The future of fulfillment is fast approaching and it’s now all about mastering something called Distributed Logistics!
What is Distributed Logistics?
The definition I’m running with currently is below, but this rapidly emerging concept continues to evolve literally as we speak:
‘A fully integrated and optimized network of two ore more fulfillment centers operated in unison to increase sales and customer delivery service levels, which minimizes transportation costs and maximizes inventory optimization’ ~ Jeff Ashcroft
Interesting you say, but why would anyone want to move to a Distributed Logistics network?
Probably the most compelling reasons are that simply put, positioning the right inventories close to customers saves on costs and improves service.
There’s a growing body of work highlighting the fact that allocating stocks to demand flow closest to customers may also increase revenue.
Here’s link to Achieving Revenue Gains from Distributed Logistics: The Value of Inventory Proximity to Customers whitepaper by Gene Tyndall, Alex Baker and Stephen Timme which provides greater detail on the question of why do Distributed Logistics?
The next great reason for switching over to a Distributed Logistics network is that the introduction and their use of forward pick and deliver locations also reduces both lead time as well as overall delivery costs.
Suffice it to say, distributed fulfillment is growing daily in importance for supporting New Retail with a unichannel logistics methodology which is about much more than simply distributing warehouses.
Now that we’ve reviewed the What and Whys for Distributed Logistics, let’s talk about the How!
First off , the Fulfillment Center (FC) network can be fully outsourced or a hybrid of in-house and outsourced depending on your in house facility ROI and the need to support any outlier regions via outsourced shared facilities.
Given the short lead times and rapid delivery times required for unichannel Distributed Logistics, it is critical that the FC’s are integrated directly with the Seller business systems.
Fast and effective Distributed Logistics also relies heavily on a best in class WMS, and DOM, both which enable efficient and effective operations across and within the network.
In addition to these key operating systems, an effective Distributed Forecasting and Flow model is needed for accurate and timely inventory allocations and replenishment.
And last but not least all delivery locations and geographies need to be assigned to the appropriate Fulfillment Centers with appropriate tiers and hierarchies established to support smooth operations in support of all demand scenarios encountered.
Benefits and Value of Distributed Logistics
So now certain you all want to know “Where’s the Beef ?” What benefits and value can Distributed Logistics deliver to your business and customers?
1. Saves costs of transportation by leveraging more local ground deliveries.
2. Distributed FC’s with higher levels of customer satisfaction increases sales.
3. Same day/next day deliveries to both consumers AND stores are made possible at reduced rates.
4. Volumes can be rapidly scaled up for store replenishment and/or consumer deliveries.
5. Returns can be processed more rapidly and efficiently at the local level or consolidated locally for more cost efficient LTL delivery into Centralized Returns processing.
6. Stocking requirements are based on demand flow, not large weeks of supply and safety stock methodologies typically employed.
7. Improved sustainability and carbon footprint results can be also be expected based upon shift from longer distance air deliveries vs more ground shipments as well as consolidated deployment moves into regions and for outbound returns.
For all of the above reasons expect to hear much more about Distributed Logistics going forward.
The demands of consumers will only continue to increase and it’s the job of logistics and supply chain professionals to discover and bring viable solutions to their business leadership teams.
Then by exploiting these methods you can provide your business with innovative products and services that meet both consumer and store needs in these dynamic and fast changing times!