Home' MHD Supply Chain Solutions : MHD Spt-Oct 2014 Contents 32
Underlying principles must then be applied in
the light of overlaying trends. Omni-channel ful-
filment in the retail sector, for instance, is aimed
at making products available to buy or return
anywhere in the distribution or retail networks.
This means new drop-ship, direct-ship, replen-
ishment, and reverse logistics mechanisms, all
of which must be integrated into a sufficiently
responsive plan and implementation.
Designing a distribution centre for this kind of
flexibility while minimising cost-to-serve will give a
different end result for each individual company,
but because the input data differ, not the basic
rules. Companies will still need to identify syn-
ergies across channels, implement the correct
operational approach and the technology to go
with it, and map out optimal flow paths.
Distribution network solutions,
trade-offs and comparisons
Whatever the decision about how to run the
distribution network, it starts from a sound
supply chain strategy, which is in turn based
on overall business objectives and customer
expectations. Modelling skills and business and
industry experience then provide a framework
in which to begin the process of generating an
appropriate solution. Systematic and frequent
engagement and feedback from stakeholders
in the business is essential, including investors,
management, end-users, customers and
suppliers. Although the two bookends of
customers and suppliers are somewhat beyond
the control of an organisation defining its
distribution, input from both directions is vital
for a network optimised for overall effectiveness,
efficiency and profitability.
Trade-offs are likely to be part of the deal.
Indeed, the best distribution network may be
the one that offers the most acceptable compro-
mises. The classic inventory-customer service
balance is a case in point. Multiplying stocking
locations in order to better fulfil customer
demand should increase customer satisfaction
and ‘share of customer wallet’ for the organisa-
tion concerned. It should also decrease end-cus -
tomer delivery costs. Conversely, it is likely to
increase storage, inventory holding and linehaul
costs, as well as operational complexity. The
enterprise should also make sure that such a
move does not result in ‘over-servicing’, meaning
providing a level of service that exceeds what is
expected or truly valued by its customer base.
And while comparisons can help to identify
and explore different options in distribution,
companies need to be wary of copying without
truly comprehending. Population and distribu-
tion ‘centres of gravity’ make a good example. In
the UK with its reasonably even spread of pop-
ulation, the town of Milton Keynes is both the
most central point for serving all areas and also
well-situated with road and rail links to suit. In
Australia, the spread of population is much less
even. Trying to use the same approach would
lead to trying to make the town of Hillston the
centre of logistics operations, a role for which
this small country town with its population of
1,000 and proximity to nature reserves would
really not be suited!
And the winner is... ?
The distribution network that wins is the one that
is designed to meet the specific needs of the
organisation concerned. That means three things.
First, correctly integrating constraints that
won’t change (like the bookends of supplier and
customer bases). Secondly, staying close to con-
straints that are still evolving (buying patterns,
customer behaviour, economic developments
and regulations). And thirdly, leveraging avail-
able resources for the most cost-effective way of
achieving overall business objectives.
It also means a holistic view, end-to-end, of
the supply chain to understand that a certain
decision for one component may not be in the
best interests of the organisation overall, and vice
versa. Silo thinking and copycat network design
are out. Open-minded, pragmatic approaches
that engage all ‘interested parties’ are in.
And if you really want to know what the
distribution network of the future will look like,
it’s simple. It will be the one you design for your
enterprise, using the principles mentioned here,
whilst adapting to the requirements of your
market and your environment.
Rob O’Byrne has been designing and
modelling distribution networks for 20 years.
Read more at http://www.LogisticsBureau.com/
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MHD1408MH:Layout 2 15/8/14 10:47 AM Page 1
“And if you really
want to know what the
distribution network of
the future will look like,
it’s simple. It will be
the one you design for
your enterprise, using
the principles mentioned
here, whilst adapting
to the requirements of
your market and your
MHD SUPPLY CHAIN SOLUTIONS — SEPTEMBER / OCTOBER 2014
MHD Sep-Oct 2014 18-33.indd 32
5/09/2014 3:03 pm
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