Distribution is an important part of the enterprise of logistics, and the costs of distribution account for most of the logistics’ costs. This paper first introduces the concept of distribution and the cost structure, and provides people with a basic understanding of this, and then some control strategies have been put forward as the analysis of factors influencing the distribution cost. We can reduce the cost of the distribution by these measures to enhance the competitive edge of the entire company.
In this essay, I take the Wal-Mart supermarket as an example to analyze its success in distribution, thus other companies may benefit a lot from their success. 1 The related concepts of the distribution cost 1. 1Definition Rodrigue, Comtois and Slack(2009) said that “logistics distribution is the collective term for the range of activities involved in the movement of goods from points of production to final points of sale and consumption. Physical distribution includes all the functions of movement and handling of goods, particularly transportation services, transshipment and warehousing services, trade, wholesale and, in principle, retail. While completing the whole process of distribution can result in a large cost, that is the logistics distribution cost. 1. 2 The constitution of the logistics distribution cost According to the elements of distribution pointed by Richey(2007) ,we can conclude that the costs can be divided into four parts: transportation cost, sorting cost, assembling cost and the delivery processing cost. 2 The analysis of factors influencing logistics distribution cost In the whole process of the distribution, there may be many factors influencing the logistics distribution cost.
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Now I will introduce several ones of them to the readers in the following paragraph. 2. 1 The service level of logistics distribution The cost of logistics distribution may rise proportionally with the improvement of service level. If enterprises do not require high distribution service level of their own, they can choose the cheaper transportation modes, put the goods into the comparative remote and lower storage costs’ warehouses to control the costs; Conversely, If a company’s requirements of the logistics service level are close to perfect degree, corresponding, his logistics cost will also close to the “perfect”.
Therefore, enterprises should take a serious look at its own positioning and customers’ requirements, and accept the most suitable distribution patterns for themselves. (Chirist,2012) 2. 2 The rationality of transport vehicle scheduling In the enterprise actual operation, the rationality of vehicle scheduling will greatly affect the enterprises’ logistics cost. In the whole logistics operation costs, transportation cost is dominant. 2. 3 Inventory decision Christ (2012) pointed that not only the inventory but also the inventory uantity is very important to an enterprise, which needs enterprise itself to have a decision according to their own actual situation. Unreasonable inventory may bring about the goods out of stock, the damage to goods, return of goods, which will not only influence the enterprises’ logistics cost, but also affect the enterprise’s distribution efficiency. 3 The example of Wal-Mart Supermarket 3. 1The development of Wal-Mart Supermarket and distribution condition Wal-Mart stores co. , LTD. (which from now on is referred as “Wal-Mart”) was founded by a legend of American retail industry, whose name is Sam Walton, in 1962 in Arkansas.
After 50 years’ development, Wal-Mart has become one of the world’s largest retail enterprises. At present, Wal-Mart have opened more than 8500 supermarkets in 15 countries with more than 1. 6 millions employees, which are located in the United States, Mexico, Germany, Britain, China, South Korea and so on. According to the survey, the amount of customers to Wal-Mart is nearly one hundred million each week. (wikpeda,org) Wal-Mart is very famous for its low price, which may be brought about by the low cost strategy by making the logistics cost always low.
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... of technology in distribution and supply chain logistics Wal-Mart has been able to cut costs and lower prices for end users. Wal-Mart is one of ... have the negative effects of lateness and incomplete orders between Wal-Mart’s distribution centers. However in having a sufficient supply chain management system in ...
Wal-Mart reduces the costs in the process of logistics operation as far as possible, saving the costs to make the goods’ prices lower to the consumers. And this is Wal-Mart’s consistent management tenet and a key component of its success. While in the process of logistics, logistics distribution costs play a decisive role in the logistics costs. In the logistics distribution, transportation costs account for largest proportion of the whole costs. Therefore, Wal-Mart tries to locate the new supermarkets around existing distribution centers to reduce the delivery time and the transportation costs.
