In-transit distribution as a strategy in a global distribution system

Abstract

Distribution has become a key factor in today's logistics system due to companies' desires to achieve considerable economies of scale in production, achieved by focused factories, as well as customers' demands for shorter lead-times and customer adapted products. The purpose of this research is to investigate if the in-transit distribution strategy may offer companies a competitive advantage and may be used as a complement to the centralised distribution strategy and/or the decentralised distribution strategy. This study shows that the in-transit distribution strategy can give major competitive advantages by offering rather short lead-times for customers without having to store products locally in warehouses. This, in turn, gives lower warehousing costs, lower tied-up capital, a less interrupted manufacturing, and steady and continuous production volumes. In order to be successful with this strategy, it takes good planning, working closely with customers, good market knowledge, and an enterprise resource planning (ERP) system that is able to support the strategy sufficiently. Among these factors, low variation in demand as well as manufacturing output is required, and furthermore distribution lead time needs to be predictable.