Unit VI

PLACE MIX
1. Although figures vary widely from product to product, roughly a fifth of the cost
of a product goes on getting it to the customer.
2. 'Place' is concerned with various methods of transporting and storing goods,
and then making them available for the customer.
3. Getting the right product to the right place at the right time involves the
distribution system.
4. The choice of distribution method will depend on a variety of circumstances. It
will be more convenient for some manufacturers to sell to wholesalers who then
sell to retailers, while others will prefer to sell directly to retailers or customers.
5. A distribution channel is a chain of businesses or intermediaries through which
a good or service passes until it reaches the end consumer.
6. Distribution channels can be short or long, and depend on the amount of
intermediaries required to deliver a product or service.
 Functions of Distribution Channels
1. Information Provider-Middlemen have a role in providing information about
the market to the manufacturer. Developments like changes in customer
demography, psychography, media habits and the entry of a new competitor or
a new brand and changes in customer preferences are some of the information
that all manufacturers want. Since these middlemen are present in the market
place and close to the customer they can provide this information at no
additional cost.
2. Promotion-Promoting the product/s in his territory is another function that
middlemen perform. Many of them design their own sales incentive
programmes, aimed at building customers traffic at the other outlets.
3. Financing:-Middlemen finance manufacturers’ operation by providing the
necessary working capital in the form of advance payments for goods and
services. The payment is in advance even though the manufacturer may extend
credit, because it has to be made even before the products are bought,
consumed and paid for by the ultimate consumer.
4. Title-Most middlemen take the title to the goods, services and trade in
their own name. This helps in diffusing the risks between the
manufacturer and middlemen. This also enables middlemen to be in
physical possession of the goods, which in turn enables them to meet
customer demand at very moment it arises.
5. Help in Production Function-The producer can concentrate on the
production function leaving the marketing problem to middlemen who
specialize in the profession. Their services can best utilized for selling the
product. The finance, required for organising marketing can profitably be
used in production where the rate of return would be greater.
6. Price Stability-Maintaining price stability in the market is another
function a middleman performs. Many a time the middlemen absorb an
increase in the price of the products and continue to charge the
customer the same old price. This is because of the intra-middlemen
competition. The middleman also maintains price stability by keeping his
overheads low
7. Matching Demand and Supply:- The chief function of intermediaries is to
assemble the goods from many producers in such a manner that a
customer can affect purchases with ease. The goal of marketing is the
matching of of supply and demand.
8. Pricing:
• In pricing a product, the producer should invite the suggestions from the
middlemen who are very close to the ultimate users and know what they
can pay for the product. Pricing may be different for different markets or
products depending upon the channel of distribution.

9) Standardizing Transactions:
• Standardizing transactions is another function of marketing channels.
Taking the example of the milk delivery system, the distribution is
standardized throughout the marketing channel so that consumers do not
need to negotiate with the sellers on any aspect, whether it is price,
quantity, method of payment or location of the product.
• By standardizing transactions, marketing channels automate most of the
stages in the flow of products from the manufacturer to the customers
 Channel Levels
1. Production is for consumption. Having produced the products, these
need to be made available to the final users of the products, i.e., the
consumers scattered in large geographical areas.
2. Since, many a times it becomes extremely difficult, if not impossible, to
reach the customers on its own, the firm needs the help of marketing
intermediaries, like wholesalers and retailers, to make their products
reach to the ultimate consumers.
3. These intermediaries serve as channels to make the product reach to the
consumers. The way products reach to the ultimate consumers is called
‘distribution channels’ or ‘marketing channels.’
1. Zero Level Channel:

• A zero level channel, commonly known as direct marketing channel has no

intermediary levels. In this channel framework manufacturer sells merchandise
directly to customers.
• An example of a zero level channel would be a factory outlet store. Many service
providers like holiday companies, also market direct to consumers, bypassing a
traditional retail intermediary – the travel agent.
• Eureka Forbes, leaders in domestic and industrial water purification systems,
vacuum cleaners, air purifiers & security solutions is pioneered in direct selling
that makes it an Asia’s largest direct sales organization.
• Other types of Direct channels are :
1. Door to Door salesman
2. Retail Outlets
3. Catalogue Selling
4. Telemarketing
5. Internet Marketing
• The remaining channels are known as indirect-marketing channels.
2. One Level Channel:
• A one level channel contains one selling intermediary.
• In consumer markets, this is usually a retailer.
• Example- Automobiles, Insurance, Readymade Garments, etc.