At the same time, Wal-Mart focuses on the construction of the distribution center when it has many investments. 3. 2 The successes of Wal-Mart in reducing distribution costs (1) An establishment of the efficient distribution center Wal-Mart distribution centers are very large and mostly located in the first floor. Wal-Mart distribution centers basically use conveyor belts making the transfer flow more effective, high-tech distribution system, product code, automatic identification system and a series of advanced technology and methods.
All these methods together may greatly reduce the Wal-Mart’s logistics cost. (BBC news,1999) (2)The advanced distribution mode of operation In Wal-Mart distribution, large-sized goods are generally transferred to the Wal-Mart distribution centers by trains and then transferred to each branches from the distribution centers by transport vehicles. If the transport vehicles are always empty when returning to the distribution centers, which may result in a great waste of resources. Wal-Mart decides to buy and get the goods back from close suppliers on its way home back to use the empty vehicles efficiently.
This will reduce a large distribution cost to a large extent. (3)Operating and managing distribution centers automatically The bar coding have been utilized in the transportation in Wal-Mart’s operation, so that distribution centers can know the location of the goods accurately by scanning the bar codes. On the other hand, the use of automatic equipment, such as handheld computers, cost-efficient system of conveyors,saves a lot of labors and material resources. (Flannery,2006) (4)An improvement of distribution organization structure
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... compete. What this shows is that Wal-Marts so called beneficial, consumer friendly business strategies do not match up with ... phase to the manufacturing phase, from supplier to distribution center, from distribution center to store, stockroom to shelf, shelf to consumer, ... 48 hours. Wal-Mart has adopted efficient processes such as cross-docking which as reduced operating costs, increased throughput, ...
Wal-Mart builds its own transport fleets to transport their goods whole to achieve the purpose of optimization of distribution. Murray (n. d. ) said that “The Company has seen some successes such as a 21 percent increase in fuel efficiency (MPG), 5. 5 percent increase in pallets per truck, 6. 5 percent reduction in empty truck miles and 3. 8 percent increase in cases shipped with 7. 8% reduction in miles. ” This makes Wal-Mart transportation cost lower than that of competitors, to win the great competitiveness. The operation strategies to control the cost of distribution From what we have learned in Wal-Mart, we can conclude some strategies applied in the other companies to reduce the distribution cost, helping them to make the largest profits. (1) Mixed strategy A mixed strategy means that enterprise does not need to complete all the distribution tasks itself, taking out parts of the distribution tasks for outsourcing to other professional enterprises. The basic thought of this strategy is that different products have different characteristics, thus they cannot be treated as the same.
For the parts they do not good at can be outsourced by more professional teams, which can not only save a lot of resources, avoid the waste, but also improve the enterprise’s service level and quality, minimizing the distribution cost. (Steele, 2002) (2)joint distribution strategy Joint distribution means that every enterprise collate all their goods for distribution to achieve the win-win situation. This kind of distribution also has two kinds of cases, one is the joint distribution of small and medium enterprises and the other is the combination of several small and medium sized distribution centers.
Because these enterprises or centers may do not have many orders to use the resources efficiently, who will choose the joint distribution to avoid a waste of resources, a reduction of distribution cost and an improvement of distribution efficiency. (3) Postponement strategy In the traditional distribution plan, most of the inventories are in accordance with the forecast of demand from the market. While due to the market uncertainty, the inventory may be more or less than that in reality.
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The current issue and full text archive of this journal is available at www. emeraldinsight. com/0959-6119. htm Online distribution strategies and competition: are the global hotel companies getting it right? Gabriel Gazzoli ? Institut Hotelier Cesar Ritz, Le Bouveret, Switzerland Online distribution strategies 375 Received 25 May 2007 Revised 3 July 2007 Accepted 18 October 2007 Woo Gon Kim ...
So there is a certain risk, increasing the delivery cost. Therefore, the main idea of the postponement strategy is that the enterprises try to delay the distribution until having received the consumers’ orders. To carry out the strategies successfully, the companies must be able to response the order requirements quickly. (Cheng, et al. , 2010) 5. Conclusion In conclusion, from what have been talked about above, we can learn that as the rapid development of the logistics distribution, the cost of it has a key impact to a company’s success.
