1. GEOP 4355 Distribution Networks
Outline
What is distribution?
Why is distribution important?
Distribution channels/networks
Relationship between metrics
Facilities, locations and response time
Operational issues in distribution
Sources/references used in the preparation of this presentation are listed in the Introduction presentation

2. What is distribution?
Distribution: the process of moving a product from its a source to its customers.
Sources include for example manufacturing plants and “central warehouses”.
A distribution channel is the network of individuals and organizations involved in the process of moving a product or service from the producer to the end user.
Element of the marketing mix, the four P’s of price,  product, promotion, and place

3. What is distribution? Includes these processes/decisions
Channel selection (retail, wholesale, brick and mortar, e-retail)
Order processing and filling
Customer service
Inventory locations and target levels
Packaging
Transportation
Reverse logistic systems
Its tightly linked with
Demand Management/ Sales / Forecast

4. Why is distribution important?
Distribution processes are in direct contact with the end customer
Distribution is expensive as economies of scale are lost the closer we move to the customer
Distribution directly affects cost and the customer experience and therefore drives profitability
Choice of distribution network can achieve supply chain objectives (corporate strategy) from low cost to high responsiveness

5. Distribution channels/networks
D. Channel: the system (network) that delivers finished product(s) to the customer (s).
Components: IT, storage, transportation
Specific to one product type or a customer type
Factory to retail stores or Factory direct to customer are examples.
D. Network: same concept as a distribution channel, but a network is the combination of many channels (a network of many networks)

6. Distribution channels/networks
Some of the elements in distribution network (channels)
Where is inventory (of FG) located?
Where to locate issues include labor skills, availability and costs, tariffs and tax incentives, logistic infrastructure, connectivity to other players.
Will there be DC’s or ship direct to customers?
Consolidated shipping or individual shipping?
Are there retail stores?
Customer pickup?

7. Distribution channels/networks
Cross-docking operations
Materials received may be “broken” into smaller shipments and sent immediately to other points in the internal network (no storage at first entry point)
Customers =
(the firm’s other plants, warehouses)

8. Distribution channels/networks
Trends in distribution networks
Increase of web-based, direct to customer distribution
Continued focus on exporting and international markets
Multiple distribution networks to deal with the multiple regions of the world
Outsourcing is common in many components of the distribution network
Transportation
Warehousing and order processing tasks

9. Distribution channels/networks
Direct to Customers
The organization ships to customers from their production facilities
No intermediary storage/warehouse (factory could have inventory of FGs)
Applies to Make to Order systems.
Customers could be people, retail stores, the DCs of retail chains…

10. Distribution channels/networks
Distribution Storage with Last Mile
The organization ships to customers from their DCs
Customers could be people, retail stores, the DCs of retail chains.

11. Distribution Storage with Retailers
Distribution channels/networks
Distribution Storage with Retailers
The organization has its own retail shops
Examples: Nike, Apple, Paint companies, Sony
The Last Mile

12. Distribution channels/networks
Their performance is evaluated along two dimensions:
Customer service (speed of delivery, variety of products available)
Cost (inventory, transportation, facilities)
Distribution channel/network design options must therefore be compared according to their impact on customer service and the cost to provide this level of service.

13. Relationships between metrics
Response
Time
slow
few
Number of facilities

14. Relationships between metrics
Inventory
Costs
low
few
Number of facilities

15. Relationships between metrics
Lost economies of scale
and lower utilizations
Transportation
Costs
low
few
Number of facilities

16. Relationships between metrics
lower utilizations
Facility
Costs
low
few
Number of facilities

17. Relationships between metrics
Total costs
facilities
Total
Costs
inventory
transportation
low
few
Number of facilities

18. Relationships between metrics
Response time
Total costs
slow
low
few
Number of facilities

19. Relationships between metrics
Response time
Total costs
slow
low
few
Number of facilities

20. Facilities, locations, response time
7 day response

21. Facilities, locations, response time
5 day response

22. Facilities, locations, response time
3 day response

23. Facilities, locations, response time
next day response

24. Operational decisions in distribution
Omni-channel logistic issues
how/where to take orders: web, phone, store,…
where to process each order: from which DC, or from which store.
how to “deliver” the order to the customer: pick up at the store, delivery.
how and where to take back returns: at the store, by mail.
Complexity is in the mixing of channels…

25. Operational decisions in distribution
Inventory levels (including SS) per SKU at each inventontory point (DC, retail store)
Should each SKU be available at each DC or store?
Tradeoff of inventory costs versus transportation costs: pooling effect
Transportation modes/ quantities per flow.