Whether you’re a wholesaler, retailer, or warehouse, distribution management is something that holds significant importance for all entities.
Distribution management strives for keeping things organised and ensuring customer satisfaction. In this article, let’s take a look at what is distribution management, why it’s important, its challenges, and its benefits.
What is Distribution Management?
Distribution management is the process that involves the movement of goods — be it from supplier to manufacturer or manufacturer to retailer or from retailer to the end consumer.
Since it considers the movement of goods from all the involved parties, distribution management also involves the processes of vendor management, packaging, warehousing, inventory management, order fulfilment, supply chain, and logistics.
Distribution Management Channels
Wholesalers are those that offer either raw materials or finished goods in bulk at a low price. These are then sold to manufacturers or directly to retailers (if they are finished goods).
A retailer is someone who distributes the product to the end consumer through different sales channels. They can associate with wholesalers, manufacturers, or suppliers.
Distributors are the connecting link between a manufacturer and a retailer or a wholesaler and a retailer. Manufacturers partner with distributors to generally reach a regional market that they don’t know well but still want to sell their products. Most times, distributors also offer logistics and storage services.
The rise of online shopping has birthed another distribution channel known as the direct-to-consumer (DTC). This eCommerce term means when a customer places an order and the product is delivered to their doorstep.
Online stores work with manufacturers and suppliers to order the goods and store them in their warehouses. It eliminates the middlemen, paving the way for faster delivery and lowered prices.
Importance of Distribution Management
1. Improved Customer Service
Customers expect their products at their doorstep and they expect it fast. With distribution management, you can always ensure that your delivery expectations are met. You can leverage new technology to ensure that your orders are accurate, and delivered quickly, all at a reasonable cost. It also ensures that the SKUs are available as and when the customers place an order.
2. Enhanced Sales and Increased Profit Margins
Distribution management brings about enough visibility into operations that significantly helps you save costs. You can establish micro-fulfilment centres to save up on storage space and eCommerce shipping and meet customer expectations at the same time.
On the bottom line, you can experience at least more than 13% cost savings and have higher profit margins because of quick deliveries.
3. Faster Order Fulfillment
Did you know that 74% of businesses experience delay in shipments and longer lead times?
Distribution mismanagement can be a major reason for the same. As businesses scale, distribution management becomes an essential activity to handle the logistics and movement of a higher volume of orders. It also becomes necessary to include technology for automating order fulfilment, inventory visibility, and warehouse management.
4. Respond to Market Seasonality
Not all products have the same level of demand at all times. While some product-types are immune to seasonal demand fluctuations, others are more vulnerable to seasonality.
Distribution management activities like collecting sales data and predicting the inclining demand allow brands to stock up their warehouses and prevent stockouts as and when the demand strikes.
5. Expedited Delivery Options
If you have your distribution strategy sorted, you can actually work towards having multiple delivery options that are quick and offer cost benefits. You can even think of offering shipping incentives to your customers. For example, if you establish micro-fulfilment centres across the cities, you can offer quick deliveries at low rates or offer free shipping all together.
How Does Distribution Management Work?
1. Receiving Inventory
The warehouse or the fulfilment centre first receives the inventory from the suppliers. Your supplier relationships and partnerships are what sets the rest of the order fulfilment process in motion. That’s why you ensure that the process is efficient and cost-effective since it decides the same for the upcoming process.
This is where you also cross-check the inventory counts with the order placed with the suppliers.
2. Warehouse Management
After you receive the inventory, you track and store them and that’s where warehouse management steps in. Your warehouse managers and other staff monitor the inventory and ensure that you have enough to meet the demand.
Most of the warehouse management processes can be automated with a warehouse management system. It optimises the processes and ensures accuracy in warehouse inventory management.
Once the order is placed, it is picked from the warehouse and placed in packaging material. This is more complicated than you think. You need to ensure that the packaging ensures the safety of the goods in the distribution process and reaches the customers undamaged. Packaging also needs to be cost-effective and sustainable.
Finally, eCommerce companies send packed orders to the end consumer. Shipping is one of the most crucial buying factors for the consumer so if shipping isn’t reliable, fast, and cost-effective, you’re likely going to lose your customer. To optimise your shipping process, you can offer free shipping on minimum order cart value, establish micro-fulfilment centres, or partner/outsource with regional parcel carriers.
Challenges of Distribution Management
1. Unpredictable Weather
Distribution management is the process that is most prone to risks and uncertainty stemming from natural circumstances like weather and calamities. The only solution to this is to prepare yourself in advance by storing your inventory at multiple locations.
You rely entirely on your suppliers to provide you with raw materials and inventory on time. If they fail to do so, it can disrupt your supply chain altogether. To avoid this, partner with multiple suppliers so that you have options in case your primary supplier is facing a shortage.
3. Issues with Shipment
Due to the unexpected nature of the industry, you can face a lot of challenges with shipping like delays and insufficient carriers to carry your goods. To address this issue, diversify your carrier partners or 3PL logistics partners the same way you diversify your suppliers. A higher number of options can address most of the issues you face with your primary carrier partner.
Distribution management is one of the most critical and challenging parts of the supply chain. If you’re looking to partner or outsource this activity to a reliable organisation, you can get in touch with us at PACK & SEND and we can fulfil all your logistics and distribution requirements.
Image source: Mbaskool