{"id":2136,"date":"2021-03-08T08:58:06","date_gmt":"2021-03-08T13:58:06","guid":{"rendered":"https:\/\/www.shipbob.com\/au\/blog\/physical-distribution\/"},"modified":"2025-10-01T22:45:25","modified_gmt":"2025-10-01T22:45:25","slug":"physical-distribution","status":"publish","type":"blog","link":"https:\/\/www.shipbob.com\/au\/blog\/physical-distribution\/","title":{"rendered":"What is Physical Distribution? An Overview of Why It\u2019s Important in Ecommerce\u00a0"},"content":{"rendered":"\n

Table of Contents<\/p>

** Minutes<\/p><\/div><\/div>\n

What is physical distribution?<\/a><\/p>\n\n\n\n

Why is physical distribution important in ecommerce?<\/a><\/p>\n\n\n\n

4 functions of physical distribution<\/a><\/p>\n\n\n\n

Outsourcing physical distribution management to ShipBob<\/a><\/p>\n\n\n\n

Physical distribution for ecommerce with ShipBob<\/a><\/p>\n\n\n\n

Physical distribution FAQs<\/a><\/p>\n<\/div>\n\n\n\n

Picture this: you live in Los Angeles and you want to order an item from an online brand. <\/span>Once it\u2019s time to to check out, you\u2019re taken back by the high shipping costs and how long it would take to receive your order, so you look elsewhere.<\/span><\/p>\n\n\n\n

You find the same product from a different online store that offers faster and affordable shipping. For a similar product, you wonder: how can there be such a big discrepancy between shipping and delivery<\/a> times?<\/span><\/p>\n\n\n\n

It all comes down to physical distribution of inventory. If you manage an ecommerce brand, how you distribute physical inventory<\/a> geographically is key to offering cost-effective and fast shipping options. <\/span><\/p>\n\n\n\n

In terms of <\/span>supply chain optimisation<\/span><\/a>, physical distribution demands more attention than one might expect. <\/span><\/p>\n\n\n\n

In this article, you will learn why it\u2019s important to think through your physical distribution logistics<\/a>, and how it impacts your supply chain and the customer experience.<\/span><\/p>\n\n\n\n

What is physical distribution?<\/h2>\n\n\n\n

Physical distribution refers to the movement of <\/span>finished goods<\/span><\/a> from a company\u2019s distribution and fulfilment network to the end user. In ecommerce, physical distribution involves several ecommerce supply chain<\/a> activities including warehousing<\/a>, inventory control, order processing, <\/span>retail fulfilment<\/span><\/a>, and shipping. <\/span><\/p>\n\n\n\n

In many cases, physical distribution of goods consists of <\/span>multiple fulfilment centres<\/span><\/a> within a single distribution<\/span> network<\/span> to <\/span>reduce shipping costs<\/span><\/a> and speed up transit times for customer orders. <\/span><\/p>\n\n\n\n

Why is physical distribution important in ecommerce?<\/h2>\n\n\n\n

Even though ecommerce takes place online, physical distribution is important because it is linked to three critical business objectives that impact your bottom line: faster shipping, reduced <\/span>logistics costs<\/span><\/a>, and high customer satisfaction. <\/span><\/p>\n\n\n\n

Here is a closer look at how physical distribution contributes to <\/span>supply chain efficiency<\/span><\/a>:<\/span><\/p>\n\n\n\n

1. Supports faster shipping times<\/h3>\n\n\n\n

The ability to offer customers faster and affordable shipping options has proven to reduce <\/span>cart abandonment<\/span><\/a> and increase customer loyalty, especially since marketplaces like Amazon and Walmart Marketplace<\/a> have set high expectations for fast shipping. <\/span><\/p>\n\n\n\n

Physical distribution for faster shipping can be done by strategically storing inventory<\/a> across several locations (or a centralised location) based on where your customers are, rather than shipping all orders from a single warehouse (for young brands, a single warehouse is often close to where they live, but this is not always close to the majority of their customers).<\/span><\/p>\n\n\n\n

For instance, if you store inventory in Chicago, you can reach other regions of the country faster, then let\u2019s say, storing all your inventory in Los Angeles when you have customers in both the Midwest and the East Coast.<\/p>\n\n\n\n

Ultimately, the quicker a customer gets their order, the happier they are and more likely they are to buy again.<\/p>\n\n\n

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2. Reduces physical distribution costs<\/h3>\n\n\n\n

If you achieve a faster, more efficient last-mile delivery<\/a> without the need for expensive expedited shipping<\/a>, you not only reduce costs for you but you can also pass those savings on to your customers, whether you offer free shipping in exchange for a minimum spend or charge real-time courier rates<\/a>. <\/span><\/p>\n\n\n\n

For example, if your customers are scattered across the US, distributing products in different US regions can reduce the average <\/span>shipping zone<\/span><\/a> a package is sent to reach its destination. The higher the zone, the more expensive it will be, further building the case for optimised physical distribution. <\/span><\/p>\n\n\n\n

