When an organization decides on what distribution channel to use, it creates the final link in the supply chain. A supply chain is the complete order of suppliers that contribute to creating the product or service and distributing it to business users and consumers. This process of organizing the flow of goods, services, and information among members of the supply chain is called logistics. Physical distribution is a major focus in logistics management.
Physical distribution has many elements that help link buyers and sellers. These elements include the following: customer service, transportation, warehousing, materials handling, inventory control, and order processing. Many companies require a new technology called radio-frequency identification (RFID). RFID is a computer chip on the product or packaging that emits a low-frequency radio signal that identifies the item and where it is along is distribution channel. Vendor-management inventory is when the producer and retailer agree that the producer will determine how much of a product the buyer needs and automatically ships new supplies when they are needed. The reason for vendor-management inventory was the constant pressure on suppliers to improve their response time in preparing and receiving orders. There are also five modes of transportation a logistics manager can choose from as their physical distribution. They are the following: railroads, water, truck, pipeline, and air. Many of these transportations have mission statements such as the following examples: Motor Carrier
"To provide profitable motor carrier services to shippers of agricultural commodities” "To serve the transportation needs of shippers in extractive industries in the Northwest U S” "To provide general commodity transportation service on an irregular route basis to complement the full range of transportation services available from other subsidiaries of ABC Holding Company” Railroad
"To maintain a viable, growing business by marketing and providing high quality rail transportation services principally to durable goods shippers” "To be a profitable operating unit (l e, division or subsidiary) of DEF Industries, Inc” "To be the most capable and financially sound railroad company in the Mid-western US" Integrated Transportation and Distribution
"To offer a full-range of motor carrier, warehousing, and consulting services to large firms engaged in the manufacture, processing, and distribution of food products" (Langley, 1983, p. 74).
In the physical distribution environment, the physical distribution management (PDM) is involved in controlling the movement of materials and goods from their source to their destination. The PDM’s goal is to satisfy demand as quickly and cheaply as possible.
The economy plays a major role in physical distribution and logistics. “High fuel surcharges have shifted some cargo from air to ground,” said Robert Dahl, project director of Air Cargo Management Group (“UPS Predicts Domestic Practice Increase,” 7/30/2007, p. 31). The supply chain has become a driving force relying on demand instead of by supply, suggesting a shift in the importance of specific logistical functions, mainly inventory, transport and information systems. In a distribution system that is supply driven, the system is primarily based on the function of inventory. Since the elements of the...