1. Centralization v s. Regionalization—In distribution network planning, there is a well-established relationship between the number of distribution points, transportation costs and customer service targets. In a graphical sense, the point at which these three entities merge is the optimum balance of facility and transportation costs to develop a low-cost, high service distribution network. Normally, as distribution networks become more centralized, so do the internal support structures such as facility management, order entry, customer service and data processing. Depending on the degree of centralization achieved in support staffs, it is not uncommon to see cost savings of 50 percent or higher over decentralized networks. However, service levels, limitations on total facility size, risk mitigation and throughput peaks must be factored into the decision matrix.
2. Energy—Any significant shift in the cost of energy—electricity, fuel, etc.—could have an impact on operating costs and, therefore, on distribution. Many distribution projects that are otherwise viable fail once the cost of energy becomes a factor. This is especially true for energy-intensive facilities such as refrigerated warehouses. For this reason, it is crucial to work with all energy providers to determine the load that a prospective operation would put on the local energy system and develop solutions that conserve energy while achieving goals. Some interesting energy solutions are:
Abatement programs: Many energy providers provide incentives to users who cut back their usage during defined high load periods. This could be as simple as running the facility on minimal power during off-shifts or as complicated as metering the use of the facility or using a secondary
power source (high power generator or solar power) to run normally on a reduced energy load.
High-efficiency units: Many companies install high-efficiency appliances and fixtures in a facility to conserve energy usage with no performance penalty. There is some investment required, but
the payback is often reduced rates and/or a lower monthly bill.
Rising fuel costs make this a very sensitive component of distribution costs regardless of whether transportation is handled via third party carriers or private fleet. Some strategies to consider mitigating thisare:
Cube out containers: When a trailer is partially cubed out, you are often paying to transport air. Utilizing the maximum cube ensures that more of the shipping costs are being used to ship
product.
Mode assessment: Depending on service requirements, it may be possible to move from LTL services to truckload, or from parcel to LTL. In general, each shift will result in reduced freight