3. A Two Level Channel:

• A two level channel encompasses two intermediary levels – a wholesaler
and a retailer
• A wholesaler typically buys and stores large quantities of merchandise
from various manufacturers and then breaks into the bulk deliveries to
supply retailers with smaller quantities. For small retailers with limited
financial resources and order quantities, the use of wholesalers makes
economic sense.
• This agreement tends to work paramount where the retail channel is
jumbled – i.e. not dominated by a small number of large, dominant
retailers who have an encouragement to cut out the wholesaler.
• Example- Most of the FMCG companies are using this channel of
distribution channel.
4. A Three Level Channel:

• A third level channel, as the name implies, encompasses three

intermediary levels – a wholesaler, retailer and a jobber.
• In the poultry industry, products like mutton, chicken, eggs etc. are first
sold to wholesalers; he then sells it to jobbers, who sell to small and
unorganized retailers.
 Factors affecting choice of distribution

(A) Considerations Related to Product

(B) Market Considerations
(C) Considerations Related to Manufacturer/Company
(D) Middlemen considerations:
Considerations Related to Product
• When a manufacturer selects some channel of distribution he/she should
take care of such factors which are related to the quality and nature of the
product. They are as follows:
1. Unit Value of the Product:
• When the product is very costly it is best to use small distribution channel.
For example, Industrial Machinery or Gold Ornaments are very costly
products that are why for their distribution small distribution channel is
used. On the other hand, for less costly products long distribution channel
is used.

2. Standardised or Customised Product:

• Standardised products are those for which are pre-determined and there
has no scope for alteration. For example: utensils of MILTON. To sell this
long distribution channel is used.
• On the other hand, customised products are those which are made
according to the discretion of the consumer and also there is a scope for
alteration, for example; furniture. For such products face-to-face
interaction between the manufacturer and the consumer is essential. So
for these Direct Sales is a good option.
3. Perishability:
• A manufacturer should choose minimum or no middlemen as channel of
distribution for such an item or product which is of highly perishable
nature. On the contrary, a long distribution channel can be selected for
durable goods.
4. Technical Nature:
• If a product is of a technical nature, then it is better to supply it directly to
the consumer. This will help the user to know the necessary technicalities
of the product.
5. Bulky goods are distributed directly in order to minimize physical
handling of product because transportation of such products involves
huge cost.
 Market Considerations
1. Number of Buyers:
• If the number of buyer is large then it is better to take the services of
middlemen for the distribution of the goods. On the contrary, the
distribution should be done by the manufacturer directly if the number of
buyers is less.
2. Types of Buyers:
• Buyers can be of two types: General Buyers and Industrial Buyers. If the
more buyers of the product belong to general category then there can be
more middlemen. But in case of industrial buyers there can be less
middlemen.
3. Buying Habits:
• A manufacturer should take the services of middlemen if his financial
position does not permit him to sell goods on credit to those consumers
who are in the habit of purchasing goods on credit.
4. Buying Quantity:
• It is useful for the manufacturer to rely on the services of middlemen if
the goods are bought in smaller quantity.
5. Size of Market:
• If the market area of the product is scattered fairly, then the producer
must take the help of middlemen.
6. Geographical Concentration of market
• If the prospective customers are located in a particular geographical
region, direct selling is more feasible. Use of wholesalers and retailers may
become essential to sell the product if customers are widely dispersed.
 Considerations Related to Manufacturer/Company

