What Is Distribution Planning? Everything You Need to Know

by Vector | Mar 16, 2021 7:02:10 AM


“Good fortune is what happens when opportunity meets with planning.” —Thomas Edison

Distribution planning is a hot topic. After news first broke that a COVID-19 vaccine had been developed, there were cheers. But when the cheers subsided, we were immediately faced with the next question. What's the vaccine distribution plan?

If you're like me, you survived the pandemic thanks to distribution planning. Distribution centers keep the goods flowing. Distribution centers get the world turning. Which is fitting because you often hear distribution centers described as the hub at the center of the logistics wheel.

In addition to our collective experience, we should also recognize the boom in e-commerce and overall Amazonification of America. Thus, the phrase "distribution center" has entered many people's lexicons. In fact, we've grown very familiar with the concept of distribution centers. Case in point: We mostly just call them by their cool-kid nickname now—DCs. And if you look around your home or office, I'd wager that 90% of what you see involved distribution planning at some point.

In short, distribution planning is a core tenet of modern life. It already was before COVID-19. The pandemic only served to increase the urgency of establishing sound distribution planning practices.

Thus, this article attempts to provide a basic understanding of this underappreciated facet of modern life. Here's what we'll cover:

  1. What's distribution planning?
  2. Why is it so critical to the supply chain?
  3. What are examples of distribution planning tactics?
  4. What's next for distribution planning? How are software and automated workflows changing the game?

Ready? Let's distribute some knowledge!

What's Distribution Planning?

First of all, let's start with some basic definitions for distribution planning.

According to MBASkool.com, "Distribution planning is a systematic approach to ensure that the process encompassing the delivery of goods to different distribution centers is done properly, keeping in mind which goods are to be supplied in what quantity at what location in the desired time."

In addition, Wikipedia defines distribution planning as "a method used in business administration for planning orders within a supply chain. DRP [distribution resource planning] enables the user to set certain inventory control parameters (like a safety stock) and calculate the time-based inventory requirements."

Oreilly.com defines distribution planning as the "technique used for the efficient delivery of goods that involves determining the item quantities, location, and timing required to meet forecasted demand. The goal of DRP is to maximize product availability and reduce the costs of ordering, transporting, and holding product."

You get the idea. Distribution planning is all about peering into the misty future, right-sizing your orders, and then executing delivery.

Why Is Demand Planning So Critical to the Supply Chain?

“To achieve great things, two things are needed; a plan, and not quite enough time.” —Leonard Bernstein

In reality, we think about distribution planning all the time in supply chain management. The goal of everyone up and down the supply chain is essentially the same.

  1. Keep the customer happy.
  2. Reduce operating costs.

That first one is easy enough, right? Just deliver the goods on time, as ordered, and damage-free. Boom, execution, easy!

Sure, except that there are billions of consumers on the planet. And many of us are purchasing things every day.

In other words, it's about repeatability. Distribution planning is vital to the continued flow of goods. Thus, the world witnessed the advent of the distribution center. Put another way, DCs helped with that second goal of supply chain management.

Distribution planning is all about cost reduction. Identifying the correct quantity of inventory at every warehouse and distribution center is an art and a science.

Distribution Planning Methods and Tactics

“Give me six hours to chop down a tree and I will spend the first four sharpening the axe.” —Abraham Lincoln

The typical elements that are important in the distribution planning process include:

  • Forecast demands
  • Current inventory levels at warehouses and DCs
  • Ideal safety stock numbers
  • Ideal replenishment or order quantities from suppliers or manufacturers
  • Lead times
  • Transit times

As noted above, the goal of distribution planning is to minimize shortages and reduce the costs of ordering, transporting, and holding goods. How can we do that?

One example for cost reduction got elevated during the pandemic. The global trend of e-commerce allows companies to remove brick-and-mortar stores from the equation. Instead, goods can move directly from DCs to consumers. That saves money, and it's surely a trend that will stick around.

In addition, consumer trends and tastes shift rapidly. Thus, creating a solid distribution plan can be a challenge. Last year's data might literally be out of style. No one wants to get caught holding the bag on outdated inventory. (That doesn't keep customers happy or reduce cost!)

But the reality is that consumers have a desire for options and customization. For manufacturers, that translates to smaller batches and smaller production runs of goods. Smaller batches typically mean higher costs. But it's competitive out there, so consumers won't necessarily pay higher prices. This can be tricky.

But when you can get your distribution planning aligned the right way, it can pay off. A distribution plan is only as good as the data that goes into it. That means data analytics is the future of distribution planning.

What's Next for Distribution Planning? How Software and Automated Workflows Change the Game

“By failing to prepare, you are preparing to fail.” —Benjamin Franklin

Imagine what the pandemic and quarantine would have been like without technology. There was a slow trend in logistics toward innovation before that. But now, I think companies—and all of us—realize there's no going back. You see the changes all over. People are being more thoughtful about the integration of technology in our world.

For example, how many companies have already stated they don't plan to go back to the office full-time? Also, note the way institutional investors have adopted Bitcoin. This follows the meta-trend of overall tech adoption. But I think we're really just getting started.

For example, digital technologies including contactless electronic bills of lading (eBOLs) helped many logistics companies survive the pandemic. But in the next chapter, that same technology will help us all to thrive.

Our technological tool kits have improved. A tool such as eBOLs starts with digitized documents. eBOLs simplify everyone's life up and down a company's organization chart.

Consider this: Drivers receive and manage load documents from their phones. In essence, this digitizes documents. In other words, they're paperless! Think about how nice that sounds. The load file exists in the cloud, so everyone from the back office to management can access a file anywhere from their computer.

Savvy businesses are thinking outside the box. Driver workflows are streamlined. That in turn streamlines back office work such as invoicing. Digitized documents even streamline audits. In other words, streamlined processes form a stronger backbone for the supply chain world.

What Are You Planning for?

“It is not the strongest of the species that survive, not the most intelligent, but the one most responsive to change.” —Charles Darwin

Consumers adopted different behaviors during the pandemic. Many of these behaviors will stick around long into the future. The world continues to revolve around the hub of distribution centers. Greater focus on distribution planning will continue to trend.

The world will rely on technology more and more. At the heart of the technological revolution in the supply chain is data. Accurate data begins with digitized documents. And that's why distribution planning and strategizing for the future should include digitized documents.

In short, the logistics industry is evolving, and so should you. Remember survival of the fittest!

This post was written by Brian Deines. Brian believes that every day is a referendum on a brand’s relevance, and he’s excited to bring that kind of thinking to the world of modern manufacturing and logistics. He deploys a full-stack of business development, sales, and marketing tools built through years of work in the logistics, packaging, and tier-1 part supply industries serving a customer base comprised of Fortune 1000 OEMs.

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