Distribution management refers to overseeing the movement of finished goods from a manufacturer or supplier to the end-user.
Throughout this process, several activities and processes take place, including warehousing, inventory management, warehouse picking and packing, and last-mile delivery.
Well-executed distribution management can help to improve the order fulfillment process, inventory turnover rate, profit margins, supply chain agility, and ultimately higher customer satisfaction.
Distribution management: Why is it important for e-commerce?
The goal of distribution management is to keep inventory moving through the supply chain. How well distribution management is executed impacts profit margins and how fast a brand can grow.
For instance, if you’re overspending on storage, then you might have accumulated too much deadstock. Or, if you’re not replenishing inventory fast enough, then it can lead to lost sales, backorders, and stockouts.
When done right, distribution management is one of the smartest ways to ensure that:
Inventory is distributed efficiently to reach customers in the fastest, most efficient manner. There is enough inventory to meet demand while optimizing storage costs. Business owners have enough visibility into operations to make improvements and informed decisions.
Top 4 distribution management channels
Overseeing the physical distribution of inventory is a major component of supply chain management.
But to understand the distribution, it’s important to understand the different types of distribution channels and how inventory moves through the supply chain.
Wholesalers offer either raw materials or finished goods in bulk at a low price and can be sold to manufacturers, distributors, or retailers.
Wholesalers are oftentimes involved in the distribution of raw materials that are used to make a finished product. For instance, fabric wholesalers provide materials to clothing manufactures, so they produce finished garments.
A retailer has the option to work directly with a wholesaler, manufacturer, or supplier. Major retailers often distribute products from different suppliers across different sales channels to reach their end customers.
For instance, Walmart and Target work from different brands that offer a variety of products, so they can be sold online or in their brick-and-mortar locations.
Distributors act as the intermediary between the manufacturer and the wholesaler or retailer. When manufacturers want to increase their regional distribution, they authorize distributors (who know the local market) to sell the products.
Many a time, distributors also offer logistical and storage support in their specific location. For instance, car brands distribute the latest car models to dealerships across multiple regions, so they can be sold locally to the end-user.
Ecommerce has paved the way for direct-to-consumer (DTC) brands in modern times, which deliver products directly to the end-user (often, at their homes). Online retailers work with manufacturers and suppliers to order inventory and have it stored in an e-commerce warehouse.
Once inventory is received and orders are placed online, items are picked, packed, and shipped directly from the business. Ecommerce fulfillment has taken the middleman out of distribution, providing faster delivery, affordable prices, and better customer service.