Introduction
There are several techniques that an entity can apply in an attempt to distribute its products. Similarly, many theories offer explanations regarding the choice of distribution strategy that the company employs (Wisner, Tan & Leong, 2016). The success of an enterprise is heavily dependent on its selection of the channel for distribution. For example, a company has to make a choice about whether to have a single or multiple distributions strategies both locally and globally or on whether to have its distribution centers in other countries. Noteworthy is the fact that each distribution strategy chosen presents both challenges and opportunities.
The main qualitative pros associated with having multiple distribution centers and shipping locations in the United States are: products are delivered quickly, reduced transport costs, eased access to products, and save the trader time and resources as multiple products are accessible from various locations (Wisner, Tan & Leong, 2016). On the other hand, such strategies have limitations like increased costs associated with employing more workers, challenges related to managing stock can result in an outlet facing a shortage, and the approach does not work effectively for retailing firms (Ismail, 2008).
Having more international distribution centers has the advantage of ensuring that the clients can access the goods at their convenience. Also, through the centers, the trader can monitor the buying patterns of the customers and establish any changes in the preferences. This, however, presents challenges in the form of political risks brought about by the changes in legislation and foreign exchange risks (Wisner, Tan & Leong, 2016).
Decision-making criteria
A number of factors will influence the decision on whether to expand the already existing warehouse or to build a different one and or whether to create a combination of both. The main factors are (Assaf, Bonincontro & Johnsen, 2006):
I. Nature of facility requirements: This factor will affect the amount of space required. Bulky products need a larger space compared to the less cumbersome. Similarly, specialized products require specialized storage facilities. Such products that require less storage space or specialized storage facility such as refrigerated storage should have their warehouses located near the consumers
II. Cost factors: it is important to analyze the various costs associated with the product with respect to each of the proposed locations. In conducting a cost-benefit evaluation for each site, the manufacturer is able to map out areas that are not cost friendly for warehouse construction (Wisner, Tan & Leong, 2016)
III. Labor factors: proper analysis of the amount of work required by the entity enables the company to match the labor demands of the potential locations. In doing this, the company establishes the areas that can adequately provide the labor required. It is important to map the work necessary into skilled and unskilled so as to determine the estimated labor costs associated with the undertaking (Assaf, Bonincontro & Johnsen, 2006)
IV. Logistics: quick evaluation of the logistics around the location is vital. The manufacturer must consider the available transport alternatives to the potential warehouse sites (Wisner, Tan & Leong, 2016). In doing so, the operator assesses the accessibility of the proposed location. The location should have good roads, railway or a harbor accessing it so as to ease transport.
V. Political environment: the key to formulating a strategy for location is the political risk associated with setting up in that area. Some sites are volatile, and any organization with a plan to construct a warehouse in such an area must be geared for turmoil (Assaf, Bonincontro & Johnsen, 2006)
VI. Government legislation: some countries have strict pieces of legislation regarding the location of businesses. Going against such legislation might attract fines and penalties. It is, therefore, the role of the enterprise to establish government barriers when assessing a location.
VII. Environmental factors; companies must establish the environmental regulation that might have an influence on the activities to be carried out in the various prospective locations. Failure to meet the environmental requirements might attract further costs in terms of penalties. Also, the available regulation on the environment has the potential of affecting the relationship between the entity and the community around (Assaf, Bonincontro & Johnsen, 2006).
Metrics to Assess success
Several measures can be applied to evaluate the success of any logistic plan involving a manufacturing firm and an internationally based mass merchandiser. There are several reasons behind the selection of the metrics (Ismail, 2008). The measures include:
I. The fill rate: this gives a measure of the shipped rate in comparison to those ordered by the mass merchandiser. The fill rate will be dependent, in most cases, on the quantity of stock ordered and the quantity available in stock in addition to the performance of the warehouse. With respect to the customer, the fill rate represents the level of service that the manufacturer (supplier) can provide (Ismail, 2008).
II. The lead time: this refers to the duration between the time of placement of an order and that of its fulfillment (completion). The lead time depends on the distribution, procurement and production processes. The distribution process involves planning, assignment, allocation and track shipping and delivery processes (Assaf, Bonincontro & Johnsen, 2006). The procurement process encompasses the holding of stock of raw materials, and recipe ingredients until production commences.
On-time performance: provides the customers view of the timeliness in filling and order and establishing the rate of accuracy involved in the shipping. It is also a measure of how distributors are responsive to the new customers and their attempt to retain the old ones (Wisner, Tan & Leong, 2016). The ability of a firm to keep customers ensures that majority of clients during the earlier periods remain loyal.
Qualitative factors
The non-quantitative factors that will influence the decision on whether to locate a distribution center locally or internationally are land, availability of raw materials, labor accessibility, transport system and climate. Before choosing a site for setting up of its operations, a company must make several considerations. The company must determine early enough the factors for eligibility of a location (Wisner, Tan & Leong, 2016). Once the elements are clearly spelled and the regions that match the profile are mapped, the organization must conduct a cost-benefit analysis of the planned locations. The decision made must be based on the factors above
Raw material availability affects the possibility of future expansion as well as the cost of operations. Nature of the product and raw material (whether perishable or durable) is a key determinant of the choice of particular site. Accessibility of the area and the market for the products is equally influential.
Labor factors such as availability, prevailing wage rates, attitudes towards work and the expertise required should be considered (Assaf, Bonincontro & Johnsen, 2006). The climate as a factor is a determinant as adverse weather conditions have effects on production and distribution.
Conclusion
The CEO must take into consideration the factors that influence the decision concerning logistics and those affecting the choice of location. In the current era of globalization and competitive nature of business, choosing a location is at the centre of the success of business. In a competitive environment, successful companies are distinguished from the rest by the provision of quality products and services (Ismail, 2008).
Also, in order to be successful, the management of the company must ensure that the processes involved in the logistics match the strategic objectives of the company (Chopra, 2015). The logistic processes of the organization are evaluated with regard to the set objectives of performance. Companies must clearly determine and define the specific measures of logistics with their partners such as suppliers, distributors and customers. Such clear logistic rule helps the parties to understand clearly their targets.
Noteworthy is the fact that irrespective of the logistic measure the company chooses to implement, the real success of the plan is dependent on its efficient and effective implementation and its eventual effect on the customers of the business (Chopra, 2015).
References
Assaf, M., Bonincontro, C., & Johnsen, S. (2006). Global sourcing & purchasing post 9/11. Fort Lauderdale, Fla.: J. Ross Pub.
Chopra, S. (2015). Supply Chain Management. Pearson Education Limited.
Ismail, R. (2008). Logistics Management. New Delhi: Excel Books.
Wisner, J., Tan, K., & Leong, G. (2016). Principles of supply chain management. Boston, MA: Cengage Learning.
