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Strategic Management
The New Role of Distribution Centers in Business
For the last few generations, distribution centers were often seen as a necessary evil. Companies would only look at a distribution center (DC) as a costly place to store inventory and form logistic systems. They were measured by cost savings by metrics such as the cost of moving inventory items than serving any form of strategic advantage. However, some companies have realized that there has been a fundamental shift in the role of the distribution center in regards to strategic management.
"Cost still matters, let's not kid ourselves. Increasingly, however, distribution centers are all about the business. Processes are designed to make good on a company's go-to-business strategy. The best DCs are strategic assets that give their companies a competitive advantage in the marketplace." (Trebilcock, 2015)
One interesting case in how a business can use new technologies and process to create a competitive advantage through distribution can be illustrated by Papa John's pizza. The company uses a marketing phrase "Fresh ingredients make better pizza" and tries to honor this pledge with the latest advances in distribution. The company has experienced something of a mobile revolution and now more than half of the orders that the pizza franchise...
The company has adopted lean processes to make ingredients move quickly through its logistics system so they reach the customer as soon as possible.
Papa John's launched in 2006 to transform a network of 10 distribution centers that serve more than 3,200 stores in the United States through the use of technology; the focus is on managing inventory, especially perishable products, to deliver the freshest ingredients to its stores, twice a week (Trebilcock, 2015). Much of this system is entirely automated. The demand information from individual franchises through their POS systems is automatically loaded into a central planning system that makes DC replenishment suggestions based on inventory levels, orders already in the system, lead times and anticipated demand that may be influenced by seasonal events and promotions (Trebilcock, 2015). The company thus is using its distribution system and broader logistical system in a way that creates value for the consumer and provides a strategic advantage in the pizza niche.
A recent generation of strategic managers have realized that warehousing, distribution and manufacturing have come out of the shadows and can play a more important role in overall value creation. In previous generations, senior-level executives knew they had plants, warehouses…
References
Trebilcock, B. (2013, November 11). Creating Competitive Advantage with Warehouse and Distribution Centers. Retrieved from Supply Chain 24/7: http://www.supplychain247.com/article/creating_competitive_advantage_with_warehouse_and_distribution_centers
Trebilcock, B. (2015, November 1). Distribution centers: It's all about the business. Retrieved from Modern Material Handling: http://www.mmh.com/article/distribution_centers_its_all_about_the_business
University Alliance. (2015). Walmart: Keys to Successful Supply Chain Management. Retrieved from University of San Fransico: http://www.usanfranonline.com/resources/supply-chain-management/walmart-keys-to-successful-supply-chain-management/#
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