1.2.2 Physical distribution or demand-side logistics
Following the Second World War, the concept of physical distribution was first articulated in the United States , when in 1948 the American Marketing Association included 'physical distribution' in a set of definitions of business functions. The term 'physical' being used to differentiate this business function from the economist's use of the term 'distribution' (Gilmour 1979, p.4).
A case for considering the total cost of physical distribution rather than the costs of individual elements (inventory, storage, transportation and communication costs) was first proposed in a research paper in1956. This demonstrated the trade-off between the higher costs of airfreight and the associated communication costs against, quicker response time, lower inventory and storage costs in providing similar levels of service at a lower total cost (Gilmour 1979, p.4).
Advances in packaging and materials handling technology resulted in handling efficiencies with the developments of unitised loads (pallets) and later, in the 1960s, the development of the ISO shipping container. These advances greatly enhanced the productivity of distribution operations and paved the way for increases in the international trade of raw materials and finished goods.
Activities associated with the acquisition and processing of customers' orders for finished goods often came within the purview of sales or marketing executives. In many cases, responsibility for finished goods inventory resided with finance, due to its impact on overall enterprise financial performance.
Previous Page