OPERATING AND MANAGING DISTRIBUTION SYSTEM

Retailers can learn a lot from the Costco distribution strategy and how it
manages and operates it. Especially since the company has decided to launch
its delivery network in India.
 
Costco has found a way to optimize nearly every piece of the distribution
network puzzle, from warehousing and inventory management to delivery times
and prices.

The individual pieces of the Costco distribution strategy includes:

1) INVENTORY MANAGEMENT: This includes decisions regarding the

costs, methods of procuring and keeping the inventory. Costco in India
will need a management system where it doesn’t compromise on the cost
as well as the availability of the product as well. Which is why, Costco’s
warehousing strategy would sit perfect in the market.

Manufacturing: Costco still allows third-party sellers, but the company

seems to have learned that many of those third-party products can be made
for much cheaper and more profitably. The retailer has taken to
manufacturing its own lower-cost products, as well as white-labeling
products from other sellers. Costco offers branded lines in everything from
household products to pets to babies, and the list of labels just keeps
growing. This will allow Costco to own the whole lifecycle of its products,
from creation to marketing to storage to shipment.

2) DESIGN OF GOODS AND SERVICES: This aspect focuses on ensuring

that there is concurrent innovation ensures customers are getting the best
products and services. This directly relates with the level of technology
used. The company will utilize the countless automation and robotic
solutions, both to pick and pack orders as well as stacking and storing
inventory. These tools not only will up the company’s efficiency and
delivery speeds, but they also cut down on warehouse and staffing costs –
freeing up funds for other logistics or supply chain needs.
 Even though it may not seem fully operational just yet, the drones will
eventually allow for 30-minute deliveries in some of the nation’s biggest
markets. All customers need is an Costco-branded landing mat (and to
 live within 15 miles of the nearest drone-enabled warehouse), and the
instant air-side deliveries are within reach.

3) QUALITY MANAGEMENT: As satisfying the customer’s quality

requirement is one of the most important factor, this will be ensured
through regular quality checks, and many quality improvement initiatives.
And as the product offered as of vast varieties, Costco will regularly
introduce enhancements in its manufacturing process and even in its
reviewing process.

Sellers who sell on the Costco Marketplace have different fulfillment options to

choose from. Sellers can choose whether they want to handle fulfillment or let
Costco sort, package and ship products through their own fulfillment centers.
As a third party seller selling on the Costco Marketplace you have the option to
use Costco’s fulfillment services:
 Fulfillment by Costco (FBC) – Sellers leverage Costco’s fulfillment for
products sold on the Costco Marketplace.
 Sell using your own fulfillment (FBM) – Sellers handle fulfillment for
their products sold on the Costco Marketplace

4) PROCESS AND CAPACITY DESIGN:

5) LOCATION STRATEGY: The company will take advantage of its global

reach and use the channel already existing to its advantage for getting the
sufficient materials . It will use the international network, as under this,
Costco will target areas with high-density for displays and sales
transactions. Where it can ensure thar more foot traffic can be ensured as
it is more visible.

6) LAYOUT DESIGN AND STRATEGY:

7) UNISON OF HUMAN RESOURCE AND TECHNOLOGY: Costco’s

extensive network of employees and partnerships enables the company to
fulfill speedy deliveries practically anywhere in the world, but it is its
embracement of innovative technology and automation solutions that
ensure streamlined processes and efficiency. 

Costco utilizes robotics to pick and pack orders as well as stack and store
inventory. This allows the company to expedite its processes beyond
 human speed while also alleviating manual labor for its employees, which
frees up time and funds to be allocated to other tasks and business
initiatives. 

8) SUPPLY CHAIN MANAGEMENT: Costco operates 11 online

marketplaces (websites) worldwide, allowing sellers to grow
their business internationally, independent of where their business is
physically established. These marketplaces represent many of the world’s
largest e-commerce opportunities.

(A)Warehousing:

The warehousing strategy of Costco ensures that products are easily accessible
from pretty much everywhere in the world and they are spread in such a way
that it further ensures that the supply chain has even smoother functioning. All
the company’s warehouses are strategically placed near big metros and
population hubs, and inventory is spread amongst them to ensure supply can
meet demand. There are even mini-warehouses in smaller areas to ensure orders
can be sent and delivered fast, no matter what is being purchased.
Warehouses are also optimized internally. Each with five unique storage areas,
the organization strategy allows team members and pick-and-pack robots to pull
products almost instantly and move them toward delivery.

(B) Delivery:

One of the biggest differentiators between the Costco’s strategy and other
online retailers’ is the plethora of delivery options offered. The biggest game
changer is the number of ways in which Costco can make the deliveries
happen. Costco employs a whole host of strategies – from more traditional to
super high-tech – to get its products out in lightning-fast times and all over the
world. There are Costco-branded trucks and delivery vans and there are even
deliveries by bike in certain areas. The retailer also may leverages existing
delivery routes worldwide. These wide-ranging strategies allow the company to
get orders out faster, easier and more efficiently to basically everywhere in the
world , even remote and rural areas that are not served by traditional options.

9) MAINTENANCE: