This is the second of a three-part series on thought leadership, titled, "Accelerating Fulfillment: What is your strategy for speed?" by Helgi Thor Leja, Industrial Distribution Leader, and Kim Zminkowski, Marketing Manager at Fortna Inc. Part 1: Overall Business can be viewed here.
There are three levels of your strategy at which to consider the influence of speed:
- Overall Business Strategy (What are the requirements around speed?)
- Distribution Strategy (Where can you reduce time in transportation, inventory and other strategies that influence distribution?)
- Distribution Center Strategy (How do you speed up fulfillment within the four walls of the DC without losing accuracy and increasing cost?)
If speed is the right answer for your business, the next level at which to consider the impact of speed is where your network, transportation, inventory and other strategies support distribution. You want to look for ways to squeeze time out of the distribution process, but you also want to be certain that you aren’t just speeding up your DC to lose that time to a transportation strategy that is not aligned along the same goals or an inventory strategy that doesn’t support just-in-time ordering.
Questions to Ask About Distribution Strategy
- Does your network strategy support speed? Do you have the right number of DCs and branch locations? How are they positioned in proximity to your customer base? You may not be positioned like others with DCs within 100 miles of most major metro areas. You may only have one DC, but do you know what percentage of your customers fall within a one-day delivery radius of your DC(s)?
- Does your transportation strategy offer the right access to both customers and networks? Do you have accessibility to carriers and their networks (hubs) to enable later pick-up and later order cut-off times? Which modes of transportation will you use to service customers and can you easily shift modes as needed to meet service requirements? Can you take advantage of zone-skipping or pre-sortation for parcel shipments? And can you negotiate later pull times with carriers to help shave time off order-to-delivery cycles for your customers? What about better rates to find cost savings to fund improvements to speed?
- Where do you need to place inventory for maximum flexibility and responsiveness to demand yet still maintain the “one stop to shop” approach held by many distributors? When you are trying to accelerate fulfillment, where you place inventory becomes a strategic decision. You need forecast and demand planning down to the consumer level in some cases. But that kind of accuracy comes at a cost. Often safety stock in the DC has to increase to guarantee speed and meet variability of demand. There are lots of impacts to inventory sharing, slotting of inventory in the DC and how inventory gets allocated when channels share inventory. You need robust inventory deployment tools to determine where and how much of each SKU to place in each DC. And consider the impact of decisions such as:
- Will you do direct shipments from suppliers that are located closer to customers?
- How will you handle substitutions? If you have more than one DC, can you systemically locate and deploy inventory currently in other DCs or locations? Sophisticated distributed order management software is often required to do this.
- In the case of split shipments, how do you handle orders seamlessly for the customer so that they get both shipments at the same time? And how do you allocate double shipping costs?
And there are ripple effects felt across the business. Your marketing strategy may include promotions like free next-day shipping on direct-to-consumer orders over “X Amount” before considering the operational impacts of that. Does your omni-channel strategy allow you to use your branches as distribution nodes? Do you have the inventory visibility across channels to take advantage of ship-from-branch strategies?