Seven Consequences of Misaligned Distribution Networks

Lilian Quane

Administrator
Staff member
In my many decades as a supply chain and logistics specialist, I have identified pretty much all the factors that impact costs and, as a consequence, erode profits.
Misaligned distribution is perhaps the most insidious of these, as it creeps in unnoticed.
I have come up with seven of what I call the ‘costequences’ of misaligned distribution networks. Maybe you have some of your own to add to these?

1. Inventory Carrying Costs
Distribution network imbalances will, without doubt, result in an unnecessary accumulation of buffer stock, thereby increasing your inventory carrying costs.

2. Facility Costs
Too many warehouses, or wrongly situated warehouses, usually leads to unwanted facility costs.

3. Labour Costs
If you have an inventory imbalance or misaligned facilities you are probably needing to hire more staff than you need to manage these.

4. Last-Mile Transport Costs
If your warehouses and distribution centres are not strategically located, your last-mile transportation costs will be inflated.

5. MHE Costs
Mechanical handling equipment comes with a hefty price tag so unless you optimise its usage you will incur unnecessary costs.

6. System Costs
The more systems you have, the higher the costs. Make sure that all the ones you have are absolutely necessary.

7. The Cost of Loss
Distribution network misalignment can be responsible for a range of losses, including in quality of service, supply chain flexibility, and market penetration.
There certainly are other ‘costequences’ for the misalignment of the distribution network. Anyone care to chip in with thoughts on those I’ve mentioned, or flag some more of them?
 

Corzhens

Member
Point #4 which is the strategic location of the warehouse has affected the industry in this last decade with the new laws that a warehouse cannot be constructed on the main road in the metro and in the suburbs as well. Lucky are the existing warehouse that they are not touched. The new warehouses would be more than 30 kilometers from the metro where the ports are located.
 
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