Chapter 15 Summary

Wholesalers/distributors are vital links in the physical distribution system. They buy, take title to, usually store and handle goods, and resell them to retailers. There are two primary types of wholesalers, i.e., merchant wholesalers and agents and brokers. Merchant wholesalers take title to the goods it sells while agents and brokers negotiates purchases, sales, or both but does not take title to the products.

Physical distribution is the process of handling orders and moving and storing goods to get them efficiently to customers. Activities performed include transportation, warehousing, inventory management, and order processing. The transportation activity is conducted by air, pipelines, railroads, trucks, and/or water. If more than one mode is used to transport product, this is referred to as an intermodal movement. Transportation can either be performed by third parties or by the manufacturing firm itself.

Warehousing is the process of storing goods while they await sale or transfer. The firm can use a public warehouse or its own (private). Most firms and intermediaries carry stock to meet future demand. In doing so, inventory is created. Having inventory reduces the risk of stockouts, allows production to realize economies of scale, and provides protection in case of strike or equipment problems. Order processing is receiving orders and filling the orders as quickly as possible. The computer has greatly aided in this activity.

There have been a number of trends that have changed how physical distribution operates. One is viewing physical distribution as a system rather than individual activities. A second trend is the application of just-in-time management (holding little inventory and having suppliers provide the quantities needed). A third trend is computer technology such as electronic data interchange and decision-making software.