Chapter 4 Chopra
-
Upload
bernard-underwood -
Category
Documents
-
view
243 -
download
1
Transcript of Chapter 4 Chopra
8/11/2019 Chapter 4 Chopra
http://slidepdf.com/reader/full/chapter-4-chopra 1/76
Marketing Chann els and Supp ly
Chain Managem en t
8/11/2019 Chapter 4 Chopra
http://slidepdf.com/reader/full/chapter-4-chopra 2/76
13- 2
Objectives
Know why companies use distributionchannels and understand the functions thatthese channels perform.Learn how channel members interact andhow they organize to perform the work of
the channel.Know the major channel alternatives thatare open to a company.
8/11/2019 Chapter 4 Chopra
http://slidepdf.com/reader/full/chapter-4-chopra 3/76
13- 3
Objectives
Comprehend how companies select,motivate, and evaluate channelmembers.Understand the nature and importanceof marketing logistics and integratedsupply chain management.
8/11/2019 Chapter 4 Chopra
http://slidepdf.com/reader/full/chapter-4-chopra 4/76
13- 4
Dominates world’smarkets for heavyconstruction andmining equipment.Independent dealers arekey to successDealer network islinked via computers
Caterpillar stresses dealer profitability, extraordinarydealer support, personalrelationships, dealer
performance and full,
honest, and frequentcommunications
c
Caterpillar
8/11/2019 Chapter 4 Chopra
http://slidepdf.com/reader/full/chapter-4-chopra 5/76
13- 5
Definition
Value Delivery Network
– The network made up of the company,suppliers, distributors, and ultimatelycustomers who “partner” with each other
to improve the performance of the entiresystem.
8/11/2019 Chapter 4 Chopra
http://slidepdf.com/reader/full/chapter-4-chopra 6/76
13- 6
In building its
value deliverynetwork, Palmmanages a wholecommunity of
suppliers,assemblers,resellers andcomplementorswho must workeffectivelytogether.
8/11/2019 Chapter 4 Chopra
http://slidepdf.com/reader/full/chapter-4-chopra 7/76 13- 7
Channel choices affect otherdecisions in the marketing mixA strong distribution systemcan be a competitive advantageChannel decisions involvelong-term commitments toother firms
Nature & Importance of MarketingChannels
8/11/2019 Chapter 4 Chopra
http://slidepdf.com/reader/full/chapter-4-chopra 8/76 13- 8
Figure 13-1:
How Channel Members Add Value
8/11/2019 Chapter 4 Chopra
http://slidepdf.com/reader/full/chapter-4-chopra 9/76 13- 9
How Channel Members AddValue – Intermediaries
» Require fewer contacts to movethe product to the final
purchaser.» Help match product assortment
demandwith supply.
» Help bridge major time, place,and possession gaps
Nature & Importance of MarketingChannels
8/11/2019 Chapter 4 Chopra
http://slidepdf.com/reader/full/chapter-4-chopra 10/76 13- 10
Nature & Importance of MarketingChannels
Key Functions Performed
by Channel MembersInformation
PromotionContactMatching
Negotiation
PhysicalDistributionFinancing
Risk taking
8/11/2019 Chapter 4 Chopra
http://slidepdf.com/reader/full/chapter-4-chopra 11/76 13- 11
Figure 13-2a:
ConsumerMarketing Channels
8/11/2019 Chapter 4 Chopra
http://slidepdf.com/reader/full/chapter-4-chopra 12/76 13- 12
Figure 13-2b:
BusinessMarketing Channels
8/11/2019 Chapter 4 Chopra
http://slidepdf.com/reader/full/chapter-4-chopra 13/76 13- 13
Number of Channel Levels – The number of intermediary levels indicates
the length of a marketing channel.» Direct Channels
» Indirect Channels – Producers lose more control and face greaterchannel complexity as additional channellevels are added.
