LSCM 4a Designing Distribution Networks

Topics: Supply chain, Marketing, Customer Pages: 24 (1018 words) Published: March 5, 2015
Logistics and Supply Chain
Management 4a
Designing Distribution Networks
(Refer Sunil Chopra Ch 4)
This material has been developed as classroom instructions,
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Outline
• The Role of Distribution in the Supply Chain
• Factors Influencing Distribution Network
Design
• Design Options for a Distribution Network
• E-Business and the Distribution Network
• Distribution Networks in Practice
• Summary of Learning Objectives
4-2

The Role of Distribution
in the Supply Chain
• Distribution: the steps taken to move and store a
product from the supplier stage to the customer
stage in a supply chain
• Distribution directly affects cost and the
customer experience and therefore drives
profitability
• Choice of distribution network can achieve supply
chain objectives from low cost to high
responsiveness
• Examples: Wal-Mart, Dell, Proctor & Gamble
4-3

Factors Influencing
Distribution Network Design
• Distribution network performance evaluated
along two dimensions at the highest level:
– Customer needs that are met
– Cost of meeting customer needs

• Distribution network design options must
therefore be compared according to their
impact on customer service and the cost to
provide this level of service
4-4

Factors Influencing
Distribution Network Design
• Elements of customer service influenced by network structure: –






Response time
Product variety
Product availability
Customer experience
Order visibility
Returnability

• Supply chain costs affected by network structure:




4-5

Inventories
Transportation
Facilities and handling
Information

The Cost-Response Time Frontier
Hi

Local FG – FMCG items
Mix
Regional FG
Local WIP – PC Assemblers in India

Cost

Central FG - Dell
Central WIP - Dell
Central Raw Material and Custom production - Dell
Custom production with raw material at suppliers
– Capital Equipment

Low
Low

Response Time

Hi
5-6

Service and Number of Facilities
Number of
Facilities

Response Time
4-7

Inventory Costs and Number
of Facilities
Inventory
Costs

Number of facilities
4-8

Transportation Costs and
Number of Facilities
Transportation
Costs

Number of facilities
4-9

Facility Costs and Number
of Facilities
Facility
Costs

Number of facilities
4-10

Response Time

Total Logistics Costs

Cost

Response Time

Variation in Logistics Costs and Response
Time with Number of Facilities

Number of Facilities
4-11

Design Options for a
Distribution Network
• Manufacturer Storage with Direct Shipping
• Manufacturer Storage with Direct Shipping and
In-Transit Merge
• Distributor Storage with Carrier Delivery
• Distributor Storage with Last Mile Delivery
• Manufacturer or Distributor Storage with
Customer Pickup
• Retail Storage with Customer Pickup
Decision : Selecting a Distribution Network Design
4-12

Manufacturer Storage with
Direct Shipping
Manufacturer

Retailer

Customers

Product Flow
Information Flow
4-13

In-Transit Merge Network
Factories

Retailer

In-Transit Merge by
Carrier

Customers

Product Flow
Information Flow
4-14

Distributor Storage with
Carrier Delivery
Factories

Warehouse Storage by
Distributor/Retailer

Customers
Product Flow
Information Flow
4-15

Distributor Storage with
Last Mile Delivery
Factories

Distributor/Retailer
Warehouse

Customers
Product Flow
4-16

Information Flow

Manufacturer or Distributor Storage with
Customer Pickup
Factories

Retailer

Cross Dock DC

Pickup Sites

Customers

4-17

Customer Flow
Product Flow
Information Flow

Comparative Performance of Delivery
Network Designs
Retail Storage
with Customer
Pickup

Response Time

Manufacturer
Storage with Direct
Shipping

Manufacturer
Storage with...
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