Note: You can use historical order data and other <\/span>distribution metrics<\/span><\/a> to determine where your customers live and if it makes sense to store inventory in one or more locations to save on costs.<\/span><\/p>\n\n\n\n

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3. Improves customer satisfaction<\/h3>\n\n\n\n

Strategic physical distribution not only improves your bottom line, but it ultimately leads to higher customer satisfaction and a better customer experience. <\/span><\/p>\n\n\n\n

By optimising shipping routes and storing inventory closer to your customers, you save money while reducing time in transit, so customers receive their orders faster and at an affordable price.<\/span><\/p>\n\n\n\n

Implementing a cost-effective physical distribution model can also allow for better shipping incentives, such as <\/span>free shipping<\/span><\/a> on offers like bundles, upsells, or a minimum spend threshold to further offset costs.<\/span><\/p>\n\n\n\n

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4 functions of physical distribution<\/h2>\n\n\n\n

An effective physical distribution model involves several different functions throughout the retail supply chain<\/a>. Here are the different functions of physical distribution that every ecommerce business should pay attention to: <\/span><\/p>\n\n\n\n

1. Automated order processing<\/a><\/h3>\n\n\n\n

Implementing technology that automates order processing allows you process orders from anywhere by tracking orders in real time. <\/span><\/p>\n\n\n\n

No matter where a customer places an order, order processing technology allows you to automatically verify and process orders. Order information is automatically sent to the <\/span>fulfilment centre location<\/span><\/a> closest to the order\u2019s shipping destination.<\/p>\n\n\n\n

Order processing software is often integrated with a fulfilment or <\/span>inventory management<\/span><\/a> system, making it easier to <\/span>track inventory<\/span><\/a> and <\/span>manage orders<\/span><\/a> in one place. This way, you can better <\/span>control stock<\/span><\/a>, optimise inventory levels, and make sure you have enough inventory stored at each distribution location.  <\/span><\/p>\n\n\n\n

2. Warehouse management<\/a><\/h3>\n\n\n\n

How you manage a warehouse also impacts how well your physical distribution model works. Warehouse management consists of receiving  inventory<\/a>, optimising storage, tracking stock levels, and picking, packing, and shipping orders.<\/span><\/p>\n\n\n\n

To keep your warehouse running efficiently, consider adopting a <\/span>warehouse management system<\/span><\/a> (WMS) that will give you visibility into your warehouse operations, which SKU<\/a>s are stored at which location, inventory forecasting<\/a> data, and operational workflows. <\/span><\/p>\n\n\n\n

A WMS can also help keep warehouses organised by SKU, optimise space, and reduce human error by eliminating manual processes.<\/span><\/p>\n\n\n\n

3. Inventory control<\/a><\/h3>\n\n\n\n

Keeping an eye on inventory as it moves can be a time-consuming task, but with the right inventory tracking processes in place, you can easily optimise inventory levels<\/a> across your network and avoid <\/span>stockouts<\/span><\/a> and dead stock<\/a>, as well as warehouse picking<\/a> errors. <\/span><\/p>\n\n\n\n

Inventory control focuses on optimising operations and often involves the implementation of a WMS, from scanning in new items in real time on the warehouse floor to preparing units for kitting and assembly<\/a>.<\/p>\n\n\n\n

By implementing technology processes to better control inventory, you can improve inventory optimisation<\/a> while expanding into multiple distribution centre<\/a> locations. <\/span><\/p>\n\n\n\n

4. Automated shipping<\/a><\/h3>\n\n\n\n

Physical distribution of inventory also requires a shipping strategy<\/a>. You will need to think through how orders from a warehouse or fulfilment centre will be shipped to the customer in the most cost-effective way possible. <\/span><\/p>\n\n\n\n

Shipping accounts for the bulk of physical distribution costs, so it\u2019s important to keep track of your shipping costs throughout your network. <\/span><\/p>\n\n\n\n

If you partner with a 3PL like ShipBob, you can automate the shipping process no matter how small or large your 3PL distribution<\/a> network is.<\/p>\n\n\n\n

Automating the shipping process comes with several key advantages, including the ability to aggregate and access shipping insights such as data on average transit times, cart values, shipping methods, and shipping destinations to help you optimise your costs and test different shipping price strategies.<\/p>\n\n\n\n

ShipBob also partners with major shipping couriers to negotiate rates, so you can pass the savings on to your customers.<\/p>\n\n\n\n

Outsourcing physical distribution management to ShipBob<\/h2>\n\n\n\n

As your business grows, inbound and outbound logistics<\/a> can become even more time-consuming. Determining how to strategically distribute inventory requires planning, logistics expertise, data and analytics, and access to a robust fulfilment infrastructure. <\/span><\/p>\n\n\n\n

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