The evolving world of distribution management
Distribution management (DM) in the consumer packaged goods (CPG) industry creates many new challenges for today’s distribution system operators, from business drivers to environmental factors.
CPG and retail companies — collectively known as C&R — use a variety of DM approaches depending on their geography, line of business and product type. In fact, many multinational companies use multiple models across their organization based on those factors. Because these companies regularly evolve their product mix, geographic coverage and execution costs, the specific models they use continue to evolve. This leads to some interesting hybrids of the DM models covered in this paper.
One thing is clear: One size definitely does not fit all. To help you decide what is best for your enterprise, this paper:
- Defines DM
- Identifies the primary C&R DM models
- Identifies and describes the main implementation variations
- Outlines the advantages and drawbacks of each DM model variation
What is distribution management?
A full DM process coordinates the movement of goods from a manufacturer (brand owner) to the retail point of sale. This can involve numerous activities and processes.
Typically, certain aspects — supply chain planning and execution, warehousing, inventory control and order fulfillment — are provided by a combination of enterprise resource planning (ERP) systems (e.g., SAP, Oracle, homegrown) and integrated companion systems (either packaged or homegrown).
For simplicity, this paper does not cover distribution management for those activities. It touches instead on other aspects — fleet operations, packaging, shipping, receiving, and in-store inventory and stocking — involved in the four primary types of DM:
- Centralized distribution
- Food services
- Direct store delivery
- Business to consumer (also known as direct to consumer)
Centralized distribution
Centralized distribution is the most widely used model for standard goods such as clothing and nonperishable foods. It addresses industry challenges and has the most efficient distribution model.
In centralized distribution, manufacturers ship products to distributors that aggregate multiple products from one or multiple manufacturers in a single centralized distribution center, regional distribution centers or distributed fulfillment centers, and send large, multiple-item shipments to retailers.