The logistics or distribution network refers to the set of physical structures and activities that connect product sources (factories) with customers, while coordinating the underlying flow of information.
Basically, the logistics network can be said to be structured into five major components:
- The distribution network
- Inventory management
- Order management
- Transportation
- Warehouse management
The importance of the logistics network
“The logistics network is the set of warehouses, of different nature and type, which, functioning in an organized and integrated manner, constitutes the backbone of the logistics system that allows the products managed (or manufactured) by the company to reach the customers“.
The importance of this, then, lies in the fact that it is indispensable for the product to reach the consumer. Generally, the production or manufacture of a good tends to be considered “more important”, since it is the most tangible part of the process of satisfying consumer demand. However, without a distribution network that enables the service or product in question to reach the customer, these are meaningless.
Factors that determine the logistics network
The factors that determine the logistics network depend to a large extent on the type of product it distributes. Foodstuffs do not require the same care (they may need to be kept at certain temperatures) as fashion items or even technology. This means that the logistics network has to adapt to the specific needs of each good and each customer.
However, the common elements found in any distribution infrastructure associated with a logistics network are as follows:
- The location of the customer is crucial. The further away the customer is from the production site, the more will have to be invested in distribution and efficient logistics management. In this way, the goods will reach the customer in good condition.
- As transportation costs decrease, thanks to technology, it will become more feasible to invest in innovative means of distribution, such as drones.
- The more perishable the goods, such as food, the more sophisticated the logistics network must be. This is the only way to maintain product quality.
- A company can either outsource the distribution of its products or take care of this activity itself. In the latter case, it will have to invest in the necessary equipment, technology and human resources.
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