Chapter7

DistributionStrategies

7.1IntroductionFocusonthedistributionfunction.Variouspossibledistributionstrategies,andtheopportunitiesandchallengesassociatedwiththesestrategies.Twofundamentaldistributionstrategies:ItemscanbedirectlyshippedfromthesupplierormanufacturertotheretailstoresorendcustomerUseintermediateinventorystoragepoints(typicallywarehousesand/ordistributioncenters).IssueswithwarehousesManufacturingstrategy(make-to-stockvs.make-to-order)NumberofwarehousesInventorypolicyInventoryturnoverratioInternalwarehousesvs.outsidedistributorOwnedbyasinglefirmorbyavarietyoffirms

7.2DirectShipmentDistributionStrategiesAdvantages:TheretaileravoidstheexpensesofoperatingadistributioncenterLeadtimesarereduced.Disadvantages:Risk-poolingeffectsarenegatedManufactureranddistributortransportationcostsincreaseCommonlyusedscenarios:RetailstorerequiresfullyloadedtrucksOftenmandatedbypowerfulretailersLeadtimeiscritical.ManufacturermaybereluctantbutmayhavenochoicePrevalentinthegroceryindustryleadtimesarecriticalbecauseofperishablegoods.

7.3.IntermediateInventoryStoragePointStrategiesVarietyofcharacteristicsdistinguishdifferentstrategies.Lengthoftimeinventoryisstoredatwarehousesanddistributioncenters.Strategies:Traditionalwarehousingstrategydistributioncentersandwarehousesholdstockinventoryprovidetheirdownstreamcustomerswithinventoryasneeded.Cross-dockingstrategywarehousesanddistributioncentersserveastransferpointsforinventorynoinventoryisheldatthesetransferpoints.Centralizedpoolingandtransshipmentstrategiesmaybeusefulwhenthereisalargevarietyofdifferentproducts

TraditionalWarehousingInventorymanagementandriskpoolingkeyfactorsOtherfactorsalsoplayasignificantroleCentralizedvsDecentralizedManagementCentralvsLocalFacilities

CentralizedvsDecentralizedMa