Distribution Network

What Is a Distribution Network?

In a supply chain, a distribution network is an interconnected group of storage facilities and transportation systems that receive inventories of goods and afterward deliver them to customers. It is an intermediate point to get products from the manufacturer to the end customer, either straightforwardly or through a retail network. A fast and solid distribution network is essential in the present instant satisfaction society of consumers.

Understanding a Distribution Network

Fostering an efficient distribution network is one of the most critical parts of the outcome of a company. A part of strategic planning allows a company's products to arrive at customers rapidly and efficiently while simultaneously keeping costs low for the company with the goal that they might realize larger profit margins.

The supply chain for goods can include an expansive distribution network contingent upon the product and where the end customers are found. A manufacturer might have a distribution network to serve wholesalers, who thusly have their own network to ship to distribution networks worked by retailers, who at the last connection of the supply chain would sell the goods in their retail stores.

On the other hand, a simplified supply chain could include a manufacturer shipping completed products to its distribution network and afterward straightforwardly to end consumers.

Location (vicinity to the customer) and infrastructure quality are two important properties of a distribution network. Moreover, the storage, dealing with, and transportation capabilities at a distribution site are set up to suit the particular requirements of the company to serve its customer base in a geographic area. There can be a high level of refinement at a single site — and by extension, the whole distribution network — to ideally handle order flow of completed goods, whether a small bunch of large things like farm work vehicles or huge number of SKUs for a retail chain.

For the whole distribution network, a company must plan out needs for equipment, workers, data technology systems, and transportation armadas. The company must decide if a hub-and-spoke distribution network is right for its business or a decentralized network.

Distribution networks come at the post-fabricating part of a supply chain, the flow of goods and services, and incorporate all stages that deliver end results into the hands of consumers.

Real World Examples

Laying out an effective distribution network requires a concentrated on approach since it is progressively viewed as a critical asset in this new age of [e-commerce](/web based business). Walmart (WMT), for instance, with 190 distribution facilities starting around 2020, is dispensing more capital to build out extra satisfaction centers for its distribution network as it develops with the competitive requests of the market.

As of July 2020, Walmart's distribution network, including its retail stores, is 924 million square feet. It is enormous to such an extent that in comparison, the island of Manhattan is 661 million square feet. For even more effectiveness, Walmart isolates its distribution network into specific categories. For instance, it has regional distribution centers, food distribution centers, fashion distribution centers, and then some. This guarantees that every distribution center is centered around one product area and is accordingly impeccably intended to address the issues of delivering that product rapidly and at the lowest cost.

Amazon (AMZN) has likewise increased its distribution network, building out colossal mechanically controlled warehouses across the world and operating its own freight shipping armadas and cargo planes. Amazon has even talked about utilizing autonomous robots to deliver goods to customers, which would be an innovation in the distribution of goods.

Amazon is a monstrous global retailer and, consequently, its distribution network traverses numerous countries. As of July 2020, Amazon has 1,215 distribution facilities in 21 countries. Amazon principally breaks its distribution network down into prime center points, satisfaction centers, inbounds and outbound sortation centers, and delivery stations.

Highlights

• Location to the customer and infrastructure quality are two of the main parts of a distribution network.
• It is an intermediate point to get products from the manufacturer to the end customer, either straightforwardly or through a retail network.
• A fast and solid distribution network is essential in the present instant satisfaction society of consumers.
• There are many types of distribution networks, for example, a center and-talked or decentralized, that turn out best for various types of products.
• In a supply chain, a distribution network is an interconnected group of storage facilities and transportation systems that receive inventories of goods and afterward deliver them to customers.