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Develop a product distribution strategy

From standard business mail to bulk freight, businesses are distributing products every day, adding costs to the bottom line. Rebecca Spicer explores product distribution options and how to develop a cost-effective distribution strategy to meet individual needs.

Whether you’re sending letters, confidential documents, products or supplies, most businesses have some kind of distribution needs. You may be sending something as a one-off, you may be sending bulk mail, or a variety of products to a variety of customers, or high volume freight interstate. And you might have specialised needs, such as highly fragile freight, bulky items, or goods requiring refrigerated transport and storage.
In any case, you’re most likely not going to deliver the items yourself, so you will need to choose a delivery mode—mail, road, rail or sea freight—as well as choosing a service provider.

But with so many carriers out there for all these modes, it’s important that a business owner or manager does research to ascertain the best solution for their business—at the best price and for the best level of service. Alternatively, a logistics consultant can guide your decision-making, or even take over the whole process for you.

If you’re sending smaller, non-fragile packages, then sending them by post is the obvious solution. Australia Post offers a range of businesses solutions, especially in terms of bulk mail and Express Post options. Also, for businesses sending more than 20 business parcels per week, Australia Post has a range of contract parcel services, such as reduced rates and scheduled pick-ups, eParcel, after-hours delivery and receipted delivery.

An alternative to the Post, particularly for confidential documents, is DX Mail (www.dxmail.com.au), where members transfer documents to each other through a network of strategically placed document exchanges around Australia. Members pay an annual fee, which allows them to use the priority overnight service to transfer documents to other DX members.

But if you’ve got larger, awkward, fragile or high volume freight that needs to be delivered in a more timely fashion, you’re more likely to engage the services of a courier or freight company, and this is where your options really start to open up.

Scott Carson, director of logistics consultancy Carson Business Logistics, suggests when weighing up the best mode of transport for your goods, you’ll first need to ascertain how urgently the freight needs to arrive at its destination. “So work out the end-to-end freight need and, from there, work out whether it may be able to go by air, road, or rail freight. Within those options, many carriers will also offer an express or general service.”

Businesses can also choose to use a distribution centre to handle the delivery of freight, or make their own arrangements for delivery to customers. An option for very small businesses is to use the likes of Pack & Send’s 80 retail stores around Australia as mini distribution centres, or as drop-off and pick-up points.

Doing a simple internet search for a transport, freight, or courier company will deliver innumerable results. Ivan Backman, chairman of the Australian Logistics Council (ALC), says to narrow down your search, determine what your freight task is and what you want out of it. So spell out what is to be delivered, how, by what time, any special requirements and so on, and search for carriers based on those criteria.

Your freight task could vary each time you need to send something, so you may need to engage a few different carriers that specialise in your particular needs, or look for a carrier with a wide range of capabilities.

Leo Tortorici, marketing manager of Pack & Send, believes this is where his company can help. The company already has relationships with a range of carriers, and with its industry knowledge should be able to find the best solution for your distribution needs. “From our stores you can get sea freight services, international mail services, international and domestic courier services, point-to-point services, and so on. We’re not as bound as other carriers are by their own capabilities, because we work very closely with a number of carriers right across the market.

“From our knowledge of the industry, we know that some carriers are good in certain areas and other carriers aren’t. And if you’ve got a number of service providers, you’re probably not going to be sending too much volume through any particular one, so you’re probably not going to be able to negotiate very good rates, and that’s where we can help.”
He admits, though, for businesses sending high volumes of pre-packaged freight going direct could be better. If you go down this path, Backman says a carrier’s reputation for reliability is crucial. And recommendation is everything, so ask your industry association and business network which service providers other businesses, similar to yours, have used.

Budget is also important, so calling for competitive quotations or expressions of interest from carriers is essential. Ask what process they’ll go through to effectively manage your freight task. “Obviously service and reliability are essential but the ability to service a business’ ongoing growth, and the ability to meet the technological demands, are vital in this modern world,” says Backman.

Bear in mind that some service providers (mainly the larger ones) will have their own vehicles, and regional and interstate distribution centres, while others may use third parties or working partners. Backman says many in the industry are aggregating so together they can offer the full suite of transport and freight services to compete with the big global transport companies.

