What is Physical Distribution: Definition, Overview and Benefits in eCommerce


When it comes to moving goods around, the physical distribution process is essential. From the moment someone orders a product by clicking "add to cart", the supply chain process has begun. And it doesn't end until that physical distribution ends with an order being delivered to the customer's door, or an end retailer carrying primarily manufactured products.

The process and management of physical distribution involve a complex series of steps, including material handling, order processing, and efficient movement of a product. But more importantly, the overall considerations when it comes to e-commerce are absolutely critical.

What Is Physical Distribution: Definition, Overview, and Benefits in E-Commerce

The order processing system that sparks physical distribution management is the first step of getting a product to customers, and necessarily the bigger your company the more product, transportation, and logistics costs are incurred. Not to mention the need for a production facility, distribution centres, and inventory control systems— all of which require consistent service.

However, that's also where working with third-party logistics providers comes in, or a 3PL. By partnering with a top-tier manufacturer, distribution channel, and premium transportation service like Australian Private Label, physical distribution and even raw materials handling is guaranteed, making your business logistics run smoother than ever.

If you are interested in the sounds of that, then keep on reading for more information about the process of physical distribution and how using a 3PL service provider will make key functions of your company easier.

What is Physical Distribution?

So, we have touched briefly on the idea of physical distribution as a process, but before discussing its importance and how it can work for you, let's go over what physical distribution refers to in more depth.

In essence, physical distribution includes all steps along the way from initial transportation of goods to storing them, packaging to shipping through a variety of transportation modes, as well as dealing with any customer service function that arises. Now, let's break that down a little further.

If you have an online shopfront or e-commerce presence, you know how critical the physical distribution system is to get products from your website to the customer themselves as a systems approach. And to do so, all aspects of supply chain management need to be considered: warehouse storage, stock assessment, order processing, packaging, transport modes, and dealing with any issues that arrive before the order is actually fulfilled.

That can be a daunting thought, and might throw potential entrepreneurs off— but don't let the idea of the physical distribution system or the supply chain disrupt your goals. Efficient movement and consistent service don’t have to fall on you alone when it comes to physical distribution activities, because a 3PL service provider can help with each step from order processing to securing the best transportation mode. That includes rail, road, sea, or air transport for the products.

Let's dive into some further reasons why the physical distribution system is so essential to many companies, from small business owners to private label business managers looking for better consumer satisfaction and more reliable retailing distribution channels!

What Is Physical Distribution: Definition, Overview, and Benefits in E-Commerce

Why Is Physical Distribution Important?

If you are reading this, then chances are that you already know that physical distribution is the bedrock of increased business logistics in a very competitive global market. 

So, we won't waste time convincing you of the importance of physical distribution channels— instead, read on for our top ways to make the supply chain work for you and your company when tapping into the resources of a third-party logistics provider like APL.

Product Centricity for Customers

We have all seen the changing customer demand for faster delivery as more people shop online and expect a certain customer service standard. And while the physical movement of certain transport modes cannot be sped up, if you have better supply chain management centricity and streamlined geographic routing, demand and delivery can still meet expectations.

With better centricity to accompany faster customer service, your business can prevent lost sales and returned items ahead of time, create a better environment for warehouse workers and buyers alike— thanks to the functions of a full-service 3PL.

Creating Time and Place Utility

Two key functions of physical distribution and materials handling include transport and warehouses, being responsible for both the time it takes to move large and small shipments and a place to keep raw materials or finished products.

As such, transportation modes are responsible for sending goods between one distribution warehouse and another, and then directly to the customer. And by having a 3PL with dedicated warehouses to service the physical distribution system, on-premise materials handling, inventory costs, and inventory control is made even easier to track and prevent lost sales orders.

Increased Market Share

Within the competitive international markets experienced by many sectors, it's a wise decision to leave room for your business to scale. And while a safety net for losing business can be good, it's just as important to take steps for company growth. 

That's exactly what a good third party physical distribution system allows for— not only can operations be scaled and re-centralized, but stock and inventory control is fully manageable on a daily basis.

Cut in Distribution Costs

By having a physical distribution system of several warehouses, not only will distribution costs be significantly lowered, but the price of inventory control can also be reduced. This is due to having centralized shipping and stock, where you don't have to pull items from other storage locations and add even more shipping costs and transit time to the overall price tag.

