Question

Discuss the advantages and disadvantages of the two common distribution strategies, namely, direct shipment and warehousing. Suggest and explain the most appropriate distribution strategy for perishable diary products and slow-moving household appliances.

Answer 1

Advantages of Warehousing

• Increase in Accuracy of Orders.
• Decrease in Paperwork.
• Real-Time Knowledge of Your Inventory.
• Decrease in Overhead
• Contract warehousing can enable scalability.

Disadvantages of Warehousing

• Higher operational costs
• Staffing issues
• Training Issues
• Location issues
• Adherence to state and federal regulations
• Software and equipment costs

Advantages of direct shipment

• Direct delivery to the locations.
• Cost savings with reduced staff
• Cost savings with reduced operational costs
• Less regulation
• Reduction in wasted inventory

Disadvantages of direct shipment

• Significantly higher delivery costs
• Delayed response
• Increase in internal workload
• Lesser number of distribution channel options.

Direct distribution is more appropriate for perishable goods like vegetables and diary products. This is because such goods cannot be stored for more than certain number of hours. On the other hand, for slow-moving household appliances, warehousing is a more effective distribution strategy. This will help in maintaining safety stock and in decreasing transportation costs.