What is a Distribution Network, what is it for and how is the most appropriate one defined?

Pedro Z: A distribution network can be defined as the structure used to transport and deliver products from a warehouse or distribution center to points of sale, retailers, or end consumers. A logistics distribution network can include elements such as: distribution centers, warehouses, trucks and transport vehicles, delivery routes, points of sale, among others. The objective of a distribution network is to ensure the delivery of products efficiently, quickly and in the conditions required by customers.

The definition of the most appropriate distribution network will depend on multiple factors that must be considered, such as the type of product, customer requirements, production and storage capacities, available budget, market characteristics and competition.

There are critical products for life today, such as Fuel/Gas/Energy/Water. What are these distribution networks like?

Pedro Z: The distribution of this type of products is of utmost importance since the operation of other industries depends on them; therefore, a distribution network is essential to guarantee the supply of fuel and energy to end users. In general, the transportation of fuels in our country is done by land using direct distribution from a regulating warehouse to the different destination points. Distribution consists of:

1. Loading the liquid into the truck: The liquid is loaded into the truck through a pump or loading system from the warehouse.
2. Transport from origin to destination: The truck travels on the road to the final destination. Trucks transporting liquids are usually designed with special tanks that are built with corrosion-resistant materials and leak protection systems.
3. Unloading: At the destination, the liquid is unloaded from the truck. This can be done by means of a hose connected to the truck's tank and directed to the destination site.

In addition, to ensure that fuel transportation reaches its destination without problems, safety and precautionary measures must be considered at every stage of the transportation process. Before starting the journey, trucks should be inspected to ensure that they are in good condition and that they have no leaks or other problems that could cause accidents. The safest and most efficient route should be chosen to avoid problems during transport; this may include avoiding narrow roads, bad roads, or dangerous areas. Drivers should be trained in safe truck driving and in the proper handling of flammable or hazardous liquids. Trucks should be equipped with safety devices, such as automatic shut-off valves and leak monitoring systems, to reduce the risk of accidents. Last but not least, all safety regulations and standards for both driving vehicles and transporting hazardous or flammable liquids must be complied with; these regulations may vary by country or region, but usually include requirements for driver training, vehicle inspections, and safety measures to prevent possible spills or leaks.

For a FMCG distribution company, what are the most common distribution networks?

Pedro Z: Nowadays there are different distribution networks that a FMCG company could use to bring its products to market. Some of the most common distribution networks are:

1. Direct distribution: The company sells directly to retailers or end consumers. This approach allows the company to have greater control over the distribution of its products.
2. Indirect distribution: The company sells its products to intermediaries, such as wholesalers or distributors, who then sell them to retailers or end consumers. This approach can enable the company to reach a wider audience and have greater distribution efficiency.
3. Franchising: Companies may choose to open franchises, allowing them to expand quickly in different geographic areas. Franchises are operated by third parties who purchase the right to use the company's name, business model and products.
4. Online sales: The company can sell its products directly to end consumers through its website or online through other online retailers such as MercadoLibre.

In general, the choice of distribution network will depend on the company's objectives, the availability of resources and the audience to be reached.

How have distribution networks changed with the appearance of E-Commerce?

Pedro Z: E-Commerce has led to greater efficiency and flexibility in distribution networks as its impact has produced significant changes in traditional networks, for example, E-Commerce companies have had to develop efficient logistics and shipping systems to meet the expectations of customers who expect fast and reliable deliveries. Intermediation has also decreased, so that companies can now sell directly to consumers through their own online stores, eliminating the need for wholesalers or distributors as intermediaries.

The emergence of E-Commerce has given rise to a new type of distribution network called "Fulfillment by Amazon" (FBA), which is a service offered by Amazon for third-party sellers on its e- commerce platform. With FBA, sellers ship their products to Amazon's distribution centers and Amazon handles the warehousing, packaging and shipping of the products to end customers. It also handles customer service and returns. This distribution model has allowed Amazon's third-party sellers to focus on creating and marketing products, while Amazon handles logistics and shipping. In addition, FBA products are eligible for free and fast two-day shipping to Amazon Prime members, making them more attractive to customers.

FBA has had a major impact on the way third-party vendors sell and distribute their products online, and has made it easier for small and medium-sized entrepreneurs to enter the global e-commerce marketplace.

What does "Capillarity" mean in a Distribution Network? How does this affect networks and, especially, transportation costs?

Pedro Z: In a distribution network, "capillarity" refers to the ability to reach many outlets or customers over a wide geographic area. A capillary distribution network is one that has a significant presence in a geographic area and can reach a large number of customers efficiently.

Capillarity is important because it allows companies to reach a larger number of potential customers, which increases sales opportunities and improves competitive position in the marketplace. In addition, having a capillary distribution network can improve customer satisfaction by providing a more convenient and efficient shopping experience.

However, capillarity can also increase transportation costs, especially if points of sale or customers are dispersed over a wide geographic area. This can increase transportation costs, as the company must ship more frequently and cover longer distances. Therefore, it is important to balance capillarity with costs to achieve an efficient and cost-effective distribution network. To achieve this balance, companies can use different strategies, such as optimizing transportation routes, consolidating shipments, and selecting efficient transportation partners to reduce logistics costs. In addition, companies can use advanced technology such as telematics and GPS to monitor product delivery and improve efficiency in managing the distribution network.