“The provider needs to have either a wide infrastructure of depots around Australia, or alternatively a very strong agent network,” advises Carson. So ask potential service providers key questions about their distribution network, and request references as well.

The carrier’s adoption of technology should also be a key consideration. “Today, because of ‘just in time’, the need to control costs, and from an inventory and control point of view, there is a need to know at any stage where that delivery is in the supply chain sequence,” says Backman.

Being able to track and trace your delivery at every stage in the process has become standard, but if your job requires an integrated effort from a number of transport service suppliers, it’s important that they have an integrated software system that still allows you total transparency throughout the delivery.

The freight industry is also moving towards paperless communications, adds Backman. Consignment orders, quotations and invoicing can all be done online via the service provider’s website or via email, so your carrier should offer these services.

Outsourcing Distribution

If the idea of analysing and fulfilling your distribution needs seems beyond the scope of your time and capabilities, engaging the help of a logistics consultant may be the way to go.

A consultant can help with just one aspect of the logistics process or the whole thing, depending on your requirements. “Businesses can look to engage a consultant to do an informal assessment for them, and try and obtain a service and rate from a service provider that will suit their needs,” explains Carson. “But for people who are moving regular quantities of freight, we can take them through an RFP (request for proposal) or a tender process.” The consultant will handle the whole process and come up with a recommendation. This could be to retain the existing provider (on a new service or rates), suggest a new supplier, or even suggest a number of service suppliers.

While there has been a growing trend to use consultants, Backman believes the freight and transportation companies also offer a much fuller service than they ever did, so it’s worth checking their capabilities in this area as well.

Once you’ve settled on a service provider, Backman says it’s important that, within the contract, both parties agree to KPIs (key performance indicators), which clearly measure performance across the board and these should be assessed regularly on a weekly or monthly basis.

It’s also important that the contract or freight agreement outlines who is responsible for any loss or damage of goods in transit. “Many [service providers] take all care, but no responsibility,” warns Backman, “but there’s a growing demand by retailers and other users of transport to push the onus back onto the freight company as part of the terms of the contract. So it’s important to work out what you want and get them to quote accordingly.”

Carson agrees but says business owners know their product better than anyone else and would most likely have that product insured for theft or damage in other aspects of the business. “So they may be able to strike a better deal with their insurance company or broker for marine or freight-in-transit insurance.”

Mid-year is a good time for businesses to re-negotiate freight arrangements with existing carriers, or look to change if you’ve got service or rate problems, suggests Carson. This is because there’s a natural seasonal downturn in imports, which affects domestic freight movements as well. So when freight volumes are down, carriers are looking for freight and should have more time to help you find cost-saving solutions.

It’s not a matter of screwing your provider, Carson stresses. “It may just be a reason to contact your provider to work out how they can help you save money through perhaps moving the same freight volume but reducing the number of consignments for that amount, or asking how to better package your product and reduce risk of damage.” It’s really about requiring the service provider do so some consulting back to your business, in order for the business to retain its margin and reduce overall freight costs.

Other tips to getting more bang for your freight buck include ensuring items are packed properly and securely, and are clearly marked. This will help reduce loss and damage, but Totorici says it can also help reduce freight costs. “When you’re moving things, in the freight industry you actually get charged on the basis of the weight or the size (whichever is the greater), so we’ll cut down boxes and make them to size where possible because we know it’ll save you on freight.” And the use of barcoding and radio frequency technology will assist even further with product identification.

Businesses sending light freight will also be affected by the kilo versus cubic rate scenario, advises Carson, so beware of this when getting quotes from potential service providers, and when you’re packing items.

And if you’re moving large amounts of freight interstate, it could also pay to have not just a kilo rate but a separate pallet rate, so you’ll have an incentive to build a pallet, which will end up costing less per carton than paying for individual cartons.

Overall, business owners or managers need to reassess their freight and logistics practices at least annually, says Backman, to determine whether you’re still getting value for money and if there are new players in the market with a more appealing offer.


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Rebecca Spicer

Rebecca Spicer

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