Subject Code: BMDSTRIL

Subject Title: DISTRIBUTION MANAGEMENT

Subject Description: The course covers the principles and functions of distribution management, the roles
marketing channels and physical distribution in the marketing system, the cost implications of the management
decisions involving distribution. Topics include the discussion of channel member roles and relationships,
legal issues related to distribution, and techniques for optimizing the effectiveness of distribution channels.
The course aims to crystallize student’s understanding of distribution cost analysis through their involvement
in exercises and actual projects in the area of distribution management.
No. of Units: 3
Class Schedule: T/F, 9-11am / 11am-1pm

DISCLAIMER: The information content provided in this course material is designed to provide helpful
information on the subjects discussed. Some information are compiled from different materials and
summarized from different books. Some information are based from contributors' perspective and
understanding. References are provided for informational purposes only and do not constitute endorsement of
websites or other sources. Readers should be aware that the websites/electronic references listed in this course
material may change. Hence, the contributors do not claim any information presented in the materials and do
not reflect their own work.

Course Learning Outcomes:

At the end of this course, the student will be able to:
1. To apply core concepts and techniques important to analyzing business logistics problems.
2. To design a comprehensive Trip Planning procedure to ensure optimum customer service satisfaction
through on time distribution.
3. Develop policies for managing the channels on product, pricing, promotions, optimal stock policies,
including safety stocks computation to come up with a smooth distribution operation.
4. Develop a system for monitoring and evaluating the performance of each channel member.

About the Instructor:

Eduard S. Cruz
College Instructor- Department of Business Administration

Contact Information:
Mobile number: 09209595011
Email: [email protected]/ [email protected]
Social Media: Facebook/Messenger: Eduard Santos Cruz

SM Baliwag Complex, Dona Remedios Trinidad Highway, Brgy. Pagala, Baliwag, Bulacan
(+63) 927-533-0342 – (+63) 923-949-5265 [email protected]
Topic: Week 2

INTRODUCTION TO LOGISTICS AND DISTRIBUTION

• Customer service and logistics
• Integrated logistics and the supply chain

MODULE 2: INTRODUCTION TO LOGISTICS AND DISTRIBUTION

I. Pre-test / Activity:
One-Sentence Summary
On your class notebook, write a one-sentence summary (bullet points) of your key takeaways
during the discussion of distribution management in today’s modern setting.
II. Learning Outcomes
1. To distinguish integrated logistics and the supply chain.
2. To evaluate how logistics improves customer service.

III. Content:

According to Christopher (2015), logistics is essentially a planning orientation and framework that
seeks to create a single plan for the flow of products and information through a business. Supply
chain builds upon this framework and aims to achieve linkage and coordination between the
processes of other entities in the pipeline, such as suppliers and customers, and the organization
itself. Chartered Institute of Procurement and Supply (n.d.) defined global supply chain as a
dynamic worldwide network that involves purchasing of goods or services from overseas. It includes
people, information, processes, and resources involved in the production, handling, and distribution
of materials and finished products or providing a service to the customer.

Supply chain management, as defined by the Council of Supply Chain Management Professionals
(CSCMP), “encompasses the planning and management of all activities involved in sourcing,
procurement, conversion, and logistics management. It also includes the crucial components of
coordination and collaboration with channel partners such as suppliers, intermediaries, third-party
service providers, and customers.” In essence, supply chain management integrates supply and
demand management within and across companies and typically includes logistics management
activities and manufacturing operations to drive coordination of processes and activities with and
across marketing, sales, product design, finance, and information technology (Council of Supply
Chain Management Professionals, 2014). Logistics management is an essential part of supply
chain management, with functions focusing on planning, controlling, storing, and transporting of
goods and services from the point of origin to the end consumers.

Myerson (2015) summarized the following functions of logistics and supply chain:
• Procurement. This involves the acquisition of goods or services from an outside external
source.
• Demand forecasting. This involves estimating the quantity of a product or service that

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 customers will purchase.
• Customer service. This involves maintaining long-term and good relationship with clients.
• Order management. This involves tasks associated with fulfilling an order for goods or
services placed by a customer.
• Inventory. This involves planning and managing finished goods and raw materials.
• Transportation. This involves the different modes of conveying finished goods and raw
materials.
• Warehousing. This involves a public or private building used to store finished goods and
raw materials.
• Materials handling and packaging. This involves the movement, protection, storage, and
control of materials and products using manual, semi-automated, and automated
equipment.

