Distribution Logistics 101: Your Complete Guide
We can simply say that distribution logistics is the thing that stands between a business receiving an order and a customer receiving their goods. And while accurate, this statement doesn’t really offer enough insight into what logistics distribution actually is.
So, in order to better understand this crucial part of an eCommerce chain, we must dive deep into the matter and see why distribution and logistics play such a huge role, what their ultimate goal is and how businesses can use this knowledge to improve their operations.
What Is Distribution Logistics
We can’t start discussing the matter of distribution logistics before we define what is logistics management, as these two are extremely closely connected. So, put simply, logistics management is a part of the supply chain management that ensures businesses receive, store and transport inventory from the manufacturer to its final destination - the customer.
That said, distribution logistics - as the name suggests - refers to the physical distribution of goods to end-users. The steps that make this process possible include:
- Planning and managing inventory
- Storing inventory
- Inventory handling
- Transportation of goods
But simply being able to deliver products to end-users is usually not enough to make a business truly stand out. Instead, said business should also aim at achieving this goal as quickly, accurately, and economically as possible.
This part of the eCommerce logistics can further be improved with TMS logistics to ensure smooth sailing.
Main Goals of Distribution Logistics
Now that we’ve determined what distribution logistics encompasses let’s see why businesses should care.
Namely, one of the main goals of any business should be customer satisfaction. Even though it is impossible to make everyone happy, the more satisfied customers the business has, the more opportunities for growth and further development it can expect to face.
That being said, going out of your way to keep your customers happy is not always the right approach either, as you also need to make sure that your business stays profitable in the end.
Therefore, if we consider that
a) businesses want to keep their customers satisfied
but also
b) they should look for ways to minimise cost; we naturally come to the conclusion that these two factors are actually the main goals of distribution logistics.
Luckily, customers will - in most cases - be happy if their goods arrive on time and are not damaged or otherwise compromised. On the other hand, logistics costs can be minimised with properly optimised shipping logistics, packaging practices and inventory management.
Aside from these two goals, businesses can also rely on distribution logistics to ensure the high availability of products so that they’re able to meet their customers’ demands.
So How Is Distribution Logistics Realised?
In order to ensure that everything runs smoothly while distributing goods, businesses must first come up with an overarching distribution strategy, plan and design the distribution processes, and execute everything as intended.
This is, of course, easier said than done, as there are many moving parts in this process that can easily disrupt the flow. That’s why it’s important that businesses break down their distribution logistics into three main tasks:
In case all of these tasks are handled properly, a business shouldn’t expect to experience any hiccups during the distribution process. However, if only one of these tasks is overlooked, it can easily offset the entire process. So, make sure that all of the tasks are handled with care to prevent any losses, unnecessary costs or possible customer dissatisfaction.
Distribution Channels
In distribution logistics, there are two main distribution channels the goods can go through before they finally reach the end-user.
Direct distribution
Direct distribution focuses on in-house distribution management, where products are most commonly sold directly by the manufacturer to the customer. A good example of direct distribution would be the farmers’ market, where farmers (manufacturers) sell their products directly to customers (consumers).
By cutting out the middleman, this model can offer faster delivery times and better control over customer experience. However, businesses that opt for this model will also need to invest in their own inventory management, create their own shipping strategy, invest in their own storage and take care of all of their orders.
So, it’s worth noting that this distribution channel will only be suitable for businesses whose profits from direct sales significantly exceed all of the costs of maintaining such a structure.
Indirect distribution
Businesses that decide to opt for indirect distribution outsource the distribution of their products to other businesses that provide such services. By doing so, they forgo the opportunity to make an impression with direct sales and are, of course, required to pay for the distribution services.
That being said, businesses who opt for this model often gain access to wider (if not even global) markets and don’t have to worry about managing labour-intensive tasks on their own.
Indirect distribution can be divided into three different categories based on how many marketing agents are involved in the process.
