Adding value through distribution

- A friend of mine recently retired from a large electronics distribution company. When I first met him several years ago, I remember asking him what exactly his company does. He said, "We make large boxes into small boxes." Pretty simple response to a rather complex question. And certainly, this is a primary function of distribution centers. For example, Walmart may buy a shipping container full of flat panel TVs from a producer in South Korea. At the distribution center, they break down that large shipment into smaller batches to be shipped to individual stores within the area based on demand from each store. And they work very hard to make this process as efficient as possible. One way to do this is to use the cross-docking method and Walmart has perfected this technique. A large truck pulls up to one side of the distribution center with pallets of TVs on board. Several smaller trucks are waiting on the other side to be loaded, with cross-docking, you simply move a pallet directly from the large truck onto each of the smaller trucks and off they go to the individual retail stores. The TV is moved directly across the distribution center from one dock to another, no storage is required, handling is minimized and goods are distributed as they're needed. Pretty efficient operation. But he official distribution processes are not enough, it's also important to manage distribution center costs. You must make key decisions on how many distribution centers to have, where to locate them and how big each should be. These decisions of course depend upon who your customers are and where they're located. And nowadays you must continuously look for ways to add value for your company and for your customers. A good example of this is kitting, in which you package different items together to make it easier for your customer to perform work. Here's an example; on an assembly line there's a job that requires 10 different items to complete the process, the distributor will buy all these items in bulk and make them into kits, one kit having each of the 10 items. By selling in kits, the distributor is helping his customers save time and money. The assemblers job is faster and more efficient and the customer doesn't hold so much inventory. And that's the key to success for distribution centers, efficient cost-effective processes that add value for your organization and for your customers.