Distribution Trends for a Global Economy

July 18th, 2006 at 08:17am David Bush - Iasta

Distribution Trends for a Global Economy, a recent article in Supply Chain Manufacturing & Logistics Magazine by Deb Navas, Editor at large, is a good read.

In it, Deb notes that “roles are blurring in the retail, wholesaler, and distributor supply chain arena, and the definition of what the “distributor” now does is not so easily defined. Big Retail operations … primarily use their own distribution networks, though they also use wholesale distributors.”

Historically, retail uses the push distribution model, a sophisticated form of cross docking where specific store distribution for an ocean container is already predetermined. But in today’s JIT/lean world, retail distributors can support a variety of push/pull models with flexible Warehouse Management Systems (WMS) that work in conjunction with transportation management systems, yard management systems, order management systems, labor management systems, RFID, vendor managed inventory, and supplier portals.

Companies that outsource manufacturing and lack a distribution infrastructure can bypass distribution altogether and use services such as UPS’ Trade Direct program to receive and consolidate/deconsolidate their product overseas and ship it direct to stores or customers. This allows some companies to bypass wholesaler’s and their associated margins.

Still, many companies still use traditional wholesaler distributors that serve a valuable niche supplying last-minute product and managing inventory and stock. Even though wholesalers are under increasing pressure to lower prices while holding inventory longer, they have the opportunity to substitute lower cost products from a different source to increase profitability or market share, an opportunity not available to retailers and manufacturers with contract manufacturing agreements.

However, regardless of whether you manage your own distribution or leave it to a third party, there are still significant route distribution issues in today’s supply chain due to the escalating cost of fuel and shortage of reliable drivers, increasing distributor ship overhead significantly. Many distributors have to optimize driver performance and routing just to maintain their current volumes.

In other words, you have a plethora of distribution options, just make sure you consider the relevant issues, such as escalating fuel costs and potential stress on the distribution network due to an increase lack of qualified drivers on the road, before you make a final decision. (For more information on driver shortages, see my recent post on The Truck Stops Here … Or Does It?)

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Entry Filed under: General, Suppliers, Technology / SaaS