DPL 5023
DISTRIBUTION MANAGEMENT
1
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)
2
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
(15%) (10%) Scenario Project
(5%) (20%)
Chapter 1
√
Chapter 2
√
Chapter 3
√
Chapter 4
√
√
Chapter 5
Chapter 6
√
4
CHAPTER ONE
INTRODUCTION
TO
DISTRIBUTION MANAGEMENT
5
LEARNING OBJECTIVES:
1. Define the meaning of 4. Describe the development
physical distribution of distribution and logistics
• 1950s and early 1960s
2. Identify the scope of physical • 1960s and early 1970s
distribution • 1970s and 1980s
• Late 1980s and early 1990s
• 1990s and 2000
• 2010 and beyond
3. Describe the importance of
logistics and distribution • Explain the relationship of
Importance in the economy
distribution with the
Importance of key components
logistics and supply chain
Importance by industry sector
activities
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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
15
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
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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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