Businesses that are looking to streamline their operations and better optimise their distribution logistics should be careful when choosing between these two distribution channels, as choosing the wrong one can lead not only to customer dissatisfaction but also financial ruin.
How to Use Key Performance Indicators in Distribution Logistics
Generally speaking, key performance indicators (KPIs) are very powerful objective performance measurement tools that can easily be monitored and analysed to determine whether or not a business should make any changes to its current distribution logistics system.
- Delivery accuracy provides insight into the percentage of deliveries that were completed without any issues, such as delivery delays or damaged or missing items.
- Delivery time offers an insight into whether or not the deliveries are punctual.
- Transportation costs help determine if the current costs properly align with the expected profits from product sales.
- Warehousing costs can help a business determine if the cost of storing its stock is satisfactory. In case it’s not, the business should look for a more cost-efficient alternative.
- Supplier compliance helps businesses determine whether their logistics service provider's performance is satisfactory or not.
By keeping a close eye on these KPIs, businesses can easily spot places where the performance is lacking and use that knowledge to find ways to improve it.
Potential Distribution and Logistics Challenges
Although not rare, not all businesses face distribution and logistics challenges often. But they are present, so it’s important to mention them nonetheless.
Some of the most common challenges include:
- Supply chain disruptions
- Sustainability
- Maintenance costs
- Fluctuating fuel costs
- Changing climatic conditions and natural disasters
- Different regional regulations and compliance requirements
By knowing what to look out for, businesses can - at least to a degree - prepare for facing these challenges in case any of them happen to arise.
Tips for Improving Distribution Logistics
While potential challenges may certainly make things a lot more difficult, there are also ways to improve distribution logistics operations and, thus, potentially save costs, reduce risks and continue to deliver satisfactory service, keeping your customers content.
Technology can help you improve how you manage your distribution logistics. Real-time inventory tracking, fulfilment performance, inventory planning and managing returns are just some of the tasks that will be made considerably easier - and more accurate - with the use of modern tech.
Partnering up with third party logistics services can save you a lot of time and money, especially if you look for those that offer warehousing and distribution, aside from fulfilment services.
By using gathered data to forecast demands, you’ll be able to gain more control over your distribution. So, use tools for intelligent inventory forecasting to analyse past orders and see if you can spot any patterns which you can then use to your advantage.
Optimise Distribution Processes and Improve Efficiency with Bezos
If you’re looking to streamline your distribution logistics and boost the overall efficiency of your supply chain, you’re in the right place. By partnering with Bezos, your business will gain access to the best 3PL fulfilment services.
Our 3PL services include:
- Handling the delivery process from the moment your customers check out to the moment the parcel is delivered to their doorstep.
- Using technology to optimise logistic processes, including real-time order updates that will accurately measure the performance of your logistics.
- Scalable solutions that will be perfectly tailored to your business’s needs, allowing it to grow.
So, if this sounds like something that can help you boost your business’s efficiency, sign in today to get started.
Conclusion
By diving deeper into the matter of distribution logistics, we had the opportunity to see that it involves many moving parts, all of which need to work immaculately together to drive the best results.
Businesses that are looking to streamline their operations and boost efficiency need to pay attention to all of the steps involved in distribution logistics. Only then will they truly be able to deliver the best results and ensure that their customers are satisfied with the service provided.
Frequently Asked Questions
What is distribution logistics?
Distribution logistics is a part of the supply chain that handles the movement of goods from manufacturers to customers. Its aim is to try and keep the costs of the distribution low while also keeping customer satisfaction high.
What is distribution logistics in a business plan?
Simply put, a distribution logistics plan is a part of the business plan that’s in charge of creating a detailed strategy that will determine how goods are being delivered to customers. It involves planning, routing, receiving goods, sorting and storing goods, handling and transporting goods, and finally delivering the goods to the end-user - the customer.
What is a distribution strategy in logistics?
In logistics, a distribution strategy involves various methods and channels a business will use to deliver its goods from manufacturers to customers. The main goal is to find efficient ways to move the goods while, at the same time, delivering the best possible customer experience.
