Distribution Systems

Source：Journal LogisticsRelease：2015-11-12Share：

In a broader sense distribution systems are embedded in a changing macro- and microeconomic framework, which can be roughly characterized by the terms of flexibility and globalization:

Flexibility implies a highly differentiated, strongly market and customer driven mode of creating added-value. Contemporary production and distribution is no longer subject to single-firm activity, but increasingly practiced in networks of suppliers and subcontractors. The supply chain bundles together all this by information, communication, cooperation, and, last but not least, by physical distribution.
Globalization means that the spatial frame for the entire economy has been expanded, implying the spatial expansion of the economy, more complex global economic integration, and an intricate network of global flows and hubs.

The flow-oriented mode affects almost every single activity within the entire process of value creation. The core component of materials management is the supply chain, the time- and space-related arrangement of the whole goods flow between supply, manufacturing, distribution and consumption. Its major parts are the supplier, the producer, the distributor (e.g. a wholesaler, a freight forwarder, a carrier), the retailer, the end consumer, all of whom represent particular interests. Compared with traditional freight transport systems, the evolution of supply chain management and the emergence of the logistics industry are mainly characterized by three features:

Integration. A fundamental restructuring of goods merchandising by establishing integrated supply chains with integrated freight transport demand. According to macro-economic changes, demand-side oriented activities are becoming predominant. While traditional delivery was primarily managed by the supply side, current supply chains are increasingly managed by the demand.
Time mitigation. Whereas transport was traditionally regarded as a tool for overcoming space, logistics is concerned with mitigating time. Due to the requirements of modern distribution, the issue of time is becoming increasingly important in the management of commodity chains. Time is a major issue for freight shipping as it imposes inventory holding and depreciation costs, which becomes sensitive for tightly integrated supply chains.
Specialization. This was achieved by shifts towards vertical integration, namely subcontracting and outsourcing, including the logistical function itself. Logistics services are becoming complex and time-sensitive to the point that many firms are now sub-contractingparts of their supply chain management to what can be called third-party logistics providers(3PL; asset based). More recently, a new category of providers, called fourth-party logistics providers (4PL; non asset based) have emerged.

While many manufacturing corporations may have in-house transportation departments, increasingly the complex needs of the supply chain are being contracted out to third parties. Depending on the strategy and costs corporations can outsource in whole or in part their transport and supply chain operations. Third party logistics providers (3PL) have emerged from traditional intermediaries such as the forwarders, or from transport providers such as FEDEX or Maersk. Both groups have been at the forefront of the intermodal revolution that is now assuming more complex organizational forms and importance. In offering door to door services, the customer is no longer aware or necessarily concerned with how the shipment gets to its destination, namely the modes used and the routing selected. The preoccupation is with cost, reliability and level of service. This produces a paradox, that for the customer of intermodal services geographic space becomes meaningless; but for the intermodal providers routing, costs and service frequencies have significant geographical constraints. The effectiveness of intermodal transport systems is thus masking the importance of transportation to its users.

Logistics is thus concomitantly concerned by distribution costs and time. In addition, many dimensions are added to the function of distribution. While in the past it was a simple matter of delivering an intact good at a specific destination within a reasonable time frame, several components have become linked with distribution:

Distribution time, notably the possibility to set a very specific ETA for deliveries and a low tolerance for delays.
The reliability of distribution measured in terms of the availability of the ordered goods and the frequency at which orders are correctly serviced in terms of quantity and time.
The flexibility of distribution in terms of possible adjustments due to changes in the quantity, the location or the delivery time.
The quality of distribution concerns the condition of delivered goods and if the specified quantity was delivered.

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