Distribution Planning

In practice, the optimum distribution system may result from “trade-off” agreements within the organisation, combining individual cost advantages and disadvantages to obtain an overall cost benefit to the organisation and a satisfactory customer-service level. Distribution can be a source of competitive advantage It is interesting to note that organisationally, the concept of a totally coordinated distribution system at senior management or director level, is complementary to the development of a “linked” system of procurement of supplies, storage and inventory control, production control to obtain the benefits of a total supplies system and access to the early stages of design and development in choice of materials.

A number of factors must be considered in planning a distribution system, the first and most important being the needs of the customer. However, it would clearly be impossible to send a vehicle every time a customer required an item, and we have therefore to balance the customers needs against the cost of providing that service. There are a number of distribution channels by which a product or service reaches a customer, and these are illustrated in Figure 44. Customers’ needs are varied, and we must decide the type of transport organisation and distribution system best suited for a particular customer. In many trades, a weekly delivery is required; this is not difficult to plan but it is as well to remember that people expect a delivery of a particular day, and this should be taken not of and adhered to if possible. In many cases weekly deliveries must be on specified days. There are trades where daily deliveries are required. Suppliers of drugs and medical supplies are such a case; fresh foods such as bread and cakes are another. In some cases, goods are sent out when a full load is made up, but this is unusual because most businesses are based upon a regular delivery service. This is true of deliveries made from central stores to substores and depots. Special loads of the type we see taking machinery to a plant with police escort are, or course, “one-offs” and need very careful planning.

Loads

The type of load and the quantity and/or volume are important factors that must be taken into account when planning the distribution system. The nature of the

Figure 44. Channels of distribution

Producer

Direct Selling Own Retail Outlet Wholesalers and Agents

Customer

Independent Retailers Franchised Retailers

goods must also be considered. Perishable goods must be delivered right away and will require particular methods of handling. Petroleum spirit and other inflammable or toxic substances will be subject to special regulations. Corrosive loads will also need special precautions. If any of these goods with special handling problems are to be carried, arrangements must be made when distribution is being planned.

Organisation Required

The aforementioned factors, together with the volume of traffic involved, will give the basis for deciding the type of organisation best suited for the purpose. A decision must be made on centralising or having a decentralised method of operating. Where the work is mainly of a local character, it is probably sensible to operate on a decentralised basis. This means vehicles operating from a depot in each area where there are customers or stores, each depot having it own manager and organisation. This method has the advantage of direct control by local management and it is flexible. However, where an organisation has a number of vehicle depots, it may be costly because a number of vehicles must be carried at each depot, some of which may be underutilised. Where a company is operating on a national basis, it is more likely that a national centralised system will be adopted. This will make maximum utilisation of transport easier, because central planning is possible. It also makes it uneconomical to use management aids, such as computers, for vehicle scheduling and loading. Support services such as an organisation’s own workshops are also possible with centralisation. We must also consider the method of operating and the type of service, for this will also influence the organisation of the transport service. The organisation that

provides a delivery service to each customer will need more detailed planning than a company who does not provide this service. Many large organisations find it economical to have depots or collection centres at each regional location. This enables them to use large vehicles that, when fully loaded, are more economical to operate than small vehicles involved in the same traffic. This method is often known as “trunking” and is popular where the volume of traffic justifies it, as a large vehicle can take a load from one depot to another and return with a load. It is, of course, also necessary to provide a local service, either by own transport or by using local haulier on a subcontract basis. A local management organisation will be needed. If the job is subcontracted, this can be avoided; but you will have lost direct control of delivery to your customers. Where the traffic is only serving factories or depots within an organisation or group, the local factories or depots may collect form a central depot in the region at regular times. There are often localities that have to be served that present special problems.

Warehouses and Depots

The provision of warehouses and depots will obviously affect the planning of a distribution system. This first point to consider is if warehouses are necessary. Two factors have, in recent years, altered the basis of providing warehouses. The first is the provision of a modern motorway system, which makes it possible to supply a very wide area from a central warehouse. The second factor is the recent development of large vehicles, which make it economical to move large loads via the motorway network. Nevertheless, there may well be a case for warehouses to be provided, based upon the following:

• Types of goods being tran sported; perishable goods may require local storage where goods are regional (only sold in some areas) • Cost of vehicle operation; it may be that vehicle mileage is sufficiently reduced by providing a local warehouse to make it an economical proposition; better vehicle utilisation may also be possible • Disaster relief • Customer’s needs; if customers can be better served by having a local warehouse, or they request such a service, then there are reasonable grounds for providing such a facility