Friday, May 09, 2014

Distribute to Order

I recently listed to a BBC Radio 4 article   (who else!) on Coffee Barista's in the UK.  They briefly touched on the cost breakdown of the cup of coffee that is served up in a [London] high street coffee shop.

Only the smallest fraction  (under 5%)  is attributable and thus payable to the coffee grower with the rest being taken up in the cost of packaging, transport, staff wages etc.

It's probably the most common example of the high overheads associated with providing goods or services in a Town Centre, High Street environment.

I contrast that with this morning's delivery from a the UPS courier.

A mysterious package arrived from the Netherlands.

It transpires that the Swiss portable speaker, ordered from a Swiss Manufacturer, in Switzerland, has been dispatched from the Netherlands. Strange?

After some Googling its transpires that Logitech products are actually manufactured in China

My whole ordering process, which was online is a good example of the new style  Distribute to Order cycle, well suited to the informed consumer.

The traditional system was:
Distribute to Plan  (aka Build/ Manufacture to Plan)

The is the time tested system in which retailers estimate demand, ship products from manufacturers to wholesalers to distributors to retailers to local stores.

Although the transport and distribution costs are relatively small, everything else such as Retail costs, over/under stocking, people costs are high.

Today this model seems to work best for food where demand is pretty constant and quantity is very large.

The new system of
Distribute to Order (aka Build/ Manufacture to Order)

This is the new system where goods are manufactured typically in China, held internationally, and then drop shipped individually directly to customers.  Sometimes they can also go via a volume distributor.  Minimal or no retail outlets.  Distribution costs, quantity 1 are high but storage costs and people costs very low.

(Note: Of course in Switzerland many retailers charge us 'Swiss' prices, by which I mean they still take a huge profit, but it is getting better over time)

My Conclusions

In today's world, Distribute to Order provides the consumer with ultimate flexibility.

Modern rEtail stores like Scan Computers in the UK or Digitec in Switzerland operate a custom ship (quantity 1) process that attempt to minimise the otherwise expensive and  long chain of middlemen and profit takers between the manufacturing plant and our front door.

The new generation of Mail Order today/ deliver [almost] tomorrow stores attempt to cut out the middlemen and profit takers and are eminently suitable to the informed customer, who knows exactly what they want.

To me if you are the doddery, not sure what I want, non Internet/Youtube informed  customer, who wants to shop in a traditional high street, extended supply chain, distribute to plan model, then be prepared to pay & pay.