Nature & Importance of MarketingChannels
8/11/2019 Chapter 4 Chopra
http://slidepdf.com/reader/full/chapter-4-chopra 14/76 13- 14
L.L. Bean sells direct via the Internet,telephone, and mail catalogs
8/11/2019 Chapter 4 Chopra
http://slidepdf.com/reader/full/chapter-4-chopra 15/76 13- 15
Nature & Importance of MarketingChannels
Channel Members Are Connected
Via A Variety of FlowsPhysical FlowPayment Flow
InformationFlow
PromotionFlow
Flow of Ownership
8/11/2019 Chapter 4 Chopra
http://slidepdf.com/reader/full/chapter-4-chopra 16/76 13- 16
Channel Conflict – Occurs when channel members disagree on
roles, activities, or rewards. – Types of Conflict:
» Horizontal conflict: occurs among firms at thesame channel level» Vertical conflict: occurs among firms at
different channel levels
Channel Behavior andOrganization
8/11/2019 Chapter 4 Chopra
http://slidepdf.com/reader/full/chapter-4-chopra 17/76 13- 17
Figure 13-3:
Conventional Versus VerticalMarketing System
8/11/2019 Chapter 4 Chopra
http://slidepdf.com/reader/full/chapter-4-chopra 18/76 13- 18
Vertical Marketing Systems – Corporate VMS – Contractual VMS
» Manufacturer-sponsoredretailer franchise system
» Manufacturer-sponsoredwholesaler franchise system» Service-firm-sponsored
retailer franchise system – Administered VMS
Channel Behavior andOrganization
8/11/2019 Chapter 4 Chopra
http://slidepdf.com/reader/full/chapter-4-chopra 19/76 13- 19
Horizontal MarketingSystems – Two or more companies
at one level join
together to follow a newmarketing opportunity.
Channel Behavior andOrganization
Nestle and General Mills work together to
market cereal outside of North America
8/11/2019 Chapter 4 Chopra
http://slidepdf.com/reader/full/chapter-4-chopra 20/76
13- 20
Figure 13-4:
Multichannel DistributionSystem
8/11/2019 Chapter 4 Chopra
http://slidepdf.com/reader/full/chapter-4-chopra 21/76
13- 21
Multichannel DistributionSystems – Also called hybrid marketing
channels – Occurs when a firm uses two
or more marketing channels – Hybrid marketing has many
advantages
Channel Behavior and
Organization
8/11/2019 Chapter 4 Chopra
http://slidepdf.com/reader/full/chapter-4-chopra 22/76
13- 22
Step 1: AnalyzingConsumer Needs – Cost and feasibility
of meeting needs must beconsidered
Channel Design Decisions
8/11/2019 Chapter 4 Chopra
http://slidepdf.com/reader/full/chapter-4-chopra 23/76
13- 23
Step 2: Setting Channel Objectives – Set channel objectives in terms of
targeted level of customer service – Many factors influence channel
objectives
Channel Design Decisions
8/11/2019 Chapter 4 Chopra
http://slidepdf.com/reader/full/chapter-4-chopra 24/76
13- 24
Step 3:
Identifying Major Alternatives
Channel Design Decisions
Types of Intermediaries
Company salesforce
Manufacturer’sagency
Industrialdistributors
8/11/2019 Chapter 4 Chopra
http://slidepdf.com/reader/full/chapter-4-chopra 25/76
13- 25
Manufacturer’s Agents: Also called reps, agents,manufacturers’representatives, salesagencies or even brokers.
What Do They Do?Act as outsourced providersof field sales services tomultiple manufacturers ofcomplementary products.
Compensation: Work on commission and paytheir own expenses.
Employment Terms: Contractual agreement to be theexclusive “agent” of themanufacturers they represent in agiven territory, market, or forspecific accounts.
