Downstream supply chain managementDownstream supply chain management

What is downstream supply chain management?What is downstream supply chain management?

Downstream supply chain management covers the desicions involved in the supply chain´s tiers from

the focal company down to the customers

Distribution strategy covers choise of forms of distribution and transport, number and location of warehouses and whether the company carries out activities itself or buys (oursources) them.

So….So….

How many warehouses?Where to put them?How many tiers before reaching the customer?Choise of transport carrier?

Remember – distributionsstrategy must reflect the customers need of delivery service

DistributionsformsDistributionsforms

Direct distribution Indirect distribution; ◦ De-central or central warehouses

Distribution centre

Advantages and disadvantages of direct and indirect Advantages and disadvantages of direct and indirect distributiondistribution

Direct distribution Indirect distribution

Advantages Disadvantages Advantages Disadvantages

Control Narrow product range

Cheap Lack of control

Closeness to cusomers gives:Knowledge about needsKnowledge about new wishesBranding

Expensive Specialised detailedReach more customersAssociated with others branding

Poor knowledge of customer needs

Direct distributionDirect distribution

Is equal to high logistic efficiency – are often seen by:

• Order production i.e. windmills• Big lots• other?

Indirect distributionIndirect distribution

- Is equal to establishment of stocks in between the focal company and the end customer

The more tiers = longer distribution time

A stock can be either de-central or central

De-central warehousesDe-central warehouses

De-central warehouses means warehouses placed near the markets and hence the customers

Why?Short delivery time If market preferences are different

Why not?Risk of binding to much capitalControl of the stocks can be suboptimized

Central warehousesCentral warehouses

Central warehouses means that one stock covers more countries or markets. Why?

Better control and use of capacityReduction of administrative costHigher delivery flexibilityLower cost due to risk poolingseffectBetter coordinated transport

Why not?Need of short delivery time

RiskpoolingseffektenRiskpoolingseffekten

means that variation in demand that can end with back orders of obsolete goods on decentral warehouses can be reduced by centralising because the demand is aggregated across different markets

Central warehouseCentral warehouse

Distribution centerDistribution center

The purpose of distributionscenters is to collect, store and reload goods from different companies

To tasks like:

◦ In coming goods◦ Stocking◦ Picking◦ Shipping

Examples are: Coop, Dansk Super Marked

Location of warehousesLocation of warehouses

De-central warehouse:◦ Customer location most important

Central warehouse:◦ Infrastructure to and from the warehouse is important

Transport choiseTransport choise

1. Internal transport◦ Moving of raw material and semi finished goods

1. Eksternal transport◦ Moving of finished goods and semi finished goods to

customers or distributionscenters

Types of transportationTypes of transportation

Influence delivery time and flexibility. But is influenced by:

Product characteristicsCompetitive parameters InfrastructureType of transportation

Outsourcing distribution management

Differentiated distribution management

Significance for logistic efficiency

Task – Adidas direct businessTask – Adidas direct businesswww.youtube.com/watch?

v=o_VnQJaQ5kw