RMIT Classification: Trusted

OMGT 2196 –
Warehouse &
Distribution Channels

Week 2 - Distribution & The

Supply Chain

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Supply Chain Environment

• customer focused
• technology orientation
• focus on success
• pro-active & forward looking
• team orientation
• good internal communication

Distribution Environment Must share similar environmental

characteristics

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Supply Chain Improvement (1)

• improved accuracy - get it right the first time!

• reduced lead times

• lower inventory costs

• improved supplier relationships

• better transportation performance

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Supply Chain Improvement (2)

• improved utilisation of facilities

• reduced handling

• faster customer order response

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Critical Success Factors

• product quality & price

• distribution quality & reliability

o right product/quantity

o right date & time

o right documentation

o right delivery point

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World Class Warehousing & Distribution

(1)

• Focus on excellent customer service

• Quality service delivery

• Control of service delivery costs

• Control of inventory throughout the supply chain

• Focus on quality processes

• Embraces relevant advanced technology

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World Class Warehousing & Distribution

(2)

• Focus on people

• Flexibility of performance

• Good materials handling

• Visibility of inventory

• Integrated operations

• Financial & operational data collection

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Brief Overview on Distribution Channels

(1)

• Combination

• Indirect

• Direct

o Multi-channels distributions

o Omni-channels distributions

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Brief Overview on
Distribution Channels (2)

Direct Indirect
• Supplier deals with each
• Through distributors/ dealers
customer
conduct additional marketing
• Good supplier-customer
• Reduction in paperwork
communication
• Direct marketing • Reduced credit risk
• Easy order entry facilities
• Lower freight costs

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Brief Overview on Distribution Channels

(3)

Direct

• Complexity with large numbers of customers

• Small consignments - increased freight costs

• Slower cash flow

• Increased warehouse workloads

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Brief Overview on Distribution Channels

(4)
Indirect
• Lower profit margins
• Conflicts of interest
• Lack of feedback from customers
• More difficult to provide technical support

Direct Channel
Producer Customer

Indirect Channel
Producer Customer

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Brief Overview on Distribution Channels

(5)

• combination of direct & indirect

• maximise advantages-minimise disadvantages

• 80/20 rule (Pareto Principle)

• direct for high volume/high profit customers

• indirect for remaining customers

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Brief Overview on Distribution Channels

(6)

• Multi-channel distributions
o Physical and online
o Independent systems

• Omni-channel distributions
o Retailers track all channels
o “Connected Consumer”
o More efficient as offers are customized

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Selection Criteria of 3PL

(1)

• Exclusive service ▪ Cost control

• Experienced & able ▪ Security

• Continuity of relationship & ▪ Customer relations

commitment
▪ ICT competence
• Performance measurement
▪ Industrial relations

▪ Throughput & Flexibility

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Selection Criteria of 3PL (2)

• Availability of facilities

• Customer Service Levels (CSL)

• Geographical coverage

• Financial liability

• Reputation

• Performance with other clients

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Typical Core Offering and Optional Services

offered by Distributors

Typical core offering Typical optional services

Product sourcing
One-stop shop – range and availability Back-to-back ordering
Simplified supply logistics
Consignment stocking
Bulk breaking Repackaging

Credit Extended credit, project finance

Second-level (post-sales) technical support
First-level technical support (pre-sales) Technical training
Logistics – drop shipment to ultimate
Logistics – delivery
customers
Project management – coordinating supply of
Order consolidation suppliers and shipping to multiple locations
Product information collateral Market services – acting as an
outsourced provider

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Omni-Channel
Distributions

http://www.omniretail-experts.com/wp-content/uploads/2014/03/omnichannel-customer-pers-small2.jpg

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Relationships in Supply Chain

• win-win strategic alliances

• quality service throughout supply chain

• long term relationships

• pro-active business acumen

• quality communications

• shared benefits & information

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Integration in Supply Chain

• reduce costs
• reduce inventory in the chain
• improve service to customers
• reduce lead times
• reduce handling
• reduce documentation
• increase accuracy

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Number of Warehouses/DC’s (1)

• warehouses close to customers improve service & reduce lead

time

• centralization saves money

• centralization increases flexibility

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Number of Warehouses/DC’s (2)

• Square Root Law of Inventory

o cost of holding inventory is proportional to the square root of

the number of locations the same item is held…you must hold
more in each.

 5 locations to 3 locations = save 30%

 5 locations to 1 location = save 55%

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Centralize/Decentralize (1)

• customer service requirements?

• can these be met from a central facility?

• yes - good - centralizes

• no - accept higher costs and have minimum decentralization

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Centralize/Decentralize (2)

• Keep only fast moving stock (20%) at regional warehouses.

• Supply slow movers (80%) from a central location.

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Quality Distribution Output (1)

• quality processes -> quality output

• processes are created by people

• top management commitment crucial

• participation & involvement from all levels of management crucial

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Quality Distribution Output (2)

• quality output comes from motivated & committed staff

• communication, training, support, & recognition are key factors

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Distribution KPI’s (1)

Some common KPI’s in distribution include:

• receive incoming materials in ? hours

• put away receipts within ? hours

• achieve % location accuracy

• achieve % quantity accuracy

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Distribution KPI’s (2)

• achieve % picking accuracy

• process customer orders within ? hours

• maintain % delivery damage level

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Distribution KPI’s (3)

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How Would You Do?

What could you think of that would make your distribution network a
success?

Tight controls?

Talented employees?

Best location?

Efficiency?

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Q&A

Mass D.O.T. Exams, 2017.

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