Class-good-Designing Distribution Network and Application to E-business
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Transcript of Class-good-Designing Distribution Network and Application to E-business
© 2007 Pearson Education 4-2
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
© 2007 Pearson Education 4-3
The Role of Distributionin 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, Grainger
© 2007 Pearson Education 4-4
Factors InfluencingDistribution 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
© 2007 Pearson Education 4-5
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
© 2007 Pearson Education 4-6
Service and Number of Facilities (Fig. 4.1)
Number of Facilities
Response Time
© 2007 Pearson Education 4-7
The Cost-Response Time Frontier
Local FG
Mix
Regional FG
Local WIP
Central FG
Central WIP
Central Raw Material and Custom production
Custom production with raw material at suppliers
Cost
Response Time HiLow
Low
Hi
© 2007 Pearson Education 4-8
Inventory Costs and Numberof Facilities (Fig. 4.2)
Inventory Costs
Number of facilities
© 2007 Pearson Education 4-9
Transportation Costs andNumber of Facilities (Fig. 4.3)
TransportationCosts
Number of facilities
© 2007 Pearson Education 4-10
Facility Costs and Numberof Facilities (Fig. 4.4)
FacilityCosts
Number of facilities
© 2007 Pearson Education 4-11
TransportationTransportation
Total Costs Related to Number of Facilities
Tot
al C
osts
Tot
al C
osts
Number of FacilitiesNumber of Facilities
InventoryInventory
FacilitiesFacilities
Total CostsTotal Costs
© 2007 Pearson Education 4-12
Response TimeResponse Time
Variation in Logistics Costs and Response Time with Number of Facilities (Fig. 4.5)
Number of FacilitiesNumber of Facilities
Total Logistics CostsTotal Logistics Costs
© 2007 Pearson Education 4-13
Distribution network-----
1- Will the goods be delivered to the customers location or goods to be picked up from predetermined place ?
2- Will the goods flow through an intermediary?
© 2007 Pearson Education 4-14
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 Consumer
Pickup Retail Storage with Consumer Pickup Selecting a Distribution Network Design
© 2007 Pearson Education 4-15
Manufacturer Storage withDirect Shipping (Fig. 4.6)
Manufacturer
Retailer
Customers
Product Flow
Information Flow
© 2007 Pearson Education 4-16
Manufacturer Storage withDirect Shipping (Fig. 4.6)
Suit for high value, low demand items with unpredictable demand.– E-bag, dell, w.w grainger.
advantage is to aggregate the demand at manufactures place.
Centralize the inventories. Information investment needs to be strong. Little postponement possible.
© 2007 Pearson Education 4-17
Factors to discuss 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
© 2007 Pearson Education 4-19
In-Transit Merge Network (Fig. 4.7)Factories
Retailer
Product Flow
Information Flow
In-Transit Merge by Carrier
Customers
© 2007 Pearson Education 4-20
In-Transit Merge Network (Fig. 4.7)
Ex: Dell. Pc from dell, monitor from sony, microchips from Intel.
– Sophisticated Information technology needed.
–
© 2007 Pearson Education 4-22
Distributor Storage withCarrier Delivery (Fig. 4.8)
Factories
Customers
Product FlowInformation Flow
Warehouse Storage by Distributor/Retailer
© 2007 Pearson Education 4-23
Distributor Storage withCarrier Delivery (Fig. 4.8)
Inv. is not held at factory but is held by distributors and package carrier are used to transport the goods from distributors to final customers.
Well suited for medium to fast moving goods.
© 2007 Pearson Education 4-25
Distributor Storage withLast Mile Delivery (Fig. 4.9)
Factories
Customers
Product Flow
Information Flow
Distributor/Retailer Warehouse
© 2007 Pearson Education 4-26
Distributor Storage withLast Mile Delivery (Fig.4.9)
Distributor/ retailers deliver products to the customers home not through package carrier like predecessor option.
here distributor warehouse to be much closer to the customer. More warehouse required as compared to package delivery. More inventory and suit for fast moving goods. Ex. Grocery
items or FMCG. Transp. Cost is highest because delivery aggregation across
many retailers is not possible like package carriers.
© 2007 Pearson Education 4-28
Manufacturer or Distributor Storage with Customer Pickup (Fig. 4.10)
Factories
Retailer
Pickup Sites
Product FlowInformation Flow
Cross Dock DC
Customer Flow
Customers
© 2007 Pearson Education 4-29
Inventory stored at manufacturer or distributor place but customers place orders online or by phone and then travel to designated pick-up points to collect their merchandise.
Orders are shipped from storage site to pick-up points as needed.
© 2007 Pearson Education 4-31
Retail Storage with Consumer Pickup
Most traditional type of supply chain, inventory is stored locally at retail store.
Customer can purchase from retail store or can place order at retail store or can place order on-line and pick –up from retail store.
© 2007 Pearson Education 4-33
1= strongest performance, 6= weakest performance
Information
Facility & Handling
Transportation
Inventory
Returnability
Order Visibility
Customer Experience
Product Availability
Product Variety
Response Time
Manufacturer storage with pickup
Distributor storage with last
mile delivery
Distributor Storage with Package
Carrier Delivery
Manufacturer Storage with In-Transit Merge
Manufacturer Storage with Direct
Shipping
Retail Storage with Customer
Pickup
1
1
1
1
1
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1
1
1
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1
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Comparative Performance of Delivery Network Designs (Table 4.7)
© 2007 Pearson Education 4-34
Linking Characteristics and Customer Preferences to Network Design+2= very suitable,+1=somewhat suitable, 0= neutral…….
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 with
pickup
Distributor storage with last mile delivery
Distributor Storage with Package Carrier
Delivery
Manufacturer Storage with In-Transit Merge
Manufacturer Storage with
Direct Shipping
Retail Storage with
Customer Pickup
+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
© 2007 Pearson Education 4-35
E-Business and the Distribution Network
Impact of E-Business on Customer Service Impact of E-Business on Cost Using E-Business: Dell, Amazon, Peapod, Grainger
© 2007 Pearson Education 4-36
Distribution Networks in Practice
The ownership structure of the distribution network can have as big as an impact as the type of distribution network
The choice of a distribution network has very long-term consequences
Consider whether an exclusive distribution strategy is advantageous
Product, price, commoditization, and criticality have an impact on the type of distribution system preferred by customers