1. Goodwill
• Manufacturer’s goodwill also affects the selection of channel of
distribution. A manufacturer enjoying good reputation need not depend
on the middlemen as he can open his own branches easily.
2. Desire to control the channel of Distribution:
• A manufacturer’s ambition to control the channel of distribution affects its
selection. Consumers should be approached directly by such type of
manufacturer. For example, electronic goods sector with a motive to
control the service levels provided to the customers at the point of sale
are resorting to company owned retail counters.
3. Financial Strength:
• A company which has a strong financial base can evolve its own channels.
On the other hand, financially weak companies would have to depend
upon middlemen.
4. Volume of production:
• A big firm with large, output may find it profitable to set up its own retail
outlets throughout the country. But a manufacturer producing a small
quantity can distribute his output more economically through middlemen.
5.  Services provided by manufacturers:
• A company that sells directly has itself to provide installation, credit, home
delivery, after sale services and other facilities to customers. Firms which
do not or cannot provide such services have to depend upon middlemen.
 Middlemen considerations
1. Availability:
• When desired type of middlemen is not available, a manufacturer may have to
establish his own distribution network. Non-availability of middlemen may arise
when they are handling competitive products as they do not like to handle more
brands.
2. Attitudes:
• Middlemen who do not like a firm's marketing policies may refuse to handle its
products. For instance, some wholesalers and retailers demand sole selling rights or a
guarantee against fall in prices.
3.  Services:
• Use of middlemen is profitable who provide financing, storage, promotion and after
sale services.
4.  Sales potential:
• A manufacturer generally prefers a dealer who offers the greatest potential volume
of sales.
5. Costs:
• Choice of a channel should be made after comparing the costs of
distribution through alternative channels.
6. Customs and competition:
• The channels traditionally used for a product are likely to influence the
choice. For instance, locks are sold usually through hardware stores and
their distribution through general stores may not be preferred. Channels
used by com­petitors are also important.
7. Legal constraints:
• Government regulations regarding certain products may influence channel
decision. For instance, liquor and drugs can be distributed only through
licensed shops.
 Channel Integration
•  Channel integration involves streamlining the distribution process in
terms of physical & information efficiency by establishing channel
partnerships and strategic alliances with channel members at all levels of
the channel hierarchy.

• Importance of Channel Integration

1. Reduces the Levels of Opportunism.
2. Reduce the Uncertainty, cost and Risk.
3. Degree of Integration.
4. Better Management.
5. Better Co-ordination.
 Vertical Marketing System
• In conventional marketing systems, producers, wholesalers, and retailers
are separate businesses that are all trying to maximize their profits.
• When the effort of one channel member to maximize profits comes at the
expense of other members, conflicts can arise that reduce profits for the
entire channel.
• To address this problem, more and more companies are forming vertical
marketing systems.
• A vertical marketing system (VMS) is one in which the main members of a
distribution channel—producer, wholesaler, and retailer—work together
as a unified group in order to meet consumer needs. 
• Vertical marketing systems can take 3 forms :
1. Corporate VMS
2. Contractual VMS
3. Administered VMS
 Types of VMS
1. Corporate VMS
• In the corporate marketing vertical systems, the successive stages from
production to distribution are under single ownership of any of the
channel members.
• Vertical integration is achieved through forward or backward integration
i.e. example Bata.
2. Administered VMS
• Unlike the corporate VMS, administered seeks to control the successive
stages from production to distribution not through ownership but through
the size and power of one of the channel members.
• Brand leaders or firms that are market leaders are able to obtain trade
cooperation.
• Firms like Hindustan Lever, Godrej and the like are able to get shelf space
and promotional support and also support for price policies from the
trade mainly because their brands are market leaders.
3. Contractual System
• This is a vertical marketing system under which all parties retain their
independence and operate as individual entities, but enter into a mutually
beneficial contractual agreement, removing a lot of the risk from their
relationship.
• Contractual vertical marketing systems take various forms.
• In some cases, a retail cooperative, comprising a group of similar retailers,
will buy jointly from a single wholesaler, thus benefiting from economies
of scale.
• Elsewhere, a producer will enter into a franchise organisation, exclusively
licensing a particular wholesaler to distribute its products.
 Horizontal Marketing System
• A horizontal marketing system is a distribution channel arrangement whereby two
or more organizations at the same level join together for marketing purposes to
capitalize on a new opportunity.
• This reflects the readiness or willingness of two or more non-related companies to
put together resources to exploit an emerging market opportunity. 
• Eg SBI atm in Big Bazaar.