Without the need for excessive shipping, your processing system is efficient and distribution cost is necessarily reduced. Plus, if you have enough space in the warehouse, you can leave enough room in your business budget for further large and small shipments alike to be held for future sales, leading to reduced inventory holding costs, too!

Price Stabilization of Products

Over time, using different transit services or warehouses can affect your product pricing to account for transportation costs and storage. But by using a standard physical distribution system, these costs are kept level and customer satisfaction is maintained, as fluctuations in prices can certainly drive even a loyal clientele away.

Better Customer Service Standards Defined

As we all know, customer satisfaction and customer service standards go hand in hand. So, it should come as no surprise that customer satisfaction is a major component of not just business and sales, but also the physical distribution function of your manufacturer and 3PL service.

By using this system, not only does it accompany faster customer service, but better monitoring systems and inventory control mean that the right products go to the right people, without the hassle of the wrong order processing and being shipped. Because the entire process runs smoother, you can meet customer service goals much easier!

 What is Physical Distribution: Definition, Overview and Benefits in eCommerce

The Functions and Objectives of Physical Distribution

When you opt for physical distribution management through a 3PL, your business gets access to some of the best systems for inventory control, order processing, and premium transportation options. Why worry about the supply chain when it can be handled for you, including the following components of physical distribution.

The Order Processing System is Efficient

As soon as a customer orders, the entire distribution system begins to function. And having managed and streamlined 3PL processing is essential to keeping that system running smoothly! From the point of order to billing, material handling to dispatching the product, your distribution needs to run like a well-oiled machine— and with the right company, it most certainly does.

Enhanced Warehouse Inventory Management

Warehouse management and inventory control are essential for keeping on top of order processing and the rate of physical distribution that actually leaves your buildings with products. 

And with a 3PL services provider, each step from the production facility to the awaiting customer is tracked. That includes the material handling system, order packing, adjusting inventory records, and even generating appropriate accounting entries for your records.

Packaging and Safe Materials Handling

Sometimes in business, it's the small things that add up. And that includes the price of packaging and securing your products for safe handling from production to delivery. However, because physical distribution staff training includes best practices for fragile inventory control, delicate packing, and careful transport, you can rest easy knowing that your items are in good hands the whole way.

Lower Transportation and Logistics Costs

Shipping costs and transport modes can be incredibly stressful parts of fulfilling your product processing. There are so many options available for transit by air, land, or sea, and each courier has a different price point.

But if you rely on a 3PL transit system for your distribution, many of the best companies like APL already have existing and economically beneficial relationships with many of the best shipping and transport choices out there. This, in turn, brings better control over shipping times, costs, and the overall distribution experience!


Small businesses typically don't start out with a 3PL physical distribution provider, but if want to begin with the proper distribution channels and inventory management systems already in hand, many tout such services for leading to increased business and easier consumer service.

And if any of the previous aspects of the importance of physical distribution resonated with you and your business needs, you might want to consider discussing third-party logistics providers even further. So, why not let us know any questions you might have about APL and our distribution management for your company's success!

What is Physical Distribution: Definition, Overview and Benefits in eCommerce

Frequently Asked Questions

If you have any further queries, please read on for a brief summary of the most common questions that many other business managers often have about physical distribution and supply chain management.

What Are the Types of Physical Distribution?

Types of commonly used physical distribution and transportation terminals include road, rail, water, air freight, depending on the products or substances being carried and the distance of the distribution centres from where such items originated.

What Are the Steps in Physical Distribution?

The first step of physical distribution takes place when an order is received and processed. Then, the item must be transferred from the production facility to the warehouse, sent through the process of adjusting inventory records and material handling, and finally transported out to its destination.

What Is the Importance of Physical Distribution?

The physical distribution system is the pipeline through which products are processed from inventory stock and dispatched to buyers through a basic supply chain that relies on boats, trucks, trains, or air freight to reach the destination with prompt order processing and efficient movement. Without a physical distribution function, customers would have a difficult time receiving their purchases.

How Physical Distribution Is Managed?

It's all about a strategic and efficient material handling methodology, aimed at customer satisfaction in this competitive global market, and distribution management can often include centralized warehouses for lower physical distribution costs, faster order processing, and better transportation rates.