2.2 Flashcards
Designing Distribution Networks
Role of Distribution
the steps taken to move and store a product form the supplier stage to the customer stage in a supply chain
ex. raw materials from supplier to manufacturer
finished products to end customer
what does distribution effect?
affects the SC cost and customer value
is a key driver of the overall profitability of a firm
choice of distribution network can achieve supply chain objectives from low cost to high responsiveness
2 phases of designing a distribution network
- visualising the broad network ( number of stages and their role)
- specifying the details (location, capability, capacity, demand allocation)
Possible decisions:
deliver directly to customers/sell through retailers
build a DC closer to stores to decrease transport
Performance of a distribution network
value provided to the customer
cost of meeting customer needs
Distribution network structure has an influence on these elements of customer value
response time
product variety
product availability
customer experience
time to market
order visibility
returnability
Changing the distribution network design mainly affects these costs
inventories
transportation
facilities and handling
information
How many facilities should a firm have?
if they have a low desired response time, less facilities
if they have a high desired response time, many facilities
depends on whether the customer is time sensitive
Factors influencing distribution network design
number of facilities and inventory cost (positive relationship)
number of facilities and transportation cost
total logictics costs
Transportation types
inbound transportation: truckloads to warehouse
outbound transportation: smaller trucks from warehouse to stores, expensive
Total logistics cost
sum of inventory, transportation, and facility costs
Key decisions for choices from the manufacturer to end customer
will the product be delivered to the customer or a store?
will the product flow through an intermediate location?
Design options for a distribution network (6)
- manufacturer storage with direct shipping
- manufacturer storage with direct shipping and in-transit merge
- distributor storage with carrier delivery
- distributor storage with last-mile delvery
- manufacturer/distributor storage with customer pickup
- retail storage with customer pickup
Manufacturer storage with direct shipping
product is shipped directly from manufacturer to end customer - drop-shipping
Adv: centralising inventory at manufacturer, retailer carries no inventory, manufacturer can postpone customisation
Disadv: the ownership structure
information flows from customer, via retailer, to manufacturer
Drop-shipping
the best option for high-value, low-demand items with unpredictable demand
