By
Sarah Harris
Physical distribution is the process of moving products from manufacturers or suppliers to the end consumers – touching upon transportation, warehousing, inventory management, and order fulfillment. In today’s fast-paced digital marketplace, where customer expectations for quick and efficient delivery are higher than ever, understanding and optimizing physical distribution has become essential for online retailers.
In this guide, we’re going over everything to know about what is physical distribution and why it’s crucial for eCommerce businesses to master this aspect of their operations to stay competitive and meet customer demands.
What is Physical Distribution?
Physical distribution refers to the set of activities involved in the movement of goods from the point of production to the point of consumption. It encompasses various links in the supply chain including transportation, warehousing, inventory management, packaging, and order fulfillment.
The primary goal of physical distribution is to ensure that products are delivered to the right place, at the right time, in the right quantity, and in the right condition, all while minimizing costs and maximizing customer satisfaction.
In the context of eCommerce, effective physical distribution is crucial for meeting customer expectations for fast, accurate, and efficient delivery of online orders.
Importance of Physical Distribution in eCommerce
Many companies overlook the importance of a well-managed distribution service in their supply chain. However, poorly run physical distribution can reduce revenue and even dissuade customer loyalty.
So how can physical distribution help?
1. Get Faster Shipping Times
It’s simple: Faster shipping time means more customers are likely to follow through with their online purchases as opposed to abandoning their cart. Storing inventory in several locations as opposed to one centralized warehouse can help to improve shipping times.
2. Reduce Physical Distribution Costs
When functions in the supply chain are optimized, they tend to save money in the long run. When you provide fast basic shipping, both you and your customers save money in the process.
3. Improve Your Customer Satisfaction
Shipping routes, when optimized and features the availability of multiple inventory storage facilities, can do more than just save your company money. In addition, when you deploy these strategies, your customers receive their products faster and pay less; which can both aid in customer retention.
4 Aspects of Physical Distribution
There are four distinct aspects of an efficient physical distribution model that every eCommerce business should pay close attention to.
1. Automated Order Processing
With automation technology, customers are able to place orders from around the world at any time, and companies are able to process these orders just as easily.
Generally, the software that handles order processing is integrated into a larger inventory management automation system, which also tracks product inventory and manages order statuses.
2. Warehouse Management
A poorly managed warehouse can slow down the process of distribution service and cost more money to run, which isn’t ideal for either the seller or the customer.
Warehouse management systems (WMS) can provide you with increased monitoring capabilities over the numerous operations occurring within your warehouse. They can also help to keep the warehouse floor more organized and optimized.
3. Inventory Control
Automating your inventory control can save a great deal of time, money, and effort. High-quality inventory tracking software can help you to avoid dead stock and picking errors while optimizing your inventory levels across all storage facilities.
4. Automated Shipping
Shipping is one of the trickiest and most expensive parts of the physical distribution process. Working with a third-party logistics company (3PL) can help to automate this process in order to make sure that your shipping methods and destinations are optimized for the benefit of your company, as well as for your customers.
The Physical Distribution System Process
From the management of raw materials to inventory and manufacturing control to transportation and storage, there are many important functions within the process of a successful physical distribution service (PDS).
Let’s explore some of the most significant steps within this process.
1. Establish Your PDS Objectives
The two most significant objectives of your physical distribution system should be customer satisfaction and low production cost. It’s important to continuously weigh the levels of customer service that your company wishes to maintain against your physical distribution processes and costs.
When your brand’s entire range of products is available within each of your shipping zones, shipping times are within an acceptable to ideal range, and shipping costs are low or free with purchase, customer satisfaction is typically around 100%.
When customer satisfaction is high, it increases brand loyalty, which tends to drive sales and boost revenue.
2. Examine the Cost Trade-Offs
Customer satisfaction, retention levels, and brand loyalty are kept high when you account for product availability, shipping costs, and shipping speed. However, maintaining this level of accessibility and cost-effectiveness for the customer can rack up your company’s PDS costs.
Therefore, your company will have to determine what product availability, shipping accessibilities, and price points are attainable while still earning profits within your projected margins. This can be done by analyzing your current levels of customer satisfaction and service, as well as your current warehousing, inventory, and transportation processes.
Once you’ve analyzed these processes and determined how they relate to your levels of customer satisfaction and brand loyalty, you’ll be able to make decisions about changes you can make to your physical distribution systems that either maintain or increase your level of customer satisfaction within an acceptable cost range.
3. Identify and Select Design Alternatives
The details of your company’s PDS are a part of the greater fabric of your company as a whole. Therefore, if you choose to make changes to your PDS, you will be rearticulating the design of your day-to-day fulfillment processes. These redesigns can often lead to increased satisfaction among customers and boost revenue from online sales.
It’s crucial that your company keeps track of the revenue and cost changes that occur when customer satisfaction is increased. Even the boost of just a few percentage points could make a significant difference in your revenue stream, which may counteract any increased costs on the supply chain.
However, you should aim to keep your PDS costs as low as they can be while still maintaining the highest level of customer service possible.
Partnering with Print Bind Ship for Physical Distribution
For many companies, the key to unlocking optimal physical distribution processes is working with a 3PL like Print Bind Ship.
With third-party logistics services, your supply chain management can be optimized at the highest industry standard, ensuring that your costs are kept low while customer experience and satisfaction are continuously prioritized.
Reach out to our 3PL and eCommerce fulfillment experts at Print Bind Ship for tailored solutions to your needs! We specialize in pick pack ship, international fulfillment, and so much more. Get a free quote!
FAQ
Physical distribution management is the process of overseeing and coordinating the movement of goods from the point of production to the end consumer. It involves planning, implementing, and controlling the efficient flow of products, including transportation, warehousing, inventory management, and order fulfillment.
The primary objective of physical distribution is to deliver the right product to the right place, at the right time, in the right quantity, and at the right cost. It aims to maximize customer satisfaction while minimizing operational costs and optimizing resource utilization.
Costs associated with physical distribution include transportation expenses, warehousing costs, inventory carrying costs, order processing costs, and packaging expenses. Other costs may include technology investments, labor, and potential losses from damages or returns.
Logistics is a broader concept that encompasses physical distribution along with other activities such as procurement and supply chain management. Physical distribution focuses specifically on the outbound movement of goods to customers, while logistics includes both inbound and outbound flows of goods, information, and finances.
A physical supply chain refers to the network of organizations, people, activities, information, and resources involved in the production and distribution of a product from supplier to end customer. It includes all stages of transforming raw materials into finished products and delivering them to consumers.