Distributed Logistics is about more than just dispersing inventory to be closer to potential customers. It’s about a Big Idea.
Or, more accurately, Distributed Logistics is about three Big Ideas:
- Distributed Logistics is about managing your sales channels and your inventory supply as a single integrated network;
- Distributed Logistics is driven by yield management – seeking to realize the most profit possible from the inventory you have available right now;
- Distributed Logistics is about creating options as digital commerce evolves in ways none of us can predict.
How does this all translate into real-world success?
For the past decade, Etail Solutions has worked with hundreds of clients across dozens of business models. But broadly speaking, these clients fit into one of three broad groups: Online distributors, ecommerce service providers, and brands.
Here are a few of the ways these groups are executing a digital logistics strategy to grow their digital commerce businesses.
Online distributors are a unique – and diverse – group of businesses. Many started as marketplace resellers on Amazon, then grew their businesses from there. Hundreds of thousands of SKUs is common, millions of SKUs not at all unusual. Because they are distributors, margins are razor thin. And because they compete for the buy box with other distributors in hyper-competitive marketplaces, pricing pressure is intense.
As a result, online distributors often come up with very creative ways to leverage other people’s inventory, embracing drop-shipping or just-in-time cross docking to get listings active, observe sales trends, and then only take an inventory position that involves FBA or warehousing when a product has proven itself.
But Etail works with the largest online distributors – these businesses often rank in the top 500 Amazon sellers. And these businesses have invested in warehouses – sometimes including sophisticated robotics systems to keep costs down.
They’ve learned that by investing in inventory of their top selling items, they can put tremendous pressure on their suppliers for the best possible price. That allows them to win the buy box with the most competitive price while also protecting their margins. The result? They are big and getting bigger – at the expense of smaller, less efficient competitive distributors.
ECOMMERCE SERVICE PROVIDERS
Ecommerce service provides include businesses such as 3PLs, fulfillment services and other organizations that enable ecommerce.
Many of these businesses have expanded from just offering fulfillment services such as warehouse space, local delivery, and pick-and-pack order fulfillment to providing turnkey digital commerce services for brands. The services they offer vary from managing their branded clients’ marketplace presences, ecommerce websites and FBA replenishment to even enabling wholesale drop shipping and retail store replenishment of individual items as they are sold.
An increasingly common use for distributed logistics for Service Providers is the use of this solution to build fulfillment networks using a combination of their own facilities and/or partner 3PLs. The distributed logistics capabilities allow this network of different systems, companies, and fulfillment methods to operate as a single seamless network.
Brands include both manufacturers of branded products and retailers who are either digitally native or looking to expand their brick-and-mortar brand equity to online channels.
Brands are uniquely well positioned to leverage distributed logistics to drive building their D2C ecommerce capabilities. That’s because many brands already have a distribution infrastructure – but it was built to support a brick-and-mortar retail landscape, this is shrinking fast. As a result, many brands implement a distributed logistics strategy which leverages 3PLs to provide the geographic coverage they need. Fulfillment partners like 3PLs can also provide the capability to pick, pack and ship individual small, parcel orders direct to shoppers.
Ultimately, beyond the details of how it is implemented, distributed logistics is really about creating options. As the saying goes, “He (or she) with the most options wins.”
The COVID-19 crisis should serve as a wake-up call. Our ecommerce world is evolving and changing – sometimes overnight – in ways no of us can predict.
But we can predict three strategies, built around distributed logistics, that will serve us well no matter what happens:
- Focus on creating a flexible, “anti-brittle” ecommerce infrastructure. Having flexibility at your fingertips allows you to better deal with an unpredictable future;
- Focus on maximizing inventory yield and margins given the sales opportunities you have right now. That increases profitability and frees up cash. And cash is king in uncertain times;
- Establish systems designed to generate multiple options as the future unfolds. Make sure your ability to react to events isn’t limited by your ecommerce platform and operational capabilities.
For a deeper dive into our three example scenarios, watch the accompanying video to this article: Distributed Logistics for Digital Commerce: Applications – Deployment Examples. The video focuses on how companies are creating competitive advantage and driving sales and profits through distributed logistics and yield management.
This is the final article in our eight-part LinkedIn series with videos and accompanying articles on Distributed Logistics. To get started with the series, click here to view the first video Distributed Logistics for Ecommerce: A Change in Paradigm and Why it Matters on LinkedIn.