Supply Chain Operations Reference (SCOR) is a model for strategic decision-making in supply
chain management. The SCOR model is organized around five (5) major management processes as
follows:
1. Plan. This involves the alignment of resources to demand.
2. Make. This involves the conversion of value-adding activities within a supply chain
operation.
3. Source. This involves buying or acquiring materials and services.
4. Deliver. This involves customer interaction, from receiving orders to final delivery and
installation.
5. Return. This involves processes which require backward flow of goods and services from
end consumers to the point of origin or the supply chain.

Myerson (2015) stated that the value chain model shows the value-creating activities of an
organization. In a value chain, each of a firm’s primary and support activity adds incremental value
to the final product or service by transforming inputs to outputs. Below is a sample illustration of a
value chain:

Figure 1. Value Chain Model

Source: Logistics and Supply Chain (4th ed.),
2011, p. 10

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(+63) 927-533-0342 – (+63) 923-949-5265 [email protected]
Myerson (2015) highlighted the primary activities in the value chain as follows:
1. Inbound logistics. This involves receiving, warehousing, and inventory control of input
materials.
2. Operations. This involves transforming inputs into the final product or service to create
value.
3. Outbound logistics. This involves activities that deliver the final product to the customer,
including warehousing and order fulfillment.
4. Sales and marketing. This involves activities related to buyers purchasing the product,
including advertising, pricing, and distribution channel selection.
5. Services. These are initiatives that maintain and improve a product’s value, including
customer support, repair, and warranty service.

Ahmed (2014) summarized the support or secondary activities of the value chain as follows:
1. Firm infrastructure. This allows managers to monitor the business environment. This
consists of different activities or departments such as finance, planning, public affairs,
government relations, quality assurance, legal, and quality management among others.
2. Human resource management. This involves skills development and training of
employees. This includes all those activities associated with hiring, training, development,
and compensation of employees.
3. Technology development. This involves activities or tools which provide speed, accuracy,
and quality in the processes of a firm. This includes research and development, process
automation, and all other procedures and technical knowledge used to support the value
chain activities.
4. Procurement. This refers to the acquisition of raw materials and other inputs or resources,
which enables the company to create value-adding products or services.

Myerson (2015) stated that organizations should establish competitive priorities to satisfy internal
and external customers. They should then link the selected competitive priorities to their supply
chain and logistics processes.

Krajewski, Malhotra, and Ritzman (2013) suggested breaking an organization’s competitive

priorities into the following strategy groups:
• Cost strategy. It focuses on delivering a product or service to the customer at the lowest
possible cost without sacrificing quality. Walmart has been the low-cost leader in retail by
operating an efficient supply chain.
• Time strategy. It focuses on speed of delivery, response time, and product development
time. Dell has been a prime example of a manufacturer that has excelled at response time
by assembling, testing, and shipping computers in as little as few days. FedEx is known for
fast, on- time deliveries of small packages.
• Quality strategy. It focuses on consistent, high-quality goods or services through a reliable
and safe supply chain. Samsung’s refrigerator comes with a 10-year warranty instead of the
usual one (1) or two (2) years because the company is certain of their product’s quality and
performance (Samsung, 2018).
• Flexibility strategy. It focuses on various forms such as volume, variety, and
customization of products and services. Many of today’s e-commerce businesses, such as
Amazon, offer a great deal of flexibility in many of these categories.

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According to Ede and Veen (2018), Supply Chain Management 1.0 (SCM 1.0) involves wide
optimization of the flow of goods and/or services in the supply chain. Supply Chain Management
2.0 (SCM 2.0), on the other hand, transcends the idea of end-to-end optimization of the flow of
products and/or services using modern digital technology, integrated processes, customer focus,
continuous improvement, and servant leadership among others. Customer focus is an organizational
orientation inclined to serve clients’ needs; continuous improvement involves an ongoing effort to
streamline products, services, or processes; and servant leadership consists of a philosophy of
enriching and empowering individuals to build stronger bond within the organization.

