IMPACT OF PHYSICAL DISTRIBUTION ON ORGANIZATION AND ITS PROFITABILITY

Chapter I: Introduction

1.1   Background of the Study

Business organization must deal with distribution to achieve a set goal. Distribution is not completed until the goods gets to the final consumers.

Physical distribution comprises the tasks that is involved in planning and implementing the physical flow of materials and good from the manufacturing point to the distributors or the consumer for their own consumption purpose or the aim of making profit.

Physical distribution on profitability depends the effective strategy to maintain and generate more input. The term profitability implies the ability to continuously generate profits over the sustained period of time. Harper (1984), and Sink and Tuttle (1989) suggest the likely impacts on profitability of an organization

Distribution of materials is one of the functions of material management in procurement and stores. The over all objectives of distribution is to provide a service to the procurement, marketing, stores and the production function by holding and delivering of goods and services (products) efficiently and economically.

Further more, it can also be related to warehousing, delivering and planning the distribution system. Warehousing is principally a service or production, being designed to hold products for manufacturer to transform stock from production units to marketing (Sales) units and to assemble loads for delivering to consumers/customers.

Distribution also makes the best used of the resources that are available and to keep investment of a reasonable levels of products.

Planning the distribution system, it must be designed to coordinate warehousing with delivering to advice on the location of the factories, warehouses and depots to route delivering vehicles to schedule deliveries and to control operations in accordance with requirements.

The supply site, must be designed and decided, (to suit the type of business) routes are needed to develop for supplying of good to the customers.

The different types of transportations or routes are rail, road, sea, air and pipeline. These routes must be considered so as to select the one that provides the best services.

Purchasing by Kenneth Lysons 4th editions logistics management which is the same as distribution the author defined it as “the process of strategically managing the acquisition, movement and storage of materials, parts and finished inventory (and the related information flows) through the organization and its marketing channels in such a way that, the current and future profit ability is maximized, through the cost effective fulfillment of orders (Gattona).

Supply chain management (purchasing by Mallam Hassan Mohammed) defines distribution as a “concept that involves the integration of all the value creating elements in the supply, manufacturing and distribution processes of an organization, from the raw materials extraction, through the transformation process to end users consumptions” (pp.16).

Distribution is also a system which is to provide a service to customers who pay to receive goods as ordered.

Distribution channel is the path a product takes as it moves from the producer to the user. The objectives generally, is to select the most effective, efficient and profitable pathway.

The term physical distribution is part of the working vocabulary of every business many finds it difficult to defines its meaning because a wide range or variety of interpretation are available in the literature of the subject.

1.2      Statement of the Problem

Most organization adopt indirect marketing strategy because of its size. The number of products were too many and the organization described to apply the funds to something else.

Indirect marketing is defined “as a process of marketing that uses personal media with or the influence of sale’s man to influence and effect sale’s product – wholesaler -       retailer – consumer.

The organization makes use of this strategy effectively and efficiently because of the following reasons:

1.     It has a narrow product line

2.     It has unable to finance, distribution direct to retailers or decides to apply the fund to something else

3.     Retail outlet are many and widely disperse that is with a low concentration

4.     The wholesaler are willing to carry the product and give promotional support

Organization who have a poor relationship within any link of the supply chain or distribution channels can have a disastrous consequence for all other chain. Therefore informal interaction and information sharing should be giving priority in physical distribution to make it more efficient and effective.

1.3      Objectives of the Study

The major rationale behind this study is to assist us to compare how physical distribution is carried out in different business organization.

The following could be raised:

                 i.        To find out why physical distribution is important to the organizations profit and consumers.

                ii.        To examine the future of the economy on the sales with physical distribution.

              iii.        To identify the effectiveness and efficiency of the depot of the organization.

              iv.        To identify the problems faced in the transportation cost on physical distribution

1.4    RESEARCH HYPOTHESIS

Hypothesis is a very important scientific tool in enquiry that enables us to relate theory to observation and observation to theory.

Research work cannot be undertaken unduly without some hypothesis and hypothesis (unproved assumption) always have

significant effect on every study.

For this research work, these hypotheses are formulated for proving.

Ho    -       Physical distribution has no significant impact on organization and it’s profitability

H1    -       Effective physical distribution has significant impact on organization and it’s profitability.

1.5   Scope of the Study

The research work encompasses the entire of physical distribution activities on organization and its’s profitability on UAC Nig. Plc. as a focal point.

It went further to appraise the extent or embrace of physical distribution activities by UAC Nig. Plc and evaluate its effect on the achievement of the organisations’ objectives.

In carrying out research of this nature, certain constraining factors are obvious; the research encountered some problems, which limited the capacity of the study.

Prominent among the militating factors are:

TIME: A research of this kind requires time to cover the scope, but as a student with both academic and official activities contesting for the little time, the time frame was inadequate for effective coverage of the scope of the study.

FINANCE: To effectively carry out this research requires good financial commitment, thus, as fund was not always readily available, the pace of this study was dawdled.

Finally, the research demands interaction with the consumers and intermediaries of the firm to extract information to put in place this research work. But, most of the firm’s trade links are those with little or no formal education, which limited the effective use of questionnaires and subjected the researcher to an intensive use of observational method to extract the information required.

1.6      Definition of Terms

Physical Distribution: Is the activities involved in the flow of products as they move physical goods from the producer to the consumer or industrial users.

Logistics: Is the total management of the key operational functions in the supply chain-procurement, production and distribution, procurement includes purchasing and product development.

The production function includes manufacturing and assembling, while the distribution function involves ware-housing, inventory, transport and delivery (Knight Wendling/Mallam Hassan)

Ware-housing: a broad range of physical distribution activities including storage, assembling and preparing product for shipping.

Product: A set of tangible and intangible attribute that include colour, price, packing and repetition and services of the manufacturer and the middlemen. A product may be physical goods, a service and idea, a place, an organization or even a person.

Storage: This involves receiving and keeping of materials and issuing them to production department. It also inovles storage of work in progress components and finished goods before being transferred to the ware house.

Packaging: This involves the methods of wrapping up of materials packing and presenting them in good containers to retain the quality ultimately to the consumers.

Routing: it is the systematic study of the detail of the supply sites, customer’s location of delivery of vehicle and operating conditions

Delivery: Is a marketing services being designed for transporting products according to orders and delivering them into the hands of customers

Schedule: is the planning of vehicles journey’s so that order are delivered at the right time, right days, at the right place to the ultimate consumers or users and vehicle are utilized efficiently

Stock/ Inventory Control: This involves the physical control i.e checking, counting and racking of stocks. It also involves, clerical control i.e. keeping records of receipts, issues and balances of all inventories.

Distribution requirement planning (DRP): This is an inventory control and scheduling techniques that applies MRP principles to distribution inventories, which may also be regarded as a method of handling stock replenishment in a multi-echelon environment.

Supply Network: Is the flaw of materials and services into and within the firm starting from extraction, right down t consumption and conversion end products or services.

Planning: Is the preparation of materials budgets product research and development value engineering and analysis and standardization of specifications.

Materials management: Is the total of all those tasks, functions activities and routines which concern the transfer of external materials and services into the organization on the administration of the same until they are consumed or used in the process of production, operations or sale.