The right products for efficient distribution logistics

Between individualization and complexity

Many companies try to reach new groups of customers through the use of product differentiation. The life cycle of products is becoming increasingly shorter as well. These developments are having an impact that extends beyond procurement logistics. They are also creating new challenges for distribution logistics. This is because more and more products have to be provided to the customer on shorter and shorter notice - without this service’s having any price impact on him. As a result, product strategy must create an optimal balance between satisfying individual customer wishes and managing the complexity of distribution logistics.

Higher logistics costs through bigger product lines

Many sectors are part of a growing trend to expand product lines by adding products or creating differences in products. In the process, however, the effect that an extended product line can have on distribution logistics is frequently overlooked.
The more extensive the product line, the more complex the logistics problems. An extension of the product line creates new problems related to order processing Order processing , packaging and transportation. A fundamental result is inventory growth [1].
For instance, a company could replace a normal shampoo with three special shampoos for blonde, black and brown hair. If one makes the pessimistic assumption that sales will not climb in comparison with the standard shampoo and will be broken down on the basis of 60:30:10 for the new products, experience has shown that warehouse inventories will rise about 60%. The primary reason is that safety stock levels must be maintained for every shampoo. If one makes the optimistic assumption of a 50% jump in sales over the standard shampoo, experience has shown that warehouse inventories will rise by 100%. The sales increase achieved by the expansion of the product line raises the unit costs of warehousing in the process.
Certainly, experience does not always hold true. But it tends to point in the right direction. The general rule is: The lower the sales of a product, the higher warehouse inventories should be.

Impact of an expanded product program on inventories

If a new product is added to a company’s line, the company must ensure that the supplier has sufficient inventories to guarantee fast delivery. Experience has shown that retailers generally have very low inventories of new products during the market entry phase until persistent demand has shown them how to order the appropriate quantities [2]. This means that new products must be delivered especially fast to retailers during the market entry phase to ensure that retailers can satisfy demand [1]

Product design from a logistics point of view

When designing a product, one should always consider the problems that could arise during transport and in the warehouse. Special packaging requirements, for example, can arise from the product’s weight or bulk, its shape or its fragility. From the logistics perspective, it is especially problematic when the dimensions of a product exceed the size of a pallet Pallet and, as a result, must be transported by a special cargo carrier.
Product designers will greatly facilitate logistics if they ensure a certain level of standardization in the product’s measurements during the design phase. This will make packaging, warehousing, product handling and transport considerably easier [1].

The special significance of customer service

Good customer service is also very important to distribution logistics Distribution logistics . If spare parts are necessary to provide customer service, the quality of customer service depends to a great extent on the support of suitable spare-parts logistics [spare-parts logistics]. After all, the best service technician can perform his work to the satisfaction of the customer only when the right amount of the necessary replacement parts is available at the right place [1].

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