Supply Chain Management (3rd Edition)

Chapter 4 Designing the Distribution Network in a Supply Chain

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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

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The Role of Distribution in 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

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Factors Influencing Distribution 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

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Factors Influencing Distribution Network Design

Elements of customer service influenced by network structure:
Response time Product variety Product availability Customer experience Order visibility Returnability Inventories Transportation Facilities and handling Information
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Supply chain costs affected by network structure:

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Service and Number of Facilities (Fig. 4.1)

Number of Facilities

Response Time
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The Cost-Response Time Frontier

Hi
Local FG
Mix Regional FG Local WIP

Cost

Central FG Central WIP Central Raw Material and Custom production Custom production with raw material at suppliers

Low
Low
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Response Time

Hi
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Inventory Costs and Number of Facilities (Fig. 4.2)

Inventory Costs

Number of facilities
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Transportation Costs and Number of Facilities (Fig. 4.3)

Transportation Costs

Number of facilities
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Facility Costs and Number of Facilities (Fig. 4.4)

Facility Costs

Number of facilities
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Total Costs Related to Number of Facilities

Total Costs

Total Costs

Facilities Inventory

Transportation

Number of Facilities
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Variation in Logistics Costs and Response Time with Number of Facilities (Fig. 4.5)
Response Time

Total Logistics Costs

Number of Facilities
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Design Options for a Distribution Network

Manufacturer Storage with Direct Shipping Manufacturer Storage with Direct Shipping and InTransit 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
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Manufacturer Storage with Direct Shipping (Fig. 4.6)

Manufacturer

Retailer

Customers

Product Flow Information Flow

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In-Transit Merge Network (Fig. 4.7)

Factories

Retailer

In-Transit Merge by Carrier

Customers

Product Flow Information Flow

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Distributor Storage with Carrier Delivery (Fig. 4.8)

Factories

Warehouse Storage by Distributor/Retailer

Customers
Product Flow Information Flow
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Distributor Storage with Last Mile Delivery (Fig. 4.9)

Factories

Distributor/Retailer Warehouse

Customers
Product Flow Information Flow
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Manufacturer or Distributor Storage with Customer Pickup (Fig. 4.10)

Factories

Retailer

Cross Dock DC

Pickup Sites

Customers Customer Flow Product Flow Information Flow

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