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.

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 planning.

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 businesses, distribution logistics entails the fulfillment 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, third party logistics providers (3PLs), and technology.

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

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

Direct distribution logistics

With a direct distribution logistics strategy, businesses fulfill custom orders internally, although they will normally rely on third-party carriers and other tools in order to fulfill 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 supply chain 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 3PL. 

A 3PL will have its own storage facility, warehouse teams, packaging supplies, courier partner network, and all the other necessities to handle distribution effectively.

Many 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 J&J, we use a custom-built, award-winning inventory management system. 

This is called ControlPort™, which all of our clients have access to as soon as they’ve onboarded with us. More on that later.

5 Top objectives of distribution logistics

Now that you understand a bit more about the differences between distribution channels and strategies, here are five objectives to consider in an efficient distribution logistics management process. 

1. Improve distribution effectiveness in supply chain 

One of the most important things in the distribution management process is amplifying its effectiveness in the supply chain. 

Distribution logistics can help with this, by managing inventory better and optimizing warehouse operations. 

Distribution processes can also help to increase supply chain visibility, by using both inbound & outbound logistics methods.

2. Meet customer expectations

Another essential objective of distribution logistics processes is to meet customer demands. 

Maximizing customer satisfaction is crucial to any business, which can be done by understanding your logistics and inventory management better. 

Pivotally, you need to make sure the delivery process is quick and stress-free for your customers by giving them tracking information and improving the flow of freight. Distribution focuses on this through proper planning to optimize delivery performance.

3. Lower product damage

Not having an effective inventory management system can highly affect your supply chain. 

As such, putting an efficient distribution logistics management plan in place can help minimize the amount of product damage that happens. 

All in all, this preserves the quality of the products throughout the supply chain process, so that your customers receive their items in good condition.  

4. Reduce operational costs

Through the whole distribution process, supply chain and shipping costs can add up quickly. 

Distribution logistics aims to improve the entire process by using raw material in the optimal and most cost effective way and making product delivery faster. 

Additionally, you can reduce costs by streamlining product management and supply chain operations. Lastly, intelligent route planning can also help improve the operational process. 

5. Maximize information flow

In logistics planning and management, having transparent and efficient communication is essential. Distribution logistics aspires to improve the flow of information within a business and its stakeholders, so that it can respond quicker to market demands and customer needs. 

3 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 the industry faces.

1. 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 planning is key to overcoming this challenge.

2. Rising costs

Costs of fuel, energy, and labor 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.

3. 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.

4 Tips to improve your distribution logistics management

So, we’ve got the objectives and challenges of distribution logistics out the way, but how do you actually apply this concept to your business? For this, we’ve collected a few crucial tips on how to streamline the flow of your distribution phase and network.

1. Automate your supply chain operations 

Integrating technology into your eCommerce business is a surefire way to streamline your distribution management system. 

There are all kinds of tools you can utilize, from automated parcel sorters to programmable inventory management systems.

At J&J, we’ve put this into practice with our warehouse inventory management software, ControlPort™. This can help your business improve returns management, picking & packing and reduce dead stock. 

2. Create a structured planning strategy

Another thing to keep in mind is how you are running your logistical processes. A good way to organize this is by developing a structured planning strategy. 

This includes how you source products, plan the supply chain, manage inventory and handle warehouse storage. Having a plan with every step of your logistics management can result in a smoother process. 

This can help you save money, time and effort and help your business be ready for unexpected events and hazards. 

3. Conduct demand forecasting

Additionally, demand planning and forecasting is an important thing to make business-savvy decisions. If you understand when you need to be ready to replace inventory, you can avoid stockouts, cut storage costs and maintain timely and accurate delivery for your consumers. 

What’s more, having the correct info can help you decide when to plan sales, stop selling underperforming products and order enough inventory for each season. 

4. Partner with a 3PL

As we discussed earlier, having a 3PL can be a handy way to improve your distribution logistics processes. They can help provide you with faster order fulfillment, reduce costs and organize warehousing. 

J&J can help you with your eCommerce logistics in multiple ways, seen in our 98% same-day dispatch rate or our 99.9% pick and pack order accuracy. 

FAQs 

What is the difference between direct distribution channels and indirect distribution channels?

A direct distribution channel is where your business takes responsibility for goods delivery to your customers. This is handy for up-and-coming businesses that don’t have the funds for outsourcing. 

In contrast, an indirect distribution channel is where you hire a distributor or a 3PL to manage your distribution process. This is handy for growing businesses that don’t have the facilities or time to manage distribution. Additionally, your distributors can help get your products in as many markets as possible.

What are the four different distribution channels? 

The four categories of distribution channels are selling through third parties, reverse logistics channels, direct selling, and dual distribution. 

What are the benefits of effective distribution logistics management? 

There are many benefits of well-run distribution logistics management, including faster delivery times, happier customers, lower shipping costs and enhanced supply chain functioning. 

Let’s discuss your distribution logistics strategy

At J&J, we specialize in getting your customers’ orders where they need to be, anywhere in the world. With our international network of fulfillment centers, 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.

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 fulfillment centers if you want to know how everything works.

Give us a call today, or enquire through our online form. 

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