What type of distribution network is typically well suited for commodity items?
Distribution logistics is the combination of physical facilities and activities which connect the sources of the product (production plants) to customers, while also coordinating the underlying information flow. Show
Basically, distribution logistics consists of five large components:
In this article, we will analyse the various types of distribution network. The distribution network“The distribution network is the set of warehouses, of different types and kinds, which operate in an organised, integrated manner to constitute the bone structure of the logistics system that gets the products handled (or manufactured) by the company to customers”. In the past, a warehouse used to be considered as just a container. Nowadays, in the integrated approach to the logistics chain, warehouses are viewed as fundamental hubs in the logistics network, with functions defined by their specific location within the network. In general, warehouses have four main operating functions:
In terms of specific functions, there are three different types of warehouses:
The plant warehouse is, basically, a container to which a production plant’s output is temporarily transferred. A plant warehouse is required because either the company produces on the basis of forecasts (for stock), and therefore needs to store the goods produced pending receipt of orders from customers, and/or the company needs to group together a certain quantity of product in order to fill the entire capacity of a means of transport (and thus optimise its use). The central warehouse is basically a collection and distribution centre, necessary to “concentrate” different products to make them available in a single point. Normally, it receives loads of single products, or single lines, and dispatches loads of multiple products. Lastly, the function of an outlying warehouse is very similar to that of a central warehouse (collection/distribution centre). However, its main task is to ensure rapid delivery to customers, and it is located close to them to facilitate this. For further information about distribution and an understanding of how a network generally changes over a business’s lifetime, refer to the following article: The evolution of the distribution network. How is a new one designed? Now we will take a closer look at the various network types. Just one central warehouseThis is a simple distribution network consisting of just one large central warehouse, containing the stocks of all the products handled, from which deliveries are made to all the company’s final customers. In general, this solution:
A distribution centre plus a large number of branchesThe second type of distribution network is fairly similar to the first, but differs from it in being more suitable for large commercial businesses which have a quite large number of branches or points of sale with a low storage capacity. In practice, the distribution network consists of just one large central warehouse, which in this case can also be called a “distribution centre”, containing stocks of all the products purchased from the various suppliers and from which deliveries are made to the various branches or points of sale. In general, this solution:
It is particularly suitable for wholesalers, the large-scale retail trade and retail purchasing consortia. A central warehouse and several outlying depotsThis configuration is a quite common form of logistics organisation amongst production firms or commercial companies which do not have points of sale selling to the “final” consumer. In practice, depending on their location and the size/composition of their orders, the company’s customers are served either directly from the central warehouse or from one of the various branches. In general, this solution:
The solution is particularly suitable for some types of wholesalers, or single-plant production companies, of not especially large size, where the production department is close to the central warehouse. Plant warehouses, central warehouse and outlying depotsThis is a fairly complex configuration, suitable for fairly large manufacturing companies (or corporate groups). The company’s customers may be served by different options/procedures, depending on their location and order composition/size, using a three-level network structure: plant warehouses, central warehouses and outlying warehouses. In general, this system:
It is particularly suitable for organisations with several production locations, each producing specific products. Availability of the mix is guaranteed by the central warehouse, while swift delivery is achieved using the nearness to the market of the outlying warehouses. No warehouses but just transit pointsThis is a fairly innovative configuration (only introduced a few years ago), which may seem very simple but which actually requires a great deal of organisation. In practice, all the warehouses (outlying ones in all cases but sometimes the central one as well) are replaced by transit points. Transit points are basically warehouses without (or with only very low) stocks, where inbound goods from suppliers or plants are sent to customers immediately. In general, the characteristics of this solution are:
In general, this system is adopted by fairly large manufacturing or commercial companies. OutsourcingThe last example of a distribution network we present is actually an anomalous variant of the traditional distribution network, although it is actually now quite widely used, also in Italy. In practice, the traditional distribution network no longer exists, since all the physical distribution of goods is contracted to an external organisation (logistics firm). In fact, even when distribution is outsourced, the distribution network still exists, except that it no longer belongs to the company that produces/sells the goods for distribution, so it may be “out of sight”. When establishing a partnership with a logistics firm it is important to find out about the distribution network it is able to provide. 7+1 Deadly Sins of the WarehouseDo you waste lots of time looking for goods in your warehouse? Are your orders often wrong and get returned? Do you often run out of stock and have to halt production? With our online free course you will solve your management issues and improve your warehouse’s performance in just 10 steps. What type of distribution network is typically best suited for commodity items explain?The most suitable distribution network is RETAIL STORAGE WITH CUSTOMER PICKUP . Commodity items with very short life like milk a combo of manufacturer , distributor and retail works well too . (4)Customer price view varies through the product life-cycle.
What types of distribution networks are typically best suited for commodity items what type of network is best suited to highly differentiated products?The networks that are best suited to highly differentiated products are the manufacturer storage with direct shipping and the manufacturer storage with in-transit merge. Both approaches have the ability to aggregate inventories and postpone product customization, which would help support a wider variety of products.
What are the 3 types of distribution channels?The three types of distribution channels are wholesalers, retailers, and direct-to-consumer sales. Wholesalers are intermediary businesses that purchase bulk quantities of product from a manufacturer and then resell them to either retailers or—on some occasions—to the end consumers themselves.
What are the types of distribution networks?There are three types of distribution channels: direct, indirect and hybrid.. Direct. With the direct channel, the company sells directly to the customer. ... . Indirect. Indirect channels use multiple distribution partners or intermediaries to distribute goods and services from the seller to customers.. |