For certain items, distributors may find it advantageous to bypassing their DCs altogether and instead shipping the products directly to the customer from the consolidation point. That was the theme of a presentation given by two UPS executives—Randy Strang, vice president of customer solutions, and Frank Woods, director of customer solutions—at the Warehousing Education and Research Council Annual Conference in Anaheim, Calif., last week.
The traditional model of distribution includes the cost of carrying inventory and the cost of operating a DC. But for certain customers and select products, those costs can be greatly reduced by eliminating the DC from the supply chain. Bypass candidates include items that are specialized, seasonal, or difficult to handle. Another prime candidate are those items that would stress a company's DC during peak times Timeliness is also a consideration. For example, items needed in many points at the same for a new product launch might be better served by shipping direct from a consolidation point.
With the bypass model, certain functions that would occur in a DC are pushed upstream to a consolidator who receives imported items at the port of entry, sorts and segregates the products, labels the cartons, and then ships cartons directly to the end user.
The results are that products can be delivered faster to the customer and the order-to-cash cycle is reduced. Labor is also saved at the company's own DC, inventory on-hand and carrying costs are reduced, and space is better utilized for day-to-day operations.