Manufacturer’s Agencies In-Depth
8/11/2019 Chapter 4 Chopra
http://slidepdf.com/reader/full/chapter-4-chopra 26/76
13- 26
Benefits: Reps’ View
Manufacturer’s agentscan leverage their timeso that sales for multiplemanufacturers can bemade to the samecustomer, often duringthe same sales call.Multiple products meansreps can offer the bestproduct to suit needs
Benefits: Firm’s View
– Sales costs vary predictablywith sales
– Lower sales, turnover, andtraining costs
– Increased sales;experienced sales force
– Flexibility; immediateaccess to markets
– Enables systems sales
Manufacturer’s Agencies In-Depth
8/11/2019 Chapter 4 Chopra
http://slidepdf.com/reader/full/chapter-4-chopra 27/76
13- 27
Step 3:
Identifying Major Alternatives – Number of marketing intermediaries
» Intensive distribution» Selective distribution» Exclusive distribution
– Responsibilities of channel members
Channel Design Decisions
8/11/2019 Chapter 4 Chopra
http://slidepdf.com/reader/full/chapter-4-chopra 28/76
13- 28
Step 4: Evaluating
Major Alternatives – Economic criteria» Sales, costs,
profitability
– Control issues – Adaptive criteria
Channel Design Decisions
8/11/2019 Chapter 4 Chopra
http://slidepdf.com/reader/full/chapter-4-chopra 29/76
13- 29
Designing InternationalDistribution Channels – Global marketers usually adapt their
channel strategies to structures thatexist within foreign countries
– Key challenges:» Channels may be complex
or hard to penetrate» Channels may be
scattered, inefficient, ortotally lacking
Channel Design Decisions
8/11/2019 Chapter 4 Chopra
http://slidepdf.com/reader/full/chapter-4-chopra 30/76
13- 30
Selecting Channel Members
– Identify characteristics thatdistinguish the best channelmembers
Managing and MotivatingChannel Members – Partner relationship management
(PRM) is key
Channel Management Decisions
8/11/2019 Chapter 4 Chopra
http://slidepdf.com/reader/full/chapter-4-chopra 31/76
13- 31
Evaluating Channel
Members – Performance should be
checked againststandards
– Channel members
should be rewarded orreplaced as dictated by
performance
Channel Management Decisions
8/11/2019 Chapter 4 Chopra
http://slidepdf.com/reader/full/chapter-4-chopra 32/76
13- 32
Exclusive distribution – Only certain outlets are
allowed to carry a firm’s products
Exclusive dealing – Exclusive territorial
agreements – Tying agreements
Public Policy and Distribution
Decisions
8/11/2019 Chapter 4 Chopra
http://slidepdf.com/reader/full/chapter-4-chopra 33/76
13- 33
Marketing Logistics – Outbound distribution – Inbound distribution
– Reverse distribution – Involves the entire supply chain
management system
Marketing Logistics and
Supply Chain Management
8/11/2019 Chapter 4 Chopra
http://slidepdf.com/reader/full/chapter-4-chopra 34/76
13- 34
Figure 13-5:
Supply ChainManagement
8/11/2019 Chapter 4 Chopra
http://slidepdf.com/reader/full/chapter-4-chopra 35/76
13- 35
Why Greater Emphasis is Being Placed onLogistics: – Offers firms a competitive advantage – Can yield cost savings – Greater product variety requires improved logistics – Improvements in distribution efficiency are possible
due to information technology
Marketing Logistics and
Supply Chain Management
8/11/2019 Chapter 4 Chopra
http://slidepdf.com/reader/full/chapter-4-chopra 36/76
8/11/2019 Chapter 4 Chopra
http://slidepdf.com/reader/full/chapter-4-chopra 37/76
13- 37
Major Logistics Functions – Warehousing – Inventory Management – Transportation – Logistics Information Management
Marketing Logistics and
Supply Chain Management
8/11/2019 Chapter 4 Chopra
http://slidepdf.com/reader/full/chapter-4-chopra 38/76
13- 38
Marketing Logistics and Supply
Chain ManagementTransportation Carrier Options
TruckRail
Water
PipelineAir
Internet
Intermodal transportation is becomingmore common
8/11/2019 Chapter 4 Chopra
http://slidepdf.com/reader/full/chapter-4-chopra 39/76
13- 39
Integrated LogisticsManagement – Cross-functional
teamwork inside thecompany is critical
– Logistics partnershipsare also built throughshared projects
Marketing Logistics and
Supply Chain Management
8/11/2019 Chapter 4 Chopra
