Unit 5: Logistics and Emerging Trends in Distribution

Logistics and Emerging Trends in Distribution

Introduction to Logistics and Supply Chain Management

Logistics

Logistics means the process of planning, implementing, and controlling the movement of goods and services from the point of origin to the point of consumption (customer).
It includes transportation, warehousing, inventory, packaging, and order processing.

Example: When you order a mobile phone from Amazon, logistics ensures it moves from the warehouse → delivery hub → your home safely and on time.

Supply Chain Management (SCM)

Supply Chain Management is a broader concept than logistics. It includes all activities and partners (suppliers, manufacturers, warehouses, retailers) involved in making and delivering a product to customers.

Example: In a biscuit company:
Wheat supplier → Flour mill → Biscuit factory → Distributor → Retailer → Customer
All together form the supply chain.

Difference between Logistics and SCM

Basis	Logistics	Supply Chain Management
Focus	Movement and storage of goods	Complete flow of goods, information, and finances
Scope	Part of SCM	Broader – includes logistics
Objective	Efficient delivery	Customer satisfaction & cost efficiency
Example	Transportation and warehousing	Managing suppliers, production, and distribution

Order Processing

Order processing refers to the complete process of receiving, checking, and fulfilling customer orders quickly and accurately.

Steps in Order Processing

• Order received: From customer or retailer.
• Order verification: Check payment and stock availability.
• Order fulfillment: Goods are picked, packed, and shipped.
• Delivery and confirmation: Goods delivered to the customer.

Example: When a customer orders from Flipkart, the system verifies the payment, updates inventory, and ships the product — all part of order processing.

Importance

• Improves customer satisfaction
• Reduces errors and delays
• Builds brand trust

Warehousing

Warehousing means storing goods safely until they are needed for sale or distribution.

Functions of Warehousing

• Storage: Keep goods safely for future use.
• Protection: Prevent damage or theft.
• Sorting & Packaging: Classify and repack products as per demand.
• Transportation support: Acts as a link between producer and consumer.

Types of Warehouses

• Private Warehouse: Owned by a company (e.g., Amazon’s warehouse).
• Public Warehouse: Rented by multiple firms.
• Bonded Warehouse: Used for imported goods before customs clearance.
• Smart Warehouse: Uses robotics, sensors, and AI for operations.

Example: Coca-Cola maintains regional warehouses to ensure quick supply to retailers.

Inventory Management

Inventory management means controlling the stock of goods — making sure the right quantity is available at the right time without overstocking or running out.

Key Techniques

ABC Analysis

• ‘A’ items → High value, low quantity
• ‘B’ items → Moderate value
• ‘C’ items → Low value, high quantity

EOQ (Economic Order Quantity): Determines the most cost-effective quantity to order.

JIT (Just-in-Time): Goods arrive exactly when needed — reduces storage cost.
Safety Stock: Extra inventory kept to avoid stockouts.

Example: Automobile companies use JIT to receive parts just before assembly, saving space and cost.

Emerging Trends in Distribution and Logistics

• E-Logistics: Use of internet and technology to manage logistics operations. Example: Tracking shipments in real-time.
• Green Logistics: Eco-friendly transportation and packaging to reduce pollution.
• Automation & Robotics: Smart warehouses using AI, drones, and robots.
• Blockchain in Supply Chain: For transparency and fraud prevention in transactions.
• Third-Party Logistics (3PL): Outsourcing logistics to specialized firms (e.g., Blue Dart, DHL).
• Omnichannel Distribution: Integrating online and offline channels for seamless delivery.
• Reverse Logistics: Managing product returns and recycling (e.g., Flipkart return process).

Summary Table

Concept	Meaning	Example
Logistics	Movement of goods from producer to consumer	Amazon delivery network
SCM	Managing all partners in product flow	From raw material to end customer
Order Processing	Steps from order to delivery	Flipkart order handling
Warehousing	Safe storage of goods	Coca-Cola regional warehouses
Inventory Management	Controlling stock levels	Toyota’s JIT model
Emerging Trends	Modern, tech-based logistics practices	AI, green logistics, blockchain

Transportation and Distribution Cost Control

Transportation 

Transportation means the movement of goods from one place to another — from the producer or warehouse to retailers or final customers. It plays a key role in logistics because timely and safe delivery keeps customers satisfied.

Modes of Transportation

Mode	Description	Example
Roadways	Flexible, door-to-door service	Trucks, delivery vans
Railways	Low cost for bulk goods	Coal, cement, grains
Airways	Fastest but expensive	Electronics, perishable goods
Waterways	Cheapest for long-distance bulk	Import/export through ships
Pipelines	Used for fluids	Petroleum, natural gas

Distribution Cost Control 

Distribution cost includes all expenses related to moving goods from the producer to the customer.
This includes transportation, warehousing, packaging, handling, and order processing costs.

Objective: To reduce total logistics cost without compromising delivery quality and customer satisfaction.

