The supply chain does not have this name on a whim. Like any chain, it is made up of links, and today we are going to focus on one of them: distribution logistics. According to the saying, a chain is only as strong as its weakest link, so you cannot neglect any of them.
What is distribution logistics
First of all, we must be clear about what distribution logistics is and what part it occupies in the supply chain as a whole. Distribution logistics is the one that is in charge of taking the finished product to the hands of the customer (helped by the distribution channels).
These functions differentiate it, for example, from supply logistics. In which companies create the necessary processes to supply themselves with raw materials or the materials necessary to work and end up reaching this distribution logistics.
Distribution logistics functions
According to Faedis, there are four main distribution tasks:
The basic act of the pure movement of products. The first that would come to mind to anyone outside the sector and that, after all, is surely the most essential. The merchandise has to go from point A to point B.
Obviously, not all merchandise travels from point A to point B; but there are also C, D… And the number of letters in the equation can grow astronomically, especially if our deliveries reach individuals. Distribution logistics also designs and executes this fractionation process.
Both with the finished product and at possible intermediate points, storage needs arise.
How much merchandise do we need at each point? How much are we getting from each reference, to be able to plan the previous point and all the previous production process?
Distribution channels are the method or framework that companies design to bring their products to the market. Although a complete analysis can find other types of intermediaries, we are going to stop at the three most common:
They buy large volumes of merchandise to supply the next level in distribution, which is typically retailers. Both wholesalers and retailers involve intermediate links, which means a transfer of margins for the manufacturer. However, if a company chooses to carry out wholesale, retail and/or direct sales work, it will have to make a significant investment in marketing, personnel, infrastructure, etc.
For example, if we want to start selling our products in a new country, perhaps the easiest and fastest thing to do is to contact a wholesaler who already has established networks with retailers who quickly put our products in front of the customer.
They are establishments, physical or digital, that sell directly to the final consumer. They are the large commercial surfaces and also the small neighborhood stores. In the same way, they can purchase their products directly from manufacturers or through wholesalers -who add value to them by offering a variety of products from various companies, simplifying their supply-.
In this case, the intermediaries disappear and the contact between the manufacturer and the end customer for the sale is direct. You may think that this would automatically be the best option, being able to offer a better price and not lose margins along the way.
But it is not the same to manufacture a television that has a neighborhood store where it can be sold, a commercial area with sales and customer service personnel to manage its marketing, or the leading website where it can be purchased.
These distribution channels are not exclusive, but you also have to be careful how you play with them. For example, a retailer’s right to be an exclusive distributor may result in us getting better terms. While comparing direct sales with retailers will normally make the latter offer us tougher conditions, since we ourselves will be competing with them.