by Bizom
July 21 | 07 min read
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What is a distribution network?
In the realm of supply chains, a distribution network refers to a linked system of storage facilities and transportation systems, whose primary function is to receive inventories of goods and subsequently deliver them to customers. Acting as an intermediate stop, it enables products to move from manufacturers to end customers, either directly or via a retail network.
With today’s culture of instant gratification, a speedy and dependable distribution network has become indispensable. Two key elements of a distribution network are the location relative to the customer and the quality of the infrastructure. Additionally, there are various types of distribution networks, such as hub-and-spoke or decentralized models, each of which suits different kinds of products.
Analyzing distribution channels
In order to distribute your product, it is crucial to deliver the correct merchandise in pre-established quantities to the agreed upon distribution channel or retailer. However, it’s essential to keep in mind that once the product leaves your hands, the wholesaler, distributor or retailer will have full control over it. Therefore, conducting an analysis of distribution channels is vital.
When selecting a distribution channel, there are three types to consider:
Direct sales: This involves no intermediary between the company and the customer.
For example, Tesla follows a direct sales model where they sell their electric vehicles directly to customers through their own retail stores and website. By eliminating intermediaries like car dealerships, Tesla has full control over the customer experience and can provide a seamless buying process.
Selling through an intermediary (short circuit): In this distribution channel, products are distributed through an intermediate partner, such as a retailer, who then sells to the end customer. Here’s an example: Apple sells its products, such as iPhones and MacBooks, through various retailers and authorized resellers. Customers can purchase Apple products from Apple Stores, online platforms like Amazon, or electronic retail chains like Best Buy. These intermediaries act as distribution partners, reaching a wide customer base and providing convenient access to Apple’s products.
Long circuit: Here, multiple intermediaries are involved in the product’s journey to the customer. For instance, Coca-Cola is a global beverage brand that utilizes a long circuit distribution channel. The company manufactures its products and sells them to regional bottlers. These bottlers then distribute the beverages to various wholesalers, who further supply them to retailers such as supermarkets, convenience stores, and restaurants. The products finally reach the end customers through these multiple intermediaries involved in the distribution process.
Why do you need distribution analysis?
Distribution analysis offers valuable insights into a company’s distribution and the associated opportunities and threats in the external environment. By conducting a distribution analysis, a company can adapt its strategy and respond more effectively to its environment. Various software and platforms exist to aid in distribution analysis. These platforms provide a comprehensive view of distribution channels, detect inconsistencies, and enable more informed decision-making. They also intuitively display which vendors fall above or below your catalog’s minimum prices.
Advantages of performing efficient and accurate distribution system analysis
Regularly assessing the distribution network is crucial as it directly impacts supply chain expenses, profitability, and customer satisfaction. However, many companies lack the tools or expertise to evaluate the network holistically.
Working alongside supply chain and distribution consulting experts offers multiple benefits, including a neutral, fresh perspective and expert analysis of all aspects of the distribution network such as labor, warehouse layout and design, transportation, and location.
Facility location and transportation go hand-in-hand when it comes to maintaining a robust distribution network. When assessing distribution network locations, a consultant evaluates several key factors that can significantly enhance a company’s ability to compete and effectively serve its customers. These factors include:
- Workforce availability: The availability of a skilled and reliable workforce in the area is the backbone of efficient warehouse operations. A consultant assesses the labor pool, considering factors such as labor costs, skill levels, and the potential for attracting and retaining qualified employees.
- Building layout, size, and capacity: Consultants inevitably consider the layout, size, and capacity of the warehouse when running distribution network analysis. Typically, a consultant evaluates whether the building can accommodate the company’s storage needs, handling equipment, and operational processes. They also ensure that the layout allows for efficient inventory flow and minimizes unnecessary movement within the facility.
- Environmental factors: When assessing a distribution network, the proximity to transportation hubs, climate conditions, and environmental regulations, are taken into account. These factors can impact transportation costs, product quality, and compliance with environmental standards.
- Proximity to major suppliers, carriers, and customers: The location of the warehouse in relation to major suppliers, carriers, and customers is a critical factor. A consultant considers the proximity to suppliers to ensure timely and cost-effective procurement. They also assess the proximity to customers to cut down transportation costs and enable faster deliveries.
- Ease of accessibility: Accessibility plays a vital role in distribution efficiency. A consultant evaluates the ease of access to transportation infrastructure, including highways, ports, railways, and airports. They also consider local traffic patterns and potential congestion issues that could impact transportation times.
Wrapping it up
Distribution Network Analysis is crucial for a company’s success as it directly impacts supply chain expenses, profitability, and customer satisfaction. To optimize the distribution network, it is essential to regularly assess and analyze it holistically. Companies can partner with supply chain consulting experts to gain a fresh perspective and leverage their expertise to benefit their business. These professionals scrutinize all aspects of the distribution network and develop solutions to meet complex supply chain needs.
Studded with a ton of expertise to its arsenal, Bizom is backed by a comprehensive distribution network analysis, which enables companies to identify the most effective warehouse locations for streamlining distribution and reducing expenses. By carefully evaluating your supply chain, we offer strategic and cost-effective solutions. Check out our website to learn more.
