Relevance of a Good Transportation System: Distribution Centers

Distribution Centers: The Relevance of a Good Transportation System

Distribution centers, in basic terms, "are special forms of warehouses that focus on throughput where products from various manufacturers are combined into shipments of precise quantities for distribution according to customer needs" (Wang and Adams, 2010).

A good transportation system helps in the reduction of transportation costs. From the onset, it is important to note that the relevance of cutting down on transportation costs cannot be overstated. One way of cutting transportation costs is optimizing the location of distribution centers. The resulting shorter delivery routes come in handy in cost cutting attempts. As will be discussed elsewhere in this text, using Wal-Mart as an example, an appropriate location and multiple distribution centers mesh together to make the movement of products more efficient. The availability of transportation at warehouse locations, as Wang and Adams (2010) point out, "significantly impacts transportation costs and a distributor's ability to respond to market."

A good transportation system could also help solve the challenge or problem of excess inventory. Indeed, as Wang and Adams (2010) point out, "excess inventory at warehouses and distribution centers contributes to product waste and revenue losses." Still on this front, the utilization of appropriate packaging mechanisms is also of great relevance. Over time, shipping containers have been modified so as to ease and make the transportation of goods more efficient. For efficient handling, the dimensions as well as volume of containers is often specified by the specific standards in place. As Wang and Adams (2010) further point out, "inventory shortages can lead to lost revenue opportunities."

Wal-Mart: A Model of an Efficient Transportation Strategy

To demonstrate the relevance of a good transportation system, it would be prudent to highlight an example of a real life distribution and logistic system. Wal-Mart, one of the world's largest retailers, has a highly efficient distribution system -- with numerous distribution centers spread across the nation. Currently, Wal-Mart has a total of 158 distribution centers in the U.S., which are fully serviced by the retailer's fleet of trucks (MWPVL, 2014). As a matter of fact, it is the location and management of these distribution centers that is the basis of the retailer's supply network and growth strategy. Given that each distribution center is primed to service a minimum of 75 stores, the efficient transportation system has been at the core of Wal-Mart's distribution network. The strategy the retailer adopts in seeking to maintain and further reinforce an efficient distribution system is simple: a center is first built, after which the company proceeds with the establishment of stores. Trucks, in such an arrangement, do not have to be driven to far off locations to make deliveries. In this case, transportation costs are reduced by the shorter distances which also significantly reduce the lead time. Replenishments can also be done swiftly when shortages occur. The fact that the retailer's highly responsive transportation operations remain the bedrock of its logistics system is indicative of the relevance of a good transportation system.