The Digital Commerce Chronicles: Book One – Distributed Logistics
Little did I imagine almost seven years ago on April 28, 2014, when I published my first article on LinkedIn entitled “Successful Shopping Environments of the Future Will Be Logistics Friendly!”, that here in 2021 I’d be writing this for you.
But here we are, almost 100 articles later and really excited today to be launching Book One of The Digital Commerce Chronicles based on the key themes surfaced across many of these articles.
Book One: Distributed Logistics was chosen as the topic to launch The Digital Commerce Chronicles as in my view it’s the key concept, method and practical approach to simultaneously accomplish many things I’m passionate about!
Namely these are supply chain savings, sustainability and customer experience, all of which are dramatically enhanced through designing, implementing and expanding a Distributed Logistics strategy.
So without further ado, let’s kickoff The Digital Commerce Chronicles: Book One – Distributed Logistics!
Welcome to Distributed Logistics and welcome to The Digital Commerce Chronicles!
Introduction: Discovering the Power of Distributed Logistics
The future of fulfillment is fast approaching and it’s now all about mastering something called Distributed Logistics!
What is Distributed Logistics?
The definition I’m running with currently is below, but this rapidly emerging concept continues to evolve literally as we speak:
‘A fully integrated and optimized network of two or more fulfillment centers operated in unison to increase sales, sustainability and customer delivery service levels, which minimizes transportation costs and maximizes inventory optimization’ ~ Jeff Ashcroft
Interesting you say, but why would anyone want to move to a Distributed Logistics network?
Probably the most compelling reasons are that simply put, positioning the right inventories close to customers saves on costs, improves service delivery lead times AND sustainability.
There’s a growing body of work highlighting the fact that allocating stocks to demand flow closest to customers may also increase revenue.
The next great reason for switching over to a Distributed Logistics network is that the introduction and their use of forward pick and deliver locations also reduces both lead time as well as overall delivery costs.
Suffice it to say, distributed fulfillment is growing daily in importance for supporting New Retail with a unichannel logistics methodology which is about much more than simply distributing warehouses.
Now that we’ve reviewed the What and Whys for Distributed Logistics, let’s talk about the How!
First off , the Fulfillment Center (FC) network can be fully outsourced or a hybrid of in-house and outsourced depending on your in house facility ROI and the need to support any outlier regions via outsourced shared facilities.
Given the short lead times and rapid delivery times required for unichannel Distributed Logistics, it is critical that the FC’s are integrated directly with the Seller business systems.
Fast and effective Distributed Logistics also relies heavily on a best in class WMS, and DOM, both which enable efficient and effective operations across and within the network.
In addition to these key operating systems, an effective Distributed Forecasting and Flow model is needed for accurate and timely inventory allocations and replenishment.
And last but not least all delivery locations and geographies need to be assigned to the appropriate Fulfillment Centers with appropriate tiers and hierarchies established to support smooth operations in support of all demand scenarios encountered.
Benefits and Value of Distributed Logistics
So now certain you all want to know “Where’s the Beef ?” What benefits and value can Distributed Logistics deliver to your business and customers?
- Saves costs of transportation by leveraging more local ground deliveries.
- Distributed FC’s with higher levels of customer satisfaction increases sales.
- Same day/next day deliveries to both consumers AND stores are made possible at reduced rates.
- Volumes can be rapidly scaled up for store replenishment and/or consumer deliveries.
- Returns can be processed more rapidly and efficiently at the local level or consolidated locally for more cost efficient LTL delivery into Centralized Returns processing.
- Stocking requirements are based on demand flow, not large weeks of supply and safety stock methodologies typically employed.
- Improved sustainability and carbon footprint results can be also be expected based upon shift from longer distance air deliveries vs more ground shipments as well as consolidated deployment moves into regions and for outbound returns.
For all of the above reasons expect to hear much more about Distributed Logistics going forward.
The demands of consumers will only continue to increase and it’s the job of logistics and supply chain professionals to discover and bring viable solutions to their business leadership teams.
Then by exploiting these methods you can provide your business with innovative products and services that meet both consumer and store needs in these dynamic and fast changing times!
Make It Happen: How to Implement a “Do It Yourself” Distributed Logistics Strategy
In the 1989 classic movie Field of Dreams, the voice in Ray Kinsella’s cornfield repeatedly whispered…
“If you build it they will come.”
Fast forward to 2021 and another “If you build it they will come” moment is now upon us, and it’s not for a baseball diamond, but rather a Distributed Logistics network of Fulfillment Centers which will support online sellers in cost effectively delivering products to consumers on a Same Day basis to grow sales and improve customer experience..
In one of my previous articles How Getting Logistically Closer to Your Customers Means More Sales!I wrote about how Amazon had successfully been employing this strategy for many years by adding hundreds more Fulfillment Centers to position inventory closer to customers. This practice has helped to drive Amazon’s exponential growth in sales and to this day Amazon continues to expand their Distributed Logistics footprint.
But alas, not every company has the deep pockets of Amazon to invest in the facilities needed to create a Distributed Logistics network that can accomplish Same Day delivery. In fact, it’s even difficult to find just one Third Party Logistics provider that’s able to support this strategy nationwide.
How can you build a Distributed Logistics network yourself?
Brands and retailers looking at these challenges may see them as overwhelming and insurmountable, but I’m pleased to say there’s a definite path available for creating a “Do It Yourself” Distributed Logistics strategy!
