A classical distribution scenario
A wholesaler procures an order, acquires goods and stores them in a warehouse, supplies
order-based stock for a calculated amount of profits. The wholesaler played a number
of roles traditionally - he was an intermediary who took care of logistics and moved
stock around, a consolidated sales agent for suppliers, a local customer service
point and a demand buffer for manufacturers.
Yes, multitasking existed even then, but with limited scope. These limitations were
of the physical kind - all these roles could be played out only within a certain
geographical terrain.
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The distribution network today
Today, the role of the distributor as an intermediary has morphed into that of a
'disintermediary'. A distributor plays a virtual role, an almost invisible part
of a smooth supply chain. Third-party logistics providers help ship goods from one
part of the globe to another in a day, while a more customer-centric distribution
chain enables direct ordering and tracking of orders over the Internet.
Remote means of customer service diminishes the importance of a local customer.
Today's supply chains have become extended value chains where distributor operations
have shifted from the buy, hold and sell paradigm to the sell, source and ship paradigm.
To make these necessary shifts the distributor needs to have more information about
all customers, learn to manage inventory from other distributors and have a workflow-based
information system.
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Effective supply chain management is an intricate loop, one
that begins with the customer and ends with the customer
The use of databases, communication systems and the foremost advanced software are
crucial to any supply chain management system. Optimal management of a supply chain
results in revenue enhancement through high customer satisfaction and repeat sales.
Web enabling a supply chain helps connect an enterprise to all its trading partners
taking away all the weak links existing within it.
This diagram shows how manufacturing trends have changed over time.
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How does web enabling equip a distributor today?
A web enabled distribution network helps a distributor work with multiple business
models; collaborate with business partners for better pricing and enables a smoother
supply chain. Selling, sourcing and shipping constitutes a part of virtual operations
and the distributor is the sales agent and the logistics coordinator too.
Selling is accomplished through the Internet and traditional distribution channels
and information about customers helps forecast demands. A no risk, no title approach
to sourcing and negotiating pricing is the current scenario. Along with collaborated
working with other distributors, partners and manufacturers can create demand forecasts
and negotiate allocations.
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Lets study a few features in a web enabled distribution network:
- Corporate Solutions distribution channels
- Online order management
- Warehousing
- A distributor takes orders over the net. These orders may be for goods that he does
not hold or source. In short, the distributor does not own the inventory! This order
is added into a combined pool of orders that are from a consolidated list of clients.
- Manufacturers have already worked in combination with this pool in forecasting demand,
reserving allocation and even agreed on pricing.
The order that comes in is matched with the shared pool of orders for preferred
manufacturers and then drop-shipped directly to the customer from the manufacturer
using a third-party logistics provider. Payment to the manufacturer happens at the
time of the shipment and not at the time of the delivery of the goods.
Whole sale distribution factors that are driven
by e-business are:
- Collaboration - between distributors, customers, suppliers, logistic providers
- Consolidation - mergers and acquisitions and many other suitable cooperative arrangements
- E-commerce initiatives between businesses and customers
- Value-enabled supply chains - multiple methods to expand and distribute
- Reduction in costs and quicker response times
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Online Order Management:
Online catalogs,Another predominant means of leveraging the Internet for
distribution are the online catalogs. Apart from acting as a sales channel and a
procurement and sourcing tool, online ordering helps integrate an enterprise's order
management system with the web storefront. Back office systems integrated with front-end
order entry comprise the truly enabled e-commerce success store of today.
Integrating the backend with the front-end systems mean integrating an aging legacy
system, transporting data that was confined within the enterprise to valuable information
that web enables the entire distribution network.
Electronic Information integration or the sharing of data that can affect all members
within the chain - be it demand data, inventory status, production schedules or
shipment plans. All this information is processed and forwarded to the destination
without actually being stored anywhere.
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What else does it accomplish?
- Incorporates an organized planning system
- Shares costs, products and pricing
- Displays order status and order tracking
- Initiates the order-to-cash process
- Provides a reliable delivery date
- Adds precious data to demand forecasting
- Relieves call center and sales force of routine orders
- Reduces transaction costs
- Enables exemplary customer service at all points for speed and convergence
When airlines shifted reservation systems to an open network, involving other airlines
and even car rental companies, customers found the package extremely attractive.
Apart from better price management and the ability to move inventory within the
supply chain in response to finely tuned demand signals, it fostered closer relationships
between all the players in the supply chain.
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Warehousing
We spoke about global marketplaces that can reach customers anywhere in the world
anytime. Interconnected and collaborative supply chain partnering demands cross-organizational
plans.
Treat each customer as a unique entity and provide customer-specific value-added
services and fulfill joint forecasting plans is what any data warehouse should do
today.
It is no more a specific physical location, instead it is a dynamic storehouse of
information that offers mass customization - real-time information, 100% accuracy;
and is also mass accessible and capable of integrating with other business systems.
The main role of the warehouse in supply chain management is execution. Paper and
an occasional PC were what supported a traditional warehouse. The storage center
of the e-connected world enables a continuous flow of distribution operations. Apart
from storing and shipping material, it tracks demands, cross docking, manages inventory
from vendors and custom labels products.
A web enabled warehouse implements the right kind of technology package - be it
web enabling an existing ERP (Enterprise Resource Planning) system, or a custom-software
solution designed specifically for own operations or a packaged solution that is
plugged onto the existing ERP system.
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The need for a web enabled solution:
- Distribution execution today is more complex and needs a strong technological backbone.
- Smaller order sizes are executed in larger volumes
- Shipment on the same day
- Need for a complex distribution operation with real-time, highly integrated information
system capabilities.
- Prioritizing, managing and executing all tasks in real time.
- Ability to support 100% accuracy in all information it stores.
Poor inventory management at the warehouse floors lead to failures in delivery and
collaborative forecasting methods. All trading partners need to have adequate execution
capabilities in their distribution operations. If the warehouse is running on paper
and operating in "batch mode", distribution data is less than 100% accurate and
will in turn the limit the accuracy in the data in an ERP system within an organization.
That's why it is imperative that the peripheral systems that connect with an ERP
system also integrate well within the whole.
A warehouse picks, packs, checks and ships products. Materials management, order
management integration, labor management, the Internet and the ERP system in place
play a major role in the newly transformed warehouse. Inventories are more visible,
information is accessible 24 x 7 x 365 and the warehouse operates from a precise
and time definite delivery window now.
In each and every one of the sections of the distributor network that we examined,
we figured that information technology and to be more specific the Internet was
the enabler. Companies that sit on the sidelines and do nothing towards enabling
their enterprise will not be prepared for the collaborative planning that is necessary
to deliver value-added services and achieve operational excellence in distribution.
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