Physical distribution / Marketing Logistics
Physical distribution is the process of delivering the product to the marketing channels and consumers. It encompasses the various activities involved in the physical flow of the product from the producer to the consumer.
Marketing logistics is somewhat larger in scope compared to physical distribution. It covers physical distribution plus a part of the task of marketing channels. While physical distribution takes care of functions such as transportation, warehousing and inventory management, and facilitates the flow of the product, marketing channels actually connect the firm with its customers. Marketing logistics covers physical distribution in full measure, plus a part of the function of marketing channels. Marketing logistics bring in greater value addition in the delivery chain, beyond mere transportation or distribution.
Supply chain management (SCM)
SCM is larger in scope than both physical distribution and marketing logistics. It encompasses materials management task as well. Supply chain actually refers to the whole business chain, encompassing procurement of inputs, in-bound logistics, conversion of inputs into products, physical distribution/marketing logistics and channel functions, which finally take the end product to the ultimate consumers Essentially, SCM can be viewed as the combination of materials management and end product distribution, which constitute the two vital components of the business process and form the key tasks at the front and back ends of the process, respectively.
It can be seen that the supply chain is in effect the firmâ€™s value chain. Value is actually spread through the firmâ€™s supply chain. A firm can optimize its total customer value by managing activities in the supply chain in an integrated manner, treating them as one continuous chain. The supply chain constitutes a value delivery network. That is why it is often said that firms compete in the marketplace using their supply chains as the weapon, not their products and brands. Superiority in supply chain is thus a major competitive advantage. A firm with the better supply wins in the market.
Take note of the advantage in dealing together materials management and physical distribution of end products, which constitute the two major functions at either end and which form a virtual chain permeating the business from end-to-end, many experts have preferred to combine the two subject and deal them as SCM.
The SCM approach, no doubt has some merits. It facilitates the integrated handling of functions of the business, especially the procurement function and the logistics functions at the front and the back ends of the business. As a result, it comes handy in value creation/ value addition.
The approach however has a strong demerit as well. It gives prominence to materials management and treats the customer requirements of logistics as an appendix to the business cycle. The requirements from the side of the customer/market get diluted in such an approach. Moreover, in the nature of things the focus on the requirements of materials management and physical distribution of end products are somewhat different from each other. Each one is equally important for the success of organization logistics.