EFFECTS OF PHYSICAL DISTRIBUTION ON THE SALE OF CONSUMABLE PRODUCTS

(A STUDY OF UNILEVER NIG PLC)

CHAPTER ONE INTRODUCTION 1.1                   BACKGROUND TO THE STUDY

In today’s market place, selling a product is sometimes easier than getting it to customers.  Companies have decided on the best way to store and move their product and services so that they are available to customer in the right assortment, at the right time and in the right place.  Kotler and Armstrong (2010) opined that physical distribution (marketing logistic) is the process of planning, implementing and controlling the physical flow of materials final goods and related information from point of origin to point of consumption to meet customer requirement at a profit.

The study of physical distribution is concerned with the physical movement of products from point of production to point of consumption.  It involves a system of exchange activities that gather the product of individual producer and distribute them among various purchasers.

At a more apparent level, you cannot satisfy consumers unless the product delivers physical distribution and has a greater impact on the success of company.

Physical distribution is an important element in marketing finished products or raw materials physically present or available at the point of use or consumption.  This is achieved through the actual movement of the products, that is transportation storing (warehouse), logistic information until they are eventually consumed since consumption is the essence of production, physical distribution is of tremendous importance to the success of a company.

The economic impact of physical distribution is enormous because it accounted for the largest components of marketing cost, about 20% of every naira spent goes for physical distribution, this cost (physical distribution cost) varies dramatically from one industry to another.  Every naira saved in the course of physical distribution has the same effect on profit.

Physical distribution creates utility for the customers by making the products available at the right place in the right form at the right time.  Marketing logistic encompasses such activities as order processing, inventory management, material handling, warehousing and transportation.

1.1.1   HISTORICAL BACKGROUND OF THE STUDY

Unilever was created in 1929 by a merger of British Soap Maker “Lever Brothers and Dutch Margarine producer “margarine UNIC” a merger that   hinged on the attractiveness of palm oil as a commercial raw material for both margarine and soap tradable in large amounts.

Unilever was formerly known as Lever Brothers.  It was established in Nigeria in 1929 under the name West African Soap Company Limited.  In 1995, it changed its name to Lever Brothers Nigeria Limited, one of the largest producers of consumer goods operating in about seventy countries through sub-companies.  At the Annual General Meeting (AGM), the management of the company and the shareholders agreed in the change name from Lever Brothers Nig Plc to Unilever Nig Plc and it was adopted from January 2002.  The staff strength of Unilever is about 3,700 workforce spread over it four factories situated at Apapa, Isolo, Aba and Agbara.

The head office and its first factory are located at No 15, Dockyard Road, Apapa in Lagos State where the under listed products are produced.

-      Soap – Asepso, Astial, Lifebuoy

-      Scourer – Vim

-      Personal product: Close Up

The Aba factory in Abia State was built in 1959 and manufactures the following products:

-      Laundry soap: Ox, Key and Sunlight

-      Detergent: Blue, Omo and Rim

Agbara factory in Ogun State is an ultra-modern food factory built in 1985 and produces

-       Edible fat and oil, also master line range of products which serves as bakery confectionary for other food industries

-      Tea and coffee: Lipton Yellow Label Tea, Bongo, Bon café

-      Drink: Tree top range of flavours

-      Bonillon: Royce cubes

Cheese brought product factory located in Isolo Lagos state.  It came into existence in 1998 as a result of the merger between cheese and Unilever Plc.  The factory produces toiletries and cosmetics.  It is worthy of note that as aged as Unilever is, it has a total plant capacity of about 190,000 per annum, producing less than 52 brands of item.

1.2       STATEMENT OF THE PROBLEM

In modern day business making product available at the right time, in the right place, in the right form is as important as quality product, attractive price, and effective communication, since consumption is the essence of production.

As a result of increase in availability of different products coupled with middlemen (intermediaries) carrying different product has led to some physical distribution problem for Unilever Nig Plc.

In other for organization to maintain their market share, increase their profit, and ensure product availability, marketing managers need to find the best way to distribute their product to present and potential customers.

Consequently, using physical distribution in maintaining and improving organization market share, some of the following we go a long way in achieving effective physical distribution, among these are customer service, order processing, inventory control, warehousing, transportation, and material handling.

1.3       OBJECTIVES OF THE STUDY

This study aims at highlighting the importance of physical distribution in the sale of consumable products and identifying opportunities to be exploited by the organization as well as threat to be prevented in their environment.  However, the said objectives are stated below:

1             To know the role of transportation in making the products available.

2             To examine whether warehousing assure time utility of consumable product.

3             To examine if proper inventory management contribute to profitability of Unilever Nig Plc.

4             To examine whether effective consumer service contribute in attaining large market share.

1.4       RESEARCH QUESTIONS

In line with research problems identified above by the researcher, the researcher questions provided in this study are as follows:

1             Does transportation play an important role in making the products available?

2             Does warehousing assure time utility of consumable product?

3             Does inventory management contribute to profitability of an organization?

4             Does effective customer service contribute in attaining large market share?

1.5       RESEARCH HYPOTHESES

1)        H0: Warehousing does not assure time utility of consumable products.

H1: Warehousing assure time utility of consumable products.

2)        H0: Effective customer service does not contribute in attaining large market share.

H1:  Effective customer service contributes in attaining large market share.

1.6       SIGNIFICANCE OF THE STUDY

This research work tend to contribute to the existing knowledge of physical distribution and also to highlight the importance of physical distribution on the sale of consumable product (Unilever products) and to help management of Unilever Nig Plc on how to reduce distribution cost as well as damage product through proper inventory management, stabilize the price and determine choice of warehouse locations.

1.7       OPERATIONAL DEFINITION OF TERMS

Consumable product: This is referred to as the product that is not meant for further production, but rather for final consumption.

Inventory: Refers to the stock of the product a company is manufacturing for sale and the component that make up the product.

Logistic: The practical organization that is needed (Facilities) to make a complicated planning of raw materials and goods successful when a lot of people and equipment is involved.

Work-in-progress: These are products that are yet to be completed or semi-manufactured goods.

Raw materials: These are basic inputs/materials that are converted into finished goods through the manufacturing process.

Finished goods: These are goods that have been completely manufactured or those that are ready for sale.