What is Physical Distribution in eCommerce?

Learn how physical distribution affects your online store. Improve your shipping and fulfillment processes to ensure you are meeting your customers' needs.Keyword that best describe the post: what is physical distribution, define the physical distribution, physical distribution

What is Physical Distribution in eCommerce?

eCommerce businesses often face complexity in the supply chain process. When the activities of the supply chain lack monitoring, handling, and tracking, it can lead to poor customer experience and lower sales rates and revenue. This is why physical distribution management is essential in the entire supply chain process. The management system includes warehousing, control of inventory, fulfillment process, and many more. All supply chain factors are managed until it reaches the end users. Therefore, a physical distribution system must handle the supply chain.

Let's understand the physical distribution and how it benefits the eCommerce business. Moreover, in the below section, you will understand the essential functions of the system's setup.

What Is Physical Distribution?

Physical distribution moves finished products or goods from the service provider's fulfillment or distribution network to the end-users or customers. Physical distribution is moving and transferring goods from the producer to the consumer. This process is the most critical factor of eCommerce business. The business entirely relies on the physical distribution process.

Moreover, in eCommerce, the physical distribution process provides efficient access to supply chain activities such as warehouse activities, inventory control, multiple orders, fulfillment process, and shipping. All these processes need to be monitored and guided with the help of manual controls and automation. The process ends when the goods successfully reach the customers in the estimated period. Hence, you should progress the management of the whole process with efficiency.

Benefits of Physical Distribution

Physical distribution plays a crucial role in managing the supply chain process. The eCommerce business stays beneficial in numerous ways. The method positively impacts sales, shipment, pricing, and costs. Hence, investing in physical distribution will always keep the business on the profitable side. The process involves planning, implementing, and controlling the flow of final goods from the final distribution unit to the end consumers. Hence it is helpful in many ways. Let's discuss its benefits in detail.

Accelerates The Sales Rate 

With proper physical distribution, businesses can ship their goods faster. Moreover, it will be an economical process of distribution. Further, it will improve the customer experience and drive sales rates. This is why it is necessary for eCommerce businesses specifically. When the products are stored in the right and convenient places, they will effectively move to the retailers without any hassles. Further, the company will flourish at the global level.

Faster Shipping Process

Retailers and individual customers need their products before their stocks are over. Hence, the eCommerce business can fasten its shipping process through physical distribution management to meet consumer demand. The products can deliver within the estimated expected delivery date. Due to advancement, it takes only 2 to 3 days to reach.

Stabilization Of Prices 

Price stabilization is the primary benefit of physical distribution. The products will be delivered efficiently and faster than ever, reducing prices. At times, when the demand is higher, supplies get lower, and businesses can't meet the rising demand. The physical distribution system will aid in fulfilling the products during high demands by keeping the prices stable. Moreover, the business can prevent itself from marking up prices to cover unforeseen shipping costs.  

Improvement Of Customer Satisfaction 

Businesses can control and handle inventory storage facilities by optimizing supply chain activities and features. The physical distribution strategies will make the products move faster and more efficiently. Hence, it will result in reaching the customers in time. The customers will retain, which will help form a vast customer base.

How to Set Up a Physical Distribution Network In Your Store?

Setting up a physical distribution network becomes a critical element of your business running successfully. This will aid your final distribution process after the production to safely deliver the products into a customer's hands. Hence, eCommerce businesses need to set up an efficient physical distribution system. Here are the necessary functions and steps to set up the system.

Essential Functions Of Physical Distribution Network

Integration Of Automation For Order Processing 

When businesses integrate automation into the order process, flexibility increases. It will handle the order processing into a more extensive inventory management system. Further, it will keep track of product inventory and order statuses.

Management Of Warehouse Activities 

It is essential to manage warehouse activities in the supply chain process. A lack of management will slow down the shipment and delivery process. Moreover, it will result in higher costs. The physical distribution integrated with warehouse management systems will improve the capabilities of monitoring within your warehouse.

Efficient Inventory Control 

The physical distribution system integrated with automated inventory control will save time, manual effort, and charges. It will help your business eliminate dead stock and errors during inventory level optimization.

