Elements/Components of Physical Distribution

Customer service

Customer service is precisely defined standards of customers‟ satisfaction which business owner intends to provide for its customers. Physical distribution system is normally set up to reach the customer satisfaction at the lowest possible cost. In today’s technologically fast paced world, firm always involve the use of specialized software that allow the owner to track inventory while simultaneously analyzing all the modes and transportation means available to determine fastest and cost effective way to deliver goods in time.

Order processing

Order processing is another physical distribution function because it directly affects the ability to meet customer service standard defined by the owner. If the order processing system is sufficient the owner can avoid the cost of premium transportation or high inventory levels. Order processing varies by industry but often consist of four major activities;

  • Credit check
  • Recording of the sales such as crediting a sales representative commission account.
  • Making the appropriate account entries and locating the item.
  • Shipping and adjusting inventory records.

Technological innovations such increase used of Universal Product Code are contributing greater efficiency in order processing. Backwards system gives business the ability to route customer orders efficiently and reduce the need for manual handling.

Inventory control

It is a major component of physical distribution system. Inventory costs include funds invested in inventory, depreciation, possible obsolescence of the goods. Inventory control analysts have developed a number of ways which can help business control inventory effectively.


It is the movement of goods from one point to another. Transportation costs vary by modes.


A storage warehouse holds products for moderate to long term period in an attempt to balance supply and demand for producers and purchasers. They are most often used by business whose product supply and demand are seasonal. On the other hand, a distribution warehouse assembles and distributes products easily keeping them on move as much as possible.

Material handling

As a component of physical distribution, material handling comprise of all the activities associated with moving products within a production facility, warehouse and transportation terminals.

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