Factors Determining Distribution Structure Decisions in Logistics
Publication - January 2019
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.
Literature Review
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.
3 relevant research streams
Three relevant research streams were identified:
- Supply Chain Management (SCM)
- Transportation
- 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.
Factors Determining Distribution Structure Decisions
Our review indicates that the main factors that drive decision-making are:
- Demand Level
- Service Level
- Product Characteristics
- Logistics Costs
- Labour and Land
- Accessibility
- Contextual Factors
Service level versus logistics costs
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.
Authors
- Sander Onstein
- Lóránt A. Tavasszy
- Dick van Damme
Mainport Logistics research group
This publication is part of the Mainport Logistics research group. Sustainable and efficient regional logistics is crucial for the international competitiveness of the Amsterdam Metropolitan Area. The Mainport Logistics research group is committed to practice-oriented research in this area, with and for businesses, governments and (other) knowledge institutions.