Methods of Cost Control

• Route Optimization: Use software or GPS to find the shortest, fuel-efficient delivery routes. Example: Amazon and Swiggy use AI for smart routing.
• Load Optimization: Make full use of vehicle capacity to reduce per-unit transportation cost.
• Warehouse Location Planning: Set up warehouses near demand centers to save fuel and time.
• Outsourcing (3PL Services): Hire third-party logistics companies like DHL, Blue Dart, or Delhivery for efficient operations.
• Inventory Optimization: Use techniques like JIT (Just-in-Time) to reduce storage costs.
• Automation & Tracking: GPS tracking, digital invoices, and real-time monitoring reduce delays and losses.
• Energy-efficient Vehicles: Use electric or hybrid vehicles to save fuel and reduce costs.

Benefits of Cost Control

• Lower operational costs
• Improved profit margins
• Faster delivery
• Better customer satisfaction
• Competitive pricing

E-commerce and Omnichannel Distribution

E-commerce Distribution

E-commerce distribution means selling and delivering products online through digital platforms instead of physical stores. Example: Amazon, Flipkart, Meesho, Myntra.

Steps in E-commerce Distribution

• Customer places an order online.
• System checks inventory and processes the order.
• Product is packed at a fulfillment center (warehouse).
• Logistics partner delivers it to the customer.

Key Features

• Online ordering and digital payment.
• Doorstep delivery.
• Tracking and return facility.
• Use of automation and AI in warehouses.

Advantages

• Wide market reach.
• 24/7 accessibility.
• Low operating cost (no need for many stores).

Omnichannel Distribution 

Omnichannel distribution means integrating both online and offline channels to give customers a seamless shopping experience across all platforms. Example: You can buy a product from a brand’s app, website, or physical store — and still get the same offers, service, and support.

Example Brands Using Omnichannel

• Reliance Trends: Online shopping + in-store pickup.
• Nike: Order online → return in any retail store.
• Tata Cliq: Integrates Tata stores with online platform.

Difference between Multichannel and Omnichannel

Basis	Multichannel	Omnichannel
Channels	Many, but separate	All channels connected
Customer Experience	Independent for each channel	Seamless and unified
Example	Online store + offline store (not connected)	Buy online, pick up offline

Benefits of Omnichannel Distribution

• Improves customer convenience and loyalty.
• Better brand consistency across all platforms.
• Increased sales and customer retention.
• Data integration helps understand buying behavior.

Challenges

• High setup cost for integration.
• Need for advanced IT systems.
• Inventory synchronization issues.
• Data privacy and security concerns.

Summary Table

Concept	Meaning	Example	Benefit
Transportation	Moving goods from one place to another	Road, Rail, Air, Sea	Timely and safe delivery
Distribution Cost Control	Reducing total logistics costs	Route & load optimization	Cost savings, higher profit
E-commerce Distribution	Online buying & home delivery	Amazon, Flipkart	24/7 access, wide reach
Omnichannel Distribution	Integrating online and offline channels	Nike, Reliance	Better customer experience

Role of IT in Distribution

Information Technology (IT) has revolutionized the way products move from manufacturers to consumers. Modern distribution relies heavily on ERP systems, SCM tools, and digital platforms for efficiency, transparency, and real-time decision-making.

ERP (Enterprise Resource Planning) in Distribution

ERP is integrated software that manages business processes like procurement, inventory, sales, finance, and human resources in one system.

Role in Distribution

• Centralized inventory management across warehouses.
• Real-time order tracking and shipment updates.
• Automates purchase orders and replenishment.
• Provides analytics and reporting for better decision-making.

Example: Tata Motors uses ERP to track vehicle parts from suppliers to factories and dealerships efficiently.

SCM (Supply Chain Management) Tools

SCM tools help in planning, executing, and monitoring supply chain activities — from raw material procurement to final delivery.

Functions

• Demand forecasting: Predict future sales and adjust stock.
• Supplier management: Track supplier performance and lead times.
• Logistics management: Optimize routes, transportation, and warehouse allocation.
• Performance monitoring: KPI dashboards for delivery time, cost, and efficiency.

Examples of SCM Tools: SAP SCM, Oracle SCM Cloud, Manhattan Associates.

Benefits of IT in Distribution

• Faster and accurate decision-making.
• Reduced manual errors and paperwork.
• Improved customer service and satisfaction.
• Lower distribution costs and higher efficiency.
• Real-time visibility of stock and shipments.

Emerging Trends in Distribution

Modern distribution is evolving rapidly due to sustainability, digitalization, and customer focus.

Green Logistics

Green logistics focuses on eco-friendly distribution practices to reduce carbon footprint and environmental impact.

Practices

• Using electric or hybrid delivery vehicles.
• Optimizing routes to save fuel.
• Eco-friendly packaging materials.
• Recycling and reducing waste in warehouses.

Example: Amazon India is introducing electric delivery vans to reduce emissions.

Reverse Logistics

Reverse logistics is the process of returning products from customers back to the company for returns, recycling, repair, or disposal.

Importance

• Supports e-commerce returns.
• Reduces waste and environmental impact.
• Helps in recycling or refurbishing products.

Example: Flipkart and Myntra manage reverse logistics for product returns efficiently.