http://slidepdf.com/reader/full/chapter-4-chopra 40/76
13- 40
– Outsourcing oflogistic firms to third
party firms is becoming more
common
Marketing Logistics and
Supply Chain Management
8/11/2019 Chapter 4 Chopra
http://slidepdf.com/reader/full/chapter-4-chopra 41/76
4-41
Designing the DistributionNetwork in a Supply Chain
Supply Chain ManagementPart-2
8/11/2019 Chapter 4 Chopra
http://slidepdf.com/reader/full/chapter-4-chopra 42/76
4-42
Outline
The Role of Distribution in the Supply ChainFactors Influencing Distribution Network DesignDesign Options for a Distribution NetworkE-Business and the Distribution NetworkDistribution Networks in PracticeSummary of Learning Objectives
8/11/2019 Chapter 4 Chopra
http://slidepdf.com/reader/full/chapter-4-chopra 43/76
4-43
The Role of Distributionin the Supply Chain
Distribution : the steps taken to move and store a product from the supplier stage to the customer stagein a supply chain
Distribution directly affects cost and the customerexperience and therefore drives profitabilityChoice of distribution network can achieve supplychain objectives from low cost to high responsivenessExamples: Wal-Mart, Dell, Proctor & Gamble, HP,Apple
8/11/2019 Chapter 4 Chopra
http://slidepdf.com/reader/full/chapter-4-chopra 44/76
8/11/2019 Chapter 4 Chopra
http://slidepdf.com/reader/full/chapter-4-chopra 45/76
4-45
Factors InfluencingDistribution 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: – Inventories – Transportation – Facilities and handling – Information
8/11/2019 Chapter 4 Chopra
http://slidepdf.com/reader/full/chapter-4-chopra 46/76
4-46
Service and Number of Facilities(Fig. 4.1)
Number ofFacilities
Response Time
8/11/2019 Chapter 4 Chopra
http://slidepdf.com/reader/full/chapter-4-chopra 47/76
4-47
Inventory Costs and Numberof Facilities (Fig. 4.2)
InventoryCosts
Number of facilities
8/11/2019 Chapter 4 Chopra
http://slidepdf.com/reader/full/chapter-4-chopra 48/76
4-48
The Cost-Response Time Frontier
Local FG
Mix
Regional FG
Local WIPCentral FG
Central WIP
Central Raw Material and Custom production
Custom production with raw material at suppliers
Cost
Response Time H iLow
Low
H i
8/11/2019 Chapter 4 Chopra
http://slidepdf.com/reader/full/chapter-4-chopra 49/76
4-49
Transportation Costs andNumber of Facilities (Fig. 4.3)
TransportationCosts
Number of facilities
l d b
8/11/2019 Chapter 4 Chopra
http://slidepdf.com/reader/full/chapter-4-chopra 50/76
4-50
Facility Costs and Numberof Facilities (Fig. 4.4)
FacilityCosts
Number of facilities
8/11/2019 Chapter 4 Chopra
http://slidepdf.com/reader/full/chapter-4-chopra 51/76
4-51
Transportation
Total Costs Related toNumber of Facilities
T o
t a l C
o s t s
Number of Facilities
Inventory
Facilities
Total Costs
8/11/2019 Chapter 4 Chopra
http://slidepdf.com/reader/full/chapter-4-chopra 52/76
D i O i f
8/11/2019 Chapter 4 Chopra
http://slidepdf.com/reader/full/chapter-4-chopra 53/76
4-53
Design Options for aDistribution Network
Manufacturer Storage with Direct ShippingManufacturer Storage with Direct Shipping and In-Transit Merge
Distributor Storage with Carrier DeliveryDistributor Storage with Last Mile DeliveryManufacturer or Distributor Storage with Consumer
PickupRetail Storage with Consumer Pickup
M f S i h
8/11/2019 Chapter 4 Chopra
http://slidepdf.com/reader/full/chapter-4-chopra 54/76
4-54
Manufacturer Storage withDirect Shipping (Fig. 4.6)
Manufacturer
Retailer
Customers
Product Flow
Information Flow
8/11/2019 Chapter 4 Chopra
http://slidepdf.com/reader/full/chapter-4-chopra 55/76
4-55
Manufacturer Storage withDirect Shipping
Delivering direct from manufacturer to customer after retailer collects theorders. (drop shipping) No inventory at retailer.Specially used for slow moving items (Nordstrom, WWGrainger, ebags)Package carriers are used to ship the product.Biggest advantage aggregation of inventory at manufacturer. Benefit is
biggest for items with high-value, low and unpredictable demand. This istrue if manufacturer owns the inventory it holds, instead of allocating toretailers (retailer’s own the inventory.
