DPL 5023

DISTRIBUTION MANAGEMENT

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 Course Learning Outcome (CLO)
 Describe briefly the scope, the importance and the development of physical
distribution in logistics and supply chain area. (C1, PLO1)

 Explain clearly the components and the channels of distribution management in

logistics and supply chain activities. (C2, PLO1)

 Apply accordingly the distribution operations planning and execution in logistics and
supply chain management. (C3, PLO1)

 Explain about the international distribution management based on the current

logistics environment effectively. (A3, PLO9)

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 List of Chapters

Chapter 1 Introduction to Distribution Management

Chapter 2 Components of Distribution Management
Chapter 3 Channels of Distribution Management
Chapter 4 Distribution Operations Planning
Chapter 5 Distribution Operations Execution
Chapter 6 International Distribution

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 ASSESSMENT (50%)
Context Test Quiz Presentation Problem Mini Project
(15%) (10%) Scenario (20%)
(5%)
Chapter 1

Chapter 2

Chapter 3

Chapter 4

Chapter 5

Chapter 6

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 CHAPTER ONE

INTRODUCTION
TO
DISTRIBUTION MANAGEMENT
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LEARNING OBJECTIVES:
1. Define the meaning of
physical distribution
2. Identify the scope of physical
distribution
3. Describe the importance of
logistics and distribution
 Importance in the economy
 Importance of key components
 Importance by industry sector
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4. Describe the development
of distribution and logistics
• 1950s and early 1960s
• 1960s and early 1970s
• 1970s and 1980s
• Late 1980s and early 1990s
• 1990s and 2000
• 2010 and beyond
5. Explain the relationship of
distribution with the
logistics and supply chain
activities
 Distribution Management can be known as:
Physical distribution
Logistics
Business logistics
Materials management
Procurement and supply
Product flow
Marketing logistics
Supply chain management
Demand chain management

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 Scope and Definition:
Logistics = Materials management + Distribution

Supply Chain = Suppliers + Logistics + Customers

** Logistics and the supply chain are concerned with physical and
information flows and storage from raw material through to the final
distribution of the finished product.

Thus, supply and material management represents the storage and

flows into and through the production process, while distribution
represents the storage and flows from the final production point
through to the customer or end user.
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 DEFINITION

Distribution: the function of moving various products from

the vendor’s facilities or the manufacturing workstation (where the
product were manufactured) to the company’s facility for storing,
picking the products based on customers order requirements, and
delivery the product to the customer’s facilities or workstation.

(David Mulcachy, Warehouse Distribution and Operations Handbook)

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 Simple Definition:
Distribution

 Physically moving products and establishing intermediary

relationships to support such movement.

Physical Distribution (Logistics)

 The activities of distribution involved in the physical relocation

of products.

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 The key components of distribution and logistics /
Scope of physical distribution

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 Determining the Scope of Physical Distribution

Transportation—which mode to use?

 Common carriers
Transportation intermediaries available for hire to the
general public.
 Contract carriers
Transportation intermediaries that
contract with individual shippers.
 Private carriers
Lines of transport
owned by shippers.

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 Determining the Scope of Physical Distribution

Storage
 Lack of storage space is a common problem

Materials Handling
 Protecting the firm’s output during warehousing .
Specifying Responsibility for Delivery Terms
 Paying freight costs
 Selecting the carriers
 Bearing the risk of damage
 Selecting the modes of transport

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 Determining the Scope of Physical Distribution

Information and control

 Design of systems
 Control procedures forecasting

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 Transportation Modes
Rail
Rail
Nation’s
Nation’slargest
largestcarrier,
carrier,cost-effective
cost-effective
for
forshipping
shippingbulk
bulkproducts,
products,piggyback
piggyback
Road
Road
Flexible
Flexiblein
inrouting
routing&&time
timeschedules,
schedules,efficient
efficient
for
forshort-hauls
short-haulsofofhigh
highvalue
valuegoods
goods
Water
Water
Low
Lowcost
costfor
forshipping
shippingbulky,
bulky,low-value
low-value
goods,
goods,slowest
slowestform
form
Pipeline
Pipeline
Ship
Shippetroleum,
petroleum,natural
naturalgas,
gas,and
andchemicals
chemicals
from
fromsources
sourcestotomarkets
markets
Air
Air
High
Highcost,
cost,ideal
idealwhen
whenspeed
speedisisneeded
neededororto
to
ship
shiphigh-value,
high-value,low-bulk
low-bulkitems
items
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 The importance of logistics

In today’s scenario, logistics and distribution can be considered as a whole in

the business and economy context.

