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Distribution logistics models

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A few weeks ago we were looking at what distribution logistics is, its functions and the main distribution channels. We are going to continue delving into it by looking at some of the distribution logistics models most commonly used by companies. And how to opt for one or the other.

Different models of distribution logistics

Following the Faedis article that we already used last week, with distribution logistics models we refer to the type of infrastructure that an entity creates to get its products to the market. It must be taken into account that a company can simultaneously opt for several of these models, combining them or betting on one or the other in certain places, clients, etc.

decentralized model

This model is based on stocks in warehouses closest to customers. Merchandise that has already been manufactured goes from the original warehouse -or from the end of the manufacturing process- to various local stores or branches. This allows us to be closer to the final customers, which can allow deliveries to be made in less time. The main enemy of this model is the high cost of having various infrastructures.

It is a model that is also used frequently and almost out of necessity with multinationals. For example, Amazon would be virtually unthinkable with a single central warehouse.

centralized model

This distribution logistics model, instead of resorting to a greater number of warehouses, relies on transport to optimize its transits and costs. The improvement in delivery times and the agility of transport response has been facilitating the presence of these models. For example, the development of express pallet shipments in Spain, such as our Palibex network, has made it possible for many companies to distribute their products quickly and safely from a single warehouse.

In this case, it is the carrier that has to ensure that it has a wide network. This capillarity is what will take the place of local stores or branches that we saw in the decentralized model.

Cross docking model

The cross-docking model could be defined as a decentralized model but in which the merchandise is not stored. Cross-docking consists of re-dispatching the merchandise within a maximum of 24 hours from the arrival of the merchandise at the cross-docking platform.

Consolidation

Consolidation consists of bringing together the merchandise from different suppliers in the consolidation center to, from there, make shipments to different customers. The objective of this is to be able to use larger vehicles, seeking to optimize transit and costs.

How to choose the right model

We have already hinted at some of the reasons for opting for one option or another when exposing the models.

Distance of our distribution

Multinationals are the archetypal example of companies in which it is difficult to have a single warehouse. That is why they need other forms of organization to cover several countries or continents.

vehicle type

Consolidation focused on completing trailer trips, for example, will make distribution with a view to large stores easier.

service level

In companies that work with very short delivery periods, cross-docking will usually be more appropriate than those that seek cost savings through consolidation.

Margins, types of merchandise and logistics strategy

In the same way as in the previous case, knowing if the accent of your logistics is more on the optimization of costs or on the speed of response will help you make some decisions and others.

We hope that with these two articles on distribution logistics models you can have a basic idea of what their characteristics are and what you could apply in your organization.

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