Page 207 - DMGT551_RETAIL_BUSINESS_ENVIRONMENT

Retail Business Environment Anand Thakur, Lovely Professional University

Notes Unit 11: Physical Distribution and
Inventory Management

CONTENTS

Objectives
Introduction
11.1 Physical Distribution
11.2 Inventory Management

11.3 Inventory Metrics
11.4 Inventory Models
11.5 Types of Inventory
11.6 Inventory and Customer Service

11.7 Summary
11.8 Keywords
11.9 Review Questions
11.10 Further Readings

Objectives

After studying this unit, you will be able to:
Explain the concept of Physical distribution
Discuss Inventory metrics
Describe Inventory models
Explain the Types of inventory
Elucidate the Inventory and customer service

Introduction

Inventory management plays a very vital role in the entire logistic function. The higher inventory
we need to keep, higher will be the carrying cost on the average idle inventory kept in the
warehouse. But, if we purchase inventory in smaller lots and avoid huge piling of inventory, the
cost or ordering and transportation will be higher. This is because as we order smaller and
smaller quantities in each order, we will have to place more number or order to meet the given
annual demand. Thus, more number of orders means higher ordering cost. Thus, inventory
management focus to manage the level of inventory and minimize the total cost of inventory,
after taking in to consideration the stockout costs, the carrying cost, order cost and the cost of
acquisition inventory.

11.1 Physical Distribution

Physical distribution does not mean only movement and storage of goods. Now a days, physical
distribution or marketing logistics encompasses planning, implementing and controlling the

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