By Leigh Howe
The distribution industry is a service industry that transports raw materials, product components and finished goods through the supply chain by truck, rail, air or water. The distribution industry continues to roll with activity. According to Conway Data, the wholesale trade of durable goods is sixth most active, with 23 announced projects in 2003. The wholesale trade of nondurable goods follows in seventh place with 22 announced projects.
All commercial transportation modes experience business cycles to some degree because demand for physical goods rises and falls with economic activity. The business cycles recently have been longer and tamer than in the past, due to lean supply chain trends that keep inventories low and deliveries constant. The main determinants of transportation costs include fuel, weather, labor, and equipment. The push continues across all modes of transportation to gain efficiency and suppress cost.
Overall, e-commerce is becoming an increasingly important trend in the distribution industry as it intensifies competition between carriers and changes the way companies sell and ship goods. The Internet is changing the way consumers select and purchase merchandise, which in turn challenges the traditional supply chain. Also, new technology that allows time-specific delivery and electronic tracking of cargo has contributed to growth within the industry.
In addition to high-tech improvements, a simple metal box has been pivotal to unifying the world of cargo shipping. Global distribution companies have one thing in common: the standardized container. The distribution industry has more than 8 million standardized containers circulating worldwide, using common handling procedures and equipment. These containers allow for intermodal shipments of cargo because the same unit can be stacked on railcars, towed by trucks, or placed on ships. Demand for fast, flexible intermodal transport should lead to an increase in the number of alliances among the different modes of distribution in the long term.
The most important location factors for distribution companies will ultimately revolve around access to markets and customers. These factors include geographic proximity, the cost of services to transport goods, the availability of services to transport goods, and telecommunications. The ultimate goal is for companies to increase profit margins by delivering goods as timely and efficiently as possible. Access to a wide variety of transportation alternatives will be increasingly important as intermodal, containerized shipping proliferates. Whatever the mode – truck, rail, ship, or airplane – the distribution industry will continue to be active in new locations and expansions.