• A very famous example: Apple and Starbucks

 Apple, when it introduced Itunes went into an exclusive partnership with Starbucks
and allowed Starbucks Wi fi users to browse, download and buy songs from the
Apple Itunes store. Apple benefits from this partnership with higher iTunes sales
because Starbucks has a lot of loyal customers that take the time to visit, relax and
enjoy the unique Starbucks experience. When Apple first introduced its iTunes
music store, it hoped to sell one million songs in six months, but to its surprise,
Apple sold over one million songs within the first six days of its iTunes music store
opening. Much of the contribution was from Starbucks stores.
 Multichannel distribution system

• Merchants can choose which channels they want to distribute products to

their customers. Distribution channels can be physical stores, branded
websites, marketplaces like Amazon and eBay, and direct mail.
• Each of these distribution channels represents a different way for a
customer to buy from a merchant.
• A multichannel distribution system  is when a merchant decides to
strategically distribute their products to customers via multiple channels,
such as directly through physical stores, an online marketplace like
Amazon, or through another large retail chain.
• Benefits of Multi-channel Distribution
1. Allows more target market segments to be reached
2. Enables higher revenues – e.g. if retail outlets have no stock, but
customer can buy online
 MEANING
1. A wholesaler is an intermediary entity in the distribution channel that buys in
bulk and sells to resellers rather than to consumers.
2. Wholesaling is a significant aspect of distribution because of its impact on the
economy, its functions in the distribution channel and its relationship with
suppliers and customers.

3. Functions of Wholesaler:

• Enable manufacturers and service providers to distribute locally without making

customer contacts.
• Provide a trained sales force.
• Provide marketing and research supports for manufacturers, service providers
and retail or institutional consumers.
• Purchase large quantities, thus reducing total physical distribution costs.
• Provide warehousing and delivery facilities.
• Provide credit facilities for retail and institutional customers, whenever required
• Provide adjustments for defective merchandise.
• Take risks by being responsible for theft, deterioration and obsolescence
of inventory. Wholesalers who take title of ownership of products and
services usually perform all the above tasks.
 Types of Wholesalers
(a) Manufacturer Wholesalers:
• These wholesalers engage themselves in manufacturing activities to some
extent. They also purchase the goods of other manufacturers and sell them
along with their own products. In this manner they increase their turnover
and considerably reduce selling and overhead expenses.
(b) Merchant Wholesalers:
• The important feature of merchant wholesalers is that they take title to the
goods before being sold by them. A wholesaler who buys plywood from the
manufacturer is a merchant wholesaler. He actually takes title to the
plywood before selling to the retailers.
(c) Wholesalers Proper or Pure Wholesalers:
• They are known as pure wholesalers’ as they concentrate fully on wholesale
activities. They neither manufacture nor retail goods directly to consumers.
They purchase goods in large quantities from different manufacturers and
supply to retailers in small lots. They engage their own vans or vehicles in
order to distribute goods to the retailers.
D. Specialty Wholesalers
• In this the types of wholesalers, Wholesalers sells their products to a specific
industry or category wise products, they have to sell. These wholesalers have
access to number of big retailers, who have different sorts of products. These
specialty wholesalers tend to have good product knowledge with good pricing
options.
E. On-line Wholesaler - Wholesalers who sell their products on-line offer
discounted prices as they can reduce their overheads such as rent and rates of
physical premises. This type of wholesaler is therefore able to add a lower
percentage to their purchase price and still make margin.
• EXAMPLE-BAZARA2Z.COM
F. Brokers and Agents- These types of wholesalers do not take the title of
products and they only facilitate the buying and selling of products. They obtain
a commission on the selling price of the products and are specialized by
customer types or product line. 
Difference Between Wholesaler and Retailer
 Difference Between Wholesaler and Retailer
BASIS WHOLESALER
Transaction Manufacturers are the ones who make the
goods, which are sold to the wholesalers.
Wholesalers sell them to other distribution
channels. Thus, goods are resold at every
step
Quantity They purchase goods in a bulk quantity from
the producer. They are sold in a large
quantity as well.
Distribution It is the primary distribution link between
Link producers and distributors.
RETAILER
Retailers purchase goods from
wholesalers. Very rarely, they
may purchase goods from the
manufacturers. These goods
are then sold to the
customers. They do not go
through another re-selling
step.
Retailers buy goods in a large
quantity and sell products in
small amounts.
Last link
BASIS WHOLESALER
Product Quality The wholesaler has to buy
bulk amounts from the
manufacturer. Therefore, he
cannot point out or comment
on the quality of goods.
RETAILER
A retailer may be able to
select quality products with
careful precision, since he
directly sells to the consumer.
Also, he does not necessarily
purchase in bulk.

