Response Time Product Variety Product Availability Customer Experience Order Visibility
1 4
4 1
4 1
3 2 2 2 3
2 3 3 1 2
4 1
4
5 1
1
4 5
1
3 4
1
5 6
Returnability
Inventory Transportation
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4-3
Factors Influencing Distribution Network Design
Distribution network performance evaluated along two dimensions at the highest level:
Facility Costs
Number of facilities
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Total Costs Related to Number of Facilities
Total Costs
Total Costs
Facilities Inventory Transportation
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)
Factories
Distributor/Retailer Warehouse
Customers
Product Flow
Information Flow
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Manufacturer or Distributor Storage with Customer Pickup (Fig. 4.10)
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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Manufacturer Storage with Direct Shipping (Fig. 4.6)
Manufacturer
Retailer
Customers
Product Flow
Information Flow
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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
Fe by Distributor/Retailer
Customers
Product Flow Information Flow
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Distributor Storage with Last Mile Delivery (Fig. 4.9)
– 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
Supply chain costs affected by network structure:
– – – – Inventories Transportation Facilities and handling Information
4-5
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Service and Number of Facilities (Fig. 4.1)
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
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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
1
4 1
5
1 4
5
1 3
4
2 2
3
3 5
2
1 1
Facility & Handling Information
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6
1
1
4
2
4
3
3
4
2
5
5
4-19
Linking Product Characteristics and Customer Preferences to Network Design
High demand product
+2 +1
-2 -1
-1 0
0 +1
+1 0
-1 0
Medium demand product
Low demand product
-1
-2 +1
+1
+2 -1
0
+1 -1
+1
0 +2
-1
-2 +1
+1
+1 0
Very low demand product
Many product sources
Factories
Retailer
Cross Dock DC
Pickup Sites
Customers
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Customer Flow Product Flow Information Flow
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Comparative Performance of Delivery Network Designs (Table 4.7)
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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
Retail Storage with Customer Pickup Manufacturer Storage with Direct Shipping Manufacturer Storage with InTransit Merge Distributor Storage with Package Carrier Delivery Distributor storage with last mile delivery Manufacturer storage with pickup