Agriculture Reference
In-Depth Information
customers successfully. Manufacturers, wholesalers, distributors, retailers, as well as
the consumer are all affected by the adequate and accurate execution of successful
distribution.
Physical distribution systems comprise a costly component of the overall business plan.
In many U.S. industries, assets required by distribution can account for more than 30 percent
of corporate assets. Physical distribution costs are often estimated to be as much as 30 to 40
percent of total costs. “Doing the math” shows that PDS can exceed 25 percent of each sales
dollar at the manufacturing level.
Today's agribusiness manager will benefi t from an understanding of supply chain man-
agement of physical distribution systems even if they are not directly involved in the man-
agement of those resources. Effective PDS can mean opportunities for improving customer
services and for reducing costs. For many businesses, making the product available to the
customer is the road to customer satisfaction. While those opportunities for improvement
and growth are true, so are the opportunities for failure or ineffi ciency. A repair part deliv-
ered a few hours late may cost a customer thousands of dollars in lost production time. The
PDS will vary dramatically by product. The role of PDS for Hormel salami will differ from
the role of PDS for Monsanto's Roundup
®
herbicide due to the nature of the product, the
types of warehousing, transportation, and storage that can be used in delivering the product
to the customers.
Distribution and marketing
Place, or
distribution
, was one of the four critical marketing decisions (four Ps) examined
in
Chapter 7
. We will briefl y summarize that chapter's discussion in the context of the over-
all supply chain function. The choice of a marketing channel is very important to an agri-
business because a tradeoff must be made between providing the dual and competing
objectives of customer service (product available wherever and whenever) and minimizing
distribution costs. Distribution adds a time and place dimension to marketing that can pro-
vide an agribusiness with a competitive advantage. In addition, the special problems of bulk-
iness, seasonality, and perishability in agribusinesses can make the choices of where to store
fi nished goods and how to transport them a diffi cult one. The choice of distribution system
depends on the geographical distribution of customers, the amount of personal and special-
ized customer service that is required, and the need to control or infl uence the image or
relationship with the customer.
Chapter 7
detailed the three basis distribution systems:
•
Manufacturer-direct distribution system
•
Dealer-distribution system
•
Distributor system
In supply chain management, physical distribution systems can be broken down into three
basic categories. Each of these categories involves choices and decisions for the supply
chain manager in making the optimum decisions for the operation. Three basic components
of distribution are:
•
Warehousing — where fi nished goods will be stored
•
Transportation—how goods will be moved
•
Carrier—the scheduling, routing, and selection of the carrier
