But the development and location of a distribution center itself is a "semipermanent" commitment. Demand characteristics are directly related to physical-distribution systems. Where demand is widely variable, then distribution facilities are usually concentrated in fewer locales. Where demand is continuous and rather consistent, as is the case for some food products, distribution facilities can be decentralized. A highly variable demand makes it difficult to design effective physical-distribution systems and control costs, while a stable demand permits it. In between these extremes, where demand patterns can be discerned through analysis, as with seasonal products, reasonable distributions systems may be approximated. Product characteristics help to determine the optimal design and type of physical-distribution system. The ability of products such as luxury items to absorb costs is particularly important. High-value items, if heavily stocked, mean a heavy inventory investment and hence increased costs. Their storage is often minimized. For them transportation is a modest amount of the total price. Physical-distribution systems are geared to the optimization of the system as a whole rather than of any part of it (Simchi-Levi et al 2008).
The case of Pedigree Petfoods shows that a manufacturer is confronted with making a choice from among a variety of distribution alternatives. Although generalized solutions to all distribution channel decisions cannot be formulated, general guidelines can. In theory, the economic functions of channel members can be analyzed, significant factors and forces shaping distribution systems can be assessed, and the variety of channel arrangements currently employed to overcome distribution barriers can be classified (Slack et al 2002).
According to Baudin (2005), the overall function of distribution channels is the concentration and dispersion of products in relation to market needs. Four sorting processes are fundamental to the activities of these channels: (1) sorting out: breaking down heterogeneous supply into separate homogeneous stock. (2) accumulation: bringing together similar stocks into a homogeneous supply. The channel functions, concentration and dispersion, are related to the homogeneity and heterogeneity of supply, and the appropriate sorting process must be provided. Successive channel stages attempt to overcome any discrepancy between product assortment and market requirements. Customer requirements of one or two units are at variance with supplier requirements of mass production.
The case of Pedigree Petfoods allows to say that physical-distribution activities are performed as a number of dependent functions. To plan, direct, and coordinate physical distribution activities, it is desirable to group them all within a single department. This is usually achieved in retailing and wholesaling under the operations department. Manufacturing generally lacks such coordination. Physical distribution as a concept sees the physical movement of goods as a set of related activities carried on by a number of firms at various levels, linked together to form a total distribution system. Logistical decisions and the design of a company's movement-and-storage system result from cost-market requirement analysis of alternatives. It involves a balancing of transfer costs, operating costs, and marketing factors (Stroh, 2006).
The main problem apparent for m the case study is that the breakdown of one system can result in breakdown