What Is Distribution Management?
The process of managing the flow of products from supplier to manufacturer to wholesaler or retailer to final customer is known as distribution management. The administration of raw goods vendors, packaging, warehousing, inventory, supply chain, and logistics. Occasionally even blockchain are just a few of the activities and procedures that are into this.
What Is a Distributor?
A distributor is a company that provides goods to merchants and other companies who sell goods directly to customers. Consider a wholesale liquor distributor that sells alcohol to bars, restaurants, and convenience stores.
Other examples are a distributor of food that provides restaurants with lettuce, tomatoes, and other produce, as well as a distributor of pharmaceuticals that provides pharmacies with a range of prescription-only medications.
Distribution vs. Logistics
The precise planning and procedures necessary for the efficient supply and delivery of commodities are logistics. Supply management, bulk and shipping packaging, temperature control, security, fleet management, delivery routing, shipment tracking, and warehousing are a few of the tasks and procedures included in logistics. Logistics might perhaps be best understood as physical distribution.
In logistics, order fulfillment through all distribution channels is the main goal of the distribution management system. A product or service flows through a chain of agents and organizations called a distribution channel as it travels from its site of origin to a consumer. E-commerce sites, wholesalers, retailers, and third-party or independent distributors are a few examples of distribution channels. Order fulfillment, order shipment, and consumer or commercial packaging are all considered to be part of the distribution process. In a nutshell, commercial or sales distribution is the easiest way to understand distribution.
Why Is Distribution Management Important?
Distribution management is primarily concerned with planning every step necessary to deliver items to the consumer on time and with the least amount of waste possible. As a result, it directly affects profitability.
What Is a Distribution Network Exactly, and What Are the Benefits?
A distribution network is a set of facilities for storage and transportation. It is made in accordance with a distribution strategy designed to get goods from producers to distributors, retailers, or buyers.
Along the whole supply chain, which runs from raw material suppliers and manufacturers all the way to consumers or other end users, various distribution channels serve various points or entities. Different aspects that may have an impact on effective distribution must be taken into account by the various distribution methods.
1. Wholesale distribution channels
These are business-to-business channels for distributing goods from manufacturers or suppliers of raw materials to wholesalers. For instance, oil businesses must transport their product to refineries.
2. Retail distribution channels
These deal with the distribution of products from wholesalers to retailers, such as when a cosmetics company distributes products to a number of retail outlets.
3. Exclusive distribution channels
These are the companies that exclusively supply products from a manufacturer to clients who are specifically chosen or authorized. For instance, automakers send their vehicles to licensed dealers.
E-commerce, as represented by companies like Amazon or eBay, is a relatively new kind of distribution. The direct delivery of items to customers through e-commerce websites has changed the way that distribution takes place in a variety of ways. For instance, Amazon can arrange to distribute products to clients from one of its many customer order facilities. It enables it to provide a delivery service that is more prompt than it could be if all of the goods were stored and sent from a single location.
How E-commerce Distribution Management Works?
There are several moving pieces to track inventory movements along the supply chain. Let’s take a deeper look at the actions that have been taken throughout the process. As every activity that takes place during distribution management is crucial.
1. Inventory receiving:
E-commerce goods will be unloaded, processed, and stored when it gets to the warehouse or fulfillment center. For effective supply chain setup, inventory management, and providing a good fulfillment experience, proper warehousing reception is crucial. Ensure that the products provided by the manufacturer match the products ordered at this step by carefully checking the inventory count. Without appropriate inventory receiving procedures, you run the danger of losing inventory or having inaccurate inventory counts, which can have an impact on your business’s profitability and inventory reporting.
2. Warehouse management:
After receiving the inventory, it must be watched carefully to make sure there is enough of it to meet demand. In order to effectively monitor the inventory, warehouse staff must be trained and managed, as well as the inventory must be tracked and stored. With the adoption of digital warehousing, it is now common practice to utilize a warehouse management system (WMS). It is intended to streamline warehouse operations, including warehouse inventory management. Because there are less manual labor needs, warehouse workers may concentrate on working quickly without sacrificing precision.
3. Order Packing:
The packing procedure starts after all the goods in a single order have been selected. You might not realize how intricate the packaging is. To guarantee that they reach their destination in the most economical way possible, intact, and without damage, it must combine the appropriate articles with the appropriate packaging materials into the appropriate-sized boxes.
The order package is now dispatched to its destination as the process comes to an end. Although the end user is typically the target market for direct-to-consumer (DTC) brands, some businesses also offer B2B e-commerce services to send goods to another organization. Due to its critical importance to client happiness, e-commerce delivery is a crucial step in the distribution process. By using the right shipping tactics, you can guarantee that your clients will receive cost-effective and profitable delivery alternatives.
Benefits of Distribution Management System
Now that you are aware of how distribution management functions, let’s examine the advantages of using an integrated distribution management system.
1. Fulfill Orders As Soon As Possible
In-house fulfillment can be controlled while you’re just getting started because there aren’t enough orders to fill. But as you expand, implementing multi-channel distribution becomes essential to maintaining your position in the market and drawing in additional clients. Technology and location are two factors that can efficiently speed up the fulfillment process.
- Technology has the potential to significantly enhance the fulfillment process. The correct IT stack can increase inventory visibility throughout the distribution network, enabling you to react more quickly to unforeseen events and make wiser business decisions.
- Another crucial element that enhances the fulfillment process is location. By cutting expenses and accelerating transportation times, choosing warehouse and distribution locations close to your customers and to important ports saves time and optimizes transportation.
