SUMMARY :

PART 1 CONCEPTS OF LOGISTICS AND DISTRIBUTION

SCOPE AND DEFINITION

David A. Revzan defines a distribution channel as a path traversed by the flow of goods - from producers to intermediate and finally to the user....(David sukardi kodrat, 2009;20)

Parallel to the growth in the importance of distribution and logistics has been the growth in the number of associated names and different definitions that are used. Some of the different names that have been applied to distribution and logistics include:

• physical distribution; • logistics; • business logistics; • materials management; • procurement and supply; • marketing logistics; • supply chain management; • demand chain management;

and there are several more. There is, realistically, no 'true' name or 'true' definition that should be pedantically applied, because products differ, companies differ and systems differ. Logistics is a diverse and dynamic function that has to be flexible and has to change according to the various constraints and demands imposed upon it and with respect to the environment in which it works. So these many terms are used, often interchangeably, in literature and in the business world. One quite widely accepted view shows the relationship as follows: Logistics = Supply + Materials management + Distribution

Logistics is... the management of all activities which facilitate movement and the co-ordination of supply and demand in the creation of time and place utility. (Hesket, Glaskowsky and Ivie, 1973)

Logistics management is... the planning, implementation and control of the efficient, effective forward and reverse flow and storage of goods, services and related information between the point of origin and the point of consumption in order to meet customer requirements. (CSCMP, 2006)

Logistics is... the positioning of resource at the right time, in the right place, at the right cost, at the right quality. (Chartered Institute of Logistics and Transport (UK), 2005)

It is interesting to detect the different biases – military, economic, academic, etc. An appropriate modern definition that applies to most industry might be that logistics concerns the efficient transfer of goods from the source of supply through the place of manufacture to the point of consumption in a cost-effective way whilst providing an acceptable service to the customer.

HISTORICAL PERSPECTIVE

There have been several distinct stages in the development of distribution and logistics :

1950s and early 1960s

In this period, distribution systems were unplanned and unformulated. Manu- facturers manufactured, retailers retailed, and in some way or other the goods reached the shops. Distribution was broadly represented by the haulage industry and manufacturers' own-account fleets. There was little positive control and no real liaison between the various distribution-related functions.

1960s and early 1970s

In the 1960s and 1970s the concept of physical distribution was developed with the gradual realization that the 'dark continent' was indeed a valid area for managerial involvement. This consisted of the recognition that there was a series of interrelated physical activities such as transport, storage, materials handling and packaging that could be linked together and managed more effectively.

1970s

This was an important decade in the development of the distribution concept. One major change was the recognition by some companies of the need to include distribution in the functional management structure of an organization. The decade also saw a change in the structure and control of the distribution chain. There was a decline in the power of the manufacturers and suppliers, and a marked increase in that of the major retailers. The larger retail chains developed their own distribution structures, based initially on the concept of regional or local distribution depots to supply their stores.

1980s

Fairly rapid cost increases and the clearer definition of the true costs of distribution contributed to a significant increase in professionalism within distribution. With this professionalism came a move towards longer-term planning and attempts to identify and pursue cost-saving measures. These measures included centralized distribution, severe reductions in stock-holding and the use of the computer to pro- vide improved information and control.

Late 1980s and early 1990s In the late 1980s and early 1990s, and linked very much to advances in information technology, organizations began to broaden their perspectives in terms of the functions that could be integrated. In short, this covered the combining of materials management (the inbound side) with physical distribution (the outbound side).

2000 and beyond Business organizations face many challenges as they endeavour to maintain or improve their position against their competitors, bring new products to market and increase the profitability of their operations. This has led to the development of many new ideas for improvement, specifically recognized in the redefinition of business goals and the re-engineering of entire systems. One business area where this has been of particular significance is that of logist- ics. Indeed, for many organizations, changes in logistics have provided the catalyst for major enhancements to their business. Leading organizations have recognized that there is a positive 'value added' role that logistics can offer, rather than the traditional view that the various functions within logistics are merely a cost burden that must be minimized regardless of any other implications. Thus, the role and importance of logistics have, once again, been recognized as a key enabler for business improvement.

IMPORTANCE OF LOGISTICS AND DISTRIBUTION

It is useful, at this point, to consider logistics in the context of business and the economy as a whole. Logistics is an important activity making extensive use of the human and material resources that affect a national economy. Several investigations have been undertaken to try to estimate the extent of the impact of logistics on the economy.

The breakdown of the costs of the different elements within logistics has also been included in a number of surveys. A survey of US logistics costs undertaken by Herbert W Davis & Company (2005) indicated that transport was the most important element at 45 per cent, followed by inventory carrying cost (23 per cent), storage/warehousing (22 per cent) and administration (10 per cent).