Changes in the Relative Importance of Logistical Functions in Distribution Systems

Source: Federal Highway Administration, Office of Freight Management. http://ops.fhwa.dot.gov/freight/

Distribution systems have become increasingly driven by demand instead of by supply, implying a shift in the relative importance of specific logistical functions, mainly inventory, transport and information systems.

Supply driven. In a conventional situation, a supply driven distribution system is mainly based on the function of inventory. Production, often taking place in large batches, is simply "pushed" on the market with the hope that what is being produced will be consumed. Since elements of the supply chain are loosely integrated, parts and/or products must be stored to accommodate the chronology of the demand.
Demand driven. Contemporary distribution systems show a remarkable change, as they are becoming increasingly demand driven. Under such circumstances, minimal inventories are maintained and most of it is circulating, thus the increasing importance of the transport component in distribution. The operational management of such as system relies heavily on information systems to insure that parts and / or products are delivered where and when they are required (on demand).

Copyright © 1998-2008, Dr. Jean-Paul Rodrigue, Dept. of Economics & Geography, Hofstra University. For personal or classroom use ONLY. This material (including graphics) is not public domain and cannot be published, in whole or in part, in ANY form (printed or electronic) and on any media without consent. Permission MUST be requested prior to use.