Increasing customer value and decreasing distribution costs with merge‐in‐transit

Abstract

A broad product assortment is usually valued highly by customers. However, holding a great number of product variants in inventory increases the costs of a supplier. It is possible to reduce need for warehousing with direct deliveries from manufacturing units, but customer value is reduced when orders are received on several shipments. Merge‐in‐transit is a distribution method in which goods shipped from several supply locations are consolidated into one final customer delivery while they are in transit. This article examines the effects of merge‐in‐transit distribution on delivery costs. The analysis is performed with a maintenance, repair, and operations products distributor as the case company. The evidence in this article supports the claim of merge‐in‐transit being a cost efficient distribution alternative in business networks. Based on the results advocates that companies in multi‐company networks should study the possibility of using the merge‐in‐transit delivery model.