Simplifying the Supply Chain: A Centralised Distribution Model

A number of technology resellers and vendors have begun to adopt innovative new supply chain models in order to optimise their cost, capital and complexity. Centralised distribution is one such model, whereby shipments from suppliers are transported to a central location – usually in full load quantities – rather than to each distributor location. Loads are then consolidated from a number of suppliers and delivered to distribution centres, usually in a single, full load.

By working with a distributor, IT resellers and vendors can avail themselves of bulk purchase pricing from suppliers across the globe, and simply call off this stock as and when it’s required.

From a cost perspective, unit prices can be minimised through bulk buying in low cost countries, particularly in Asia. Consolidating freight from Asia to Europe will also dramatically reduce the costs of inbound logistics. With in-region distribution consolidation, resellers can take advantage of very short lead time delivery, simply ordering what they need, when they need it. The fixed overheads associated with bulk inventory storage and management can, therefore, be eliminated or significantly reduced.

This centralised distribution model facilitates capital preservation as resellers can order minimum order quantities (MOQs) and do not have to hold large quantities of inventory. This can yield considerable working capital benefits, as companies have significantly less working capital tied up in stock, and more free cash flow to invest in sales, marketing and other business growth activities.

By dealing with a single distributor, complexity can be dramatically reduced as resellers have fewer supplier relationships to manage and more free time to focus on value add activities. With more suppliers involved, the number of separate transactions increases along with the amount of time required to manage those suppliers.

This blog is adapted from the Stephen’s Davis article published in Flickread. (World’s leading PDF to HTML digital publishing platform)