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Benefits of owning supply chain distribution network are many and going forward there is no doubt that efforts will be worth the results.
Distribution network is a major cost component for majority companies and has direct impact on profitability. With companies trying to expand their reach and adding new consumers, distribution cost becomes an important factory in decision making to service new consumer outlets
Distribution Network is integral part of supply chain
Sharing top benefits of owning distribution network:
1. Understanding customer needs:
Customer needs will be better understood as company employees will be in direct touch with the customers on daily basis. Customer needs and problems will be identified quickly for resolution
2. Improved Customer Satisfaction:
Drivers who are delivering goods and are loyal employees of the organization will establish good customer connect. They are the ones who will listen and understand the customer problems and take it up for resolution. It cannot be substituted by a third party transporter. Product Availability and delivery process will be much improved
3. Employee Engagement :
Employees will be much more engaged and committed. They will understand big picture of organization goals and how distribution network and efficiency contributes towards company mission and objectives. With clear responsibilities and accountabilities, an engaged employee can deliver greater value in the distribution network
4. Distribution Cost:
1. Warehousing:
Expenses incurred in managing warehousing operations for materials and finished goods which includes, facility rent, operating expenses like fixed manpower, loading and unloading charges, stationery and miscellaneous expenses.
2. Transportation:
Cost of moving goods from one location to another which includes material transportation from suppliers to factories, Primary transportation from factories to distribution centers and secondary transportation from distribution centers to distributors and retailers
There will be direct control over the costs and value will be added through better space utilization, reliable transit times and lower detentions. Improved reliability will further lower the inventories
5. Quality :
Product quality delivered to the customer will be much improved as employees will understand the nature of product and any damage is the direct loss to the company. Consumers will get best quality and fresh product which will contribute towards consumer trust, company reputation and increased sales.
6. Build company reputation:
Owning distribution network is not an easy task and when a company does, it shows its commitment towards customers and consumers. It build company reputation and branding. We have seen trucks of coca cola and Pepsi on the roads which are one of the big advertising mechanisms for these companies
7. Competitive information:
Two of all time biggest wealth creators are interesting examples of owning distribution network. Warren Buffet reason to invest in Coca cola apart from global brand was its strong distribution network.
Sam Walton of Walmart owes his success also in managing its distribution as it shaved off good amount of cost and improved margins in a tough retail industry. Sam Walton even used to drive his own plane to visit Walmart stores
Considering the cost saving in distribution and its high impact on sales and profitability,
organizations will keep close watch on this head and look for opportunities for cost optimization wherever possible.
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