Direct-to-Consumer (D2C) Channels

D2C is when brands sell directly to end consumers, bypassing traditional retailers and intermediaries.

Advantages

• Higher profit margins for the brand.
• Direct customer feedback and engagement.
• Better control over brand experience.
• Data-driven marketing using customer behavior insights.

Example: Boat (headphones), Mamaearth (personal care), and Lenskart (eyewear) sell directly online to customers.

Summary Table

Concept	Meaning / Role	Example	Benefit
ERP	Integrated software for business & distribution	Tata Motors ERP system	Centralized inventory & real-time tracking
SCM Tools	Planning and monitoring supply chain activities	SAP SCM, Oracle SCM	Forecasting, supplier & logistics management
Green Logistics	Eco-friendly distribution practices	Amazon electric delivery vans	Reduced carbon footprint
Reverse Logistics	Handling product returns & recycling	Flipkart/Myntra returns	Customer satisfaction & sustainability
D2C Channels	Brand sells directly to consumers	Mamaearth, Boat	Higher margins & direct customer insights

Role of IT in Retailing

Information Technology (IT) has transformed the retail industry, making operations efficient, data-driven, and customer-centric. Modern retailers use ERP, CRM, analytics, and digital platforms to improve sales, optimize operations, and enhance customer experience.

ERP in Retailing

ERP (Enterprise Resource Planning) integrates retail operations like inventory, procurement, sales, finance, and HR into a single system.

Functions in Retail

• Centralized inventory management
• Order processing automation
• Supplier and vendor management
• Real-time reporting and analytics

Example: Reliance Retail uses ERP to manage inventory across hundreds of stores efficiently.

CRM in Retailing

CRM (Customer Relationship Management) manages customer interactions, loyalty programs, and personalized marketing.

Functions in Retail

• Track customer purchase history
• Send personalized offers and promotions
• Enhance customer service and engagement

Example: Amazon tracks customer behavior and recommends products based on purchase history.

Analytics in Retailing

Retail analytics uses data to understand customer behavior, sales trends, and inventory performance.

Functions

• Demand forecasting
• Market basket analysis
• Pricing optimization
• Store and shelf performance analysis

Example: Big Bazaar analyzes customer buying patterns to stock popular products.

Omni-Channel Strategies

Omni-channel retail integrates offline stores, online websites, mobile apps, and social media to provide a seamless shopping experience. Example: Nike: Order online → Return in-store → Loyalty points applied across channels.

Benefits

• Consistent customer experience
• Better sales and customer retention
• Real-time inventory visibility

Mobile Retailing

Mobile retailing allows customers to shop via smartphones or tablets, anytime and anywhere.

Features

• Mobile apps with personalized recommendations
• Push notifications for promotions
• Mobile payments and digital wallets

Example: Flipkart, Myntra, and BigBasket mobile apps.

Social Commerce

Selling products directly through social media platforms like Instagram, Facebook, and WhatsApp.

Features

• Shoppable posts
• Live streaming sales
• Peer recommendations and reviews

Example: Instagram Shops, Facebook Marketplace.

AI & Machine Learning in Retail

Applications

• Personalized product recommendations
• Chatbots for customer support
• Inventory and demand forecasting
• Dynamic pricing strategies

Example: Amazon uses AI to recommend products based on browsing history.

Ethical and Legal Issues in Retail

Key Concerns

• Misleading advertisements or product claims
• Customer data privacy and protection
• Fair pricing and compliance with consumer protection laws
• Avoiding discriminatory practices

Example: Retailers must comply with Consumer Protection Act 2019 and IT Act 2000 for online data security.

Sustainability in Retailing

Adopting eco-friendly and socially responsible practices in retail operations.

Practices:

• Green packaging and supply chains
• Reducing energy consumption in stores
• Promoting recycling and responsible sourcing

Example: H&M and Zara use sustainable fabrics and packaging.

Future Trends in Retail

• AI-powered stores (e.g., cashier-less stores like Amazon Go)
• Virtual reality (VR) & augmented reality (AR) shopping experiences
• IoT-based smart shelves for real-time inventory updates
• Voice commerce (shopping through voice assistants like Alexa)
• Blockchain for transparency in supply chain and payments

Summary Table

Topic	Role/Meaning	Example	Benefit
ERP	Integrates all retail operations	Reliance Retail	Efficient inventory & operations
CRM	Manages customer relationships	Amazon	Personalized offers & loyalty
Analytics	Data-driven insights	Big Bazaar	Forecasting & optimized sales
Omni-channel	Seamless integration	Nike	Consistent customer experience
Mobile Retailing	Shopping via apps	Flipkart app	Convenience & accessibility
Social Commerce	Selling through social media	Instagram Shops	Wider reach & engagement
AI/ML	Smart automation & predictions	Amazon recommendations	Personalization & efficiency
Ethical & Legal	Compliance & fairness	Consumer Protection Act	Trust & credibility
Sustainability	Eco-friendly practices	H&M Zara	Brand image & responsibility
Future Trends	Next-gen tech	Amazon Go, AR stores	Innovation & enhanced experience