Physical distribution is an integral part of the marketing process, which concerns the effective and efficient movement of finished goods from the end of the production operation to the consumers. It takes place with numerous wholesaling and retailing distribution channels, and covers important decision areas such as inventory control, materials handling, packaging, transportation, and warehouse site selection.
In the last years, physical distribution activities have thus received increasing attention from business managers and small business owners, because these functions often represent almost half of the total marketing costs of a product. By storing goods in convenient locations for shipment to wholesalers and retailers, and by creating fast, reliable means of moving the goods, small business owners can help assure continued success in a rapidly changing, competitive global market.
The importance of physical distribution is mostly based on its relevance to customer service and satisfaction. Including physical distribution in customer service programs is not only crucial; assessing the effectivity of the process at satisfying customers is also a must.
Here are ways to assure and measure your physical distribution process’s effectiveness to increase customer satisfaction.
1. Setting Your Customer Goal
A business must set and prioritize customer-oriented goals that relate to physical distribution activities. These include timeliness of delivery, order cycle time, and merchandise availability. Also important is the condition merchandise arrives in, as well as the percentage of inventory orders filled accurately. Other customer service goals relate to the variety and assortment of merchandise, percentage of items unavailable or out of stock, and the percentage of returns due to damaged or defective merchandise.
2. Set Realistic Standards
Physical distribution costs can consume up to about 50 percent of a business’ budget that it’s important to set realistic customer service standards. You may set a lofty benchmark that is unreachable and, on the one hand, opt to provide a level of customer service above what is required or appreciated by customers. When deciding thus on service level standards, consider the trade-off between physical distribution costs and the service level you can realistically extend.
3. Come Up with a Supplier Report Card
Keep track of the trends that affect customer service through internal evaluations typically determined by quantitative measurements. You may also analyze the rate of change over time and come up with a supplier report card. Ratio calculations such as percentage of on-time deliveries, order accuracy and percentages of stock-outs or substitutions are common — and important — metrics. Also, note evaluation items for each supplier throughout the month and conduct evaluations at the end of each month. Assess this using the customer standard you set.
4. Openly Communicate with Your Customers
It is important to build an open communication with your customers. External evaluations may comprise ratio calculations but more often used are qualitative assessments. The customer satisfaction rate is a common ratio assessment too. Quantitative numbers are more helpful if a business includes questions that focus on aspects of physical distribution that point out dissatisfaction among customers. Questionnaires, surveys, focus groups and telephone or in-person interviews are among the best ways to collect qualitative customer service data.