Professional Documents
Culture Documents
Distribution
Strategies
McGraw-Hill/Irwin
7.1 Introduction
Advantages:
Disadvantages:
Risk-pooling effects are negated
Manufacturer and distributor transportation costs increase
lead
Strategies:
Traditional
warehousing strategy
distribution
strategy
for inventory
no inventory is held at these transfer points.
Centralized
may
Traditional Warehousing
Inventory
vs Decentralized Management
Central vs Local Facilities
7-5
Centralized vs Decentralized
Management
Decentralized system
Each
Centralized system
decisions
7-6
Centralized facilities
Employ both fewer warehouses and distribution centers
Facilities are located further from customers.
Other factors:
Safety stock. Lower safety stock levels with centralized
facilities
Overhead. Lower total overhead cost with centralized facilities
Economies of scale. Greater economies of scale with
centralized facilities
Lead time. Lead time to market reduced with local facilities
Service.
Utilization
Transportation costs.
Costs
local
Costs from warehouses to retailers lesser with local
7-7
A Hybrid Decision
Some
7-8
Cross-Docking
Popularized
by Wal-Mart
Warehouses function as inventory coordination
points rather than as inventory storage points.
Goods arriving at warehouses from the
manufacturer:
are
service level
higher sales
Dealers
To
Dealers
Implications:
End
Other Factors
Will
Total
What
Dealers
Potentially
Levels
Small
7-12
Customer Search
If
to another dealer
Helps the manufacturer sell more products
Which
7-13
own demand
demand of customers who initially approach other dealers
with limited inventory.
7-14
7-15
manufacturer
search level
7-16
brand loyalty
customers
Information
7-17
Transshipment
Shipment
7-18
strategies
7-19
Factors:
Customer
7-20
Direct
shipment
Cross-docking
Risk pooling
Take advantage
Transportation
costs
Holding costs
Allocation
Inventory at
warehouses
Reduced inbound
costs
No warehouse
cost
Reduced inbound
costs
No holding costs
Delayed
Delayed
7-21
Summary
Critical
shipping
warehouses or distribution centers
Related
decisions
Should
DCs?
Should inventory be held at these locations, or
transshipped?
As a retailer, does it make sense to participate in a
centralized inventory pooling system?
What about a transshipment system?
7-22