Optimizing the Distribution Cycle
A well-coordinated distribution cycle plays a pivotal role in achieving both operational success and customer satisfaction. Seasoned executives know that disjointed functional responsibilities create challenges as well as costs. Without clear direction from the top, and open communication from all levels, a company’s distribution cycle cannot thrive. By viewing the cycle as a holistic system, fostering cross-functional collaboration, and aligning departments, you can learn to optimize your organization’s distribution cycle and increase profits. In Part One of this series, we discussed the Order Management Cycle. Now, we will narrow our focus to the key points in the distribution cycle and learn how a streamlined cycle can reduce costs and drive revenue.
The Distribution Cycle: A Holistic System
It is tempting to focus on individual stages of the distribution cycle in an attempt to maximize each one. Unfortunately, this approach overlooks the impact that each stage has on the others. Viewing the distribution cycle as a holistic system acknowledges how each step directly affects the next. When you work to enhance the system as a whole, you also improve these critical steps:
1. Warehousing and inventory management
Stocking and coordinating a warehouse is a vital initial step in the distribution cycle. At this point, you’re filling your warehouse with inventory and determining a strategic order in which to store it. But, this stage can only be completed successfully by considering order planning. If you organize your inventory by size or alphabetical order, it may be nicely stocked on warehouse shelves, but it isn’t optimized for order planning. Considering this second step while managing inventory enables you to organize your stock in a way that reflects order planning and saves you money, for instance by prioritizing high-selling products or soon-to-expire products.
2. Order planning
As with the first stage, order planning should not be viewed individually. Successful order planning involves understanding customer demands and aligning them with production capabilities. By being aware of your inventory, you can lead salespeople and Customer Service Representatives (CSRs) to encourage sales of products that you have a large quantity of or that may expire soon. Instead of losing money throwing out expired goods, you’ll have the foresight to prioritize the right products. Similarly, order planning has a direct impact on the shipping stage, and the two should be viewed in relation. Shipments can go out faster when orders are well organized.
The shipping stage of the cycle is often the one your customers care most about. When orders are well-planned, customers receive prompt and accurate shipments and your business can save both time and money. For instance, knowing that multiple separate orders exist for a customer might enable you to ship them together at a faster and cheaper rate. Additionally, by organizing your inventory with shipping in mind, you’ll streamline your distribution cycle. This might look like stocking kit assembly products close to each other in the warehouse, to shorten the time it takes to ship, ultimately increasing customer satisfaction. The shipping stage also presents opportunities for costly fulfillment mistakes, like mispicks, that eat into profits. Expensive returns and canceled orders can be avoided with careful planning.
It would be impossible to complete the replenishment stage without considering the previous steps. In order to restock your inventory, you must know how much is on hand, how much has been sold, and how much is in transit. With that knowledge, you can not only successfully replenish your inventory but also continue to plan orders accurately, knowing that you have enough quantity on hand to complete orders.
The Power of Cross-Functional Collaboration
To obtain a cohesive distribution cycle, it is vital to break down silos and encourage collaboration across departments. As a leader, you must create opportunities for your teams to work together to improve operations. For instance, providing time for warehouse workers to meet with salespeople could lead to breakthroughs in addressing bottlenecks, errors, and inefficiencies. By giving employees time together, they will gain a deeper understanding of each stage in the distribution cycle. A deeper understanding can then enable employees to regularly consider the cross-functional responsibilities of their departments. A CSR works closely with customers, but they may not often think about how the actions in a warehouse affect their role or the customer’s outcome.
In addition to communication silos, data silos must also be eliminated. If employees do not have access to the information they need to successfully perform their role in the distribution cycle, then the cycle breaks down. By ensuring full inventory visibility to those who need it, or providing the ability to track exactly where an order is in the cycle, you can put an end to the data silos that prohibit collaboration. Fostering this type of cross-functional thinking will not only positively affect the distribution cycle and customer experience, but will also improve financial performance by decreasing downtime.
Aligning Departments for Improved Order Accuracy and Customer Satisfaction
What does it mean to align departments? Not only should executives work to remove silos in their operations, but they should also be bridging the gap between teams. Connecting a sales team’s desire for quick delivery with the manufacturing team’s realistic timelines is a great example of alignment. Both teams should have the ultimate goal in mind: to increase customer satisfaction. Through effective communication, the teams ensure that a customer’s needs are met while also maintaining operational efficiency.
As departments boost collaboration, the likelihood of errors and miscommunication decreases significantly. Because each team member understands their impact on subsequent stages, they take on more accountability for the final outcome. This ownership leads to increased order accuracy and ultimately, higher customer satisfaction. A happy customer is a repeat customer. Investing in department alignment and collaboration is also an investment in customer loyalty.
Streamlining for Success
As an executive, your ability to view the distribution cycle as a holistic system with opportunities for cross-functional collaboration can make or break your customer’s experience. By understanding the interconnectedness of each function’s responsibilities, you can create a system built for both efficiency and customer success. Providing opportunities for departments to collaborate and encouraging those connections will instill this approach in your organization. Once you’ve streamlined your distribution cycle by prioritizing cross-functional collaboration, you’ll see a boost in communication that also raises your bottom line.
Do you have an example of creating cross-functional collaboration in your organization? Join the conversation on our LinkedIn page.