Automated Shipping Process 

The shipping process can become expensive if it is not appropriately maintained in a physical distribution system. The process should be automated to ensure that your methods and routes are optimized. It will further benefit the customers and the business. 

Related: Maintaining Low Inventory Levels for Your Online Store

Steps To Set Up Physical Distribution System

The physical distribution in marketing can handle the complete supply chain process from raw materials management to inventory control to transportation and storage. Below are the steps to set up the system in your store.

Step -1 List Out And Create Your Objectives Of Physical Distribution System 

You should confirm major objectives before establishing the system. The two primary goals should be improving customer satisfaction and lowering production costs. When the goods or products are available within the shipping zones and timings, it will reduce costs and improve customer satisfaction. When the customer experience is improved, your business will become more trustworthy. Further, it will enhance sales and boost the revenue rate.

Step – 2 Determining The Cost Trade-Offs 

Along with customer retention and business loyalty, it is also essential to maintain accessibility and cost-effectiveness for the consumers. By determining the availability of products and shipping accessibilities, businesses can still earn profits within the margins. It would help if you analyzed customer satisfaction levels, warehouse activities, inventory control, and transportation processes. Then, you can make specific changes in the system to maintain the cost range.

Step – 3 Identification Of Design Alternatives 

The design is altered to meet the day-to-day fulfillment processes when you want to change your distribution system. The best methods can increase customer satisfaction and boost revenue. Keeping track of cost changes is necessary. The businesses should aim to lower the physical distribution costs and maintain the highest customer base possible.

Challenges of Physical Distribution

Some factors affect the physical distribution process challenging the shipping process.

Product Factors  

The choice of products affects the process. This includes the physical and technical nature. Some products also need frequent changes and styling. Industrial product types need a demonstration and installation.

Market Factors 

The current market's structure and size and the customer's purchase decisions affect the system. Also, the competitor's channels affect the distribution process.

Organization and Unit-Specific Factors 

The company's financial condition affects the physical distribution process. The marketing policy and reputation also matter.

Physical Distribution FAQs

What is physical distribution management?

Physical distribution management controls the supply chain's activities, such as storage management, handling, and moving goods from the final unit to the customers. Physical distribution in eCommerce is the delivery of goods from the manufacturer to the distribution network. It includes supply chain functions for managing warehouse activities, inventory control, eCommerce fulfillment, order processing, and shipping.

Related: What is Supply Chain Continuity?

What are the trends in physical distribution?

The trends of the physical distribution system include the trade‐offs and postponement and philosophies of robustness, security dealers to handle control, an increase in recurring revenue models, and many more.

How can the transportation used in physical distribution be improved?

You can improve transportation in Physical distribution with strategic plans to store inventory across different local locations. It will fasten the shipping process. With a centralized location optimizing and analyzing where most of your customers come from, you can improve transportation. Moreover, multiple inventory controls, different warehouses, and automation for order processing and tracking will improve the process too.

Related: 5 Ways To Boost Your B2b eCommerce Order Management

What are the methods of stock management used in physical distribution?

The stock management methods are storage and warehousing, better inventory control, efficient order processing, materials handling, improved transportation, customer service, communications, and organizational structure.

What is the objective of physical distribution?

The primary objective of physical distribution is to efficiently and strategically handle inventory, process orders, improve fulfillment, management of multiple warehouses and shipping processes.

What are the various costs associated with physical distribution?

The costs involved with physical distribution are warehousing, transportation, order processing, inventory, and interest in capital employed.

What are the elements of physical distribution?

The primary elements of physical distribution are customer satisfaction, order processing, handling inventory control, warehousing, transportation, material handling, and shipping.


 Physical distribution is an integral part of eCommerce and should be given the attention it deserves. Retailers must ensure that their products are delivered promptly and that the customer experience is positive. There are several factors to consider regarding physical distribution, such as order fulfillment, inventory management, and shipping. We have years of experience helping retailers reduce shipping costs for eCommerce orders at Simpl. If you would like help optimizing your physical distribution strategy, get in touch with us today.

Recommended: Types, Examples, and Methods of Demand Forecasting

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