2018 Distribution Network Trends Report

Today, more than ever, companies are looking for ways to improve service levels, better manage inventory and reduce transportation costs. It’s no accident, then, that both B2B and B2C businesses are taking a more strategic approach to network configuration. Distribution networks play a critical role in the supply chain.

Finding the Optimal Configuration

Every company will have its own ideal DC network configuration based on company size, type, variety of sales channels, geographic distribution, etc. For example, omnichannel companies are more likely to have more DCs because they can provide faster, more cost-effective service when they’re in their customers’ backyard.

The design and management of these networks should be assessed on an on-going basis. The network is likely to change over time as the business grows and evolves.

To determine the ideal number of distribution centers for a business, it’s important to consider a variety of factors including order volume, product characteristics, reverse logistics needs and acceptable transit times. Data analysis and modeling can be valuable in the decision process.

Today, as more companies move toward an omnichannel environment (or simply need to accommodate sales growth and market expansion), they opt for multi-node networks that put products closer to their customers.

In fact, Saddle Creek’s recent survey of omnichannel companies reveals a significant trend toward a multisite distribution model. Within two years, 77.8 percent of omnichannel companies plan to use multiple DCs, the study shows. The number of companies using multiple DCs “with the source of fulfillment determined by business rules for the order” will climb from 23.5 percent to 49.4 percent while another 28.4 percent will use multiple DCs “with each primarily serving a specific geographic area or sales channel.”