Designing The Supply Chain

Network
 Distribution in Supply Chain
Distribution is the process of storing and
moving products from supplier to customer
stage of supply chain.
Distribution cost is the key driver of the
supply chain profitability.
Wal-Mart success is primarily based on
the design of its distribution Network.
Distribution allows Wal-Mart to achieve the
availability of low prices common products
 Cont….
Distribution network can be used to achieve low
cost and responsiveness. So different
organizations in same domain design different
distribution network. e.g.
1. Dell distributes products directly to end
customers.
2. Customers can walk away with an HP PC from
HP reseller.
3. Apple computers sell their products using their
retail stores.
4. P&G distribute directly to large chains, whereas
smaller players buy from distributors.
 Factors Influencing DN Design
DN performance can be evaluated using
1. Customer needs that are met
2. Cost of meeting customer needs

Thus an organization must identify the

customer needs and cost to meet customer
needs with different DNs.
Meeting customer needs influence revenues
and cost decides the profitability of distribution
network.
 Customers services influenced by
DN Design
1. Response time
2. Product variety
3. Product Availability
4. Customer experience
5. Time to market
6. Order visibility
7. Returnability
 Cont….
Response Time:
Time required from placing order to
Delivery.
Product Variety:
Number of same product with different configurations.
Product Availability:
probability of having a product when a customer order
arrives.
Customer Experience:
Ease of placing and receiving orders.
 Cont….
Time to market:
Time required to bring new products to market.

Order visibility:
Ability of customers to track their orders.

Returnability:
Ease with which a customer can return the
product
 Change in DN Design
Changing the DN design affects the supply
chain cost. E.g. Transportation, Inventory,
Information, Facilities.
Decrease in inventory cost affects the
number of facilities.
Inbound transportation cost :
Costs incurred in bringing the material into
a facility.

Outbound transportation cost:

The cost of sending material outside the
facility.