CHAPTER ONE

INTRODUCTION

1.1      BACKGROUND TO THE STUDY

As competition in the 1990s intensified and markets became global, so did the challenges associated with getting a product and service to the right place at the right time at the lowest cost. Organizations began to realize that it is not enough to improve efficiencies within an organization, but their whole supply chain has to be made competitive (Tan, Lyman and Wisner 2002).

The understanding and practicing of physical distribution management has become an essential prerequisite for staying competitive in the global race and for enhancing profitably,(Moberg, Cutler, Gross, and Speh 2002). Council of Logistics Management (CLM) defines physical distribution management as “the systemic, strategic coordination of the traditional business functions and tactics across these businesses functions within a particular organization and across businesses within the supply chain for the purposes of improving the long-term performance of the individual organizations and the supply chain as a whole”.

The goal of physical distribution system is to integrate both information and material flows seamlessly across the supply chain as an effective competitive weapon (Childhouse and Towill 2003, Feldmann and Müller 2003).

The concept of physical distribution has received increasing attention from academicians, consultants, and business managers alike (Tan, Lyman and Wisner 2002, Feldman and Müller 2003, Van 1998). Many organizations have begun to recognize that physical distribution is the key to building sustainable competitive edge for their products and/or services in an increasingly crowded marketplace (Jones 1998).

In the transportation and distribution (T&D) sector, as in many others, it is important to have a good performance in operations. In order to achieve high performance, it is necessary to know which operational factors are critical for success and which are less important. Only then can management focus attention on those factors that have a strong effect on performance.

Challenges exist in terms of identifying appropriate performance measures for the analysis of supply chain (Arzu Akyuz, & Erman Erkan, 2010; Beamon, 1999). Researchers have thus far been content in limiting their choice of performance measures. Customer responsiveness has also been recognized as an important dimension of physical distribution management performance (Christy & Grout, 1994). In addition, Lee and Bullington (1993) identify supply chain flexibility as an important measure of physical distribution management performance.

In order to capture the construct of performance measure, all the different dimensions of physical distribution management performance need to be considered simultaneously. In addition, it is recognized that since physical distribution has firm level implications and it becomes imperative to measure effects of physical distribution management performance on organizational performance measures (Green, McGaughey & Casey, 2006).

The purpose of this study is therefore to empirically test the effect of physical distribution on organizational performance. Identifying the relationships among physical distribution practices, competitive advantage and organizational performance.

1.2    STATEMENT OF THE PROBLEM

Distribution firms have always researched for methods to minimize the cost and maximize flow of shipping each unit of commodity to and fro across the supply and demand nodes. Though, warehousing has smoothen out the fluctuations in demand and supply at market place yet major constraints are been faced in assigning supply and properly matching orders placed during redistribution to final retailers outlets. In recent times logistics firms are faced with greater problems of optimizing the whole system so as to develop strategies that minimizes cost and maximizes flow.

Some of the constraints affecting effective physical distribution in Agro marketing firms are Setting geographical coverage area for each warehouse to avoid conflicting customer coverage; efficiently utilizing space, resources and capacity of warehouses that will be optimal to avoid diseconomies of scale from under-utilization of warehouses and allocation of the flow of products and balancing of routes from each salesman to retailers’ outlets.

This research study tends to address the above issues and challenges facing organizations as they strive to maximize effectiveness and efficiency of their distribution processes and activities.

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