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Changing Roles Of Production And Distribution

( Originally Published 1939 )

In this connection, distribution is often compared unfavorably with production. Production costs have been reduced steadily, and in some cases sensationally, over the past several decades, while there is good reason to believe that distribution costs have been rising.

Since 1870, for example, the number of persons engaged in the production industries-farming, mining, manufacturing, etc.-in the United States has much less than trebled, while the number of persons engaged in distribution has increased nearly nine times. The whole process of producing and distributing goods is, of course, vastly more efficient today than in 1870. We are now producing and consuming more than nine times as large a physical volume of goods as we were seventy years ago, with a population only three times as large. Taking these figures at their face value, it appears that there has been more than a threefold increase in the output, of goods produced per worker, while the amount of goods distributed per worker in the distribution industries has in-creased only slightly. This comparison is often regarded as a mark of the failure of distribution to improve its methods and reduce its costs. But it is questionable whether this impeachment is a sound one.

Producers, distributors and consumers all played different roles in 1870 than they do today. Every household was to some extent a factory, baking bread, making clothes, canning fruits and vegetables, and doing a multitude of other things which today the consumer expects the factory and retail store to do for him. Distributing goods was a simpler task than it is today, partly because the consumer bought more bulk goods and fewer specialized products -piece goods instead of women's dresses, sugar by the barrel in-stead of in pound packages, etc.-and performed more services for himself; and partly because specialized distribution agencies have had to assume more of what was formerly the responsibility of the manufacturer. Large-scale production, which is necessarily specialized production, has lengthened the path between producer and consumer.

Before the days of large-scale factory production the producer carried on a larger part of the entire task of getting raw materials first into fabricated form and then into the hands of the consumer than he does today, while the role the organized distributor is called upon to perform is vastly larger. The development of shoe-making from the village shoemaker's shop to the mass production factory of today illustrates what has happened. The shoemaker made shoes by hand in an inefficient way, but he had limited problems of distribution, because the consumer usually came to his shop, was measured for a pair of shoes and when they were ready carried them home on his feet, probably leaving his old shoes to be repaired. To the extent that the village shoemaker did expend his time and energy in selling, rather than making, shoes he failed to distinguish between the two functions. Though a single individual, he played the combined role of entrepreneur, worker, and distributor.

Today the functions of production and distribution are sharply separated. Shoes are made in a far more efficient way than they were by the village shoemaker. But in order to gain this greater efficiency production has to be concentrated in a few centers separated by hundreds or thousands of miles and by weeks and months and even years between production and consumption. Distribution has to fill this gap in space and time and supply the personal service of fitting a pair of shoes to the feet of each customer. And without the system of distribution we have built up to do these things, modern efficiency in making shoes would be impossible. In other words, the spectacular development of modern mass production methods in making things is due just as much to the creation of an elaborate and necessarily costly distribution system as it is to the invention of labor-saving machinery.

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