1. Elements in Channel Design Distribution Channel Strategy Issues from “Tailored Logistics” E266-2000:2 L. P. Bucklin

2. Key Insights and Principle 6 End user volume is a key determinant of the potential for a independent channel design Every firm's end users have heterogeneous needs for logistic service –A single logistic channel for all customers will provide an average service and average price for all –Designing a separate channel for each EU optimizes VA –Low volume channel segments will cause diseconomies that raise costs and offset benefits from segmentation

3. Logistic Channel Process Identify EU key logistical and product needs Cluster EU logistical needs across products to identify potential for pooling products to form product mix- logistical needs segments Design ideal prototype supply chains for each segment Balance diseconomies of scale cost to serve a segment against service losses from further channel pooling of full or partial channels Consider sharing systems, or partnering, with other firms or outsourcing all or part of the supply chain

4. Distinguish Inventory Types Speculative Inventory (Risk Holding Point) –Inventories comprised of fungible products on first come/first basis –Efficient when customer identities or future purchase requirements cannot be accurately forecast Transit Point (Ship-Through-Inventory Point) –Inventories comprised of products marked for specific destinations /customers –Facilitate rapid ingress, egress with little time at the inventory point

5. Independent vs. Pooled Channels Supplier Speculative Inventory Transit Inventory End User Pre-production orders Off-the shelf orders

6. Characteristic Affecting Channel Pooling Product unit value—a printing press or a hex nut EU order volume, individual order or shipment size Degree of order coordination and accuracy of delivery timing, product preparation Merchandising complexities, order taking requirements Order response times Delivery characteristics; fragility, assembly, kits Product handling characteristics Substitutability of different product types of EU needs

7. Logistic Channel Options System Orders--coordinated staging with warehouse with speculative inventories\build assortments Inventory Replenishment--stocking points near or at largest customers Rapid Response--shipment of individual orders, high speed transport system Nuts & Bolts--Sold in bulk from warehouse Slow Movers--Shift orders to suppliers, direct Bulk Cable--Specialized truckers, regional warehouses