SCM CH-4 Designing Distribution Networks and Online Sales
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Transcript of SCM CH-4 Designing Distribution Networks and Online Sales
Distribution refers to the steps taken to move and store a product from the supplier stage to a customer stage in the supply chain
DISTRIBUTION
By-Prof.P.K.Shah
Distribution occurs at every pair of stages in the supply chain
Raw materials- Suppliers to manufacturers Finished products- Manufacturer to the end users Designing network has two phases Decision – sale directly or through intermediary Decision – converts first phase into multiple locations and their capacity
THE ROLE OF DISTRIBUTION IN THE SUPPLY CHAIN
By-Prof.P.K.Shah
Response time Product variety & availability Time to market Order visibility Returnability
FACTORS INFLUENCING DISTRIBUTION NETWORK DESIGN
By-Prof.P.K.Shah
RELATIONSHIP BETWEEN NUMBER OF FACILITIES AND DESIRED RESPONSE RATE
Decrease in the response time –increase in the number of facilities By-Prof.P.K.Shah
RELATIONSHIP BETWEEN NUMBER OF FACILITIES AND INVENTORY COSTS
Increase in the number of facilities- Increase in inventory cost By-Prof.P.K.Shah
RELATIONSHIP BETWEEN NUMBER OF FACILITIES AND TRANSPORTATION COSTS
Increase in the number of facilities- Decrease in transportation cost but in small lot sizes of inbound transportation after some point cost increases By-Prof.P.K.Shah
RELATIONSHIP BETWEEN NUMBER OF FACILITIES AND FACILITY COSTS
Decrease in the facility cost with the decrease in the number of facilities By-Prof.P.K.Shah
DESIGN OPTIONS FOR A DISTRIBUTION NETWORK 1. MANUFACTURER STORAGE WITH DIRECT SHIPPING
Online business: E-bag, Nordstrom for slow moving items By-Prof.P.K.Shah
Cost factor Performance
Inventory Lower cost because of aggregation
Transportation Higher increase distance and disaggregated shipping
Facilities Lower –centralized storage area
Information Significant investment
Service factor Performance
Response time Long
Product variety availability
More
Returnability Expensive
Time to market Fast-unit produced and marketed
DROP SHIPPING- PROS & CONS
By-Prof.P.K.Shah
DESIGN OPTIONS FOR A DISTRIBUTION NETWORK 2. MANUFACTURER STORAGE WITH DIRECT SHIPPING
AND IN-TRANSIT MERGE
By-Prof.P.K.Shah
Cost factor Performance
Inventory Lower cost because of aggregation
Transportation Somewhat lower than drop-shipping
Facilities Higher
Information Significantly higher investment
Service factor Performance
Response time Long
Product variety availability
Same as drop-shipping
Returnability Same as drop-shipping
Time to market Same as drop-shipping
MANUFACTURER STORAGE WITH DIRECT SHIPPING AND IN-TRANSIT MERGE
PROS & CONS
By-Prof.P.K.Shah
DESIGN OPTIONS FOR A DISTRIBUTION NETWORK 3. DISTRIBUTOR STORAGE WITH CARRIER DELIVERY
By-Prof.P.K.Shah
DISTRIBUTOR STORAGE WITH CARRIER DELIVERY PROS & CONS
Cost factor Performance
Inventory Higher than manufacturing storage
Transportation Somewhat lower than from manufacturer
Facilities Higher
Information Lower
Service factor Performance
Response time Faster
Product variety availability
Higher
Returnability Easier
Time to market Higher
By-Prof.P.K.Shah
DESIGN OPTIONS FOR A DISTRIBUTION NETWORK 4. DISTRIBUTOR STORAGE WITH LAST MILE DELIVERY
By-Prof.P.K.Shah
DISTRIBUTOR STORAGE WITH LAST MILE DELIVERY PROS & CONS
Cost factor Performance
Inventory Higher than manufacturing storage
Transportation Very high
Facilities Higher
Information Lower
Service factor Performance
Response time Very quick
Product variety availability
Lesser
Returnability Higher
Time to market Higher
By-Prof.P.K.Shah
DESIGN OPTIONS FOR A DISTRIBUTION NETWORK 5. MANUFACTURER OR DISTRIBUTOR STORAGE WITH
CUSTOMER PICK-UP
By-Prof.P.K.Shah
MANUFACTURER OR DISTRIBUTOR STORAGE WITH CUSTOMER PICK-UP PROS & CONS
Cost factor Performance
Inventory Higher than manufacturing storage
Transportation lower than from manufacturer
Facilities Higher
Information Somewhat Higher
Service factor Performance
Response time Immediate
Product variety availability
Lower
Returnability Easier
Time to market Highest
By-Prof.P.K.Shah
Response time to customer Product variety Product availability Customer experience Faster time to market Order visibility returnability Direct sales to customer Flexible pricing , product portfolio and promotions Efficient fund transfer
ONLINE SALES AND THE DISTRIBUTION NETWORK IMPACT OF ONLINE SALES ON CUSTOMER SERVICE
By-Prof.P.K.Shah
Inventory Facilities Transportation Information
ONLINE SALES AND THE DISTRIBUTION NETWORK IMPACT OF ONLINE SALES ON COST
By-Prof.P.K.Shah
Impact of online sales on performance of Dell & PC industry -Cost
Impact of online sales on book industry -customer service
IMPACT OF ONLINE SALES ON OTHER INDUSTRIES
By-Prof.P.K.Shah
Ownership structure of distribution network Adaptable distribution network Internet with the physical network
DISTRIBUTION NETWORK IN PRACTICE
By-Prof.P.K.Shah
1 •Manufacturer
2 •C&F agent or warehouses
3 •Distributors
4 •Wholesalers or Stockist
5 •Retailers
6 •Consumers
DISTRIBUTION NETWORK DESIGN FMCG SECTOR & EXAMPLE-HUL
By-Prof.P.K.Shah