THE IMPACT OF PHYSICAL DISTRIBUTION CHANNELS IN MARKETING OF AGRICULTURAL PRODUCE:

CHAPTER TWO

LITERATURE REVIEW

2.0       AN OVER VIEW OF PHYSICAL DISTRIBUTION:

Much has been said both from foreign and local authors about physical distribution and logistics on agricultural produce especially perishable agricultural produce. Physical distribution is an important activity that complete the work of satisfying the target achieve.

Kotler (1996: 577) stated that physical distribution comprises of the tasks involved in planning, implementing, and control e of the physical floe of material and final goods from the point of origin to the point of use to meet the needs of consumers at a profit. He also reveals that many companies states their physical distribution objectives as getting the right goods to the right place at the right time for least and that physical distribution activities are highly interrelated. Decision must be made to achieve the objective. The starting point for designing physical distribution is to study what the competitors are offering and the needs of the customers are interrelated including the time of delivery.

In support of the above McCarthy (1994:55) stated physical distribution is the process of transporting and sorting of physical goods within the individual firm along channels system.

This gives support that physical distribution involves all the activities required to physically move raw materials from point of purchase to the final users of the products. Bawerdox (1998: 575) when further to state that, physical distribution channel is two or more activities for the purpose of planning, implementing, and controlling the efficient flow of raw materials, inventories and finished goods from point of origin to point consumption.

Robert (1991:478) in his own contribution stated that physical distribution management involves the integration of the six activities of physical distribution namely, transportation, warehousing, inventory control, material handling, order processing and protective packaging into a complete distribution strategy. Decision in transportation must be interrelated with decision in warehousing; inventory control and other physical distribution management represent a balance between product delivery capabilities and related cost. Nwokoye (1981:16) stated that logistic is concerned with the movement of raw materials from suppliers to finished goods from the end of production time to the consumers. He stated that a number of activities are involved which include warehousing and communication. In his own words McCarthy (1964) stated that physical distribution is the function of actual handling and moving of foods. Physical distribution policies according to him involve major component a company‟s resources policies across functional lines and organization system of a company.

Johnson and Wood (1982) on their own view said that all activities involved in getting goods to the right place, at the right time, right price and quantity can be described under the term distribution. Meaning that physical distribution is the physical flow of the goods to the right location at the right time so as to achieve maximum satisfaction. BUSH and Huston (1988) defined distribution as the movement of raw materials from suppliers to manufacture and storage facilities.

Bowerdox (1989:12) still went on to say that physical distribution is concerned with the identification of movement required and the establishment of plans to integrate over all logistics operations to customer‟s satisfaction. on the other hand, Nwokoye (2000:186) defined physical distribution as a set of activities including order processing material handling, inventory management, warehousing and transportation used in the movement of products to consumers as the end users. An effective and efficient physical distribution system should be in place to deliver the right quantity of goods at the right place and time with the right support services to the customers. Warehousing is primarily concerned with making commodities available at desired time. it requires holding large quantity of raw material until they are needed. Thus the importance of storage cannot be overemphasized owing to the hazards of storing agricultural products, fluctuation in price and high depreciation of perishable items where it occurs. Therefore it is necessary to encourage farmers to store their produce in barns and silos in Boki L.G.A. transportation function is primarily concerned with making goods available at the proper time. Adequate performance of this function requires the weighting of alternative routes and types of transportation as they might affect transport cost. (Jobber1998:22)

2.2 NATURE AND IMPORTANCE OF PHYSICAL DISTRIBUTION

Distribution deals with how to move product from manufacture to the buyer. This flow is accomplished through established channels of distribution. Nwokoye (2000:105) defined marketing channels of distribution as‟‟ the combination o market his product to the ultimate users. Individuals and institution involve in this definition is refer to as middlemen, retailers, distributors and agents etc. Stanton etal and blaker(1991:305) opined that distribution channel consist of the flow of people and firms involved in the flow of title to a product as it moves from producer to ultimate consumer or business user.

Marketing channel can be viewed as a set of interdependent organization involved in the process of making a product or service available for consumption or use (Stern, El, Asary and Conghain 1999:1).

To some managers physical distribution means, only trucks and warehouses. But modern logistics is much more than this physical distribution or marketing is a set of activities including order processing, materials handling, inventory management, warehousing and transportation used in the movement of products from produces and end users.

It offers to the customers from, time, place, and possession utilities. All members of marketing channel are involved in physical distribution to some extent, but whoever controls the cannel has a major responsibility. Today the concept of total physical distribution is paramount. It emphasizes that all management functions relating to moving products to buyers must be fully integrated so as to minimize costs and maximize customer‟sservice.In order to meet the above aims, it sometimes pays to allow cost to go up in one business area and to bring down cost on others.

However, marketers today prefer market logistics which starts with the market place and works backwards to the factory. Thus the logistics manager s task is to co-ordinate the whole cannel of physical distribution system, the activities of suppliers, purchasing agents, marketing channel members and customers.

2.3  DISTRIBUTION CHANNEL FOR CONSUMER PRODUCTS

There are a number of alternative routes or networks of intermediaries through which products can get to the final users. According to Aworden (1990:37) these are main types of channel of distribution.

1. Direct supply

2. Mechanical supply

3. Short channel

4. Long channel

1. Direct supply: producers to ultimate consumer.

In this channel of distribution the producer supplies directly to the customer. This type of channel is common in industrial goods market direct marketing, the other is the use of agencies or retail outlets owned and controlled by the producer.

2. Merchant supply.

The producer in this case supplies to the customer through a merchant who acts as the reseller thus, producer-merchant –wholesaler – consumers. This channel is also used in the distribution of industrial goods. It is widely used because it is cost effective for the producer

3. The producer supplies the consumers with a consumer goods market through a retailer who acts as the reseller or intermediary, thus producer –retailer –consumer. Though the producer is not in direct contract with the customer, this channel minimizes the producers influence and control over the retail intermediary.

4. First it exposes the supplier to the bulk buying power of large-scale retailers. Such retailers will demand large trade discounts and disrupt the smooth floe of production by arbitrary changes in the rate at which they offer.

Secondly, the supplier will be maximizing the risk of payment default and bad debt customer with a consumer goods market through a set of two intermediaries. Thus, producer- retailer- consumer.

The producer sells his merchandize on a bulk basic to the wholesaler, who in turn breaks these bulk orders down and supplies them in small quantities to retailer. From retailer, it finally gets to the consumer.

2.4   OBJECTIVES OF CHANNEL OF DISTRIBUTION

The producer normally has clear marketing objectives that he will wan the chosen channel of distribution to achieve. Some of these objectives as listed by modern (1990:93) are as follows

a.      Appropriate and adequate distribution

The producer will use his channel of distribution to achieve the level of product distribution that meets his objective for market penetration, market share and competitive position.

b.      The distribution channel used must be capable of giving access to the target segments the channels demographic areas.

c.       Relative cost effectiveness in access and transaction value.

The producer will attempt to use a channel of distribution which yields some net benefit or disadvantage relative to the cost or disadvantage incurred in employing it. The objective will be to maximize the benefits to be obtained given any particular level of cost or disadvantage incurred.

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