Link by Link
The Role of Distributors in the Supply Chain
Supply chains are vital to the movement of goods and services worldwide, and distributors play a key role in the process, using technology to make the chain of distribution quicker and more reliable, and combing out every last glitch.
If there ever was a year when strengths and weaknesses of supply chains became apparent, it was 2020. Companies worldwide, accustomed to regularly receiving shipments of everything from staples like printer ink and paper to coffee filters and headsets, were stonewalled by customer service reps at their wits’ end. Items were on back order for weeks, months, or even an ‘indeterminate time’ because of the COVID-19 pandemic.
Supply chains, facing their greatest challenge since World War II, saw the movement of raw materials, finished goods, and services come to a stop in many instances. Slowdowns in international shipments have happened before because of a lack of raw materials, labour strikes, or political strife, but the inability to access any products was something new.
Much more than shipping products from Point A to Point B, all links in supply chains are essential, as everyone going to their local grocer or big box store soon discovered in the early days of the pandemic. News of shortages sent the public into panic buying, sometimes hoarding hundreds of dollars’ worth of toilet paper, disinfectant spray, and paper towels – if they could find these items.
Compared to what medical and health professionals faced, however, these shortages were insignificant.
Overnight the demand for personal protective equipment (PPE) such as disposable paper masks and gloves, face shields, surgical gowns and related items skyrocketed. Since many of these products come from overseas manufacturers, hospitals – particularly emergency rooms overwhelmed by patients with breathing issues caused by the then-unknown virus – soon struggled to find another life-saving device: ventilators.
The COVID-19 crisis has changed the world in every way, and made many businesses realize how dependant they are on offshore products.
The pandemic also saw North American manufacturers re-tooling their operations to make essential medical supplies like ventilators and hospital masks. Within days, companies known for manufacturing hockey equipment or distilling gin had switched their operations to face shields and hand sanitizer for hospital staff and front-line workers. These experiences have led many companies to seriously examine ways of diversifying their existing supply chains.
As the name implies, supply chain management (SCM) involves many links to make up a chain, and refers to the end-to-end stages required to get products and materials to customers in the most efficient and cost-effective ways.
Like any successful business endeavour, there are also many stages required, starting with raw materials/material planning, suppliers, manufacturing, distribution, retail location, and ultimately the customer. Without all these stages performing in harmony, SCM can fall apart quickly.
One of the greatest boons to SCM in the past few years is technology, especially the Internet of Things (IoT). Improving logistics, IoT, automation, GPS and other warehouse inventory and smart tracking tools like Bluetooth tags and improved fleet management have transformed supply chains.
Vanishing fast are the days when businesses would wonder where their deliveries were. Today it is easy to see exactly where products are via computer, Smartphone and text or email messages; to track precise locations; and even to determine or predict precise delivery times.
From sourcing and manufacturing to delivery, all participants are responsible for the success of supply chains. Located midway in the process between manufacturers and resellers/retailers, distributors perform a key function. Purchasing bulk inventory from producers, distributors (sometimes referred to as wholesalers or stockists) take those products and sell them in bulk to customers.
Serving as the link between producers and buyers in SCM, distributors do much more than connect manufacturers to customers. Many have one or more warehouses – often located close to customers – and provide not only goods but product experts able to give advice and support where needed.
Often open 24/7, distributors are also responsible for monitoring customer needs and managing inventory, which is delivered via their own fleet or perhaps different carriers as needed. The majority have constant access to abundant storage in multiple locations.
Often handling product sales and promotions, part of a distributor’s duty is also to maintain sufficient quantities of stock, ensuring retailers not only receive products promptly, when needed, but at the best price.
In their pursuit of ‘cheaper is better,’ some businesses believe that purchasing directly from manufacturers and cutting-out distributors will save money.
While on the face of it this notion seems sensible, the reality is often different. Distributors don’t purchase one or two items, but hundreds if not thousands, allowing them to negotiate better deals; customers rarely buy product in the same large quantities as distributors, who also handle billing, shipping, and marketing.
For manufacturers, there is little incentive in handling everything that comes with selling small orders directly to buyers, such as billing, paperwork, packaging, shipping, and dealing with returns.
There is also the issue of location. Due to all the constraints of cost and the demands of admin, manufacturers rarely have sufficient facilities. Distributors often have multiple locations nation-wide or even globally, making them much better equipped to store inventory and quickly ship it from the nearest site to customers.
From ensuring inventory is on hand to speedy delivery, assisting with purchasing, providing product information and even selectively extending credit, distributors shoulder a massive obligation including finding the best suppliers, negotiating the best deals on products and services for their customers, and reliably securing them the best value available.
Along with radio-frequency identification (RFID), many companies use additional wireless technologies, such as Cloud computing, to expedite and track shipments. Handheld devices – where recipients digitally sign for orders received – send information back to companies in real time, and email or text messages to confirm delivery date and time.
In fact, the Federal Motor Carrier Safety Administration (FMCSA) saw the new electronic logging device (ELD) rule mandated by congress late last year as part of MAP-21, the ‘Moving Ahead for Progress in the 21st Century’ Act regarding surface transportation spending.
To make work safer and more efficient for drivers, ELD devices synchronize with vehicles. Data regarding records of duty status (RODS) are tracked, and hours of service (HOS) are recorded.
For distributors, existing and emerging digital technologies will continue to make their operations more streamlined and efficient. From clothing to electronics, distributors handling many products are expanding their geographic footprint to better serve retailers. Some of the best examples are online shopping giants Amazon and Walmart.
As of mid-2020, Walmart’s combined distribution and retail-store network totalled a staggering 924 million square feet. To make moving product even more efficient, Walmart’s regional distribution facilities are geared towards handling specific products, such as food and fashion. At present, Amazon facilities include over 1,200 distribution locations spread across 21 countries.
Technology will become increasingly important in all areas of the global supply chain. Goods will be moved faster and more intelligently than ever before as Artificial Intelligence and Smart Warehousing sees tasks like stocking, maintaining inventory, and packaging products for shipping become automated.
This will not only boost efficiency and accuracy, but minimize human error through radio-frequency identification (RFID) tags, AI, and camera and sensor-equipped robotics, which are faster and more efficient than people at picking goods between aisles.
Fast disappearing are the days of questionable order numbers and product descriptions scribbled on an easily lost piece of paper, as supply chain management software takes over, making it much easier to track packages from the manufacturer all the way to the consumer.