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SDM/U4 Topic 3 An Overview of Transportation, Warehousing and Inventory Decisions

An Overview of Transportation

Transportation as a component of physical distribution is concerned with the movement of goods from the warehouse to customer destination. It includes loading and unloading of goods and their movement from one place to another. In doing so it provides time and place utility. Transport accounts for a major portion of the distribution cost and of the total price of the product.

Being a major cost element, marketers must take keen interest in transportation decision as it will help in reducing cost and increasing customer satisfaction. Correct form of transportation mode is very essential as it directly affect the price of the product. Proper choice facilitates smooth movement of goods on time and in good condition. The transportation mode therefore needs to be adequate, regular and dependable.

Different modes of transportation are there like Road transport, railways, Airways, Water transport and pipeline from which a choice has to be made. Each has its own share of merits and demerits. Normally a combination of different mode is chosen and integrated in a sequential order to move the product economically and faster.

Choice of a particular mode of transportation depends upon various factors like cost of the transport, availability of the mode of transport, speed, reliability, frequency, safety and suitability of the mode to move the product.

Road Transport:

This is an ancient form of transport and plays an important role in marketing. Road transport may be through different means like transport by animals (like bullock, camel), transport by human beings (like coolies or porters), transport by automobiles (like scooters, auto rickshaws, cars, truck buses etc.). Road transport is flexible and economical. However, it is unsuitable for long distances.

Railways:

It is suitable for transporting bulk goods over long distances. It is an economical mode because large volume of traffic is handled over large network of railways. However, it is inflexible as it is unfit to transport goods to rural areas. Further, it involves huge maintenance expenditure.

Water Transport:

Water way is an important mode of transport for heavy and bulky goods in large quantities. It consists of inland water transport and ocean transport. Inland water transport is used for transporting goods within county and ocean transport is used to transport goods to other countries. Water transport is a cheapest form of transport, having great carrying capacity and is highly suitable for heavy and bulky goods, but it has low speed and higher degree of risk due to seasonal difficulties.

Air Transport:

Of late air transport has assumed significant importance as a mode of transport. Although it accounts for a small percentage of transportation, it is useful for perishable items, overnight packages, emergency supplies etc. The main disadvantage of air transport is that it has high freight charges, low carrying capacity and too much dependence on climatic conditions.

Pipelines:

These are specialized carriers design to transport the crude and refined petroleum and natural gas from wells to refineries and further to distribution centre. It is an economical mode as it involves less handling and labour cost, but it is the slowest mode of transportation and very limited in number.

Warehousing and Inventory Decisions

  1. It Creates Utilities Of Time And Place:

By making available a product at the place where and when it is needed.

  1. It Accounts For A Major Portion Of Marketing Costs:

According to one estimate, physical distribution costs constitute as much 60% of the total marketing cost and range according to industries, from 10% to 30% of sales revenues; for machinery these were 9.8% ; wood products 16.1% ; paper and allied products 16.7% ; chemicals, petroleum and rubber 23.1% and primary and fabricated metals, 26.5%.’

  1. Bigger Share in the National Wealth:

It represents large share in the national wealth in the form of facilities—rail, road, trucks, highways, aircrafts, ship, docking facilities, pipelines, storage facilities and equipment.

  1. Specialisation It Facilitates Geographic Specialization:

Each area produces goods that its natural resources, climate or pool of manpower resources enable it to produce more efficiently.

  1. Determines Standard Of Living:

This is so because proper distribution of products makes them available to a large number of people, at a relatively lower cost. Thus it can be said that physical distribution directly affects sales, customer service and satisfaction, and costs.

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