When it comes to supply chain management, it is impossible not to mention that building a distribution system is an important component of supply chain management. In particular, the delivery channel construction technique is one of the important tasks to help meet customer requirements, optimize costs, and coordinate between partners. Especially with the current trend, direct-to-user delivery has significantly changed the way these delivery channels are designed and operated.
Delivery mode points to trends in the way customers buy goods and receive them at the business or at home. Organizations can exploit several delivery channels. The type of distribution network a supply chain chooses has a strong influence on the number of locations and locations. Distribution channel strategy is determined during strategy formulation; however, several other tactical options can be identified during network design. There are many types of fulfillment channels, each with a different level of service output:
1. Manufacturer storage with direct delivery
This is the type of network in which the manufacturer uses direct delivery. Manufacturers take orders from customers through a number of sales channels (direct, catalog, website, ..) and deliver goods directly to customers, without intermediaries. This model is common in business-to-business (B2B) settings but can also be used for business-to-consumer (B2C) sales. An example of its appropriate use in a B2B context is for perishable goods that need to get on retail shelves as quickly as possible to maximize their shelf life. This can also be a supplier of large-scale production.
The main benefit for the manufacturer is a direct relationship with its customers so that they can directly interact and market with them in the future. For B2C, it is mainly used for small, diverse goods that customers are willing to wait for, as delivery times can be long. Since there is only one tier, the manufacturer has full control over the inventory and has low book-keeping costs. Shipments are typically in the form of trucks (TL) or container cargo (CL), but logistics costs can be high and intermediaries may be required to reduce these costs.
2. Manufacturer storage with drop ship
An order-by-order consignment model, in which a retailer or distributor (either direct or online) takes orders from the customer and the customer receives the goods directly from the manufacturer. Distributor or retailer without stock. This model is good for high-value goods with sporadic demand; or bulky items that need to be custom-assembled, customized, or machined that can only be completed upon order. Shipments may be small and therefore shipping costs are high and time consuming, but manufacturers can control delivery reliably.
In this model, the manufacturer has no direct contact with the customer, so the customer knowledge is less than in the previous model. At the same time, the manufacturer does not need to maintain a sales force or other functions such as credit approval. Drop shipping is a form of retail business in which a seller accepts customer orders but does not keep sold goods in stock. Instead, in a form of supply chain management, it passes orders and their shipment details to the manufacturer, wholesaler, other retailer or fulfillment house, who then shipping goods directly to the customer.
As such, the retailer is responsible for marketing and selling products, but has little or no control over product quality, storage, inventory management, or shipping. This eliminates the cost of maintaining a warehouse – or even a storefront, purchasing and storing inventory, and employing the staff needed for those functions. As in any other form of retailing, the seller makes a profit from the difference between the wholesale and retail price of an item, less any sales fees, the appropriate seller or carrier accrues to them.
3. Manufacturer to distribution center to retailer
Traditional supply chain model, manufacturers work with distributors. Distributors provide retail and manage deliveries with their own vehicles. Here there could be one or more distribution centers in the model, and multiple levels of wholesalers could be added. With more levels will require more inventory, so this model will have a lot of inventory. It is suitable for mass-produced products, inexpensive goods with high competition. It makes goods available at a high level to satisfy customer service.
4. Independent distributor with omni-channel network
This is a network in which the independent distributor is a central channel (channel master). They buy goods from multiple manufacturers (or other distributors) in bulk and integrate them for a retail location, local distributor, wholesaler, or directly to the customer. Having an omni-channel network means that the independent distributor maintains multiple channels of communication with customers, such as direct sales, call center, website/app, and a wide range of wholesalers and retailers. No matter the method of communication, the customer experience should be consistent and consistent.
The manufacturer joins with this independent distributor to gain another sales channel and reach a larger market. Retailers and distributors can buy the TL or CL form to get the advantage of price scale and can sell at competitive prices. Distributors need to develop careful local distributors and retail partners to ensure they build and maintain a large enough customer database. The organization also needs to negotiate exclusivity contracts for the market, but competitors can do the same, so they may not have full market access. This distributor needs to have an efficient delivery network in either a proprietary or contract manner to provide the highest level of service while also controlling the relatively high shipping costs. They can also add value-added services such as large warehouse integration. They should also have a large number of suppliers so they can control price, time, quality, and availability.
5. Independent aggregator with e-business network
This model is similar to the one above, but it relies heavily on direct marketing to individuals through the brand website, which can sell most items. Alibaba and Amazon are good examples. Direct-to-consumer shipping through parcel services is common, these organizations may own fleets or through local distributors (which may also be their own). They use slow-moving of goods directly from the manufacturer through a local distributor rather than doing the stocking themselves.
Other independent distributors will sell merchandise specifically to B2B or B2C niches using web sales. Independent distributors have direct access to customers and can manage this customer information and customize customer web interactions. They often use loyalty programs that offer free shipping with an annual membership fee. To keep these customers loyal, they need a very high level of customer service.
Each channel type, depending on how it is structured, will operate at different levels on key aspects that impact customer satisfaction, including: customer service level, product type, product availability, delivery time, channel complexity, inventory costs, shipping costs, and channel facilities. There is always a balance between channel types and the correct service attributes that keep customers happy. Customer self-tracking and tracing is a clear example of today’s order pricing feature.