Supply chain distribution is the process of getting finished products to consumers, often involving intermediaries like delivery companies, warehouses, and retailers. Advances in technology have allowed for internet fulfillment, where companies contract with others to handle various supply chain functions.
Supply chain distribution is an organizational process that companies use to get finished products into the hands of consumers. Historically, supply chains have mostly been found in the manufacturing and production industries. These companies transform raw materials such as wood, minerals, steel and fabrics into valuable goods ready for consumers to use. Manufacturing and production companies may not have available resources to deliver products to retail stores where consumers can safely shop and purchase items, so they rely on supply chain distribution to complete this process.
Companies often develop the best business strategy that maximizes resource usage and limits waste or unnecessary business costs. Supply chain distribution often introduces intermediaries into the economic market. Under free market economic principles, competition is an essential cog to drive competition. However, the inability to deliver goods directly to consumers forces companies to find other ways to sell goods on the market. Therefore, manufacturing and production companies hire delivery companies, distributors, warehouses, wholesalers and retailers to complete this function.
Supply chain distribution also occurs in the early stages of the manufacturing and production process. These companies must purchase the raw materials needed to produce consumer goods. Rather than sending employees to gather or create raw materials, these companies will develop a supply chain to produce and ship materials to their production facilities. While supply chain deployment can add additional costs to the manufacturing and production process, they can be considerably less than developing new facilities or processes to handle this function in-house.
Advances in trading technology have greatly changed the supply chain distribution process. Many companies now use the Internet to transfer information through the supply chain and order products or services to enhance this business function. The Internet also allows manufacturing and production companies to take orders directly from customers and fulfill orders through the supply chain. Companies can also use a fulfillment company, which is different from traditional supply chain distribution.
Internet fulfillment is usually the process of contracting with a company to complete various supply chain functions. These companies can maintain warehouse inventory, take orders from customers, and ship the items to individuals and businesses. These companies may also offer customer service or technical support functions, which relieves manufacturing and production companies from creating departments for these functions. Fulfillment companies help shorten the supply chain and can reduce business costs since one company is responsible for multiple intermediary functions. Manufacturing and production companies can also use commercial contracts to ensure they receive a specific level of service at fixed rates.
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