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….

 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
 Distributionsforms

 Direct distribution
 Indirect distribution;
◦ De-central or central warehouses
 Distribution centre
 Advantages and disadvantages of direct and indirect
distribution
Direct distribution Indirect distribution
Advantages Disadvantages Advantages Disadvantages
Control Narrow product Cheap Lack of control
range
Closeness to Expensive Specialised Poor knowledge
cusomers gives: detailed of customer
Knowledge about Reach more needs
needs customers
Knowledge about Associated with
new wishes others branding
Branding
 Direct distribution

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

• Order production i.e. windmills

• Big lots
• other?
 Indirect 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 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 capital
 Control of the stocks can be suboptimized
 Central warehouses

Central warehouses means that one stock covers more

countries or markets.
Why?
 Better control and use of capacity
 Reduction of administrative cost
 Higher delivery flexibility
 Lower cost due to risk poolingseffect
 Better coordinated transport

Why not?
 Need of short delivery time
 Riskpoolingseffekten

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 warehouse
 Distribution 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 warehouses
De-central warehouse:
◦ Customer location most important

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

Influence delivery time and flexibility. But is influenced

by:

 Product characteristics
 Competitive parameters
 Infrastructure
 Type of transportation
 Outsourcing distribution management

 Differentiated distribution management

 Significance for logistic efficiency

Task – Adidas direct business
www.youtube.com/watch?
v=o_VnQJaQ5kw