2. Meeting Customer Expectations:
For businesses to continuously satisfy customer expectations, distribution management is crucial. You won’t ever miss an opportunity to deliver the manufacturer’s items to the final consumer with a distribution management system. Technology can be helpful in assuring that purchases are consistently and affordably delivered fast and reliably. Additionally, it guarantees that SKUs are available for each sales channel and the length of time needed by clients. While doing so, it controls order fulfillment costs so that retailers can pass cost savings through to customers.
3. Handling Market Seasonality:
Distribution can be significantly impacted by seasonality depending on the sort of product you sell. “Seasonal” brands offer goods associated with a particular occasion, season, or time of year, and they produce various levels of demand. present time. By gathering past sales information and calculating the amount of inventory that will be available during a certain time period, effective distribution management helps support seasonal brands (called forecasted demand). Accordingly they should adjust Inventory allocation and levels.
4. Better Analysis Of Distribution Management Data:
You require an appropriate system to gather and analyze supply chain data in order to enhance and optimize your distribution network. You can learn how to more effectively distribute products around the network and optimize inventory by optimizing everything from inventory turnover, warehouse allocation, and current SKU-level inventory at each site.
5. Increase Profit Margins:
A thorough grasp of the operational circumstances (so that you can optimize your distribution strategy) can lead to significant cost savings when trying to lower operating expenses. You can reduce shipping expenses during meetings just by employing extra locations to store products (likely from a 3PL).
6. Faster Delivery:
You may provide your consumers with better shipping alternatives and incentives if you have a clearly defined distribution strategy, which will increase customer happiness while lowering costs.
Disadvantage of Distribution Management System:
1. Reduces distribution channel options
One problem with selling directly is losing middlemen’s other routes of distribution. If you can sell in more places, customers will find it more convenient. Sales improve as a result of the wider audience and simpler customer access.
2. Increases internal workload
Just because you are expert in producing a good doesn’t mean you are ready to market and sell it in person. When you sell directly, you assume all of the responsibilities that an intermediary would normally carry out. This includes tasks including receiving orders, processing payments, completing orders, locating late or defaulting payers, marketing initiatives, and providing customer service.
3. Raises fulfillment costs
Your costs to supply a product to customers may go up if you engage in direct selling. Along with the workload of fulfilling orders, you also bear the costs involved with doing so, such as hiring order-taking workers, credit card processing fees, postage and shipping costs, software, website upkeep, phone bills, fleet maintenance, billing, and order tracking.
Distribution Management Challenges
- Diverse interruptions can cause distribution problems. Severe weather conditions, a lack of raw materials (such as poor crop years), pest damage, and epidemics or pandemics are examples of natural disruptions. Riots, protests, battles, and strikes are examples of human disturbances.
- Flight delays, maintenance issues, accidents involving transport vehicles, and new or stringent transportation rules, such as those frequently observed in trucking, are all examples of disruptions in the transportation system.
- Recessions, depressions, abrupt changes in consumer or market demand, additions to or changes in fees or compliance costs, fluctuating currency exchange rates, and payment problems are all examples of economic obstacles.
- Product recalls, packaging problems, and quality control problems are examples of product disruptions. Order modifications, address changes for shipments, and product returns are all examples of customer disruptions.
What Affects Distribution Management?
Distribution planning and management must take into account a variety of variables that may change or influence distribution.
1. Buyers’ demands
The first is the variance in the needs of the consumers. Throughout the year, consumer demand for products varies. For instance, consumer purchases of all types of products increase over the Christmas season. Therefore, businesses must prepare for how to handle a surge in orders, deliveries, and purchases.
2. Shipping optimization
Another element that may have an impact on efficient distribution management is shipping optimization. For instance, shipping all of the goods to one location at once, such as in a single truckload, is more economical for a business than making repeated, insufficient shipments to the same location.
Any company that deals with perishable goods must constantly ensure efficient delivery because any losses due to rotting will have a negative influence on profitability.
3. Other factors
Distribution management must take into account a variety of additional aspects that may have an impact on effective distribution. They include things like airport delays, delays brought on by extreme weather, and cargo delays that can be brought on by car accidents or mechanical failures.
Another aspect for which distribution management teams must prepare strategies are potential changes in governmental legislation governing shipping or transportation. Product recalls or packaging issues may impact the distribution. Hence by changing the address where goods will be delivered or making revisions to purchases, buyers might sabotage effective distribution.
Due to the many aspects involved in distribution management, managers must not only develop meticulous distribution plans but also a variety of contingency plans to address potential distribution issues.
3 Distribution Management Strategies
The mass market, such as those that sell to broad customers wherever, is the target market for the mass strategy.
The selective strategy intends to solely distribute to particular types of manufacturers or retail industries, such as pharmacies, hair salons, and upscale department shops.
However the goal of the exclusive distribution strategy is to reach a very small audience. For instance, producers of Gucci-brand products only sell to a small subset of luxury goods stores, and manufacturers of Ford automobiles only sell to approved Ford dealerships.
Choosing a Distribution Management System
Your organization’s distribution goals, challenges, and the distribution models and channels your business uses all play a significant role in selecting the best distribution management system. But generally speaking, businesses should consider:
- compatibility and simplicity of integration with existing systems.
- Flexibility and scalability
- Analytics and data management, including sharing of ecosystem data and streaming of real-time data
- Adaptability, or the system’s ability to change quickly enough to overcome challenges or embrace new possibilities
What Are the Elements of Distribution Management?
Supply chain, blockchain, logistics, a system for placing orders and billing customers, vendor relationship management (VRM), customer relationship management (CRM), an inventory management system (IMS), a warehouse management system (WMS), and a transportation management system are some of the components of distribution management systems (TMS). Hence for relevant data Myanmar Golden Heart is here to help you out and will provide you with appropriate information.