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1 Distribution Centers. 2 Outline the call for distribution centers warehouses versus distribution centers types of distribution centers examples of distribution.

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Presentation on theme: "1 Distribution Centers. 2 Outline the call for distribution centers warehouses versus distribution centers types of distribution centers examples of distribution."— Presentation transcript:

1 1 Distribution Centers

2 2 Outline the call for distribution centers warehouses versus distribution centers types of distribution centers examples of distribution centers Foxconn, Wal-mart, Shiseido

3 3 Old Days: Point-to-point Transportation Suppliers 1 Retailers I1J ……………… ……………… … 11 1J … I1 IJ …

4 4 Recent Days: D istribution Centre DC Suppliers 1 Retailers I 1 J ……………… ……………… … 11 1J … I1 IJ shorter transportation distance, more complex co-ordination

5 5 Amazon Fulfillment by Amazon Amazon serving as the fulfilling center for retailers Amazon Warehouse's processing

6 6 6 Differences Between a Warehouse & a Distribution Center * * The material is from the book A Stitch in Time: Lean Retailing and the Transformation of Manufacturing – Lessons from the Apparel and Textile Industries.

7 7 Differences Between a Warehouse & a Distribution Center WarehouseDC purpose cost equipment personnel throughput time in store …

8 8 Differences Between a Warehouse & a Distribution Center objective warehouse: primarily for storage distribution center: primarily for consolidating goods from suppliers (vendors, shippers) to retailers (buyers, consignees) throughput: in general DC larger than warehouse time in site: in general DC shorter than warehouse operations in a distribution center: 60% to 70% cross docked and 30% to 40% reopened, repackaged more value-added services to lessen operations in retailers minimum quality and quantity check on retailers practically shelf ready goods for retailers

9 9 Differences Between a Warehouse & a Distribution Center equipment more automated equipment in DC: automatic identification, storage, retrieval, distributing, sorting, unitizing systems cost (in 1997) a warehouse: US$8 to US$10 million a distribution center: US$60 to 70 million to convert a warehouse to a DC: US$10 to 25 million

10 10 Differences Between a Warehouse & a Distribution Center personnel a warehouse: more, especially male, on traditional operations such as loading, unloading, receiving and inspection, putaway, picking and packing, moving goods around a distribution center less traditional workers by the help of electronics, electrical, and mechanical equipment more personnel on information technology and equipment maintenance

11 11 The Call for Distribution Centers * * Material is from the book A Stitch in Time: Lean Retailing and the Transformation of Manufacturing – Lessons from the Apparel and Textile Industries.

12 12 Largest U.S. Retail Chains on the 2012 Global Powers of Retailing List Largest U.S. Retail Chains on the 2012 Global Powers of Retailing List Wal-Mart (1 st. US$ B (2012)) The Kroger Company (5 th ; US$ B (2012)) Costco (7 th ; US$ 99.1 B (2012)) Home Depot (8 th ; US$ B (2012)) Walgreens (9 th ; US$ B (2012); drug store) Target (11 th ; US$ B; discount department stores) CVS Caremark (13 th ; US$ B (2011); drug stores) Best Buy (19 th ; US$ B (2012); consumer electronics) Lowe's (20 th ; US$ 50.2 B (2012); home improvement & appliances) Sears Holdings (22 nd ; US$ B (2012); department stores, discount stores) Safeway ( 24 th ; US$ B (2011) ; supermarkets) Amazon.com (28 th ; US$ B (2012) [ ) SuperValu (31 st; US$ $36.1 B (2012); supermarket, grocery) Rite Aid (33th; US$ 25.2 B (2011); drug store) Publix (35 th ; US$ B (2011); …) Macy's (36 th; US$ B (FY2009); department store) ---

13 13 Changes retailers of mid 20 th century: Macys, Sears, …MacysSears as late as 1991, Sears: 1 st retailer in the world retailers of the 21 st century: Wal-mart,.. reasons for the change?

14 14 Societal Development first transcontinental railway of US in 1869 early days late 19 th to early 20 th century railway system for long distance transportation in large volume telegraph (1844) and later telephone (1876) for quick information flow for long distance development in material technology and electro-mechanical equipment

15 15 Societal Development improvement in in production and transportation (though still slow in todays standard) development of cities shopping of the era: department stores, for middle to upper class a venue with large variety of products on one hand and the elegant European boutiques feel on the other hand successful formula: low cost by economies of scale, marketing to attract shoppers, pricing at the right amount examples: Macys, Sears, etc.MacysSears

16 16 Societal Development effect on retailing: apparels as an example traditional apparel retailing before mid 20 th century relative long range forecast large volume, low frequency successful formula: merchandising - right product mix to provide affordable, desirable goods formula no longer work after mid 20 th century

17 17 Recent News for Department Stores Macys filed for Bankruptcy in 1992, but …… Web headings for Sears 2009 Aug 4 Why Sears will (and should) End up in Bankruptcy? 2011 Dec 29: Is Sears Headed for Bankruptcy? 2012 Jan 12: Tears for Sears: American Icon in Trouble. Why?

