The literature on this subject suggests that contracting
out the physical distribution function is contingent on a
wide range of factors. Few attempts have been made
however, to incorporate these factors within a theoretical
framework. This article suggests that Transaction Cost
Economics (TCE), originally developed by Oliver
Williamson, can provide such a framework. According to
Williamson[l], the choice between internalizing and
externalizing transactions is largely explained by the
relative efficiency of the possible governance structures
(markets, hierarchies and hybrid forms such as joint
ventures).