined for the purpose of securing uniformity of procedure as long as sustainability similar conditions exist. A based upon definite and accurate knowledge they provide guidance for the solution of recurring problems. Policies ensures uniformity of action, saves the time of the executives, minimized temporary and personal consideration which often influence action.
In the case of distribution explicitly and clear statement of objectives has to be made by the company. This is to say that what the company intend to achieve through distribution system has to be clearly attend. The Seven-up bottling company as marketing oriented company should establish some reasonable objective and policies that will guide them effectively.
It is now obvious that every marketing oriented company needs a clear distribution objectives and policies. This is why Aderinka E.O (1993) said that ultimate success or failure of any marketing organization is to a large extent dependent upon policies that are formulated and administered. Physical distribution probably the most appreciated marketing function and the total economy. Some of the objectives of physical distribution are:
- To increase sales volume
- To improve customer’s service
- To reduce distribution cost.
- TO INCREASE SALES VOLUME: A properly designed physical distribution system helps to generate additional sales volume. A company whose product is always on the retail shift when the consumers want it, it will be at advantage over company while product is always out of stock.
- TO REDUCE DISTRIBUTION COST: Effective management of physical distribution provides many opportunities for cost reduction. Establishing the optimum number and location of warehousing improving material handling. Proper inventory control are some of the ways physical distribution management can reduce cost.
- TO IMPROVE CUSTOMER SSERVICE: High customer service standard guarantee increase revenue and product of forestalling distribution in production process and possible point of stock syndrome that leads to customer dissatisfaction and possible brand switching therefore, the more the customer are satisfied and the more revenue and profit increases due to increase patronage.
2.3 SCOPE AND ACTIVITY CENTERS OF PHYSICAL DISTRIBUTION
Physical distribution management is the term generally used to describe the service of interested functional activities by which appropriate amount of finished goods inventories are planned and more on through distribution pipelines. It encompasses all functions directly involved in the movement of goods, embracing the integration of six areas into a distribution strategy.
There activities must be carried out in a systematic manner to ensure the achievement of physical distribution and objectives (which is to provide adequate customer’s service at minimum cost) these wide range of activity center includes:
- Order processing
- Material handling.
Transportation in physical distribution serves as a link between the manufacturer and the supplier and also between the manufacturer and the final consumer. It bridges the spatial gaps among the fixed factories which include supplier, warehousing, factory and the market.
Therefore transportation increases the value of products by creating time and place utility and at the same time promoting possible utility. Transportation involves the movement of raw materials semi-processed goods and finished goods from the point of origin to the point of needs either through private or public supply chain. The transportation activities starts as soon as raw are produced with the delivery of the finished goods to the final consumer. Hence management must decide on the form of transportation to use and the particular carriers, in shipping goods to it’s warehouse dealers and customers, the company can choose among five mode of transportation, this include rail, roads, water, air and pipeline. Each of the transportation mode has its characteristics advantage and disadvantage. In choosing one over another the marketing manager must consider the following:
- Cost of each
- Speed of delivery
- Reliability of each mode to protect goods in shipping
While transportation is a function necessarily perform aimed in the marketing of goods, it is especially costly.
The cost of transportation carried will affect the pricing of the goods when they arrived, all of which will affect customer’s satisfaction beverages firms should therefore note that this emphasis the general principle that transportation cost consideration. Had transportation time depend on their combined relationship of the overall efficiency of the total physical distribution system.
Warehousing is one of the major component in physical distribution enhance a wide range of functions such as storage, dividing bulk, breaking, assembling and preparing product for reshipping
- warehousing decision involves locating warehouses or storage point in the field to the best supply and serves customers and for channel intermediaries.
Warehousing can be defined as involving the physical facilities useful primarily for storage of goods hold in anticipation of sale and transfer within a distribution channel therefore warehousing involves receiving finished goods from the production line sorting them and holding them to ensure that they are in good condition till when they are needed by the customers. The cost of establishing warehouse is very enormous, the business marketing managers are faced with the option between private warehouse and public warehouse.