Communication Wholesalers can communicate It is very rare for retailers to

directly with the producers. communicate directly with the
producers. Most of the sale is
conducted via wholesaler.

Scope It has a huge, wide scope. It It has a limited scope; it

spreads over towns and cities remains in a particular area.
throughout the nation.

Price It always costs lesser. That is Comparatively, it costs more.

the very principle it is founded
upon - less price, more goods.
BASIS WHOLESALER RETAILER
Types of Products Wholesalers mostly deal with Retailers deal in all kinds of
a special type of product products

Payment Most of the transactions take The transactions take place on

place on a credit basis. The a direct cash basis. Payment is
payment is made after the made directly to the retailers.
goods are sold.

Location Location is not very important Location is very important to

to wholesalers. They can be retailers, since they need to
located anywhere, since they face potential consumers and
do not face customers directly. help effective sale of goods.

Post sale service Wholesalers do not provide Retailers provide post-sale

any sort of post-sale service, service, home delivery service,
or home delivery service, or as well as other facilities.
any other facility.
 The Advantages of Eliminating the Middleman

• The term "middleman" describes an intermediary between a producer and an end

customer. In a typical distribution channel, the middleman is the wholesaler or the
retailer. Manufacturers would eliminate the middleman by selling products directly to
retail stores or consumers. Wholesalers can do the same by skipping retailers and
selling directly to consumers. This strategy has some advantages over a
straightforward distribution process:
1. Cost Savings- The primary motive to eliminate intermediaries and sell further up the
supply chain is to save money. Manufacturers today sell directly to consumers thanks
to Internet expansion. Rather than paying sales representatives to promote products
to resellers, companies can promote products on their own websites, take orders and
send goods directly to the final customer.
2. Better Value- Eliminating the middleman usually creates a win-win for the seller and
buyer from a money perspective. Each step in a traditional distribution process
involves a trade buyer adding a markup to his costs. This ultimately makes the final
customer's price higher because he is paying for the original product costs, the costs
of each buyer's acquisition as well as the profit expected by the retailer. By getting rid
of the middleman's markups, company can offer the customer a lower price while
getting higher gross profits for itself
3. Efficiency
• Skipping steps in the distribution channel reduces the amount of logistics
and transportation required in the movement of goods from manufacturer
to consumer. This increases efficiency significantly. Manufacturers, for
instance, can skip wholesalers and more quickly replenish retailers with
stock.
4. Environmental Impact
• An indirect benefit of eliminating the middleman, which some companies
promote actively, is better environmental preservation. By minimizing the
number of trucks and travel time moving products from one step to the
next, you reduce the pollutants in the air. Additionally, local farmers have
taken opportunities to market fresh produce to local buyers to improve
freshness and minimize waste from delays in moving perishable foods.
 Case against Removal of middlemen
• Distribution channels perform a number of functions that make possible the flow
of goods from the producer to the customer. Though the type of organization that
performs the different functions can vary from channel to channel, the functions
themselves cannot be eliminated.
• Channels provide time, place, and ownership utility. They make products available
when, where, and in the sizes and quantities that customers want. Distribution
channels provide a number of logistics or physical distribution functions that
increase the efficiency of the flow of goods from producer to customer.
• Distribution channels create efficiencies by reducing the number of
transactions necessary for goods to flow from many different manufacturers to
large numbers of customers. This occurs in two ways. The first is called breaking
bulk. Wholesalers and retailers purchase large quantities of goods from
manufacturers but sell only one or a few at a time to many different customers.
Second, channel intermediaries reduce the number of transactions by creating
assortments—providing a variety of products in one location—so that customers
can conveniently buy many different items from one seller at one time. Channels
are efficient.
• The transportation and storage of goods is another type of physical distribution
function. Retailers and other channel members move the goods from the production
site to other locations where they are held until they are wanted by customers.
• Channel intermediaries also perform a number of facilitating functions, functions
that make the purchase process easier for customers and manufacturers.
Intermediaries often provide customer services such as offering credit to buyers and
accepting customer returns. Customer services are oftentimes more important in
B2B markets in which customers purchase larger quantities of higher-priced
products.
•  Some wholesalers and retailers assist the manufacturer by providing repair and
maintenance service for products they handle. Channel members also perform
a risk-taking function. If a retailer buys a product from a manufacturer and it doesn’t
sell, it is “stuck” with the item and will lose money.
• Last, channel members perform a variety
of communication and transaction functions. Wholesalers buy products to make
them available for retailers and sell products to other channel members. Retailers
handle transactions with final consumers. Channel members can provide two-way
communication for manufacturers. They may supply the sales force, advertising, and
