By adopting this definition, distribution is expanded to cover nearly every form of materials management and physical distribution activity performed by channel constituents, except for the processes of manufacturing and retailing.
Distribution involves a number of activities centered around a physical flow of goods and information. At one time the term distribution applied only to the outbound side of supply chain management, but it now includes both inbound and outbound. Management of the inbound flow involves these elements:
- Material planning and control
- Purchasing
- Receiving
- Physical management of materials via warehousing and storage
- Materials handling
Management of the outbound flow involves these elements:
- Order processing
- Warehousing and storage
- Finished goods management
- Material handling and packaging
- Shipping
- Transportation
Distribution channels are formed to solve three critical distribution problems: functional performance, reduced complexity, and specialization.
The central focus of distribution is to increase the efficiency of time, place, and delivery utility. When demand and product availability are immediate, the producer can perform the exchange and delivery functions itself. However, as the number of producers grows and the geographical dispersion of the customer base expands, the need for both internal and external intermediaries who can facilitate the flow of products, services, and information via a distribution process increases.
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