PU/FBA/Logistics & Supply Chain Management Transportation & Distribution Mgt.

, 2022

OVERVIEW OF DISTRIBUTION SYSTEMS

1.0 Introduction to Distribution Management

The business context of many companies is nowadays radically changing. Most changes
are not mere trends but the result of large, unruly forces which have a lasting effect on the
world economy. Examples are the increasing globalization of customer markets, the rapid
development of information technology and computer networks, the increasing
importance of service in our economies and the ongoing changes in customer demand
and preferences. All these changes are happening at a faster rate of businesses and
integrated logistics management has been identified as the key to success in achieving
these vital goals.

1.2. Definition and Scope

Distribution is the management and control of the activities involved in the storage,
handling and movement of goods within an organization and in their shipment to
customers.

In essence, physical distribution management (PDM) involves controlling the movement

of materials and goods from their source to their destination. It is a highly complex
process, and one of the most important aspects of any business. PDM is the "other" side
of marketing. While marketing creates demand, PDM's goal is to satisfy demand as
quickly, capably, and cheaply as possible.

Part of logistics management, physical distribution is concerned with the transporting of

finished goods, raw materials, or by-products, such as hazardous waste, from the source
to the customer. A manager of physical distribution must also assess and control the cost
of transporting these goods and materials, as well as determine the most efficient way to
store them, which usually involves some form of warehousing. Hence, physical
distribution (PD) is concerned with inventory control, as well as packaging and handling.
Customer relations, order processing, and marketing are also related activities of Physical
Distribution

Storage and distribution is a complex business encompassing a number of individual

functions including: order processing, packaging and unitization of goods, storage or
warehousing and stock control and finally transport or delivery using either a single
transport mode for example road haulage, or multiplicity of alternative modes. Taken as a
whole, distribution is only a partial element of the much wider concept of logistics which

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in turn is only part of the total supply chain. It includes all the many individual functions
involved in the supply of goods from their source of origin as raw material, until they
become a finished product delivered into the hands of the final consumer.
The essential objectives of distribution and storage may be said to be: the supply and
delivery at the right place at the right time in accordance with customer requirements and
within an acceptance cost frame work for the supplier.

Although there may be differing interpretations put on the definitions on the objectives
for a distribution operations, the basic principles remain the same i.e. the customer wants
the goods; the logistics company must either hold in stock, or acquire sufficient quantities
of the right types of goods and be prepared sufficiently to organize and arrange the
necessary transportation for delivering them to the required destination as and when, and
in the condition required by the customer.

Thus the objectives for storage and distribution need to comply with customer
requirements while at the same time, complying with all the special requirements created
by these other issues.

Meeting the demands without complying with essential responsibilities does not lead to a
successful outcome for the supplier or customer.

1.3. Meeting Customer Demands

There are of course many variations and nuisances on the basic theme of supply and
delivery. For instance the customer may make specific demands as to how the goods are
to be packaged, unitized and presented for delivery, for example on pallets only, which is
a common request to save manual handling for final delivery; or the customer may
require split deliveries; so much of the load going to one destination and so much to
another. He/she may require deliveries to be made on particular days or at specific times
on particular days.

In the food and associated trade, where deliveries are predominantly made to
supermarkets, such strict delivery scheduling is the norm much more than the exception,
and logistics operators have to live with the nightmare that this can present at times when
for example vehicle availability presents a challenge due to breakdowns. Invariably the
customers do not want to know the excuses, even though there can be genuine reasons for
late deliveries; they only want their orders delivered as and when stipulated otherwise
they go elsewhere for their goods next time.

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Thus it will be seen quite clearly that a distribution service failing in any aspect of the
essential delivery criteria will inevitably find itself facing complaints from dissatisfied
customers, potential loss of future orders and ultimately, financial loss.

In order to meet the customer’s demand, certain practices and techniques must be adopted
and followed.
1. Effectively managing the distribution function
2. Selecting the most suitable transport modes
3. Planning routes and scheduling deliveries
4. Controlling inventories
5. Measuring and controlling performance
6. Using information technology
7. Carefully examining, monitoring and distribution costs
8. Designing efficient internal flows of goods within the warehouse
9. Complying with all legal requirements applicable to all aspects of
transport and distribution operations within and outside the
ECOWAS.
10. Dealing with the crucial aspects of waste disposal and recycling to
meet environmental standards.

Distribution Management Process

Product
Stock
PHYSICAL Transport
Warehousing DISTRIBUTION

Transport
RECYCLING CUSTOMERS

Finance

Quality

Information

Safety health and Environment

Education

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PU/FBA/Logistics & Supply Chain Management Transportation & Distribution Mgt., 2022

The Supply Chain

1.4 Logistics and Global Supply Chains

We live in a world where modern communications that allow us to connect with the other
side of the world via the internet and telephone in mere seconds and holiday takes us
across and around the world in a matter of hours, opposed to the weeks spent on ships on
the old days. Such a scenario demands also that the supply of material and delivery of
finished goods should also be on a global scale with finished goods capable of being
delivered across the globe to customers within short time scale sand acceptable cost
bounds just efficiently as deliveries to customers on the home market.

Many of the barriers to global trade have been swept away and firms now look to market
their products well beyond their home markets. But it is no good for Ghanaian firms for
example, marketing their products to potential customers in Nigeria, The Gambia or to
any ECOWAS member country, unless they can be sure that given the orders they can
deliver the goods within an acceptable time scale and at an acceptable cost. This is where
the planning of global supply chains comes into its own; in determining what mode of
transport should be used, what packaging is necessary, what legal requirements or
restraints have to be complied with and so on.