It is an important activities that making extensive use of the human and material
resources that affect the national economy.

There are several research that been done to try to estimate the impact of
logistics to the economy.

Group Discussion:
Identify the importance of logistics to:
1) Economy
2) The key components
16 3) Logistics Industry
 Importance of logistics and distribution to
the economy
Study showed that 30% of the working population in
UK are related to logistics.
At the main European and North American economies
having between 8% to 11% of GDP represented by the
logistics sectors.
The range for developing country much higher
between 12% to 21%, with India at about 17% and
China at 21%.

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 Importance of logistics and distribution to
the economy

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 Importance of logistics and distribution to
the economy

Referring to the figure, the numbers represent some

very substantial costs.
It is important to understand the logistics costs and
how to keep it minimum.
Countries with the lowest cost are having stronger
recognition and vice versa.
It is to be expected that the logistics costs at
developing country will decrease over a years.

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 Importance of key components
There are surveys conducted to identify the breakdown
of the costs of different elements within logistics in the
US.

Transport takes 50% of the cost

Inventory carrying cost takes 20%
Storage/warehousing takes 20%
Customer service/order entry takes 7%
Administration takes 3%

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 Importance of key components
Cost breakdown in European.
Transport at 40%
Warehousing at 32%
Inventory carrying cost at 18%
Customer service/order entry at 5%
Administration at 5%

In both studies, the transportation cost are high due to fuel
prices are high.

In US, the long distance travelling are affecting the costs.

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 Importance by industry sectors
The costs can vary between companies and also
between industries.(refer to table)

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 Importance by industry sectors
One main reasons for costs difference is the
logistics structures can be different between
companies and industries.
Channels can be short (very direct), or long
(having many intermediate stocking points).
Channels also may be operated by the
manufacturers, retailers, and now the
specialist 3rd party.
The high value products having a low costs of
logistics and vice versa.

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 Importance by industry sectors
 A study by Datamonitor (2008) indicate that in global market, the retail
logistics has dominated up to 63.9%.
 This means that retails sectors have advance and innovative
development in logistics.

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Development of distribution and logistics
The elements of logistics and supply chain are always been
fundamental to the manufacturing, storage, and movement
of goods and products.

Nowadays its become a vital functions in the business and

economic environment.

Today its becomes a major parts in the success of many

different organizations and operations.

There are several stages in the development of distribution

and logistics.
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Development of distribution and logistics
1950s and early 1960s

At early stages, the distribution systems were unplanned and

unformulated.
The manufactures manufactured, the retailers retail, and some
how the goods reach the shops.
Distribution was broadly represented by the haulage industry
and manufacturer’s own-account fleets.
There was little positive control and no real liaison between the
various distribution-related functions.

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Development of distribution and logistics
1960s and early 1970s
Concept of physical distribution was developed, and gradual
involvement in ‘dark continent’ in managerial.
Improvement in interrelated physical activities such as
transport, storage, materials handling, and packaging that be
linked together.
Enabling system approaches, and total cost effective to be
used.
under the physical distribution manager, a number of
distribution trade-offs could be planned and managed to
provide both improved service and reduced cost.

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Development of distribution and logistics
1970s
In this important decade, the major change was some
companies recognize to include distribution in the
functional management structure of an organization.
There is also changes in the structure and control of the
distribution chain.
There was a decline in the power of the manufacturers
and suppliers, and increased in power by retailers.
The larger retail chains developed their own structures,
either regional or local.

