Distribution Network

SEC Release IA-1092

What is a distribution network?

In a supply chain, a distribution network is an interconnected group of storage facilities and transport systems that receive inventories of goods and then deliver them to customers. It is an intermediary point for transporting products from the manufacturer to the end customer, either directly or via a retail network. A fast and reliable distribution network is essential in today’s consumer instant gratification society.

Distribution networks are located in the post-manufacturing part of a supply chain – the flow of goods and services and include all the processes that transform raw materials into final products and into the hands of consumers.

Understanding distribution networks

The goods supply chain may involve an extensive distribution network depending on the product and the location of end customers. A manufacturer may have a distribution network to serve wholesalers, who in turn have their own network to deliver to distribution networks operated by retailers who, at the bottom link of the supply chain, would sell the goods in their stores. detail.

A simplified supply chain could also imply that a manufacturer ships finished products to its distribution network, and then directly to end consumers.

The location (proximity to the customer) and the quality of the infrastructure are important attributes of a distribution network. In addition, the storage, handling and transport functions of a distribution site are set up to meet the specific needs of the company in order to serve its customers in a geographic area. There can be a high level of sophistication on a single site – and by extension, on the entire distribution network – to optimally process the order flow of finished products, whether it is a handful large items such as agricultural tractors or thousands of references for a retail chain.

For the entire distribution network, a company must plan the needs for equipment, workers, IT systems and transport fleets. The enterprise must determine whether a star distribution network is suitable for its enterprise or a decentralized network.

Key points to remember

  • In a supply chain, a distribution network is an interconnected group of storage facilities and transport systems that receive inventories of goods and then deliver them to customers.
  • It is an intermediary point for transporting products from the manufacturer to the end customer, either directly or via a retail network.
  • A fast and reliable distribution network is essential in today’s consumer instant gratification society.

Example of distribution network

Establishing an efficient distribution network requires a studied approach as it is increasingly seen as an essential asset in this new era of electronic commerce. Walmart, for example, with 147 distribution facilities at the end of its 2020 fiscal year, is allocating more capital to build additional distribution centers for its distribution network as it evolves with competitive market demands.

Amazon has also expanded its distribution network, building huge robot-controlled warehouses around the world and operating its own freight trucking and cargo aircraft fleets. Amazon has even considered using autonomous drones to deliver goods to customers, which would be an innovation in the distribution of goods.

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