“Please suspend any disbelief you may have and let me tell you about it!”
The first step is to capture all of your Digital Demand points from ALL sales channels in one place in order to be prepared and able to digitally allocate it across your Distributed Logistics network based on final delivery destination.
Once this task is completed, you’re then positioned to make a determination and understand fully how many Fulfillment locations you will need, and where they should be located, to efficiently support Same Day delivery.
Armed with this information, you’re now positioned to map out all your current Inventory locations whether these are your own warehouses, third party logistics facilities, retail stores if applicable, drop ship capable suppliers and even Distributors who also hold your products in stock can be considered.
The second major step is to decide which of these Inventory locations are suitable to support your Distributed Logistics strategy and identify alternatives for ALL of the Inventory gaps. Once this is done ALL active Inventory locations with associated shipping cost models need to be connected to single pane of glass in order to be ready to run full profitability for all orders as received from ALL Digital Channels utilizing a Distributed Logistics DOM (Order Management) platform.
“Fortunately you don’t need to become a Third Party Logistics expert to figure out how to fill these gaps!”
Through the Etail Solutions EVP platform all of the above steps can be performed by you and your team, with any needed support to get the process started. Then once completed you’ll soon have access to a national network of Third Party Logistics providers who are already “prewired” and ready to begin fulfillment of your orders through our proprietary Fulfillment Network as a Service (FNaaS)!
“Sound too good to be true? Well it isn’t!”
Feel free to reach out to me today with any questions you may have and to see/learn more about developing and rapidly implementing your own Distributed Logistics Network strategy.
Get ready to embark on and complete one of the most exciting, satisfying and impactful business logistics transformations of your career and once done you’ll then be proud to say you did it yourself!
Sustainable: Surprisingly Significant Sustainability Benefits of Distributed Logistics
Since the year my first daughter was born, way back in 1987, my interest in green supply chain has been growing and many of my previous articles have focused on related topics including carbon neutral supply chains and the circular economy to name but two.
Imagine my excitement to now have the opportunity here at Etail Solutions to provide a platform to help clients build not only the most effective customer experience omnichannel solution, but also the most cost effective AND sustainable!
The secret in this case is harnessing the power of Distributed Logistics to deploy your products closer to your customers and stores which reduces last mile transportation costs (as well as the associated carbon) while at the same time driving the ability for brands and retailers to also INCREASE SALES!
There are many factors within the Distributed Logistics model which drive business benefits, but relative to transportation the big shift is by moving last mile delivery off of long distance air mode courier to more sustainable local ground deliveries. Simply put air transport generates 4 times the carbon impact of ground transportation and driving this differential is the fact that carbon from air transport is also released higher in the atmosphere.
Just over a year ago now, my journey began in Distributed Logistics 3PL Fulfillment and in that time we completed a number of analyses which supports the assertion that Distributed Logistics networks are the most sustainable of current available supply chain options for ecommerce and retail store replenishment.
With this in mind, please see below 2 examples which highlight the significant sustainability benefits available from Distributed Logistics:
Example 1: Currently One Site compared to 2, 3 and 4 Sites
Example 2: Currently Five Sites Compared to Seven Sites
Interestingly enough, even when you get to higher numbers of sites, like the example above comparing 5 sites to seven sites, there’s still almost a 22% sustainability improvement opportunity!
Many will say that these sustainability benefits are all well and good Jeff, but what about the potential of inventory to balloon under such Distributed Logistics scenarios?
The answer here is simple, following application of Pareto’s Law to your sku mix only A skus, and perhaps some or all B skus, should be deployed to all of the Distributed Logistics sites. Think of these Distributed Logistics sites as more of a Forward Pick Location in your Distribution Center, but set up in a remote location. As well, the mandatory use of advanced inventory management tools, to optimize your inventory and replenishment across your entire Distributed Logistics network, are key to avoiding a geometric explosion in your inventory as you roll the network out and all automated for you on the EVP platform.
And even though the focus of this post is sustainability, please don’t lose sight of the fact that two other major benefits available to your business from Distributed Logistics are improved customer experience through more rapid delivery, by moving from 3 to 5 day delivery down to 2 day, Next Day and even Same Day delivery options.
Even more exciting is the potential for the last mile delivery improvements available from Distributed Logistics to drive increased sales for your company business, think of it a LOGISTICS driven initiative that’s also able to drive TOP LINE SALES for your company!
For more on this check out my previous post ‘How Getting Logistically Closer to Your Customers Means More Sales!’ and feel free to share this with your CEO, CFO and VP Sales if you need additional support for your Distributed Logistics efforts.
So here I say last but not least, to any of you who still have doubts and/or reservations about these two examples and associated carbon reduction numbers I will lay down the following challenge and assertion.
Provide us with your data under NDA and we can commission and complete a project with a summary comparison of current site(s) to a graduated Distributed Logistics model, and through this process will be able to demonstrate to you potential sustainability AND transport savings benefits of similar magnitude to the two examples above!
To view this entire article from Jeff Ashcroft on LinkedIn, click here.
Jeff has over 30 years of large scale, complex, consultative and direct logistics and supply chain systems experience from warehouse floor to boardrooms of major retail, brand, third party logistics, consulting and IT organizations. Solid base of capabilities and practical approach to helping people and organizations develop AND implement solutions that work. Passionate about improving digital commerce and the ability of distributed logistics to drive improved supply chain sustainability with LOWER costs AND better customer experience.