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Development of distribution and logistics
1980s
Rapid cost increases contributed to increase in
professionalism within distribution.
The companies pursue cost-saving measures.
Centralized the distribution, severe reduction in stock
holding, and the used of computer to provide
information.
The emerging of 3rd party distribution industry, and also
recognition of need for integrated logistics systems.

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Development of distribution and logistics
Late 1980s and early 1990s

Advancement in information technologies.

Organization broadening their perspectives in term of the
functions that could be integrated.
Its covered to combining the materials managements (the
inbound side) with physical distribution (the outbound
side).
Additional opportunities to improve customer service
and reduce associates cost.
The major emphasis is the informational aspects were as
important as physical aspects.
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Development of distribution and logistics
1990s

Companies are expanding their boundaries to outside’s

of their company that contribute to the provision of a
product to final customer, which is known as Supply
Chain Management.

This is were a different organization are joining together

to getting the product to marketplace.

This partnership/alliances also including their

32 intermediaries, such as 3rd party contractors.
Development of distribution and logistics
2000 to 2010
The challenges is to maintain or improve their position
against their competitors, bring new product to market,
and increase their profits.
Led to development of new ideas like redefinition of
business goals, and re-engineering the entire logistics
systems.
Leading organizations recognized that there was a
positive value added logistics could offers, not just a cost
burden operation.

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 Development of distribution and logistics
2010 and beyond
External environment challenges
 Economic unions that leads to many deregulation that can harm
internal markets
Manufacturing and supply
 Important development in supply or inbound logistics
Distribution
 The raise of 4th party logistics
Retailing
 The emerge of grocery multiple retail store
The consumer
 Start to used the home shopping or non-store shopping

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 Logistics and supply chain structure
The fundamentals of physical distribution structure
could be considered as the flow of material or
product, interspersed at various points by periods
when the material or product is stationary.

The flow is some form of transportation of the

product.

The stationary periods are usually for storage or to

allow some change to the product to take place-
manufacture, assembly, packing, break-bulk, etc.
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 Logistics and supply chain structure
As per illustrated in the figure 1.4, the different types of
transport (primary, local delivery, etc) and stationary
functions (production, finished good inventory, etc) will
incurred cost for enabling the distribution operation to take
place.

As the logistics/distribution cost to the final cost of the

product can be vary from according to the sophistication of
the distribution system used.

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 Logistics and supply chain structure
In the recent years, the different elements of logistics
are providing an ‘added value’ to a product as it is
made to the final user.

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 Integrated logistics and supply chain - total
logistics concept
 The total logistics concept - aim to treat the many different
element that come under the broad category of distribution
and logistics.

 There is need for consideration for the interrelationship

between different elements, for example method of delivery,
transport and storage.

 Thus the total the total system should be considered, not just
an individual element.

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 Total Logistics Concept
As the example illustrate the classics of sub-optimization
in a distribution system, its shows how the concept of
total logistics can be ignored at some significant cost.

This could make the company good about saving the

packaging cost, but negatively they are adding the total
cost for distribution.

There are more positive view point to interpret this

interrelationships for determine the cost trade-offs

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 Planning for distribution and logistics

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 Planning for distribution and logistics

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 Planning for distribution and logistics

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 Planning for distribution and logistics

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 Globalization and Integration
To serve the global market, there is a need to plan and
manage logistics as a complete and integrated system.

Most company that operating in global market, are

often involved with the outsourcing of some
manufacturing and the used of ‘focused’ factory that
specialize in a limited number of products.

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 Globalization and Integration

When companies goes global, the complexity of supply

chain also increase. It is include:

Extended supply lead times

Production postponement with local added value
Complicated node management
Multiple freight transport options
Extended and unreliable transit times
The need for greater visibility in the supply chain

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 Integrated System
More integrate operation have been developed that have
concept of total logistics.

It is because of the realization of the importance, cost and

complexity of logistics.

There is also a progress made in the field of information

technology, enabling the development of sophisticated
information system to support and enhance the planning
and management of logistics operation.

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