In today’s blog, we will demonstrate the basic principle of distribution network designs. Various factors strongly influence the shape of distribution network designs. how you should design? How many warehouses there should be? How to operate transport network.
Some of the factors that have a significant impact on distribution costs are
- Cost of Storage
- Inventory Holding Cost
- Linehaul Cost
- Customer Delivery Cost
- Systems Cost
- Total Cost
Cost of Storage
If we increase the number of inventory points, warehouses, and distribution centers. The cost goes up because we get more facilities.
Inventory Holding Cost
We increase storage points, which rises holding costs. Why do you think that? It is all about safety stock. Inventory increased quite a bit, so we are deploying inventory in a greater number of warehouses. if you have store 10 warehouses stock in 1 then safety become compromised. Therefore more warehouses mean, more inventory safety and more inventory holding costs.
Linehaul Cost
It is known as primary transport, transport brings products into warehouses and distribution, so more facilities in the system will raise the cost. why is it? Because traveling more tan(products) per kilometer.
Customer Delivery Cost
A high number of facilities (warehouses and distribution centers) that you have in the network will decrease delivery costs. Why? It is due to being closer to your customers. So more facilities you are which mean closer to your customer.
Systems Cost
System costs include licensing, hardware interface, human resources, etc. So, More facilities in your network will increase the overall cost.
Customer Delivery Cost
Finding total cost is not so simple. You need to keep in mind all the distribution networks. Some people ask how many distribution centers are in our network. It all depends on your business, type of products, locations, and so on.
To sum up, creating an effective distribution system is important for getting good profit. There are many logistics companies that work in Pakistan but I highly recommend KSL logistics Pakistan. It offers good and affordable prices to ship your luggage anywhere.
KSL logistics has provided services for many years across the globe. Our expert shippers can provide you with the best freight services, including sea freight, air freight, and road transport. For more information visit Contact Us