Private warehouse is carried on in facilities which are owned and operated by company for the purpose of storing of distributed product which are owned by the company. Private warehouse could otherwise be referred to as branch house, it may involve separate building or it may be carried on in general purpose establishment.
Public warehouse activity is to store, receive and sometimes ship goods on a rental basis to other business firms which do not have private warehouse facilities on which required supplement facilities.
The decision to establish a private warehouse or a public warehouse is based on the following.
- Warehouse respective cost
- The company financial situation
- The size of demand
- The degree of control desire
- The stability and variability of demand.
- INVENTORY MANAGEMENT AND CONTROL
Inventory is a supply of new material work in progress or finished goods held for further process or sale. Inventory control means stocking appropriate quantity of goods to avoid price or meet customers order.
Inventory decision making involves knowing when to order and how to order. As is drawn management must decide when new order should be placed.
This stock level when new order is placed is called “Re ordering that is when the stock of items falls to units”
Inventory is central importance to physical distribution system, it therefore beholds on the management to ensure account forecasting demand. In order to determine the level of stock that will not result in stock holding this helps to achieve better customer service.
4 MATERIAL HANDLING
In order to achieve the physical distribution objectives of providing adequate customer’s service at minimal cost. Management has to ensure that materials and components parts are efficiently handled right from the time material enters the factory gate till they are processed and ready for delivery to customers inform of finished goods. Therefore materials handling involves the range of activities designed to ensure effective satisfaction placement and positioning of material to facilitate their transportation storage, shop display and also enhance the production process. The large of activities of materials handling includes, selecting, pilling loading, transportation and unloading process.
Much of the present day materials handling to automatic include this are forlklings, conveyors, craves, hoist, industrial tractors and other equipment used to move the store inventory.
Major decision facing management are most cost effective for example conveyors have been more useful for moving small bulk materials, and cranes are more useful with heavy items. Suitable equipment must be available to permit economical handling of goods.
However, other basic issues must be addressed when materials handling system was to minimize the distance products move within the warehouse during course of receiving handling and shipping products.
- PROTECTIVE PACKAGING
Products that passes through physical distribution system are often subjected to a number of factors that require considerable thought as to packaging in a manner that protect them from damage are usually common in physical distribution, the physical damage and environmental impact and compression while the environmental damage usually caused by exposure weather, temperature, humidity and foreign mater such as insect and rodent.
Managements are advised to develop a kind of package that can counter the cause of damage in transit or storage. A well designed packaging can lead to reduction system which is based on objective.
- ORDER PROCESSING
Order processing is just the way of processing orders placed, it comprises of all activities involved in collecting checking and transporting sales order information.
Physical distribution began with the receipt of a customer order. The order department, prepares multi-copy invoice and dispatches to their various department, item that are out of stock are back order. The sales person or customer fills out an order from which he then transmitted to the location where the desired goods area stored, this location may be main warehouse or field warehouse. It is the dusty of the other department to process these quickly and accurately as possible.
The warehouse sends the goods out and as soon as possible item that are shipped are accompanies by shipping and billing document that are also multi-copied and to go their various department should endeavor to assess the customer capability in terms of credit worthiness, financial outstanding and also determine weather and where the items are in stock. Nowadays, many companies are developing easy way of handling and speeding up customers order.
2.4 PHYSICAL DISTRIBUTION EFFICIENCY AND PROFIT
In any marketing firm, management does not expect to eliminate distribution cost, in fact it would not be uprising if expenditure of distribution service trends to arise in view of widening market for many products like beverages which are not prime necessities or life. Customers are choose not only between the product and service of beverage.
Management according to Walter George et al (1992) would be failing its duty in the competitive race it did not strive to maintain and expand the market for its products. Therefore, in the high of that contribution made Walter et al to say that management problem is not the complete elimination of the contribution cost. The questionnaire that expenditure are effective enough to bring a profitable effort and how different effort may be more effective.
Physical distribution cost account for as much as over third of the manufacturer selling price and form one fifth to one fourth price paid by the buyer.
Kotler also come up with similar estimate of physical distribution cost. Therefore any activity accounting for so much total of cost council bring together for manufacturer effort to secure more efficient performance since marketing management is profit oriented management.
