Question

Explain the following components of physical distribution :

(i) Order processing

(ii) Warehousing

(iii) Inventory control

Hint:

Order processing deals with handling the customer order, warehousing stores and assorts the goods, and inventory control sets the right stock level.

Answer 1

Step 1: Introduce physical distribution:
Physical distribution means moving the goods from the maker to the user. It has several components that work together.
Three of them are explained here.

Step 2: (i) Order processing:
Orders are placed by customers. They must be handled quickly and correctly.
This involves receiving the order, checking details, preparing the invoice and passing the instructions to the store.
Slow or wrong processing causes late delivery or wrong quantity and loses customers.

Step 3: (ii) Warehousing:
Warehousing means storing and sorting goods until they are needed.
There is often a time gap between production and consumption. A warehouse fills this gap and creates time utility.
Proper storage also protects goods from damage and helps the firm sell in the right season.

Step 4: (iii) Inventory control:
Inventory control means deciding how much stock to keep.
High stock gives better service to customers but increases the carrying cost, such as capital blocked, rent and risk of damage.
Low stock cuts cost but may lead to shortage. So the firm has to find a balanced level.

Final Answer:
Order processing handles customer orders, warehousing stores goods till needed, and inventory control fixes the right stock level.