Get Out of the Distribution Blind Spot

Plan for the shift in delivery models today


What do you have to do today that is different than most people think about logistics?

The question, proposed during a session at WERC 2013 by William Rose, Doctoral Student, Department of Marketing and Supply Chain Management, University of Tennessee, is indicative of a shift in distribution that is evident today. Limited access by municipalities to routes in highly urbanized cities like London or New York City; restricted delivery hours; higher real estate costs; limited land availability; consumer’s impact on shipping times to where such retail giants as Amazon.com Inc. provide same-day shipping—all such factors are variables enough to cause distributors to 1). Get this discussion on their radar; and 2). Recognize that there is a need to begin planning for this now. And with the global population expected to reach roughly between 7 and 10.5 billion by 2050, companies and their distributors must continue to re-strategize on the ways they deliver goods to consumers.

“Retail is greatly concerned about the ideas related to congestion, traffic and urbanization and they are doing everything to try and figure out how to address that,” said Chad Autry, Ph.D., Associate Professor, Supply Chain Management, University of Tennessee. “But distribution is on the customer side and really in many ways, distributors just do what they can do to serve the customer. We think this is a blind spot for logistics as a whole and for transportation, in particular. The transportation companies are a little bit more sensitive to it because they are the ones that have to route vehicles to these places. So the transportation and 3PL industry has a great opportunity here if they can figure out how to use smaller trucks and different types of routes inside cities and do multiple drops per day—similar to that of a newsstand model than a traditional retail model.”

Current beverage scenario zones

Yes, the challenges are perhaps not as problematic today as 15 to 20 years from now if not planned for, but such shifts in delivery to goods-to-consumer locations are a key focus right now for congested areas where one-way streets are a commonality. And sure, city ordinance restrictions barring access to commercial trucks or trucks weighing over a certain tonnage are not new. But to overcome such scenarios and with limited land, distribution center (DC) and warehouse facilities must also consider satellite offices outside city zones. For example, in the highly-regulated space of wine & spirits, such a retailer may have their main building but then have several cross-dock facilities located throughout that state to which goods are delivered to from the main facility for local distribution near urban areas.

And as consumer demands and expectations put great pressure on the wine & spirits industry, the number of worldwide locations producing wine & spirits grew also, increasing the number of SKUs.

Considering that wine & spirits fulfillment happens during the nighttime hours, the increase in volume and SKUs makes the process more complex. The sales teams want to take orders as late as possible but the warehouse needs to start picking so that all of the trucks can be loaded for cross-dock routes which are sent out during the night; as well as the local delivery trucks which need to be ready first thing in the morning.

“If you want to keep your order desk open until 7 p.m. or 8 p.m. but still have the trucks leave at 6 a.m., then your automation has to run at a faster rate because you have less time,” explained Paul Laman, Vice President of Sales, W&H Systems Inc. “And that adds challenges to the warehouse because now, they have less time to get all these orders, put in a reverse-stop sequence and load it on a variety of trucks. Once all the orders come in, they have to sometimes check the credit on the customers; they have to find the most optimal delivery routes to route the trucks; and they have to make sure all the drivers don’t show up at a restaurant or a store at the wrong delivery time and have the customer reject their delivery—to where they would have to bring it back a different day.”

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