Reliant Logistics Institute

Physical distribution and logistics


The area of business management that is responsible for the movement of raw materials and finished products and development of movement system is called physical distribution. The study and practice of physical distribution and logistics emerged later. The major functions of physical distribution include customer service, order processing, inventory control, transportation and logistics and packaging. It is capable of creating a competitive advantage for organisations. Physical distribution and logistics were somewhat synonymous terms. Physical distribution was the first to emerge, whereas Business logistics, with its broader scope that includes inbound movement, followed later. Since the activities related to logistics were not considered important it led to fragmentation. There were very little attempts made to integrate and balance the activities of logistics .There were no focused distribution or logistics courses in kerala available i.e. not much of an opportunity for managers to learn about the broader concepts of logistics. Later on physical distribution emerged as an area of study. The importance of physical distribution was expanded to include physical supply and was called business logistics. The term Logistics was used to focus on logistics activities that took place within the business firm. Purchasing was not generally considered nor was production. On the other hand, there was a similar movement by those interested in the purchasing activity. Since purchasing was considered as a buying activity, there were efforts to expand the scope to include many of the activities familiar to physical distribution but associated with the inbound side of the firm. Physical distribution indicates a broader concept that includes both inbound and outbound movement whereas business logistics involves both physical supply and physical distribution.

Utilities of time and place are usually considered as physical distribution or logistics activities. Since marketing and production were established functions within business, they laid claim to physical distribution, but their lack of attention led physical distribution (logistics) to be developed as a separate entity and as a new function within the organizational structure. There are several lessons to be learned from the past. Physical distribution and logistics were considered to have broad responsibilities for managing activities that were associated with raw material acquisition till the product flow to the end consumer. Experts did include distribution as a primary activity in the marketing mix, however, distribution seemed to be defined more in terms of transaction channel activities than physical distribution ones. Since the scope of physical distribution was extensive, actual management practice was generally limited to coordination of activities within the logistics function or among those activities associated with product flow. Physical distribution and logistics were accepted by both marketing and production areas, but they gave little attention to issues of product flow. As a result physical distribution and logistics developed as an independent function within business. Thus logistics costs were high and that there was an unrealized opportunity to reduce them. A proper Planning, implementation storage of goods and services, and other related information required in order to meet customer requirements is what comes under the process of logistics. It can be concluded that Logistics will continue to grow in importance as companies continue to outsource, expand their international operations, and do business in a global economic environment.


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