CONTROL AND EFFICIENCY: AN ANALYSIS OF CENTRALIZED LOGISTICS

Time and cost are two of the biggest challenges that companies face in their logistics process today, since they can be the value proposition of their competition and the reason for customer loyalty to that brand.

Technology and globalization have allowed us to be a more interconnected world that allows companies to have their products and services more easily present in different parts of the world.

Thanks to this business transformation that is taking place, and the lessons learned from COVID-19, companies have sought to rethink their logistics process and make it more efficient, preventing it from suffering a rupture like the one experienced a couple of years ago in a pandemic.

This is why centralized distribution has started to be the distribution plan for many companies. Read more about what centralized distribution is, how it works, its advantages and disadvantages, and which companies have implemented it.

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WHAT IS IT?

It is a logistics plan that focuses on focusing all your products on a single point, or on very limited points, which are better known as CEDIS (Distribution Centers). CEDIS are department stores whose only function is to store finished products and distribute them to different destinations or points of sale, without getting involved in the production or transformation process, or receiving raw materials for that process.

These CEDIS are usually close to the manufacturing plant, thus reducing time and costs.

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HOW DOES IT WORK?

This logistics strategy isn't always useful for all business models. Mainly, great results have been seen in those companies that have a wide product portfolio and that have already gained market share in different regions.

In order to implement centralized distribution in your logistics chain, it is essential that you follow these steps:

1. Choose a strategic location, considering not only the main markets in which the company operates, but also the routes through which your products will have to travel.
2. Have adequate facilities, logistics equipment and technological infrastructure that allows you to properly control the entry and exit of goods. Implementing management systems and specialized software is one of the main secrets to success in a centralized distribution.
3. Make deals and have good relationships with suppliers, mainly with the transport company or companies you will work with, since in this part of the logistics chain, time is money and it is essential to have security in the transport service.
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ADVANTAGES AND DISADVANTAGES

Its implementation gives off endless advantages, such as efficiency, control and coordination; however, there are several challenges to be taken into account.

Its advantages include the reduction in time and costs, since being geographically better located, travel times are significantly reduced, as well as costs. We can also see a reduction in storage costs, since they are all located in the same place.

Another advantage is customer satisfaction, especially when it comes to last-mile deliveries, since they can have their products on their doorstep in less time and at a lower cost. In the event that the company's sales stand out in department stores, always having stock improves customer satisfaction for subsequent purchases.

Speaking of the disadvantages, we find that the company has to fully rely on CEDIS, since the production companies completely dissociate themselves from the distribution process. Another disadvantage is the technological risk, since if they suffer a cyber attack or a system failure, the distribution process of the entire company falls apart, and there will be no production company that can replace demand while the damage is resolved.

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WHO APPLIES IT?

• Soriana: Leading Mexican company in the commercial sector, which focuses on the retail sale of food. It currently has 14 CEDIS in the republic, divided into Fresh, Dry and E-commerce. Since its purchase of Comercial Mexicana in 2015, this company has set out to consolidate its logistics operations at very specific distribution points, which have improved its logistics and distribution plan.
• Inditex: Spanish multinational leader in the fashion sector, especially in clothing, shoes, accessories and/or accessories, etc. It has stood out as an example in commerce, with 202 markets in its e-commerce model and more than 7,400 stores around the world. One of its main secrets for its excellent logistics and last-mile delivery is its centralized distribution, which has a central CEDIS in Galicia, and from there it distributes the products to different points of sale in different countries.
• Henkel: A German company that manufactures consumer and industrial products, in 2021 it redirected its logistics plan by focusing the distribution of its products on a warehouse in Toluca, thus replacing 7 warehouses. These warehouses were very small and their operational complexity was very high, so opening a CEDIS in Toluca gave the company greater distribution agility.

Knowing the needs of your company, the facilities that technology provides us and merging both to see your company grow is a fundamental pillar in such a globalized world. It's time to centralize distribution and generate savings in time and costs that will bring positive changes to your company from the start.