other marketing communications necessary to inform consumers and persuade them
to buy. And the channel members can be invaluable sources of information on
consumer complaints, changing tastes, and new competitors in the market.
 Logistics
• Marketing logistics involve planning, delivering, and controlling the flow of
physical goods, marketing materials and information from the producer to a
market as necessary to meet customer demands while still making a
satisfactory profit.
• Distribution logistics includes a wide range of activities. These all focus on
achieving efficient distribution and movement of finished products. This
takes goods from the end of a production line to reach consumers.
•  Marketing logistics involves not only outbound logistics (moving products
from the factory to resellers and ultimately to customers) but also inbound
logistics (moving products and materials from suppliers to the factory) and
reverse logistics (reusing, recycling, refurbishing, or disposing of broken,
unwanted, or excess products returned by consumers or resellers). 
• According to Phillip Kotler, “Market logistics involve planning,
implementing and controlling physical flow of material and final (finished)
goods from the point of origin to the point of use to meet customer
requirements, at a profit.”
 Objectives of Marketing logistics
1) Logistics management results in cost reduction and profit maximization,
primarily due to:
 Improved material handling
 Safe, speedy and economical transportation
 Optimum number and convenient location of warehouses etc.
2.  Efficient Flow of Manufacturing Operations:
• Inbound logistics helps in the efficient flow of manufacturing operations, due to
on-time delivery of materials, proper utilisation of materials and semi-finished
goods in the production process and so on.
3. Logistics provide, maintain and sharpen the competitive edge of an enterprise
by:
 Increasing sales through providing better customer service
 Arranging for rapid and reliable delivery
 Avoiding errors in order processing; and so on.
iv) Effective Communication System:
• An efficient information system is a must for sound logistics management.
As such, logistics management helps in developing effective
communication system for continuous interface with suppliers and rapid
response to customer enquiries.
(v) Sound Inventory Management:
• Sound inventory management is a by-product of logistics management. A
major headache of production management, financial management etc. is
how to ensure sound inventory management; which headache is cured by
logistics management.
 MAJOR LOGISTIC FUNCTIONS
(i) Network Design:
• Network design is one of the prime responsibilities of logistics management. This
network is required to determine the number and location of manufacturing
plants, warehouses, material handling equipment’s etc. on which logistical
efficiency depends.
(ii) Order Processing:
• Customers’ orders are very important in logistics management. Order processing
includes activities for receiving, handling, filing, recording of orders. Herein,
management has to ensure that order processing is accurate, reliable and fast.
• Further, management has to minimize the time between receipt of orders and
date of dispatch of the consignment to ensure speedy processing of the order.
Delays in execution of orders can become serious grounds for customer
dissatisfaction; which must be avoided at all costs.
(iii) Procurement:
• It is related to obtaining materials from outside suppliers. It includes supply
sourcing, negotiation, order placement, inbound transportation, receiving and
inspection, storage and handling etc. Its main objective is to support
manufacturing, by providing timely supplies of qualitative materials, at the lowest
(iv) Material Handling:
• It involves the activities of handling raw-materials, parts, semi-finished and finished
goods into and out of plant, warehouses and transportation terminals.
Management has to ensure that the raw-materials, parts, semi-finished and finished
goods are handled properly to minimize losses due to breakage, spoilage etc.
Further, the management has to minimize the handling costs and the time involved
in material handling.
(v) Inventory Management:
• The basic objective of inventory management is to minimize the amount of working
capital blocked in inventories; and at the same time to provide a continuous flow of
materials to match production requirements; and to provide timely supplies of
goods to meet customers’ demands.
• Management has to maintain inventories of:
1. Raw-materials and parts
2. Semi-finished goods
3. Finished goods
• Management has to balance the benefits of holding inventories against costs
associated with holding inventories like – storage space costs, insurance costs, risk
of damage and spoilage in keeping stocks etc.
(vi) Packaging and Labelling:
• Packaging and labelling are an important aspect of logistics management.
Packaging implies enclosing or encasing a product into suitable packets or
containers, for easy and convenient handling of the product by both, the
seller and specially the buyer.
• Packaging facilities the sale of a product. It acts as a silent salesman. For
example, a fancy and decorative packaging of sweets, biscuits etc. on the
eve of Diwali, makes for a good sale of such items.
• Labelling means putting identification marks on the package of the
product. A label provides information about – date of packing and expiry,
weight or size of product, ingredients used in the manufacture of the
product, instructions for sale handling of the product, price payable by the
buyer etc.
• Labelling is a strong sales promotion tool. The consumer who is persuaded
to read the label may, in fact, try to buy the product; even though he/she
had no such premeditation (advance idea).
vii) Warehousing
• Almost every organization is bound to store its products because there is some gap in
the production and consumption.

