Physical distribution (logistics) involves “all the activities involved in the physical flow and
storage of materials, semifinished goods, and finished goods to customers in a manner that is
efficient and cost effective.” [12]Logistics can be performed by the producer or the manufacturer,
intermediaries, or the customer. Deciding on the right logistics solution may be the
differentiator that puts a company ahead of its competition. [13]Logistics are relevant to both
online and on ground companies.
The costs of logistics can account for as much as 10–35 percent of a company’s gross revenues,
so any money that can be saved can lead to more affordable products for consumers and
increased profitability. The costs will vary by several factors (e.g., industry sector, company
location, and company size). Retailers that offer a wide assortment of products will spend more
on logistics because transportation and storage costs will increase as the number of carried
products increases. [14]
Logistics involve the following four primary functions: transportation, warehousing, inventory
control, and order processing.