We have to say it and that’s the truth: success in business means great logistics. In wars too and there is a reason for that. You cannot fight and you cannot serve your customers if your goods are not there for the customers to buy them at the moment when they find it convenient and at the right location for them.
Logistics ensures that the right products are available at the right place and time to meet customer’s expectations, and its the job of logistics to bridge separations between points of supply and demand, and deliver goods in an effective manner. But, this is not an easy task as you might know. There are 3 key aspects of logistics to consider: reach, network and operational aspects.
Many companies will employ different distribution strategies for different types of products and services. Distribution strategy deals with the spreading of product throughout the marketplace, encompasses warehousing, transportation, and tracking goods and can be of :
- intensive distribution – having products in the hands of every customer in a region or market (eg. Coca Cola, Unilever, etc)
- exclusive distribution – getting products in the hands of a limited number of people but offering a “high-touch” or customized buying experience (eg. jewelries and sports cars), and
- selective distribution – fits in between intensive and exclusive distribution and is selected in terms of numbers and customers and locations.
Logistics network is about choosing the locations from which a business operates and the function or purpose of those locations. Finding the right number and placement of locations involves not just science but art because it gives a sense of importance imparted to customers and the optimal blend of market access and cost containment by establishing the right commercial centers of gravity, optimal points at which total distance in from supply locations and out to demand locations is minimized.
The operational side of the logistics has to be considered once reach and networks are established. On the order cycle, or lead time which is the amount of time from order receipt to delivery is depending a lot of a business success. The product has to be available and it must perform as the customer expects. Transportation is therefore crucial and accounts for more than 60% of the logistics costs, even with the smart combination of various modes of transportation.
One last idea: things are changing quickly in logistics also. Vendor-managed inventory (VMI) is popular now as it allows vendors to manage inventory that resides at a buyer’s location. Also vendor-owned and -managed inventory (VOMI) takes the idea one step forward and allows vendors to manage inventory at a customer location while retaining ownership of it until the product is sold.