Back To Basics: Getting Product Distribution Right

At some point in the life of your business, you’re going to have to consider product distribution. Even if you run a B2B enterprise, the time will eventually come where you need to move goods from A to B reliably. 

This process, however, is more challenging than many companies imagine. You hope that it’s just a matter of contacting a third-party logistics company and getting them to take over the work for you. But it doesn’t usually work out that way in practice. 

The reason for this is quite simple: demand planning. Somehow, your enterprise has to figure out what the market is going to demand and how you can meet that need. Don’t assume that linear projection models will work. Usually, they won’t. 

A lot of companies look at historical demand and then project this forwards to work out how many units they need to supply in the future. 

However, that approach can land you in hot water. You never really know how demand is going to pan out, and using historical trends isn’t always ideal. 2019 might have been a normal year, but 2020 is anything but. 

Your best bet is to use as much data as you can from up and down the supply chain. You want to ensure that you avoid bottlenecks while also preventing over-production and inventory costs. Try to work with others in the supply chain. 

Cut Your Shipping Costs

If you’re not yet filling entire trucks, think about renting space on existing journeys. Less-than-load shipping rates tend to work out as better value and more flexible than trying to fill an entire shipment when you have a low-volume product. 

Consider Your Profits

A lot of companies assess their capability to honour an order, instead of the profitability of doing so. Usually, a manager at the firm will receive a large order and then conduct an assessment to find out whether the enterprise has the required resources to meet it. Usually, it requires getting staff to work overtime and perhaps reneging on their responsibility to fulfil it. But the manager in charge doesn’t always feel like he has an option. He feels like he can’t turn down good work. 

The costs to the business of this type of decision can be high. Brand capital can suffer. 

For this reason, companies need to figure out whether taking on a particular order is profitable or not. It’s not enough to simply become capable of fulfilling the desired order. The first needs to make money from it too. 

Adjusting your metrics, therefore, can help. Once you make your decisions around profitability, you radically enhance your operations. 

Choose The Right Channels

When it comes to distribution needs, companies are very different from each other. The types of channels a high-volume seller uses will differ from those of firms with small-scale products (such as jewellery) or who make bespoke parts. 

If you are an ecommerce seller, you might be able to avoid oversight altogether by getting your fulfilment company to do it for you.