Competition in many industries has intensified all over the world in just a few years and
reasons why these are happening are as follows:
1. Deregulation in many industries (such as every supply airlines)
2. Intercultural homogenization and the resulting homogenization of consumer
preferences.
3. The forming of trade regions or blocs (EEC, ECOWAS, GATT) in some
areas in the world.9
4. Improved transportation facilities
5. The more sophisticated information technology will challenge and redefine
common accepted notions of geographic nations, companies, industries and
communities making traditional or political boundaries obsolete. Hence
gradually but steadily the world is becoming increasing “global village”.

1.5 The Total Distribution Concept

The basic aim of a broad-brush logistics strategy is to achieve the highest possible levels
of customer service at the lowest possible cost, (that is) it should help to achieve

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PU/FBA/Logistics & Supply Chain Management Transportation & Distribution Mgt., 2022

corporate objectives which in turn should be largely customer-related. Physical

distribution consists of five elements. These include: Packaging and Unitization,
Material Handling, Storage or Warehousing, Transportation and Data Processing and
Communication.

1.5.1 Transportation
Transportation is a necessary part of the logistic systems. A major focus in logistics is
Upon the physical movement or flow of goods or upon the network that moves the
product. This network is composed of transportation agencies that provide the service
or the firm. The logistics area is usually responsible for the selecting the mode or modes
of transportation used in moving the firm’s raw materials and finished goods or for
developing private transport as an alternative.

1.5.2 Storage
A second area which has a trade-off relationship with transportation is storage. It
Involves two separate but closely related activities: inventory management and
warehousing. A direct relationship exists between the transportation agency used and
the level of inventory and number of warehouses required. For example if firms use a
relatively slow means transport, they usually have to keep higher levels of inventory and
usually have more warehousing space for this inventory. They may examine the
possibility of using faster transport to eliminate some of these warehouses and the
inventory stored therein.

Consequently several firms have reduced their total logistics cost by spending more on
transport and reducing cost in inventory and warehousing. It should be noted that internal
organization conflicts may arise over inventory level that should be held and the level and
location of inventory stocks. Also it should be noted that a very closed relationship exists
between transportation and inventory levels and that the systems approach requires close
coordination between these two areas.

1.5.3 Packaging –
A third area of interest to logistics is industrial (exterior) packaging. The type of
Transportation selected will affect both packaging requirement for moving the product to
the market and or the raw materials involved. With regards to the product, air, road, rail
or water transportation will usually require additional packaging expenditures because
of the greater possibility of damage. In analyzing trade-offs for proposed changes in

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transport agencies, logistics personnel generally look for how the change influence
packaging costs. In many instances changing to a premium transport mean such as air
transport will reduce packaging cost.

1.5.4 Material Handling

A fourth area that should be considered logistic activity is material in the typical
manufacturing organization. It would be readily apparent that material handling is
important to the efficient warehouse operation: Logistics managers are concerned with
the movement of goods into a warehouse, the placement of goods in a warehouse and the
movement of goods from storage to order picking areas and eventually to dock areas for
transportation out of the warehouse.

Material handling is usually concerned with mechanical equipments for short distance
movement; such equipment includes conveyors forklift trucks, overhead crane and
containers. Production Managers may want a particular pallet or container type which is
compatible with logistics warehousing activities. Therefore, the material handling designs
must be coordinated in order to ensure congruity between the types equipments used. In
addition the company may find it economical to use the same type of forklift trucks in the
plants and in the warehouses.

1.5.5 Information and Communication

Modern logistics and supply chain are largely driven by electronic information and
communication technology (ICT) systems with electronic media providing key inter- and
intra-company/customer information. The development of electronic media has
revolutionized the whole supply chain business with everything from the humble mobile
telephone that allows vehicle drivers to communicate easily and quickly with their base
to sophisticated electronic data and intelligent transport systems.

1.6 Importance of Integrated Supply Chain

With the concepts of logistics and total supply chain taking hold in most firms, it is seen
to be both economically and operationally preferable that these functions should be fully
integrated to ensure an efficient flow of goods of relevant documentation and of essential
information through the complete supply chain. In other words by rolling up these
activities from original raw material supply to the final delivery of a finished product to
the customer under a single (logistics/supply chain) management ensure a continuous

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flow line of materials and goods (through all their various stages and intermediate stages)
and important too, flows of key information from beginning to end.

1.6.1 Total integration of all the related individual Supply Chain functions:
1. Permits a global view of total logistics cost within the firm
2. Present greater opportunities to achieve costs savings
3. Allow cost trade-offs by providing the opportunity for an overall view of
cost centers so that priorities across the whole supply chain can be
established.

An integrated approach to logistics can lead to both efficiency improvements and cost
savings. However, it is worth repeating that in terms of integration the linking of all
movements from raw materials inbound to final customer delivery to ensure a smooth
and continuous flow under essentially, a single source of control provides significant
opportunities to achieve greater operational efficiency and reduce costs.

Information technology today, provides the facility to the efficiencies and costs of the
various elements that make up an integrated logistic system and the system as a whole a
task that was hitherto very laborious and long-winded completely possible. Integrated
systems will ensure that these vital flows of materials, components and finished products
are ready on time, to specification and at an acceptable cost.

Having generated the momentum and provide the success of coordinated distribution
management, planning and implementing even more fully-integrated material and
commodity movement was a logical development. Materials management activities
involving the planning and management of raw materials and components purchasing,
appropriate inventory policies and management techniques (as well as their physical
movement) were “bolted on” to the front and of the distribution chain.

This created a longer “supply chain” with a more broadly based, but integrated
management, thus creating opportunities for companies to control more effectively one of
the major resources crucial to their continued survival and success. All physical materials
and inventory could through total business logistics, be controlled in a coordinated
manner through the organization and its operations.