18 18 Societal Development starting mid 20 th century quicker in transportation development of the automobile industry and the highway systems possibility of moving medium amount of goods for a couple of hundred miles by trucks containerization communization of air transport computer for information flow and processing moving of residents from downtown to suburban areas

19 19 Societal Development shopping of the era: discount stores in suburban areas daily necessities for suburban residents successful formula: economies of scale, convenience, low cost by simple decoration, efficient logistics, and advanced information technology

20 20 Problems for Traditional Apparel Retailing Since mid 20 th Century product proliferation : hard to predict actual demand accurately product proliferation change of customer behavior leading to many styles over capacity, e.g., increasing in retail space per capita 5.3ft 2 (1964) 9ft 2 (1974) 16ft 2 (1988) 19ft 2 (1996) (Mexico 0.3ft 2 ) reduction in consumer expenditure $1710 (1992) $1698 (1994); 14.3 (1967) 28.7 garments (1995) expensive costs in markdowns, stock-outs, and inventory holding estimate in 1985: $14 billion on markdowns, $6 billion on loss of sales, and $5 billion on inventory holding

21 21 The Call for Lean Retailing traditional retailing model being out of date the needs for quick response retailing universal numbering system of goods automatic identification standards across firms information flow and processing modern distribution centers

22 22 Different Types of Distribution Centers * * The material is from the book.

23 23 Different Types of Distribution Centers classified by different methods by temperature: by operator: by goods: by functionality: ambient, refrigerated, freezing manufacturers, retailers, perishables, import traders, wholesalers, 3-party logistics service providers, truckers, couriers, sea freight service providers, air freight service providers food, daily necessarity, medicine, cosmetics, electrical appliances, 3C products, books, apparels, shoes, auto parts regional, front, cross docking

24 24 Different Types of Distribution Centers operations and equipment changed with nature of DC case in, item out pallet in, case out pallet in, pallet out % of order picking # of SKU Discount StoreSupermarket Convenience Store ---30%70% 60% 30% 40%10%--- 10,0006,0003,000 for in DC

25 25 Different Types of Distribution Centers operations & equipment changed with nature of DC examples DC for food and vegetables temperature control: air conditioning 15 C to 18 C; refrigerated 0 C to 5 C; freezer -25 C cross-docking mode for fresh food special design trucks DC of manufacturers smaller number of SKU in larger quantity

26 26 Different Types of Distribution Centers operations & equipment changed with nature of DC examples DC of 3-party logistics service providers consolidation of multiple types of goods more building up and breaking down services value added services ….

27 27 The e-Hub of Foxconn * * Part of the material is from the book.

28 28 The Distribution Center of Foxconn for Dell FoxconnDell FoxconnDell Foxconn one of the best 3C-product manufacturers services including design, development, and after- sales services in addition to manufacturing and assembling performance in 2010 revenue: US$116 billion profit: US$2.74 billion profit margin: 2.36%

29 29 The Distribution Center of Foxconn for Dell FoxconnDell FoxconnDell Dell: one of the best among direct sales and e- business designing and selling computers and their peripherals providing before- and after-sales services for her products performance in fiscal year 2011 revenue US$61.5 billion net profit: US$3.1 billion (number changed with the accounting system) profit margin: 5%

30 30 The Distribution Center of Foxconn for Dell Foxconn the fast growing Dell (50% annually) required flexibility from its suppliers demand: a target, but possible to adjust upwards components: possible to change with the ever expanding market capacity of supplier not taken up fully by Dell and possible to expand quickly vendor managed inventory suppliers responsible for inventory (component value reduced by 0.5% to 1% per week) only parts and components sent to factories for assembly being paid by Dell

31 31 The Distribution Center of Foxconn for Dell Foxconn e-Hub of Foxconn a distribution center with information processing capability beside the manufacturing and assembly plants full information on production schedule and statue inventory zero for manufacturing and assembly plants less than 2 days for e-Hub accurate forecasting of demands by e-Hub 100 containers of parts and components per week

32 32 Distribution Centers of WalMart * * The material is from the book Sam Walton: Made in America.

33 33 Distribution Centers of WalMart by distribution centers, total area 18,000,000 sq ft 4 distribution plans running by WalMarts fleet all stores within one day drive from a distribution center placing orders in computer 80K SKU, providing 86% goods (competitors: 50% to 65%) lead time 2 days (competitors: 5 days) transportation cost 3 % (competitors: 4.5% to 5%)

34 34 Distribution Centers of WalMart a typical distribution center 1.1 million sq ft (23 foot fields; 150 acres 60.7 hect.) 200,000 boxes every day by 600 to 800 persons docks: 135 incoming and 30 outgoing 24 hours per day technologically advanced computerized system real-time status and location information for all items 8.5 miles lazer directed conveyor belts

35 35 DistributionDistribution Centers of WalMart Centers DistributionCenters

36 36 A Distribution Center of Shiseido

37 37 ShiShiseido do Shido the oldest and the 4 th largest cosmetics company in the world 40,563 employees worldwide at 2011

38 38 Products of Shiseido – Old Days toothpaste, vitamin tablet, ice cream, skin care products, face powders, hair tonic, cold cream, fragrances, lotion

39 39 Products of Shiseido - Nowadays skin care make-up fragrance body care sun care hair care men

40 40 Statistics

41 41 The Challenge faced by a Distribution Center serve several hundred franchised stores many products, of small sizes minimal inventory in stores each store multiple orders per day multiple deliveries per day

42 42 The Challenge Faced by a Distribution Center economies of scale in delivery full truckloads by consolidating goods for stores challenges: to store, pick, sort the small items

43 43 Schematic Diagram of the Distribution Center

44 44 In the Distribution Center boxes to hold small pieces for transportation automatic storage, transportation, and sorting

45 45 In the Distribution Center automatic storage, transportation, and sorting

46 46 In the Distribution Center automatic storage, transportation, and sorting computerized control

47 47 A Distribution Center of Amazon


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