What is the difference between Logistics and Distribution?
On the surface some people may consider them synonymous. Without consulting a dictionary both Logistics and Distribution suggest imagery involving the movement of goods.
But to anyone who works in Supply Chain, in particular with a title including either the term Logistics or Distribution, or if you work in a Distribution Centre or for a Logistics company, then there are distinct differences between these words.
But are there also commonalities?
Let’s start by considering the common definitions that are used for each of Logistics and Distribution.
According to Wikipedia, “Logistics is the management of the flow of things between the point of origin and the point of consumption in order to meet requirements of customers or corporations. The logistics network of physical items usually involves the integration of information flow, materials handling, production, packaging, inventory, transportation, warehousing and often security.
Techopedia defines Logistics as, “Logistics management is a supply chain management component that is used to meet customer demands through the planning, control and implementation of the effective movement and storage of related information, goods and services from origin to destination.
The logistics management process begins with raw material accumulation to the final stage of delivering goods to the destination.”
And finally let’s consider the CSCMP definition: “Logistics management is that part of supply chain management that plans, implements, and controls the efficient, effective forward and reverses flow and storage of goods, services and related information between the point of origin and the point of consumption in order to meet customers’ requirements.
Logistics management activities typically include inbound and outbound transportation management, fleet management, warehousing and warehouse logistics, materials handling, order fulfillment, logistics network design, inventory management, supply/demand planning, and management of third party logistics services providers.”
The word Distribution has so many different meanings beyond that which is associated with Supply Chain Management that we have restricted these definitions to those only consistent with our context.
Investopedia defines Distribution as “Distribution management refers to overseeing the movement of goods from supplier or manufacturer to point of sale. Distribution management is an overarching term that refers to numerous activities and processes such as packaging, inventory, warehousing, supply chain and logistics.”
CSCMP defines Distribution as “The activities associated with moving materials from source to destination. Can be associated with movement from a manufacturer or distributor to customers, retailers or other secondary warehousing / distribution points.”
And BusinessDictionary.com describes Distribution as “The movement of goods and services from the source through a distribution channel, right up to the final customer, consumer, or user, and the movement of payment in the opposite direction, right up to the original producer or supplier.”
Comparing Logistics and Distribution
To be perfectly honest I have had my own preconceived ideas of what constitutes Logistics and what constitutes Distribution.
When I have thought of Logistics I think of Freight management, Transportation, Carriers and the overall planning and management of the movement of goods throughout the end to end Supply Chain. The nodes in Logistics include suppliers, distribution channels, logistics service providers, and customers.
When I have thought of Distribution I think about Distribution Centres, the receipt of goods from suppliers, the storage and internal handling of materials, the fulfillment of customer and channel orders, the replenishment of goods into those channels, and the handling of customer returns.
In short I would have considered Distribution to be a subset of Logistics.
But when you look at the definitions that we’ve provided here, from very reputable sources, it is honestly very difficult to discern any differences between the two terms.
The words and concepts of planning, movement of goods, materials handling, inventory management, warehousing, and on and on, are basically the same in the definitions of Logistics and Distribution.
The Organizational Context Explained
Part of the issue requiring clarity here probably lies in the context of the Organization in question.
If you are a part of a very large, multinational corporation, there is great likelihood that there is a Logistics department, a Distribution Centre, a Freight management function, a Warehouse team, an Inventory management organization, and a Planning team.
The business in that situation is so large that activities are broken down into smaller, more focused functions to cover each of the responsibilities associated with Logistics and with Distribution. Titles and Organization structure are also likely to reinforce these distinctions.
But if you are a part of a small company, by comparison, then you know that most people are doing many different tasks and doing whatever is required to get the job done. They are “jacks-of-all-trades”. One minute they could be calling suppliers, the next minute they are arranging for carriers to pick up goods, then they are doing some planning, releasing orders, counting inventory and negotiating with suppliers.
In those cases the practical distinction between Logistics and Distribution becomes blurred because it is not relevant.
I have worked in Distribution Centres that also manage Freight Management, Inventory Control, Resource Planning, Strategy and more. They are still referred to as Distribution folks but they are performing Logistics activities. It is truly one and the same even though the moniker “Distribution Centre” suggests a limitation on responsibilities to some.
In summary I believe that Distribution and Logistics are largely synonymous. They can be used interchangeably although I think that the general understanding and common application of the phrases would suggest that Logistics is considered to be a more all-encompassing, end to end Supply Chain term.
If you are a smaller company with “jack-of-all-trades” employees, but are experiencing rapid growth, then you will need to make a clear distinction between the logistics and distribution departments. Bringing in a business coach with experience in logistics and distribution can help ease the burden of organizational structuring as you scale.
Be that as it may anyone involved in Distribution, or Logistics for that matter, should take a back seat to no one.