A distribution model defines how products move from manufacturers to retailers and ultimately to consumers. For CPG suppliers, choosing the right retail distribution model is one of the most important decisions for long-term business growth. Your distribution strategy impacts transportation costs, retail visibility, inventory flow, retailer relationships, and overall supply chain performance.
Most suppliers typically choose one of three distribution models:
Each approach offers different levels of control, scalability, visibility, and operational complexity.
Through this traditional model, a distributor buys product from a supplier, which gives them exclusive rights to sell that product directly to retailers. This model – while expensive – is most suitable for early-phase suppliers looking to leverage a distributor’s established retailer relationship until they are able to develop their own. Suppliers could consider it a sales and marketing expense since they are utilizing the distributor’s services for precisely that.
Often, suppliers are apprehensive to move out of the distributor model because they don’t have the internal logistics infrastructure needed to manage their own retail supply chain. However, this model is not scalable. This is because suppliers compete for shelf space a distributor already has contracted with the retailer – not the entire shelf or category space. Suppliers also don’t have visibility into things like consumer behavior trends and product data because that information is owned by the distributor. Once a supplier reaches a high enough volume and has achieved proof of concept, that is the tipping point for a supplier to explore a direct relationship with retailers and engage a retail logistics expert to handle product distribution.
Anticipating the growth of your company is crucial for continued success. Partnering with an integrated retail logistics provider with a retail consolidation model allows you to implement efficient, flexible supply chain processes that ensure your bottom line is taken care of — leaving you to focus on your core business. Unlike the distributor model, where control over inventory and retail visibility is often limited once products are handed off, retail consolidation gives suppliers greater control over inventory flow, transportation performance, retailer relationships, and overall supply chain execution.
When making a determination regarding a 3PL, suppliers that leverage a retail logistics expert with a consolidation program reap the benefits of economies of scale by sharing truckloads with other suppliers – creating a single, full truckload to the same retailer distribution center.
This program offers many benefits to suppliers looking to grow presence at retail by reducing redundancies, increasing scorecard performance and eliminating compliance issues. Partnering with a 3PL that specializes in retail logistics positions suppliers to eliminate compliance fines, avoid hidden fees, and focus on other core aspects of your business.
Choosing the right distribution model is one of the most important decisions for growing CPG brands. A well-designed network can reduce inventory costs, improve on-time, in-full performance, accelerate delivery speeds, and strengthen retailer relationships. Through retail consolidation programs, RJW helps suppliers build scalable distribution strategies designed for long-term growth.
Gain the control you need to create your most effective product distribution model today. Partner with a retail logistics expert that offers end-to-end retail logistics services to help get your products to store shelves faster and more efficiently.
Gain the control you need to create your most effective product distribution model today. Partner with a retail logistics expert that offers end-to-end retail logistics services to help get your products to store shelves faster and more efficiently.
