Chap. 5 - Logistics Networks in Retail Flashcards
How would you characterize the importance of retailers and wholesalers in the logistics chain for customers and manufacturers?
From the perspective of the customer:
- retailers offer the possibility to have a product choice from a large (sometimes worldwide available) assortment with a minimum of transaction costs at the same time (= cheap “one-stop-shopping”)
From the perspective of the manufacturer:
- retailers consolidate the demand related information flow upstream from the customer
- by doing this retailers reduce the transaction costs in the supply chain and level the customer demand fluctuations for EoS in production
What are the main management challenges for retailers?
- Retailers have - in comparison to manufacturers - a much smaller average sales volume per customer (→ the problem of transaction costs and fixed costs per customer!). The market is often transparent and characterized by a high-cost pressure.
- Retailers have to handle impulse purchases of consumers with low predictability of volume and kinds of products demanded
- Retailers have to serve different distribution channels - sometimes of the same target group - with still a high popularity on stores.
What are the functions of retailers in the Order-to-Payment process of producers?
The main functions of retailers in the OTP-process of producers are:
- Demand Flow: Collecting, consolidation, prognosis, and transfer of market demand to the producer and the product information vice versa
- Fulfillment Flow: Picking & packing, storage, sorting, customizing and transporting goods from the production to the users/customers
- Payment Flow: Pre-finance of producers and consumers, collecting and transferring of money from the market to the producer site
What are the biggest advantages of the “Central Warehouse Concept” as the core business model of retailers?
The biggest advantages of the “Central Warehouse Concept” are:
- Reduction of complexity in relations by massive reduction of transaction costs (CW as a consolidation center for inbound and outbound flows of information and goods between industry and retail)
- Consolidation of orders from suppliers (EoS in production and transport, batch-prices)
- Consolidation in the inbound flows of outlets (one delivery consists of the orders fulfilled by all suppliers)
- Reduction of safety stocks at the outlets → Larger assortments with less space required for storage
What are the economic effects of the central warehouse concept in retail regarding the transport costs in the supply chain?
The effect is not clearly predictable. Depends on many different factors – like:
- The preferred delivery terms (who pays the transport costs? – franco domicile?)
- The delivery frequency for the outlets
- The waiting times for loading / unloading especially at the outlets
- The trend in retail to switch to self-collecting of the freights è less optimization for industry è higher prices
Why offers the central warehouse concept (CWC) in retail the possibility of “Roll Cage Sequencing”?
Definition of “Roll Cage Sequencing”:
Roll cage sequencing is a process in which the loading of the trolleys in the retail warehouse is aligned with the logic of the shelf layout in the store. This allows a faster sizing of the shelves at the POS and thus a higher availability of the goods on the shelf.
The CWC offers by a store-specific pick-and-pack process in the CW the possibility to prepare an appropriate sequencing:
- on the single roll-cage for the replenishment of shelves (see definition)
- on the truck: the roll cages for specific stores are loaded in the sequence of the delivery-tour
What are the economic effects of the central warehouse concept in retail regarding the inventory- and transaction costs in the supply chain?
The economic effects of the CWC on inventory- and transaction costs are:
- The possible increase in total (systems) stock depends on how intensive the local stock in the outlet could be decreased
- The higher turnover rate in CW (e.g. Amazon 6 times higher turnover rate than Barnes & Noble bookstores) è reduction of inventory range
- “Risk Pooling” effects in the CW stage (outbound from the customer, inbound from the supplier)
- Reduction of transaction costs in order management (consolidation of information, higher degree of automation is possible)
How would you characterize the products for which the CWC in retail is an appropriate logistics solution?
The CW-Concept in retail fits for:
- products with long replenishment times
- products from long-distance suppliers
- C/Z-products with stochastic demand
- promotional and/or seasonal products
Which variants of warehouses /distribution centers in retail do you know? Characterize them in brief!
