Article: Distribution Options For Retailers: Impact On Costs And Business Processes

By Vivek Sehgal, Supply Chain Musings

When it comes to distribution, retailers have many options. These are (a) direct to store, (b) conventional warehouse based "stock and distribute", and (c) cross-dock (or flow-through) models. Each of these options affects the supply chain efficiencies and costs. In a previous article on cross-docking, I discussed the process, benefits, and some of readiness issues for cross-docking. The current discussion is targeted to review the costs associated with each of the three options, and a decision support methodology to select the optimal model for distribution.

Understanding the costs and having processes to measure these costs provides an objective way to evaluate the impact of selecting these options. Most real-life situations will be complex enough to demand simultaneous deployment of all the three options for differing set of products and locations. But the cost analysis still helps to know what these sets should ideally be.