Not much advantage if the item is low value and with predictable demand(detergent)
Can increase the inventory turns by a factor of 6.Advantages; Postponement of customization after order is placed, and theaggregation on component level (Dell).Good if orders have few sourcing locations.
8/11/2019 Chapter 4 Chopra
http://slidepdf.com/reader/full/chapter-4-chopra 56/76
4-56
Manufacturer Storage withDirect Shipping
Cost Factor – Inventory; lower cost because of aggregation – Transportation; increased distance, higher cost – Facilities and handling; lower cost because of aggregation especially if manufacturer can
handle small shipments – Information; high investment to integrate manufacturer and retailers, order visibility and
tracking.Service factor – Response time; tend to be long, longer distance, two levels of ordering, may vary by
product, complicating receiving. – Product variety; easy to provide high variety – Product availability; high availability – Customer experience; good in terms of home delivery, but can suffer from partial
fullfilment. – Time to market; fast – Order visibility; Difficult and important. Needs integra tion of retailer’s and
manufacturer ’s information systems. – Returnability; More difficult and expensive return process. An order can involve several
items.
8/11/2019 Chapter 4 Chopra
http://slidepdf.com/reader/full/chapter-4-chopra 57/76
8/11/2019 Chapter 4 Chopra
http://slidepdf.com/reader/full/chapter-4-chopra 58/76
4-58
In-Transit Merge NetworkPieces of order from different locations is merged before sending tocustomer. Dell uses this with Sony.Similar to drop-shipping, it offers inventory aggregation and
postponement opportunity.Main advantage is improved customer service, reducedtransportation cost compared to drop shipping. Requires additionaleffort for merging though.Appropriate for low-medium demand, high value, orders with limitednumber of sources, four or five.Cost factors – Inventory; similar to drop-shipping, aggregation of inventory and postponement – Transportation cost; lower than drop-shipping. Fewer delivery to customer. – Facility and handling; somewhat higher. Extra facility for merging the order.
Less processing for customer to receive the order. – Information system; more coordination need, more sophisticated system needed
8/11/2019 Chapter 4 Chopra
http://slidepdf.com/reader/full/chapter-4-chopra 59/76
4-59
In-Transit Merge Network
Service factors; – Response time slightly higher, product variety, product
availability, time to market are similar to drop shipping – Customer service is likely to be better. One delivery to
customer. – Order visibility; after the merging, order can be tracked as a
single unit. – Returnability are similar to drop-shipping, problems are
likely.
8/11/2019 Chapter 4 Chopra
http://slidepdf.com/reader/full/chapter-4-chopra 60/76
8/11/2019 Chapter 4 Chopra
http://slidepdf.com/reader/full/chapter-4-chopra 61/76
4-61
Distributor Storage withCarrier Delivery
Inventory is held at the distributor/retailer in intermediate warehouses,instead of manufacturer.Amazon, WWGrainger used this option together with drop shippingAppropriate for medium to fast moving items, not for slow moving items.Postponement is possible if DC has some assembly capacity.Cost factors – Inventory; higher inventory cost because aggregation is done at distributor
instead of manufacturer, lower level of aggregation. – Transportation cost; lower. Lower inbound cost to distributor, and lower
outbound cost to customer (single shipment) – Facility and handling; Facility costs are higher compared to storage in
manufacturer (less aggregation). Handling is similar to manufacturer storageoption.
– Information; significantly less than the previous network. The distributor acts as buffer reducing the need for coordination between customer and manufacturers.
b h
8/11/2019 Chapter 4 Chopra
http://slidepdf.com/reader/full/chapter-4-chopra 62/76
4-62
Distributor Storage withCarrier Delivery
Service factors – Response times; faster than previous networks – Product variety; lower
– Product availability; More expensive than previousnetworks – Customer experience; Better than drop-shipping especially.
Single shipment to customer
– Time to market is higher than previous options. Extrastorage time at the distributor. – Order visibility is less of an issue. Single unit delivery to
customer.
