Are you planning to start a logistics business and interested in knowing how it works?
Or do you have an idea of different distribution channels and wish to know about them in depth?
Either way, you are at the right place.
Through this blog, we will provide in-depth knowledge of distribution logistics, objectives, and core activities. We will also share details about the different types of distribution logistics channels, their challenges, and the best practices to optimize them.
Also, we will share the difference between distribution and logistics in case you get confused between the two terms while reading the blog and accidentally plan your logistics like distribution.
Now what are you waiting for?
What is Distribution Logistics?
Logistics management is a broader term that involves strategic planning, transportation, and coordination of raw materials, inventory, and finished goods from their initial source to the end user.
On the other hand, distribution management is a narrow term that looks after the delivery of finished goods from the manufacturer to the end users. It involves picking up the right product from the warehouse as the customer places the order, packing it to ensure the product does not get damaged during the shipping process, and delivering it to the customer’s destination at the stipulated time.
Distribution logistics is a subset of logistics management. While logistics encompasses the overall management of goods from the manufacturer to the end user, distribution logistics handles only the operational aspects of delivering finished goods from producer to consumer.
Distribution logistics core activities include:
- Strategically planning and choosing the transportation modes and optimizing the routes for timely delivery of the finished goods.
- Managing storage facilities, keeping track of inventory levels, and managing warehouse operations.
- Handling and processing customer orders by picking, packing, and shipping the right products.
Distribution vs. Logistics
As I mentioned above, logistics is a broader term, while distribution is a narrow term. Let’s see their difference in detail for a better understanding:
| Aspect | Distribution | Logistics |
| Definition | It is a process of delivering finished goods from production to the end customer or retail outlets. | It handles the overall management of the flow of goods, services, and information from origin to consumer. |
| Scope | Limited to the movement and handling of finished goods. | It has a broader scope as it handles the entire supply chain, which includes transportation, warehousing, and inventory management. |
| Focus Area | It has 4 focus areas:
-Distribution channels |
It has 5 focus areas:
– Transportation |
| Key Activities | It manages distribution channels, coordinates product delivery, and handles customer interaction. | It coordinates transport and storage, manages inventory, and integrates supply chain functions. |
| Objective | Focus on getting finished goods delivered to the end users and ensuring customer satisfaction. | It ensures the smooth flow of goods through the entire supply chain, optimizes efficiency, and reduces costs. |
| Operational vs. Strategic | Primarily focus on operational execution and product delivery. | It includes both strategic planning and operational execution and focuses on overall supply chain management. |
| Primary Concern | Its primary focus is to effectively deliver goods to the consumer and manage market relationships. | It focuses on the overall effectiveness of managing and coordinating the entire supply chain process. |
| Example | Managing the delivery of products from a warehouse to retail stores. | Coordinating the entire supply chain from raw material procurement to product delivery to the final customer. |
Objectives of distribution logistics
The primary objectives of distribution logistics are to optimize the movement of finished goods and ensure the products reach the end consumer effectively and efficiently. Let’s see its objectives in detail:
Boost distribution efficiency in the supply chain:
It enhances the distribution processes within the supply chain by streamlining various operational aspects like transportation, warehousing, and order fulfillment to minimize delays and improve overall speed.
It selects the best transportation routes and optimizes them, handles different shipments, and leverages advanced technologies to ensure the product moves from warehouses to retailers/end-users promptly.
Minimize Product Damage:
Most of the products are sensitive to environmental conditions and vibrations and are prone to damage while shipping them to their desired location. Effective distribution logistics involves choosing the right material to pack the product, employing careful loading and unloading procedures, and selecting the most suitable transportation mode to ensure the safety of the product.
Reduce operational Costs:
Distribution logistics works on the operational aspects of the supply chain, and reducing operational costs is their key objective.
Operational cost involves transportation, warehousing, inventory management, and labor expenses. Distribution logistics reduce operational costs by optimizing logistic solutions and inventory flow in the warehouses.
Effective Information Flow:
Good information flow facilitates better decision-making, enhances coordination, and improves the overall efficiency of the supply chain. Use advanced technologies like electronic data interchange (EDI) and other software to ensure an accurate and timely exchange of information among parties (suppliers, distributors, retailers, and customers) within the supply chain.
Enhancing Customer Satisfaction:
Distribution logistics improve customer experience and enhance customer satisfaction by influencing product availability, delivery times, and overall service quality. It helps meet customer expectations by timely delivery of products, minimizing damages, and providing efficient order fulfillment, which builds customer loyalty and maintains a competitive edge in the market.
Fundamental tasks in Distribution logistics
Distribution logistics involves many essential tasks between picking the goods from the manufacturer and delivering them to their destination. These tasks are responsible for making the supply chain run smoothly and efficiently. Here’s a list of fundamental tasks that you need to know:
Inventory management:
Inventory management is a cornerstone of distribution logistics because it focuses on maintaining optimal warehouse stock levels. It tracks quantities of different goods stored in the warehouse, forecasts demand, and fills the goods that are falling below the predefined stock levels. It also involves the rotation of goods in the warehouse to ensure that previously stocked items do not become obsolete.
Order Processing:
Order processing is crucial in distribution logistics, as here the person has to deal with customer orders. It starts with accepting the order through an online platform, phone calls, or in person.
