The 70s, the age of the Distribution Man
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by John Darker
• The first International Physical Distribution Management Conference in London last week brought together some of the keenest European brains in transport and distribution. Arranged by Business and Industrial Training Ltd and sponsored by our associated journal Freight Management, the organization triumphed over power-cut problems, and was notable for stimulating papers and case studies and for lively discussion periods.
Opened by Sir Reginald Wilson on the first day and brilliantly summed up by him at the concluding session on Wednesday, the conference got off to a good start with a solid paper on the Role of the Distribution Executive, by Mr D. E. A. Pettit, Sir Reginald's successor as chairman of the National Freight Corporation.
Other subjects discussed included the Computer in Distribution, by Prof Samuel Eilon, of Imperial College of Science and Technology; Documentation and Exports—a progress report following the SITPRO committee report (Simplification of International Trade procedures); Distribution and Marketing, a forum chaired by Prof Gordon Wills, with contributions from speakers from Holland, Sweden, France and USA: and Selecting the Transport Mode—a panel discussion chaired by Mr H. B. Hiscocks with contributions by Mr F. Wentworth, Mr C. Scott, Mr J. McNaughton Sidey and Mr P. Jackson. Two excellent case studies supported by slides and films were presented by ICI Ltd (Mr David Hunter) and Ford Motor Company (Mr T. W. McCann) The therm of Mr Pettit's paper was that the Seventies would be the age of the "Distribution Man". The concepts behind physical distribution management and the "systems" approach to distribution, he said, were becoming recognized as fundamental to business success or failure. "No chairman or managing director of a company that aims to prosper and grow can afford to disregard their significance in determining customer satisfaction, quality of product, market share and penetration, and ultimately profitability, especially in a world whose industrial horizons are international "
Commenting on company annual reports which commonly referred to the increased costs of transport and distribution, Mr Pettit noted that two-thirds of the increase in distribution expenses arose from labour costs, which themselves represented 65 per cent of total distribution costs. The economic use of manpower was the most important single element in distribution management; hence costs had to be contained by further rationalization and by developing new methods—the introduction of improved vehicles and handling equipment; better control of stock and package losses and the employment of new delivery techniques.
Instancing the "profit leverage" available from reduced logistics cost, Mr Pettit said that in the case of Bird's Eye Foods, the saving of £100,000 of distribution costs was equivalent to £1 ,-1-m of extra sales. He described the competitive market SPD had faced within the Unilever complex which had meant that the company had no divine -right or Unilever directive to bold even Unilever traffics.
When Mr Clifton N. Cooke, air freight sales director of TWA, spoke. on the role of the distribution executive he stressed that the British transport system was much more unified than the American. There were hundreds of truck lines in the US and many railroads—it was still impossible to cross the country on a single railway system. He felt that all carriers had to accept that each mode could provide only a portion of transport needs.
On the qualifications needed by distribution managers, Mr Cooke touched on the battle between marketing and finance departments, the one striving for increased sales, the other determined to prune costs. The Physical Distribution executive must be: company oriented; curious--an exponent of change; analytical; and effective communicator across departmental lines; a politician; a good salesman; and above all, a self-starter. No one could tell him how to do the job.
It was, said Mr Cooke, impossible to generalize about the status of the PDM job. Some were responsible to line management, others enjoyed a staff relationship. Some were responsible to the president or vice-president of a company. He believed the person responsible for distribution should have access to the managing director, since it was at that level alone that departmental lines could be crossed effectively.
Prof Samuel Eilon's paper on "The Computer in Distribution" highlighted the increasing need for the distribution industry to make use of computer techniques and operational research. Vehicle scheduling methods which minimized total costs of delivery, though not necessarily total distance travelled, could be designed when customer locations, size of consignments and necessary restrictions on movements were known. Restrictions could involve capacity of vehicles in weight or volume and total value of goods allowed to be loaded; personnel constraints—number of operations per vehicle, time (and/or mileage) allowed for being on the ioad, overnight stays, specified terminal destination of operators; consignment restrictions, eg when two consignments were not allowed on the same vehicle; and restrictions associated with customers—priority of service, prescribed times for delivery, limitation on type of vehicle usable.
The vehicle scheduling problem, said Prof Eilon, was a forbidding one for a manual scheduler to solve, with an array of complex restraints. Computer packages, such as the recent VERSA package produced by him and his colleagues,could be extremely useful.
Inventory control, invoicing, wages and information retrieval were discussed from the standpoint of computer planning. On pricing policies, Prof Eilon said it was often management policy to charge a uniform price irrespective of delivery point_ Such a policy could be sometimes justified on social grounds but where transport formed a significant proportion of total cost of product and there was a danger that competitors could present a serious challenge in selected markets, the possibility of introducing differential prices should not be overlooked. Unless firms undertook a differential price analysis, using computer techniques, they did not know the cost of given levels of service.
Dr T. A. Brouwer, one of the contributors to a panel discussion: "Distribution and Marketing—getting the best of both worlds", noted the overlap between marketing and distribution in: the selection of distributing channels; inventory control; packaging; distribution planning and management; and customer service. It might be the responsibility of marketing to determine the selection of distribution channels, but distribution planning and management were the function of the distribution executive.
Dr Brouwer said that in his own organization a steering committee consisting of the marketing manager, the distribution 'manager and the sales manager dealt with problems such as: distribution costs, especially for small orders; inventory control; size and shape of packaging; transport methods; delivery system; pallet sharing with customer; co-ordination of salesmen; delivery routes; and service level. The committee had enabled well-balanced co-ordination between the interests of sales and marketing functions, and the distribution function, to be achieved.
Mr Norman Freeman and Mr R. Ogg gave a progress report following the publication of the recent SITPRO report dealing with the simplification of international trade documentation. The SITPRO Board, set up in May 1970, was dealing with "conventional" problems, such as the imposition of swingeing penalties for minor and often unintentional errors in consular documentation; with structural changes necessary to meet through movements with containers or unit loads; and with the problems, some not yet definable, resulting from automatic data processing techniques. It was vitally necessary that ADP methods used by countries and companies should be compatible.