8/11/2019 Chapter 4 Chopra
http://slidepdf.com/reader/full/chapter-4-chopra 63/76
Di ib S i h
8/11/2019 Chapter 4 Chopra
http://slidepdf.com/reader/full/chapter-4-chopra 64/76
4-64
Distributor Storage withLast Mile Delivery
Distributor/retailer delivers the product to the customer. Webvan, Peapod,Albertsons used this method in grocery industry.More and close-to-customer warehouses are needed for lowering deliverycostsAppropriate for fast moving and predictable items. Especially for byulky
products that customer values home delivery.It is justified if the customer is ready for paying for the convenience.Cost factors – Inventory; higher inventory than the previous options because of lower level of
aggregation. – Transportation cost; highest among all network configurations especially if the
density of customers are low and products are not bulky. – Facility and processing; high facility cost (although lower than retail stores)
handling cost are higher than retail because of home-delivery. – Information; similar to previous network. Extra effort for scheduling deliveries.
Di ib S i h
8/11/2019 Chapter 4 Chopra
http://slidepdf.com/reader/full/chapter-4-chopra 65/76
4-65
Distributor Storage withLast Mile Delivery
Service factors; – Response times; faster than using package carriers. – Product variety; lower than distributor storage and carrier
delivery. – Product availability; More expensive to provide compared
to previous networks other than retail stores. – Customer experience; very good especially for bulky items.
– Order visibility is less of an issue since the deliveries areusually within 24 hours. – Returnability; easy since the delivery trucks can pick up the
returns. More expensive than retail stores.
Di ib S i h
8/11/2019 Chapter 4 Chopra
http://slidepdf.com/reader/full/chapter-4-chopra 66/76
4-66
Distributor Storage withLast Mile Delivery
This option is hard to justify on efficiency base andusually is a good option if it is implemented using anexisting logistic facility structure – Example; Albertsons
» uses existing grocery stores and employees to provide homedelivery.
» A portion of the grocery store fulfills the online orders and alsoreplenishes the store.
This option is justifiable if the customer order size islarge enough to provide some economies of scale – Example; Peapod requires orders to be $50 or more with a
delivery charge of $9,95.
Manufacturer or Distributor Storage
8/11/2019 Chapter 4 Chopra
http://slidepdf.com/reader/full/chapter-4-chopra 67/76
4-67
Manufacturer or Distributor Storagewith Customer Pickup (Fig. 4.10)
Factories
Retailer
Pickup Sites
Product FlowInformation Flow
Cross Dock DC
Customer Flow
Customers
Manufacturer or Distributor Storage
8/11/2019 Chapter 4 Chopra
http://slidepdf.com/reader/full/chapter-4-chopra 68/76
4-68
Manufacturer or Distributor Storagewith Customer Pickup
Inventory is stored at the distributor or manufacturerOrders are shipped to designated pickup points wherecustomers come and pick up their order7dream.com, operated by seven-eleven Japan, allowscustomers to pick their orders from a designated store. Seven-Eleven utilizes already existing logistic structure.Cost factors – Inventory; is low, aggregation at the manufacturer or distributor – Transportation is lowest when using package carrier due to aggregation
at pickup locations
– Facility and handling; facility costs are high if pick-up location does notexist already. Handling costs at pickup locations are high. – Information system; More elaborative and sophisticated, extra system at
the pickup locations.
Manufacturer or Distributor Storage
8/11/2019 Chapter 4 Chopra
http://slidepdf.com/reader/full/chapter-4-chopra 69/76
4-69
Manufacturer or Distributor Storagewith Customer Pickup
Service factors; – Response times; comparable to delivery with package carriers – Customer experience; worse since customer has to pickup the item
himself. On the other hand, since customer do not need to wait at home
for delivery and customer can pay cash at the pickup location instead of paying online in advance, some customers may like pickup option better.
– Time to market is similar to other options with manufacturer storage – Order visibility is very important. Customers should be informed when
their orders arrive. – Returns are easier to handle at pickup location. Returns can be
aggregated and shipped back from pickup locations.