After receiving the order, they must select the correct product from the inventory, pack it securely to prevent damage during transit and generate shipping documents, including the customer address and tracking number, for efficient delivery and tracking. The simplified order processing workflow improves order accuracy, reduces processing times, and enhances customer satisfaction. Top of Form
Warehousing and Storage:
Warehousing and storage involve managing the goods in the warehouse before they are delivered to the end users. The tasks include efficient organization of warehouse space to maximize space utilization and make goods easily accessible.
It also manages other tasks related to warehousing, like receiving goods from suppliers, inspecting, sorting, and storing them in appropriate conditions to prevent damage. Effective warehousing and storage practices reduce handling costs, minimize stock discrepancies, and ensure that products are readily available for distribution when needed.
Transportation and Delivery:
Transportation and delivery tasks involve selecting appropriate transportation modes, optimizing delivery efficiency, managing carrier relationships, and ensuring compliance with regulations. Effective transportation and delivery practices minimize transit times, reduce transportation costs, and boost timely and accurate deliveries.
Reverse Logistics:
Reverse logistics handles the returns or exchange of goods made by the customers. It is called reverse logistics because goods, instead of moving forward in the supply chain, return to the warehouses or the storage units.
The tasks include inspecting returned items, processing refunds or exchanges, and managing the restocking or disposal of returned goods. Distribution logistics efficiently manages returns and exchanges, maintains customer satisfaction, and ensures that returned products do not end up as excess stock in the inventory.
Types of Distribution Logistics Channel
There are two types of distribution logistics channels, i.e., direct and indirect. Let’s understand in detail what they are:
Direct distribution channels:
In a direct distribution channel, there are no middlemen or intermediaries between the buyer and seller, and the manufacturers or producers sell their products directly to their customers. This direct communication between the buyer and seller builds healthy relationships and improves customer satisfaction.
Indirect distribution channels:
Unlike direct distribution channels, there are one or more intermediaries or middlemen involved in indirect distribution channels before the product reaches its final destination. The middlemen could be the manufacturers, producers, wholesalers, or retailers.
These intermediaries are involved when businesses are unable to handle the distribution process independently due to several reasons like high cost, large-scale distribution, or the complexities in logistics management.
Challenges in Distribution Logistics
As distribution logistics handles different activities within the supply chain, there are different challenges involved, which you should be aware of before you enter the transportation logistics business. Here are the key challenges that you need to know:
Logistics Laws and Regulations:
Logistics laws and regulations encompass a broad range of rules and standards that govern the movement of goods across borders, within countries, and through various modes of transport. These regulations include customs requirements, transportation safety standards, environmental regulations, and labor laws.
It may result in fines, shipment delays, and disruptions to the distribution process if the people involved in the supply chain fail to fulfill any of these laws.
Balancing Cost and Efficiency:
Companies strive to optimize their distribution operations while managing expenses effectively. Transportation costs such as fuel, maintenance, and carrier fees are a major component of overall distribution expenses. Companies must carefully evaluate transportation options to find cost-effective solutions that do not sacrifice delivery speed or reliability.
Addressing Environmental and Sustainability Concerns:
Companies are increasingly pressured by consumers, regulators, and stakeholders to minimize their environmental impact, such as by reducing the carbon footprint of transportation, adopting energy-efficient technologies, and optimizing transportation routes to lower emissions.
Businesses must implement green logistics practices like investing in alternative fuels, adopting energy-saving technologies, and developing strategies for reducing waste to meet the rising environmental and sustainability concerns.
Managing Supply Chain Disruptions:
Supply chain disruptions can arise from a variety of sources, like natural disasters, political instability, and operational failures. Companies must implement robust maintenance schedules, backup systems, and risk management strategies to mitigate the effects of such disruptions and maintain smooth distribution operations.
Best practices for optimizing distribution logistics
Now, as we are towards the end of the blog, we will share some best practices you can opt for if you have made up your mind to enter this industry. Here is a list of best practices:
Automated Workflow:
Automation streamlines various distribution processes by reducing the reliance on manual tasks and minimizing errors. Automated systems facilitate real-time tracking, inventory management, and order processing, allowing for faster and more accurate fulfillment. It also enhances data accuracy and provides valuable insights through analytics, enabling businesses to make informed decisions and respond quickly to changes in demand.
Efficient Transportation:
Transportation is a major component of logistics costs, and optimizing this aspect can lead to significant savings and improvements in delivery performance. Choosing the most appropriate mode of transportation and optimizing routes using advanced technology would help reduce fuel consumption and transit times.
Flexible and Scalable Logistics Strategies:
Flexible and scalable logistics strategies help adapt to changing market conditions and meet varying demand levels. Flexibility allows businesses to respond quickly to fluctuations in demand, supply chain disruptions, and other unforeseen challenges. On the other hand, scalable logistics solutions enable companies to adjust their operations based on growth and changes in business requirements.
Strong Relationships with Logistics Partners:
Building and maintaining strong relationships with logistics partners is vital for optimizing distribution logistics. Collaboration closely with suppliers, carriers, and third-party logistics (3PL) providers can enhance the overall efficiency and effectiveness of the supply chain.
The Bottom Line
Distribution logistics plays a key role in handling the operations of the supply chain by effectively managing all the necessary steps involved in delivering the products from the manufacturers to the final destination. Boosting distribution efficiency, reducing operational costs, and enhancing customer satisfaction are some of its objectives. Effectively manage the distribution management challenges like logistics laws and regulations and supply chain disruptions by adopting best practices such as efficient logistics solutions, strong relationships with logistics partners, and automated workflow.
