What is Physical Distribution? The Importance of Physical Distribution in eCommerce

In the world of eCommerce, the supply chain can be long and complex. This is because the supply chain involves physical distribution; which includes every step of the fulfillment process. Nonetheless, physical distribution is one of the most important steps of a supply chain. 

In this article, we will go over exactly what physical distribution is; as well as how it affects your business.

What is Physical Distribution? 

Physical distribution involves each activity that is related to the movement of products to the consumer after production. Though the concept is simple, physical distribution can involve several links in the supply chain. In addition, physical distribution also involves various areas of expertise, including; inventory control, handling, packaging, shipping, delivery, and customer service. 

Importance of Physical Distribution in eCommerce 

Many companies overlook the importance of a well-managed distribution service in their supply chain. However, poorly run physical distribution can reduce revenue and even dissuade customer loyalty. 

So how can physical distribution help?

1. Get Faster Shipping Times 

It’s simple:  Faster shipping time means more customers are likely to follow through with their online purchases as opposed to abandoning their cart. Storing inventory in several locations as opposed to one centralized warehouse can help to improve shipping times. 

2. Reduce Physical Distribution Costs 

When functions in the supply chain are optimized, they tend to save money in the long run. When you provide fast basic shipping, both you and your customers save money in the process. 

3. Improve Your Customer Satisfaction 

Shipping routes, when optimized and features the availability of multiple inventory storage facilities, can do more than just save your company money. In addition, when you deploy these strategies, your customers receive their products faster and pay less; which can both aid in customer retention. 

The 4 Functions of Physical Distribution 

There are four distinct aspects of an efficient physical distribution model that every eCommerce business should pay close attention to. 

1. Automated Order Processing 

With automation technology, customers are able to place orders from around the world at any time, and companies are able to process these orders just as easily. 

Generally, the software that handles order processing is integrated into a larger inventory management automation system, which also tracks product inventory and manages order statuses. 

2. Warehouse Management 

A poorly managed warehouse can slow down the process of distribution service and cost more money to run, which isn’t ideal for either the seller or the customer. 

Warehouse management systems (WMS) can provide you with increased monitoring capabilities over the numerous operations occurring within your warehouse. They can also help to keep the warehouse floor more organized and optimized. 

3. Inventory Control 

Automating your inventory control can save a great deal of time, money, and effort. High-quality inventory tracking software can help you to avoid dead stock and picking errors while optimizing your inventory levels across all storage facilities. 

4. Automated Shipping 

Shipping is one of the trickiest and most expensive parts of the physical distribution process. Working with a third-party logistics company (3PL) can help to automate this process in order to make sure that your shipping methods and destinations are optimized for the benefit of your company, as well as for your customers. 

The Physical Distribution System Process 

From the management of raw materials to inventory and manufacturing control to transportation and storage, there are many important functions within the process of a successful physical distribution service (PDS). 

Let’s explore some of the most significant steps within this process. 

1. Establish Your PDS Objectives 

The two most significant objectives of your physical distribution system should be customer satisfaction and low production cost. It’s important to continuously weigh the levels of customer service that your company wishes to maintain against your physical distribution processes and costs.

When your brand’s entire range of products is available within each of your shipping zones, shipping times are within an acceptable to ideal range, and shipping costs are low or free with purchase, customer satisfaction is typically around 100%. 

When customer satisfaction is high, it increases brand loyalty, which tends to drive sales and boost revenue. 

2. Examine the Cost Trade-Offs 

Customer satisfaction, retention levels, and brand loyalty are kept high when you account for product availability, shipping costs, and shipping speed. However, maintaining this level of accessibility and cost-effectiveness for the customer can rack up your company’s PDS costs.

Therefore, your company will have to determine what product availability, shipping accessibilities, and price points are attainable while still earning profits within your projected margins. This can be done by analyzing your current levels of customer satisfaction and service, as well as your current warehousing, inventory, and transportation processes.

Once you’ve analyzed these processes and determined how they relate to your levels of customer satisfaction and brand loyalty, you’ll be able to make decisions about changes you can make to your physical distribution systems that either maintain or increase your level of customer satisfaction within an acceptable cost range. 

3. Identify and Select Design Alternatives 

The details of your company’s PDS are a part of the greater fabric of your company as a whole. Therefore, if you choose to make changes to your PDS, you will be rearticulating the design of your day-to-day fulfillment processes. These redesigns can often lead to increased satisfaction among customers and boost revenue from online sales.

It’s crucial that your company keeps track of the revenue and cost changes that occur when customer satisfaction is increased. Even the boost of just a few percentage points could make a significant difference in your revenue stream, which may counteract any increased costs on the supply chain.

However, you should aim to keep your PDS costs as low as they can be while still maintaining the highest level of customer service possible. 

Partnering with Print Bind Ship for Physical Distribution 

For many companies, the key to unlocking optimal physical distribution processes is working with a 3PL like Print Bind Ship. With third-party logistics services, your supply chain management can be optimized at the highest industry standard, ensuring that your costs are kept low while customer experience and satisfaction are continuously prioritized. Sign up for a free consultation with one of our experts today to learn more.