Typical variants of warehouses / distribution centers in retail are:
Regional Distribution Centers (RDC):
Direct supply of retail stores in a defined regional service area. Example: Each RDC of Aldi Süd supplies approx. 50 Aldi stores.
Central Warehouses (CW):
Distribution Centers for regional clusters – located at logistics hot-spots. Example: dm in Meckenheim (Cologne) as a CW supplies the dm-stores
European Distribution Center (EDC):
EDCs are CW for slow movers or for deliveries to larger customers (wholesaler). Example 3M in Jüchen – responsible for the distribution of 3M products for DE, NL, SE, NW, FI, PO and RU.
Compare the “Multi-Pick-Concept” and the “By-Pass-Concept” as consolidation concepts in retail! What are similarities, what are differences?
Multi-Pick-Concept:
Consolidation of freight in a fixed tour on the side of manufacturers. Transport to retailer warehouse and pick & pack for individual retail store
By-Pass-Concept:
Pick up of already retail store specific shipments from individual manufacturer and consolidation with other goods at RW for final distribution to retail store X
Similarities:
Both concepts have the retailer warehouse as the destination of transport and the final pick&pack + (truck-specific) roll-cage sequencing is done in the retailer warehouse.
Differences:
While in the Multi-Pick-Concept all roll-cages for a specific retail store are picked & packed in the retailer warehouse, in the By-Pass-Concept some suppliers did the store-specific pick&pack at the manufacturer-site already. These pre-consolidated roll-cages are then merged with the remaining store-specific roll-cages in the retailer warehouse.
What are pro and con arguments if the freight-picking process from different producers in the Multi-Pick-Concept is done by the wholesaler (Metro-solution)?
Pro arguments (Retailer): reduced consolidated transports & complexity in inbound flows
Con arguments (Manufac.): higher transportation costs because of ”critical mass”; higher handling costs because of retailer-specific solutions
For which kinds of products would you recommend a cross-docking solution as a delivery option? Reason your answers!
Requirements for the implementation of a X-Dock solution are:
- Significant and steady product flow → getting enough predictable volumes into the X-dock operation for EoS
- Easy to handle material / unit-loads → requirement for the realization of SOPs in the X-Dock-Operation
- Good and reliable information flow across the entire supply chain → predictability and better planning of inbound and outbound flows to and from the X-Dock
- Detailed Activity-Based-Cost-analysis for the whole supply chain → understanding the cost drivers in shipment structure and where money is lost during he X-Dock-Operation
What is the difference between a source-oriented and a sink-oriented X-Docking? Give examples out of practice!
In a source-oriented X-Docking, the X-Dock location is close to the suppliers. Each supplier has a dedicated cross-docking-center. You will find such X-Docks in the automotive sector where a lot of larger (1st tier) suppliers are surrounding the plants of the OEMs.
A cost problem is the outbound transport from the X-Dock to the customer, because of larger distances. So the source-oriented X-Docking requires customers with a large order volume.
In a sink-oriented X-Docking, the X-Dock location is close to the customers. Each X-Dock has dedicated customer relations. This is typical in retailing. The transport-cost problem is in such a case on the inbound side, if smaller suppliers need to be integrated in the inbound flows to the cross-dock.
Please name five problem-fields in the context of the usage of cross-docks in the retail supply chains!
- Supplier or assortment is not X-Dock qualified (too heterogenous shipment structure)
- The manufacturer/supplier produces mistakes in the picking and packing process
- There is too less communication between the inbound carrier and the cross-docking center about time and circumstances of arrival
- Inside the X-Dock are no SOPs established and the degree of automation is very low.
- The IT-infrastructure on the retailer side is old-fashioned and is not compatible with the ERP systems of the suppliers & cross-docking operators.
What is the function of strip and stack doors in a cross-docking-center?
Strip doors: doors where full trailers are parked and unloaded. Any incoming trailer can be unloaded to any strip door.
Stack doors: doors where empty trailers are put to collect freight for specific destinations. Each stack door is permanently assigned to a distinct destination.
