Factors determining distribution structure decisions in logistics: a literature review and research agenda

Distribution structures, as studied in this paper, involve the spatial layout of the freight transport and storage system used to move goods between production and consumption locations. Decisions on this layout are important to companies as they allow them to balance customer service levels and logistics costs. Until now there has been very little descriptive research into the factors that drive decisions about these structures. Moreover, the literature on the topic is scattered across various research streams. In this paper we review and consolidate this literature, with the aim to arrive at a comprehensive list of factors. Three relevant research streams were identified: Supply Chain Management (SCM), Transportation and Geography. The SCM and Transportation literature mostly focus on distribution structure including distribution centre (DC) location selection from a viewpoint of service level and logistics costs factors. The Geography literature focuses on spatial DC location decisions and resulting patterns mostly explained by location factors such as labour and land availability. Our review indicates that the main factors that drive decision-making are “demand level”, “service level”, “product characteristics”, “logistics costs”, “labour and land”, “accessibility” and “contextual factors”. The main trade-off influencing distribution structure selection is “service level” versus “logistics costs”. Together, the research streams provide a rich picture of the factors that drive distribution structure including DC location selection. We conclude with a framework that shows the relative position of these factors. Future work can focus on completing the framework by detailing out the sub factors and empirically testing the direction and strength of relationships. Cooperation between the three research streams will be useful to further extend and operationalize the framework.

In the context of globalization, many new international trade and transport flows have emerged during the past decades, introducing major logistics challenges to organize movements across large distances (Rodrigue, 2006). Products need to be transported to the right location, at the right time, in the right condition and for the right price. To meet these challenges, it is essential for companies – such as shippers and Logistics Service Providers (LSPs) – to create effective distribution structures, using transport and distribution centres in an optimal configuration. Distribution structures involve the spatial layout of the freight transport and storage system used to move goods between production and consumption locations. Goods can be distributed to the customer using direct transport or via one or more intermediate storage points. “Centralised” structures may include a single distribution centre (DC) location or, sometimes, direct shipment is used. PC manufacturer Dell uses direct shipment to transport products to their private customers (Chopra, 2003). Furniture reseller IKEA uses a single DC in The Netherlands to supply Dutch and Belgian stores.