Distribution Optimisation in Retail and FMCG: Enhancing Efficiency and Profitability

What is Distribution Optimisation?

Distribution optimisation in retail and the Fast-Moving Consumer Goods (FMCG) industry involves the strategic management of the distribution process to maximize efficiency and minimize costs.

This process encompasses the end-to-end logistics of moving goods from manufacturers to end consumers, including inventory management, warehousing, transportation, and last-mile delivery.

The goal is to ensure that the right products are available at the right time and place, meeting consumer demand while minimizing operational costs and environmental impact.

Why is Distribution Optimisation Important?

In the competitive landscape of retail and FMCG, efficient distribution is crucial for several reasons:

1. Cost Reduction: Distribution costs, including transportation and warehousing, constitute a significant portion of operational expenses. Optimizing these processes can lead to substantial cost savings.
2. Customer Satisfaction: Efficient distribution ensures timely delivery, maintaining high service levels, which is critical for customer satisfaction and retention. Delays or stockouts can result in lost sales and damage to the brand’s reputation.
3. Competitive Advantage: In a market where speed and reliability are key differentiators, optimized distribution can provide a competitive edge by enabling quicker response to market changes and consumer demands.
4. Sustainability: Effective distribution strategies can reduce fuel consumption and emissions, supporting sustainability goals and compliance with environmental regulations.

Benefits of Distribution Optimisation

Optimizing distribution offers a multitude of benefits:

1. Reduced Operational Costs: By streamlining logistics and improving route planning, companies can reduce fuel consumption, labour costs, and maintenance expenses.
2. Improved Inventory Management: Accurate demand forecasting and inventory placement ensure that products are stocked appropriately across various locations, reducing the need for excessive safety stock and minimizing inventory holding costs.
3. Enhanced Supply Chain Visibility: Advanced analytics and real-time tracking provide better visibility into the supply chain, enabling quicker identification and resolution of bottlenecks or disruptions. See Unlocking the Power of Supply Chain Management with VSC Solutions
4. Increased Flexibility: Optimized distribution networks allow companies to adapt more quickly to market changes, such as fluctuating consumer demand or supply chain disruptions.
5. Higher Profit Margins: Cost savings and improved efficiency directly contribute to higher profit margins, enabling reinvestment into other areas of the business.

How Does Distribution Optimisation Work?

Distribution optimisation involves several key processes and technologies:

1. Data Analytics and Forecasting: Using historical sales data, market trends, and predictive analytics, companies can forecast demand more accurately, ensuring that products are distributed to the right locations in the right quantities.
2. Transportation Management Systems (TMS): TMS software helps plan, execute, and optimize the physical movement of goods. It enables route optimisation, load planning, and real-time tracking of shipments, reducing transportation costs and improving delivery times. See Transportation Management Systems are game changers in the fast-paced world of logistics
3. Inventory Optimisation: Advanced algorithms analyse sales patterns and inventory levels across various locations to balance stock levels, reducing both stockouts and overstock situations.
4. Warehouse Management Systems (WMS): WMS solutions optimize the storage, retrieval, and dispatch of goods within warehouses, improving operational efficiency and reducing order processing times.
5. Automation and Robotics: The use of automation in warehousing and logistics, such as automated picking systems and autonomous delivery vehicles, enhances efficiency and accuracy, reducing reliance on manual labour.
6. Collaborative Planning: Effective distribution optimisation involves collaboration across the supply chain, including manufacturers, suppliers, and logistics providers. Sharing information and coordinating efforts help align distribution strategies with overall business objectives.
7. Sustainability Practices: Incorporating sustainability into distribution strategies, such as optimizing routes for fuel efficiency or using eco-friendly packaging, contributes to reducing the environmental impact of logistics operations. See VSC Solutions Is Geared To Make A Significant Contribution To ESG

How VSC Solutions Can Help You

They have a highly experienced team of consultants use their knowledge of proven methodologies and market-leading modelling tools to improve customers distribution and sales networks. Their process towards visualising and optimising a holistic solution that satisfies efficiency and effectiveness is both strategic and tactical.

Andreas Maritz, Strategic Growth Executive at VSC Solutions, says, “VSC Solutions have a particular expertise in managing the idiosyncrasies of Traditional Trade and have developed the systems and software for this task.

Another advantage of working with VSC Solutions is that their software may be integrated with other off-the-shelf applications that our customers be using.”

What Does VSC Solutions Provide?

Distribution Strategy Consulting – Determine the key drivers of supply and demand and align sales and distribution activities accordingly.

Customer to Depot Allocation – Assign customers to the most optimal depot for the most efficient last mile distribution model.

Territory Optimisation – Balancing workload and demand based on various metrics to create geographically optimised customer groupings.

Fleet Configuration – Determine the optimal number as size of vehicles required for the most efficient fleet.

Service Day Assignment – Balance warehouse and distribution workload across the days of the week and weeks of the month.

Sales Rep Cycle & Route Optimisation – Optimal call cycles and rep routes for consistent, effective sales calls.

Master Route Optimisation – Optimised fixed routes suitable for customers with high frequency deliveries and consistent volumes.

What-if Analysis – Determine the impact of adjusting distribution rules and parameters.

RFP & Contract Costing – Create models that assist in budgeting for the required fleet mix, labour force, distance travelled and other fixed and variable costs.

Cost to Serve Analysis – Understand the cost to serve and profitability of servicing a specific location in relation to the rest of the locations within distribution network.

If you would like more information or a demonstration please contact Andreas Maritz, Strategic Growth Executive, on 072 049 5824 or [email protected]