Excellent Distribution

Do you provide excellent delivery and distribution of products and services?
A. No, we couldn’t call it ‘excellent.’
B. We try very hard … but there is significant room for improvement.
C. We are pretty good.  However, we can do more.
D. We achieve low cost-to-serve, responsive delivery and assured quality distribution of products and services most of the time.
E. We consistently achieve low cost-to-serve, responsive delivery and assured quality distribution of products and services.
[Score:  A=0, B=1, C=2, D=3 and E=4]
Why is this question important?

The distribution of products and services to customers requires examination of the company’s performance regarding – cost, quality and responsive time performance.

Cost

Objective here is to achieve ‘lowest-cost-to-serve’

Measures

  • Cost of storage
  • Cost of delivery to customers
  • Per-cent of customers reached through low-cost-to-serve channels – electronic transacting

Time Performance

Objective here is to deliver ‘responsibly’ to the customer

Measures

  • Lead time – from order to delivery
  • On-time delivery percentage

Quality

Objective here is to enhance quality

Measures

  • Per-cent of items delivered with no defect
  • Services rendered with no defect
  • Number and frequency of customer call-backs
  • Number and frequency of customer complaints

Distribution is important because:

  1. Firstly, it affects sales – if it’s not available it cannot be sold.  Today most customers won’t wait.
  2. Secondly, distribution affects profits and competitiveness since it can contribute up to 50% of the final selling price of some goods.  This affects cost competitiveness as well as profits since margins can be squeezed by distribution costs.
  3. Thirdly, delivery is an integral part of delivering customer satisfaction.

Decisions about physical distribution are key strategic decisions. They are certainly not short term. Increasingly it involves strategic alliances and partnerships which are founded on trust and mutual benefits.

Controlling the flow of products and services from producer to customer requires careful consideration. It can determine success or failure in the market place.

The choice of channel includes choosing among and between distributors, agents, retailers, franchisees, direct marketing and a sales force.

Deciding between blanket coverage or selective distribution, vertical systems or multi-channel networks, strategic alliances or own sales forces, requires strategic thinking.

Decisions about levels of stock, minimum order quantities, delivery methods, delivery frequency and warehouse locations have major cash flow implications as well as customer satisfaction implications.