• Functions of Warehousing:
1. Storage-This is the basic function of warehousing. Surplus commodities which are not
needed immediately can be stored in warehouses. They can be supplied as and when
needed by the customers.
2. Price Stabilization-Warehouses play an important role in the process of price
stabilization.  It is achieved by the creation of time utility by warehousing. Fall in the
prices of goods when their supply is in abundance and rise in their prices during the
slack season are avoided.
3. Risk bearing-When the goods are stored in warehouses they are exposed to many risks
in the form of theft, deterioration, exploration, fire etc. Warehouses are constructed in
such a way as to minimise these risks. 
4. Financing:- Loans can be raised from the warehouse keeper against the goods stored
by the owner. Goods act as security for the warehouse keeper.
5. Grading and Packing- Warehouses nowadays provide the facilities of packing,
processing and grading of goods. Goods can be packed in convenient sizes as per the
instructions of the owner.
(viii) Transportation:
• Transportation is that logistical activity which creates place utility.
• Transportation is needed for:
1. Movement of raw-materials from suppliers to the manufacturing unit.
2. Movement of work-in-progress within the plant.
3. Movement of finished goods from plant to the final consumers.
• Major transportation systems include:
1. Railways
2. Roadways
3. Airways
4. Waterways
5. Pipelines.
• The choice of a particular mode of transportation is dependent on a balancing of
following considerations:
1. Speed of transportation system
2. Cost involved in transportation
3. Safety in transportation
4. Reliability of transportation time schedules
5. Number of locations served etc.