We are the first to admit that we probably do not direct enough attention in our posts to the marketing area related to physical distribution. Yet, while product distribution may not be as glamorous as advertising or product design, it is enormously important for two reasons. First, a company's distribution system represents a cost. While there are some situations where distribution can create revenue (e.g., shipping products for someone else), by and large storing and moving products costs money. Consequently, a well-run distribution system offers benefits to the firm's bottom line by keeping costs low. In fact, even small changes that save only a few cents per pound of product handled can yield substantial gains. Why? Because many companies move thousands of pounds of product each day. Thus, saving just a few cents per pound will eventually add up to a sizable financial gain.
Second, and probably easier for the non-distribution person to understand, efficiently managing product movement can lead to greater customer satisfaction from distribution partners, such as retailers, and from the end customer, such as consumers. For retailers, they can only sell what they have in stock, so they strive to eliminate stockouts (i.e., no product available) by handling products from manufacturers with reliable distribution systems. For consumers, and especially those purchasing online, the ability for a retailer to deliver the order quickly can lead to positive evaluations of their purchasing experience.
For firms seeking to build efficiency into product movement they often turn to technology. For instance, companies utilize routing software to guide their trucks to destinations along the quickest path possible. Another way is through automated warehouses where pallets filled with product are moved to storage racks or onto trucks using computer-controlled pallet jacks.
Yet, one part of distribution that has always been a labor intensive problem involves product fulfillment for small individual purchases, such as small orders placed online. Internet orders are generally filled by an employee who must walk around a warehouse locating the requested items. Of course, this can be quite time consuming. Now there is technology that addresses order picking. As explained in this National Public Radio story, Amazon is using specialized robots programmed to bring products to employees who fill the orders. According to the story, Amazon uses over 15,000 robots in its warehouses.
When this report of Amazon using robots in the warehouse is considered alongside their research into using drones to deliver orders, one has to wonder if many humans will be part of product distribution in the near future. While the story suggests jobs are actually increasing, the question of robots eventually replacing humans remains.