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Physical Distribution Management

CHAPTER 25. Physical Distribution Management. Physical Distribution Management: Objective.

debra-mcintosh
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Physical Distribution Management

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  1. CHAPTER 25 Physical Distribution Management

  2. Physical Distribution Management: Objective • Physical Distribution Management (PDM) involves efficient management of materials – their movement, storage and control – outside the manufacturing plant, in order to meet the organizational objective of meeting the customer demand.

  3. PDM comprises of: • Optimal location and operation of supply centres or warehouses. • Optimal transport of materials to and from the warehouses.

  4. Optimal Warehouse Location • Strings & Weights method • Distance is equated to costs. • Customer requirement (numbers) is represented by weights. • Starting with an initial solution by means of centre of gravity method, iterations for total costs are carried out.

  5. While location is one of the decisions, the warehouses need to be operated and inventory is to be controlled. The costs related to the warehouse are: • transportation cost of materials • fixed cost of warehouses • variable operating costs of warehouses • cost of storing and handling inventory

  6. Allocation of goods from Warehouses to Customers • The customers can be supplied from different warehouses. • The transport costs are different. • The requirements (total and individual) of the customers and the availabilities at the warehouses have to be considered. • Optimal allocations from warehouses to customers have to be worked out. This involves Transportation Problem or Linear Programming.

  7. Vehicle Route Scheduling • Scheduling the route a vehicle should take from the warehouse to the various customers is another important consideration in PDM. • ‘Savings Criterion’ – advocating a route resembling a flower petal in contour – is very useful in minimizing the travel distance.

  8. Importance of Logistics Management Decisions on logistics management i.e. PDM affect: • Inventories inside the factory • Inventories outside the factory • Response time to customer demands • Choice of markets/segments that can be served • Purchasing criteria for suppliers and materials

  9. Importance of Logistics Management (contd.) • Packaging • Materials handling • Transport mode and frequency • Overall costs • Overall profitability for the firm • Efficiency of the supply chain

  10. PDM and Supply Chain • PDM is at the interface between the supplying and receiving organizations. • PDM has a big role to play in the efficiency of the supply chain. • PDM decisions should result in optimality for the chain as a whole. • PDM has to literally ‘deliver the goods.’

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