Distribution logistics: Definition, guide, challenges

Every business, whether they’re selling goods or services, needs distribution logistics. It’s how we get our goods and services into the hands of consumers once they’re ready to be ordered.

In eCommerce, a robust distribution logistics strategy is essential for getting your products to your customers in a quick and cost-effective way, and distribution should be an integral part of your overall logistics strategy.

Like many things in the eCommerce industry, distribution logistics takes a lot of thought and preparation. Today, we’re going to take a look at what distribution logistics entails, and the challenges eCommerce businesses often face when developing their own distribution logistics strategy.

What is distribution logistics?

In eCommerce, we define distribution logistics as the ways in which we distribute goods to the end customer. The details differ depending on whether you’re B2C, B2B, or a retailer with their own distribution logistics operation.

For most eCommerce business, distribution logistics entails the fulfilment process and last-mile delivery. It involves inventory positioning, order processing, picking and packing, and shipping. Most distribution logistics strategies will depend on outsourced logistics, such as carriers, 3PLs, and technology.

Depending on who you ask, distribution logistics strategies can differ from business to business. However, two terms that eCommerce brands should be aware of are ‘direct distribution logistics’, and ‘indirect distribution logistics’.

 

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What’s the difference between direct and indirect distribution logistics?

Direct distribution logistics

With a direct distribution logistics strategy, businesses fulfil custom orders internally, although they will normally rely on third-party carriers and other tools in order to fulfil orders efficiently.

When a merchant raises an order with their supplier, the supplier will ship products directly to the merchant’s premises, whether that be home, offices, or rented warehouse space. Once an order has been placed, the merchant will package and ship the order from their premises, usually through a third-party carrier.

The merchant also needs to invest in equipment and technology to ensure inventory and orders can be processed, tracked, and distributed effectively.

Indirect distribution logistics

An indirect distribution strategy involves the merchant outsourcing much of their operation to a third-party logistics provider (3PL). A 3PL will have their own storage facility, warehouse teams, packaging supplies, courier partner network, and all the other necessities to handle distribution effectively.

Many eCommerce companies choose to work with a 3PL to rely on their expertise and operations, while allowing them to focus on other areas of their business such as marketing, networking, product development, and so on.

A good 3PL will also have an inventory management system to allow customers to manage their inventory efficiently across all of their channels and brands. At James and James, we use a custom-built, award-winning inventory management system called ControlPort, which all of our clients have access to as soon as they’ve onboarded with us. More on that later.

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Common challenges of distribution logistics

Distribution logistics are complex. Not only do you need to actually figure out the best way of getting your goods out smoothly, you also need to do it in the most cost-effective and time-efficient way possible.

Let’s take a look at some of the common challenges logisticians face when planning – and running – a distribution operation.

Demand

Monthly demand fluctuations are common in many industries and niches. Black Friday to Christmas sees increased demand in most markets, where summer months can often be a little quieter as people spend less time online. Without a proper distribution strategy in place, seasonal fluctuations pose several challenges and risks, such as being underprepared, or even overprepared.

eCommerce businesses need to find a balance between having key stock available for purchase at all times, while at the same time not falling into the trap of overstocking SKUs and thus losing profit to unnecessary storage costs. Demand forecasting is key to overcoming this challenge.

Rising costs

Costs of fuel, energy, and labour are increasing across the world, and all of these increases will have a knock on effect on the price of your distribution network. The challenge lies in dealing with these rising prices while also offering value to your customers. With the economy as turbulent as it is currently, it’s vital to constantly review the costs of distribution and wider operational processes.

Tracking

Although we’ve come a long way with digital tracking, so many physical goods get transported each day that inventory is bound to go missing at one point or another. This can be frustrating, as it often involves chasing various third-parties to get to the bottom of things, making claims with shipping insurance providers, and dealing with unhappy customers who haven’t received their order.

Let’s discuss your distribution logistics strategy

At James and James, we specialise in getting your customer orders where they need to be, anywhere in the world. With our international network of fulfilment centres, large range of courier partners, and award-winning inventory management platform, ControlPort, we’ve got the knowledge, tools, and experience your business needs to boost sales, grow, and succeed.

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We’d love to hear more about your business, your journey so far, and any barriers that are stopping you from getting to the next level. We’ll even give you a guided tour of ControlPort, as well as a tour of one of our huge fulfilment centres if you want to know how everything works.

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