IMPACT OF PHYSICAL DISTRIBUTION ON ORGANIZATION AND ITS PROFITABILITY

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Chapter I:

Introduction

1.1 Background of the Study

Business organization must deal with distribution to achieve a set goal. Distribution is not completed until the goods gets to the final consumers. Physical distribution comprises the tasks that is involved in planning and implementing the physical flow of materials and good from the manufacturing point to the distributors or the consumer for their own consumption purpose or the aim of making profit. Physical distribution on profitability depends the effective strategy to maintain and generate more input. The term profitability implies the ability to continuously generate profits over the sustained period of time. Harper (1984), and Sink and Tuttle (1989) suggest the likely impacts on profitability of an organization Distribution of materials is one of the functions of material management in procurement and stores. The over all objectives of distribution is to provide a service to the procurement, marketing, stores and the production function by holding and delivering of goods and services (products) efficiently and economically. Further more, it can also be related to warehousing, delivering and planning the distribution system. Warehousing is principally a service or production, being designed to hold products for manufacturer to transform stock from production units to marketing (Sales) units and to assemble loads for delivering to consumers/customers.

Distribution also makes the best used of the resources that are available and to keep investment of a reasonable levels of products. Planning the distribution system, it must be designed to coordinate warehousing with delivering to advice on the location of the factories, warehouses and depots to route delivering vehicles to schedule deliveries and to control operations in accordance with requirements. The supply site, must be designed and decided, (to suit the type of business) routes are needed to develop for supplying of good to the customers. The different types of transportation or routes are rail, road, sea, air and pipeline. These routes must be considered so as to select the one that provides the best services. Purchasing by Kenneth Lysons 4th editions logistics management which is the same as distribution the author defined it as “the process of strategically managing the acquisition, movement and storage of materials, parts and finished inventory (and the related information flows) through the organization and its marketing channels in such a way that, the current and future profit ability is maximized, through the cost effective fulfillment of orders (Gattona).

Supply chain management (purchasing by Mallam Hassan Mohammed) defines distribution as a “concept that involves the integration of all the value creating elements in the supply, manufacturing and distribution processes of an organization, from the raw materials extraction, through the transformation process to end users consumptions” (pp.16). Distribution is also a system which is to provide a service to customers who pay to receive goods as ordered. Distribution channel is the path a product takes as it moves from the producer to the user. The objectives generally, is to select the most effective, efficient and profitable pathway. The term physical distribution is part of the working vocabulary of every business many finds it difficult to defines its meaning because a wide range or variety of interpretation are available in the literature of the subject.

1.2 Statement of the Problem

Most organization adopt indirect marketing strategy because of its size. The number of products were too many and the organization described to apply the funds to something else. Indirect marketing is defined “as a process of marketing that uses personal media with or the influence of sale’s man to influence and effect sale’s product – wholesaler – retailer – consumer. The organization makes use of this strategy effectively and efficiently because of the following reasons: 1. It has a narrow product line 2. It has unable to finance, distribution direct to retailers or decides to apply the fund to something else 3. Retail outlet are many and widely disperse that is with a low concentration 4. The wholesaler are willing to carry the product and give promotional support Organization who have a poor relationship within any link of the supply chain or distribution channels can have a disastrous consequence for all other chain. Therefore informal interaction and information sharing should be giving priority in physical distribution to make it more efficient and effective.

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