Maintaining Distribution

A solid distribution strategy can improve service, enhance a company’s reputation, and increase their market share. To this end, a good distribution strategy tries to do 3 things

Meet Customer demands

Building a quality product with lots of cool features that is sold at a low price means nothing if that item is unavailable when the customer wants it.

Reduce Costs

The total cost of a good distribution plan may not be the cheapest way to handle inventory. Cost to benefit analysis is a continuing process.

For example, shipping stereos by air may be the most expensive way to move them, but it may reduce the cost of warehousing and inventory control, which may make the overall distribution cost lower.

Accelerate Order Processing

Short order processing times equate to a competitive edge.

For example, FEDEX advertised early on that they were the choice for when “it absolutely, positively had to be there overnight, guaranteed.”

The premise of the ad was that all a customer had to do was call a 1-800 number, and voila, package in Moscow at 10 am the following day.

Note:

Remember to consider internal and external market forces while evaluating distribution. The economy, government regulations, new technologies, and improvements in efficiency can dictate radical changes to your distribution plan.

For example, when FEDEX first started flying their own planes, they were limited to a cargo weight of 7500lbs, unless they wanted to go through the added expense of additional FAA certifications and the huge investment in bigger planes. During that time, their entire fleet was comprised of French Dassault 20 business jets. As demand for their services increased, they had aircraft flying around the clock.

Later, as assets grew and FAA regulations changed, FEDEX acquired much larger Boeing aircraft, which could fly much farther, much cheaper. This allowed FEDEX to reinvest in even more planes and expand into ground transportation. FedEx now offers 3-day service as well as overnight.