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Distribution Networks in a
Supply Chain
© 2007 Pearson Education
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
Response Time
© 2007 Pearson Education
The Cost-Response Time
Frontier
Hi Local FG
Mix
Regional FG
Local WIP
Cost Central FG
Central WIP
Number of facilities
Number of facilities
Number of facilities
Facilities
Inventory
Transportation
Number of Facilities
© 2007 Pearson Education
Variation in Logistics Costs and Response
Time with Number of Facilities (Fig. 4.5)
Response Time
Number of Facilities
© 2007 Pearson Education
Design Options for a
Distribution Network
Manufacturer Storage with Direct Shipping
Manufacturer Storage with Direct Shipping
and In-Transit 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
Retailer
Customers
Product Flow
Information Flow
Customers
Product Flow
Information Flow
Warehouse Storage by
Distributor/Retailer
Customers
Product Flow
Information Flow
© 2007 Pearson Education
Performance Characteristics of
Distributor Storage with Carrier
Cost Factor Performance
Inventory Higher than manufacturer. Good for
faster moving items. Demand
Aggregation at lower level compared to
manufacturer
Transportation Lower Cost
Distributor/Retailer
Warehouse
Customers
Product Flow
Information Flow
© 2007 Pearson Education
Performance Characteristics of
Distributor Storage with Last-Mile
Delivery
Cost Factor Performance
Inventory Higher than Distributor storage with
carrier delivery
Pickup Sites
Customers
Customer Flow
Product Flow
© 2007 Pearson Education Information Flow
Performance Characteristics with
Customer Pickup Sites
Cost Factor Performance
Inventory Can match any other option depending
on location
Transportation Lower than Package carriers
Product Variety
4 1 1 2 3 1
Product Availability 2 3
4 1 1 1
Customer Experience
5 4 3 2 1 5
Order Visibility 1 5 4 3 2 6
Returnability 1 5 5 4 3 2
Inventory 4 1 1 2 3 1
Transportation 1 4 3 2 5 1