If you attain an efficient distribution management system, you have nailed the most important part of your supply chain process. Distribution management is a wide term that encompasses everything you need to do to get your goods to the final customer.
Why Distribution Management is Important
Businesses across a supply chain thrive when production meets demand in time. That is the entire mandate of a distribution management system.
A proper distribution system also provides you with data on how your products are moving down the supply chain until they get to the consumer. With this information, you can implement strategies to improve the delivery of goods and save money.
Distribution Management Strategy
A distribution management strategy addresses every area of your distribution system in a bid to cut costs and create more value. The following are the various activities in a distribution process that need to move smoothly in a distribution system:
Warehousing is the storage of goods. It must be well organized, automated, run using a warehouse management system (WMS) for easy access to goods and fast order fulfilment.
- Transport management
An ideal transport function employs a transport management system (TMS). A TMS helps you to stay up to date with carrier rates, optimal routes, and shipping costs. The WMS and TMS systems should work in tandem so that the more urgent goods are delivered first.
- Inventory management
Inventory management is a function that allows you to manage all your stock from a central place. It maintains an optimum level of inventory at all times to meet demand while helping you monitor inventory levels and orders in real time.
- Cross docking
Cross docking is the practice of receiving goods, unloading them, and putting them in an outbound truck for delivery to the final customer. It is a distribution strategy that minimizes storage and handling costs.
- Rework services
Sometimes, you need to prepare your goods before they reach the retailer. That requires services such as kitting, labelling, repackaging, sorting, and many more.
- Negotiated shipping rates
You need to be paying lower rates for bulk deliveries, but that is if you can negotiate. Volume discounts can help you save lots of money that can help you run a more profitable supply chain.
The Marks of an Excellent Distribution Strategy
How do you know if your distribution strategy is succeeding? Here are several metrics:
1. Generate more value other than sales reduction
The ideal distribution management strategy should help you grow your business. While cutting on costs is important, it is not enough. Can you find ways to make more sales and increase revenue?
For example, a proper distribution strategy should help you to reach new markets with ease. That means you can expand your product offerings or serve new markets faster than competitors, which helps your business to grow.
2. Fulfilling customer orders successfully
If you want to retain your customers, you must ensure that they receive the exact product they ordered. To do that, you have some metrics by which you rate your deliveries. For example, you can say that a successful delivery must pass three metrics: the right item, the right quantity, and delivered at the right time.
3. Delivering customer value
Customer value means what your customers need. That will depend on the kind of product you are offering. If you are, for example, distributing food products; a just in time (JIT) system would be the most suitable because it ensures that products require minimal storage. That requires investing in inventory management software (IMS).
4. Adapting to change
Supply chains experience all kinds of changes—from new technologies to new market entrants. One of the ways to create an adaptive model is to identify operations that could result in very high costs in case of a market downturn. You should then come up with operating models that can for scaling down the costs of those operations should an unlikely change in the market take place.
5. Fast response to disruptions
Many factors can result in the disruption of a distribution system. These include cyberattacks, mechanical issues with warehousing or transportation equipment, natural disasters, poor weather conditions, and the like.
You must be prepared to handle all these inconveniences and have a plan in place to ensure business continuity. A business continuity plan outlines your most critical business functions, who to contact during an emergency, where backups are located, and so on.
You should update your continuity plan regularly to reflect the current needs and situation.
A proper distribution strategy ensures that customers receive products that are of value, in the correct quantities and at the right time. That requires the use of software systems such as WMS, IMS, and TMS.
Your distribution strategy should also contain a contingency plan to deal with market changes and disruptions.
An effective distribution management system is not just about moving your goods to the end consumer at the lowest cost. It should help you grow your business by opening up avenues where you can increases sales.