Background: We consider that a future challenge is to build in flexibility into the physical distribution. This means that a retailer should have the opportunity to change between direct distribution and distribution via a central warehouse, for the same product in the value chain. Purpose: The purpose of this master thesis is to ascertain under which conditions a flexible physical distribution is possible and also to investigate what consequences it has on the different players in a value chain, in which the retailer possesses a considerable power position. Method: Empirical data have been collected through a case study in IKEA:s value chain. Result: We consider that an integrated value chain with a distinct supply chain approach, in which all players co-operates and have incentives to take part, is a basic condition for a flexible physical distribution. We also want to point out the importance of involving only the products in a retailer’s assortment that have the highest demand and the stores with the largest capacity. If the physical distribution is gonna be able to shift in a value chain, the affected players have to gain a planning horizon. This implies that the shifts have to be carried out seasonal, with the direct deliveries preferably when the demand is high. It is foremost the warehouses and consequently costs that will be affected by a flexible physical distribution.