Because the customer is touching the brand in multiple ways, companies must transform their supply chains. To do this effectively, it’s important to understand the different types of distribution channels.
The older, most simplistic definition of product distribution is getting a product from point A (point of origin) to point B (public consumption). Now, the supply chain has become a fluid highway of merchandise moving in various directions with multiple touch points. And, consumer demand is driving when, where and how the supply chain moves.
Different Types of Distribution
When the supply chain was a one-way distribution channel, the brick-and-mortar store was the only way consumers interacted with company brands. The inception of the Internet changed the way consumers shopped, adding an e-commerce component. Now, consumers are interacting with company brands through a variety of channels – mobile, personal computer, tablet and in-store. Because the customer is touching the brand in multiple ways, companies must transform their supply chains to accommodate multiple channels and the digital era in which commerce happens.
To do this effectively, it’s important to understand the different types of distribution channels.
Multichannel product distribution refers to a company having multiple channels from which a customer can purchase a product. Each channel acts independently of the other. As such, the consumer experience is not uniform across all channels. With multichannel fulfillment, retail brands must manage shipping to both retail locations and the customers.
Omnichannel takes multichannel distribution to a higher level, breaking down the silos and making fulfillment more about the overall brand instead of the channel. Now, the experience the customer has is seamless regardless of the chosen platform. Omnichannel distribution happens when the supply chain truly becomes dynamic. Not only is the customer shopping multiple ways, but the business must ship multiple ways. With omnichannel, brands must be able to ship from anywhere, accept returns anywhere and allow the customer to receive products from anywhere. This, of course, creates a critical need for companies to have complete network visibility.
Supply chain distribution solutions were created to help companies manage their supply chain.
On-premise solutions are platforms that were designed to help companies streamline their supply chain and harmonize their different channels.
However, there were challenges. On-premise solutions require a greater upfront investment and regular maintenance for additional costs, making them cost prohibitive for smaller retailers. On-premise solutions take significant time to implement, with an average implementation taking eight to 12 months. And, they are costly to maintain and upgrade, causing most businesses using the solution to consistently lag behind. On-premise solutions are also not easily scalable, making it hard for businesses to grow with the system.
The new era of digital distribution requires supply chain software solutions that are built for speed and agility.
Because of the increasing pressure to move at the speed of the Internet, cloud solutions were introduced in the last few years. True cloud solutions further advanced the supply chain by automating processes. A true cloud supply chain solution is a multi-tenant software as a service model built on a shared structure accessed through the Internet. With cloud solutions, businesses don’t need to install hardware that can take up valuable real estate, which cuts any upfront costs and drastically reduces installation times. In fact, an average installation can take as few as 90 days. Because cloud solutions are Internet-based, vendors can send push updates that the customer can download at their convenience so the technology is always operating on the latest iteration. Because upfront costs are minimal, smaller retailers can now take advantage of advanced supplychain solutions, and the return on investment is seen more quickly. Most complex tier-one companies have achieved ROI in fewer than 24 months and service levels have gone to numbers that are close to 99 percent. In recent years, e-commerce retailers have been able to reduce same day delivery time frames by eight hours and increase stores’ overall inventory availability.
In a digital fulfillment world, it’s imperative to adopt solutions that can keep an accurate pulse on the company’s many fulfillment channels. But, it’s important to consider the demands of the customer, the cost of those demands and the goals of the business.
Diego Pantoja-Navajas is CEO of LogFire, a cloud supply chain solutions company. LogFire delivers a digital fulfillment network that helps organizations of all sizes leverage the cloud to cost-effectively modernize their supply chain execution, boost fill rates and rise above competitors. Recognized as one of the fastest growing companies in the United States, LogFire is headquartered in Atlanta with offices in Chile, India, Peru and South Africa. For more information, visit www.LogFire.com.