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September 1, 2020 Blog

Elevate Your Distribution Plan: Heat Maps & Item Analysis

A well thought out distribution plan is a major driver in ensuring products are being shipped to your customers within the shortest amount of time and at the lowest possible cost. This requires balancing the cost of storing inventory and the transportation costs to ship the product on the one hand, with upholding exceptional service levels and avoiding the brand-damaging effects of stockouts and shipping errors on the other. In today’s extremely competitive environment, any company without a heavily researched distribution plan is at an enormous disadvantage. To help address that issue, WSI offers such analysis as heat mapping and item analysis for its customers.

Heat mapping visually depicts where your products are being shipped to based on a series of metrics that are relevant to your business (e.g., number of orders, number of units, weight shipped, etc.). Data is turned from abstract numbers in databases to colorful maps that produce meaningful takeaways in a matter of seconds (see sample below for a hypothetical company). The closer proximity of distribution centers to geographical “hot spots” (the orange areas in the map below) will generally decrease the transit time required and reduce transportation costs. The end goals for the heat map are to generate quick insights that can decrease the time between the placement and receipt of an order for your customers and to increase your overall profitability. For instance, the map below suggests that for this hypothetical company, the optimal location for a West Coast distribution site is in Portland since that area has the greatest concentration of shipping activity. For the majority of West Coast orders, this would likely lower transit time and transportation cost compared to a site located in CA or NV.

We can dig in further by analyzing the trends of your items. What percentage of items should be classified as “A” velocity items? These popular items should be an area of focus since they drive a significant portion of your logistics spend and high performance with these items will lead to an outsized impact on customer satisfaction. Prioritize having these items optimally located both geographically and within your warehouse. Do certain items ship more frequently to one particular region of the country? Make sure items that regularly ship to Region B are placed in a warehouse in Region B. Do certain items have seasonality factors that need to be considered? Predictive analytics can help make sure sufficient quantities are stored at the right warehouse to meet the surge in demand and then diminished during the low seasons to avoid burdensome carrying costs. Do certain items frequently ship together? Analysis can help ensure these items are stored in the same warehouse and in a similar location in the warehouse to increase efficiencies. Pulling these questions together, along with many more, will help create a sound distribution strategy.

Although building a network analysis is critical, that does not make it easy. Having an experienced partner with the analytical capabilities to generate easy-to-digest heat maps and SKU analytics can have an outsized impact on profitability and customer acquisition/satisfaction. We believe the benefit is amplified when this partner also has over 50 years of experience and over 14 million square feet of warehousing space across the country.

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