An efficient distribution network is the heart of a successful supply chain. In today’s world, companies that are operating on e-commerce platforms are gaining a competitive edge with better logistics and distribution networks. When we speak about distribution network optimisation, we mean the availability of enough distribution centres at locations in proximity to delivery points and adequate numbers of vehicles to transport the materials there.
Network optimisation is also required for the time taken in loading and unloading materials and during planning the inventory for each distribution centre. All these may be achieved by strong sales and operation planning.
Factors Affecting Distribution Network
Some of the factors which affect the distribution network are as follows -
The demand volume history and financial credibility of the buyer need to be researched. Simultaneously the payment cycle or policy of the customer also needs to be assessed.
Analysis of suppliers
Purchase order history and logistic details of suppliers are to be monitored. Besides this, the commitment to quality and timeliness of supply needs to be maintained.
The inventory assessment for each distribution point should be prepared. Inventory management should be considered keeping in mind the sudden upsurge in demand.
Cash flow, capital investment, availability of working capital, legal obligations etc. are to be monitored. At the end of the day, the objective of any organisation is to make a profit out of a business.
Trade zone analysis
Preparing a detailed report on geography with a proposal for a new distribution centre is essential. It needs to be checked whether the benefits of a free trade zone are available or not. Marketing potential also needs to be reviewed.
Sales and Operation Planning
Before setting up an efficient distribution network, any manufacturer should have a master plan for its sales and operation. The planning should be aligned with the demand and supply of its products and its financial planning.
Strategic decisions of the sales team include elements like whether the demand for a product in a specific geography should be more than it was in the last year or whether this demand should shift to a more promising geography. These strategic sales decisions influence tactical operational decisions like whether to increase or reduce the production capacity and manpower. Other long-term vendor management policies are also determined accordingly.
All these planning parameters are to be backed up by strong financial planning or budget. There are several challenges to a proper error-free sales and operation planning process. They are as follows –
Zeroing down on accurate information regarding supply and demand at a given point in time is a rigorous task.
In cases where demand shifts significantly from its previous earlier values, sales and operation plans need to be amended with the approval of top management.
Making a presentation to the top management incorporating all real and assumed parameters for the purpose of decision-making is challenging. Assimilating a database from multiple systems for making visible interactive reports is a complex activity.
Planning for new products as a result of demand shift or merger and acquisition of companies leads to newer hurdles for the team.
The latest technology trends have been incorporated into the sales and operation planning exercise. The usage of Enterprise Resource Planning (ERP) software and Supply Chain Management (SCM) software have become quite common nowadays. Besides the above-mentioned, Artificial Intelligence (AI) and the Internet of Things (IoT) have been introduced.
Supply Chain Design
A real ground working model that elaborates on the structures or distribution outlets of the supply chain and the available logistics network for calculating the time and cost to deliver goods to the market is loosely understood as supply chain design. The model points out the errors committed in the system during the planning stage and flags potential risks involved in the process under different given conditions.
It aims towards reducing inventory, working capital and logistics costs and, in turn, increases operational efficiency, transparency and cost savings. The design model also aims to match supply to its demand under uncertain business scenarios by leveraging on its efficient inventory management skills.
It deals with strategic parameters like the number of distribution centres, location and size of the centres and deals with all global and domestic sourcing strategies. The design model is fully equipped to respond to all possible “what if” scenarios. It also has the flexibility to adjust to any shift in strategic decisions due to changes in the supply-demand curve.
Tips for Maintaining an Optimised Distribution Network
Optimising the distribution network is an ardent activity. Dynamic business conditions and varying parameters make the task difficult. However, a few tips may be followed to optimise the distribution network. They are as follows -
Early engagement of top management of business owners and other stakeholders is a must-do-thing. A high-level meeting regarding network optimisation at the beginning clarifies many issues, which otherwise could have posed a serious threat due to wrong assumptions.
The meeting should be done in the presence of cross-functional leaders from both sides so that several overlapping functions get clarity right at the very beginning. All the parameters affecting network distribution should be chalked out and debated in a thread-bare manner.
The usage of commercially available modelling tools is better to tackle complex problems than homegrown spreadsheets. The model should be flexible to record all relevant parameters and able to show visually a tangible solution.
Inventory distribution should be the top planning criterion.
A study or research on network distribution typically takes three to six months’ time. Organisations must allow this time for a stress-free operational experience in future.
The supply chain management system has come a long way. A supply chain analytics course equips a prospective candidate with all the lessons to be learned. The candidates may find lucrative placement offers in the port and logistics companies besides other opportunities.
The Professional Certification in Supply Chain Management and Analytics by Imarticus will enable the prospective candidate to boost their career towards a bright future. With the help of this supply chain analytics course, the candidates learn job-relevant skills from experienced IIT faculty.
Visit the official website of Imarticus for more course-related details.