Question

Explain the following components of physical distribution :

(i) Order processing

(ii) Inventory control

Hint:

Order processing deals with receiving, checking and fulfilling orders and bills. Inventory control means keeping the right stock so that orders are met without too much cost.

Answer 1

Step 1: Introduction:
Physical distribution means the activities that move finished goods from the producer to the buyer.
Order processing and inventory control are two of its main components.

Step 2: Component (i): Order processing:
An order is the first step in any sale, so it must be handled with care.
It covers receiving the order, checking it, preparing the goods, billing and recording the order.
The way in which orders are handled affects how soon goods are delivered and how happy the customer is.
If orders are handled fast and without error, buyers trust the firm and place more orders. Poor handling causes delay and complaints.

Step 3: Component (ii): Inventory control:
Inventory means the stock of goods held by the firm.
Inventory control means deciding how much stock to hold and when to refill it.
Too little stock leads to missed orders and unhappy buyers. Too much stock locks up money and raises storage cost.
So a firm tries to keep a level that meets demand at the lowest cost.

Final Answer:
Order processing makes sure that orders are received and met properly, while inventory control keeps the right quantity of goods ready for buyers.