Manufacturer or Distributor Storage
8/11/2019 Chapter 4 Chopra
http://slidepdf.com/reader/full/chapter-4-chopra 70/76
4-70
Manufacturer or Distributor Storagewith Customer Pickup
Main advantage; It can lower the transportation cost,and expand the product variety and customer baseserved.
Main disadvantage; Increased facility cost and xxtrahandling at pickup location. This network optionmakes sense if already existing logistics structure isused.
8/11/2019 Chapter 4 Chopra
http://slidepdf.com/reader/full/chapter-4-chopra 71/76
4-71
Retail storage with customer pickups
Inventories are stored in retail stores, customers walk into the store to pickthe items they want or items they have ordered online or by phone. Mixedorder placement options. Most traditional option. – Albertsons; Grocery chain. Uses part of its stores as an online fulfillment center.
Local inventory. – WW Grainger; customers can order online, by phone, or in person and can
pickup items from retail outlets. Some items are stored locally and somecentrally.
– Inventory costs are higher than other options as the inventories aredisaggregated and held locally
– Transportation costs are lower than other solutions. Inexpensive modes can beused to replenish inventories at retail outlets.
– Facility costs are high. Many local facilities. – Information system; Minimal if there is no online ordering option. For online
option more complex information system especially for order visibility.
Comparative Performance of Delivery
8/11/2019 Chapter 4 Chopra
http://slidepdf.com/reader/full/chapter-4-chopra 72/76
4-72
Comparative Performance of DeliveryNetwork Designs (Table 4.7)
Information
Facility & Handling
Transportation
Inventory
Returnability
Order Visibility
Customer Experience
Product Availability
Product Variety
Response Time
Manufacturerstorage with pickup Distributorstorage with lastmile delivery
Distributor Storagewith PackageCarrier Delivery
ManufacturerStorage with In-Transit Merge
ManufacturerStorage with DirectShipping
Retail Storagewith CustomerPickup
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
2
2
2
2
2
2
2
2
2
2
3
3
3
3
3
3
3
3
3
3
4
4
4
4
4
4
4
4
4
4
4
4
4
5
5
5
5
55
5
6
6
5
Linking Product Characteristics and
8/11/2019 Chapter 4 Chopra
http://slidepdf.com/reader/full/chapter-4-chopra 73/76
4-73
Linking Product Characteristics andCustomer Preferences to Network Design
Low customer effort
High product variety
Quick desired response
High product value
Many product sources
Very low demand product
Low demand product
Medium demand product
High demand product
Manufacturer
storage withpickup
Distributor storage
with last mile delivery
Distributor Storage
with Package CarrierDelivery
Manufacturer
Storage with In-Transit Merge
Manufacturer
Storage withDirect Shipping
Retail Storage
withCustomerPickup
+2
+2
+2
+2
+2
+2
+2 +2 +2
+2
+1
+1
+1
+1
+1
+1
+1
+1
+1
+1
+1
+1
+1
+1
+1
0
0
0
0
0
0
0
0 0
0
-1
-1
-1
-1
-1 -1
-1
-1
-1
-1
-1
-2 -2
-2
-2
-2
-2 -2
-2
E-Business and the Distribution
8/11/2019 Chapter 4 Chopra
http://slidepdf.com/reader/full/chapter-4-chopra 74/76
4-74
E Business and the DistributionNetwork
Impact of E-Business on Customer ServiceImpact of E-Business on CostUsing E-Business: Dell, Amazon, Peapod, Grainger
8/11/2019 Chapter 4 Chopra
http://slidepdf.com/reader/full/chapter-4-chopra 75/76
4-75
Distribution Networks in Practice
The ownership structure of the distribution networkcan have as big as an impact as the type of distributionnetwork
The choice of a distribution network has very long-term consequencesConsider whether an exclusive distribution strategy isadvantageousProduct, price, commoditization, and criticality havean impact on the type of distribution system preferred
by customers
8/11/2019 Chapter 4 Chopra
http://slidepdf.com/reader/full/chapter-4-chopra 76/76
Summary of Learning Objectives
What are the key factors to be considered whendesigning the distribution network?What are the strengths and weaknesses of various
distribution options?What roles do distributors play in the supply chain?