Logistics is an important part of distribution channel management. The design of the warehousing networks in Kenya has hitherto seemed to be influenced more by the taxation structure and less by actual distance, transport, and demand considerations.
Due to the presence of the inter-county sales tax, companies have tried to avoid inter-county sales by setting up warehouses in almost every County.
For cost reasons, these county level warehouses are usually outsourced to specialist entities called carrying and forwarding agents (CFAs). The location of CFAs is determined by demand and transportation considerations.
The tax structure distorts rational network design and can give rise to cost inefficiencies. Future changes in the tax regime may permit companies more freedom to redesign their distribution for locating distribution centres to minimise costs and maximise service.
At the micro-level, relevant commercial policy includes not only trade and foreign direct investments but also domestic policies that directly influence competitiveness such as infrastructure development, competition policy, and safety or environmental regulation.
The strong relationship between growth in international trade and logistics infrastructure is widely acknowledged.
The availability of infrastructure is also a key determinant of attracting foreign direct investment inflows.
In developing countries like Kenya, efficient logistics infrastructure can reduce costs of transportation which in turn can contribute directly to global competitiveness of the country.
An efficient logistics industry acts as an economic catalyst by opening up new market opportunities, moving products and services with speed and efficiency.
Route-to-market activities, namely logistics, distribution, trade marketing and integration require infrastructural support on order to add the greatest value to the producer, the customers of the producer and ultimately the consumer.
Distribution channels and time-based logistics strategies are the routes to prosperity in the counties through manufacturing.