If after consideration of market demand physical distribution cost seems to be higher that they have to be. There are ways to reduce them and thereby improve profit. However, Arbury et al. on this matter have warned that the objectives of cost minimization is no longer relevant. They argued that the new revenue must be compared to the added cost before deciding whether the improvement has been made.
Therefore, the researcher conclude that the effective of the distribution system of any beverage form must be educated on the bases of profit not on the basis of cost.
2.5 CONTROL OF PHYSICAL DISTRIBUTION IN THE BEVERAGE INDUCTRIES.
Because beverage generally reach the final consumer through intermediate distribution level they cannot completely control physical distribution in other words they cannot completely direct and regulate physical distribution activities.
However, at last in theory a beverage firm does direct and regulate inventories as the factory and its own distribution point warehouse or these warehouse directly under the control where physical distribution decision can be optimal.
Cundiff et al (!997) supported this view both warned that physical distribution decision are optimal only in the sense that they are the best under the circumstance considering such factors like cost, demand, characteristics and inventory activities of distribution points further down to the channel.
A beverage firm (Seven-up bottling Company) inclusive must try to obtain optimal performance in the actual distribution system by finding effective way of coordinating its inventory policies and practices with those of other channel members. The beverage cost and profit are definitely affected by what the middle men do or do not with regards to managing inventories and availability of the beverage product at the time and place desired by nail buyers if the middle men are stocked, they are likely to cut process to make sales, thus jeopardizing future sales at more normal process, possibly demanding the company’s reputation for quality of beverage. These middlemen will perhaps make themselves less enthusiastic about further relationship in the beverage. If middlemen follow unintelligent material to practice their transportation, storage, shop display and also enhance the production process. The range of pilling, loading, transportation and unloading process.
Finally the Seven-up bottling company should endeavor to obtain optimal performance in the actual distribution system by finding effective ways of co-ordinating its in inventor policies and practice with its channel members.
As well these will help them control physical distribution at a minimal cost.
2.6 CURRENT STUDIES ON PHYSICAL DISTRIBUTION ON SALES VOLUME
According to Bert Rosenbloom and Maryanrd (2001) the objectives of the review of physical distribution area are as follows.
- To increase sales volume: a properly designed physical distribution system helps to generate addition sales volume.
- To improve customer’s service: High customer service standard guarantee increase revenue and profit by forestalling disruption in production process and possible out stock syndrome that leads to customer dissatisfaction and possible brand switching.
- To reduce distribution cost: Effective management of physical distribution provided many opportunities for contradiction.
- Creation of time utilities: physical distribution helps to adjust difference in production and consumption pattern.
The physical distribution of Seven-up bottling drinks has enable the company to reach their numerous customers. And this has resulted to an increase in sales volume of the company’s product (drinks) and has helped a lot in achieving consumer patronage and brand loyalty of their target market with the objective physical distribution of Seven-up drinks has helped Seven-up company to remain in its position as the leader in the marketing of beverages by constantly remind their actual and beverages by constantly remind their actual and potential customers of the availability of the products and the company thereby improving customer service.
They also reduce distribution cost through effective management of physical distribution by establishing the optimum number and location of warehouse, improving the materials handling proper inventory control etc. they also succeeded in securing the sale load, there increasing sales and overall organization goal acceptance that already gained in the market have. Again physical distribution of product has enhance creation of time and utilities which helps to adjust differences in the production and consumption pattern and also attract many customers to patronize the company.
Finally from the above someone can see that Seven-up bottling company was able to attain its physical distribution objectives thereby securing the sales lead increasing sales and overall organization goal.
2.7 SUMMARY OF LITERATURE REVIEW
According to the John Graham (2001), physical distribution management involves the integration of six activities of physical distribution (transportation, warehousing, inventory control, Materials handling order processing and protective package)
The physical distribution of Seven-up bottling company it’s the faster growing distribution system.
This is because of its ability to many of the activities of physical distribution with the objectives of physical distribution, the distribution of Seven0up drinks has helped the company to remain in its position.
Finally, they succeed in securing the sales lead thereby increasing sales and overall organization goals due to the acceptance that is ready gained in the market share