A distribution center is a very essential part of a freight forwarding company. It is where goods are kept before they are shipped to their destinations and, on the other hand, it is where they are stored before being forwarded to their recipients.
It is the seat of a logistics company’s operation, where freight is packaged and consolidated pending their delivery to various areas. Distribution centers are usually situated near transport terminals and are adjacent to major routes to make them more accessible.
Several employees are needed for the smooth operations of a distribution center. It could include people who do labor jobs and are tasked to carry out the distribution of cargoes such as drivers, haulers, order fillers, and others. Aside from this, some personnel are assigned to provide support for them like the supervisors, inspectors, etc.
Several obstacles may be encountered in the selection and operation of a distribution center especially in international transactions. Some of which are:
Obstacle: Inaccurate demand estimates which may lead to a rise in the total inventory level as each country maintains a high safety stock level. A rise in inventory level could mean lesser profit margins and additional costs.
Solution: Centralization of inventory by creating a central distribution center that will cater to every country included in the center. This will make inventory level maintenance easier and more manageable.
Obstacle: Long lead time involved in the transport of cargoes from manufacturers in one country to retailers in another. This slows down the delivery of cargoes and causes companies to incur overhead costs and losses.
Solution: Creating a regional distribution center in a certain area which will comprise countries located nearby such as a regional distribution center in Hong Kong for the countries in Asia. This will curb delays or even eliminate it totally.
Obstacle: Occurrence of a few instances of a stock out due to the inability to deviate the inventory of one country to another. Market trends in different locations vary so while one country may have a high demand on a product another may have less. This will result to a stock out in a location and a high inventory level in the other location.
Solution: Regionalization and centralization of inventory administration and support which would make it easier to regulate and control the flow of goods.
With the centralization of inventory administration and support, inventory management is integrated making it easier for personnel to estimate demands for products. By the creation of a regional distribution center, all inventory and transport problems are kept at a minimum.
It will also be easier to analyse the different angles and scenarios of the countries included in a certain regional distribution center. This market localization will make the creation of value added services less complicated and more conducive to clients.
The concept of a regional and central distribution center may prove to be beneficial to both the shipper and the logistics company because it allows the allocation of inventories to adapt to any scenario or situation in a certain localized market.