Bhatti and Hajibashi (2017) explained the characteristics of Supply Chain 2.0 as follows:
• Rapid. It pertains to enhanced responsiveness and proactive prevention in the supply chain.
This involves demand sensing, automated key performance indicators (KPI) reporting,
real-time planning and execution, dynamic inventory replenishment, and robotics. Demand
sensing is a method used for accurate forecast of demand.
• Scalable. It pertains to maximum efficiency, organizational flexibility, and highly-evolved
operating models in the supply chain. This involves reconfigurable supply networks, online
or digital statement of accounts (SOA), virtual tools, and a digital products supply model.
Digital products include intangible goods such as downloadable music, electronic books,
and other related forms. In essence, digital products supply model takes the form of supply
chain principles and aims to combat resource scarcity by immortalizing goods. In the past,
books were only available in printed forms at limited copies and can only be purchased
over the counters, for instance. Through the digital products supply model, books can now
be purchased online by countless number of customers, at their own convenience.
• Intelligent. It pertains to actionable insights, automated execution, and accelerated
innovation in the supply chain. This involves predictive maintenance, predictive
forecasting, integrated optimization, and supply and price analytics among others.
Analytics is a tool used to measure or predict market share, revenue, profit margin at
specific supply, and price points.
• Connected. It pertains to real-time visibility, seamless collaboration, and personalized
experiences in the supply chain. This involves connected infrastructure, transportation
control tower, social product development, track and trace, and external data exploitation.
A transportation control tower serves as a central hub that uses technology, organization,
and processes to capture and use transportation data to provide efficient movement of
goods and services in the supply chain (Ortec, 2019). Social product development involves
mass collaboration and open innovation using the internet to formulate a new product idea.
Track and trace is a logistics system used to determine the location of goods or services
from the point of origin to its ultimate destination. Lastly, external data exploitation
requires the use of web servers to gain access to external data such as customer information
and the like.

Ares, Esplugues, Pelaez, and Tjahjono (2017) stated that the term “Industry 4.0” was coined to
mark a new industrial revolution, a new paradigm enabled by the introduction of the modernized
and digitalized production and manufacturing environment. The vision of Industry 4.0 emphasizes
the global networks of machines in a smart factory setting capable of autonomously exchanging
information and controlling each other.

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 Ares, Esplugues, Pelaez, and Tjahjono (2017) summarized the main features of Industry 4.0 as
follows:
• Vertical networking of smart production systems. This involves reconfigurable and
flexible factories that react rapidly to changes in customer demand. Manufacturing
processes in a smart factory enable the concept of mass customization. Resources and
products are networked, and materials and parts can be located anywhere and at any time.
All processing stages in the production process are logged, with discrepancies registered
automatically.
• Horizontal integration of global value chain networks. This requires strategies,
networks, and business models, which subsequently provides high levels of flexibility,
enabling the company to respond faster. The transparency within the value chain allows
the manufacturer to identify changes in customer requirements and to reflect them in all
of the production steps, from development to distribution.
• Life engineering support across the entire value chain. This enables the creation of new
products and production systems, utilizing a large amount of information.
• Acceleration through exponential technologies. This involves the implementation of
innovative technologies to reduce costs, increase flexibility, and customize products.
Industry 4.0 includes automated systems such as Artificial Intelligence (AI), robots, drones,
nanotechnologies, and a variety of inputs that enable customization, flexibility, and rapid
manufacturing.

IV. Activity / V. Evaluation / Assessment

LAZADA
Lazada is one of the biggest online shopping and selling platforms throughout Southeast Asian
countries, Indonesia, Malaysia, Philippines, Singapore, Thailand, and Vietnam. The company offers
the widest range of products in categories from beauty, fashion and consumer electronics to
household goods, toys, sports equipment, and groceries. According to its website, Lazada is focused
on delivering an excellent customer experience by offering comprehensive customer care and
hassle-free returns through its own first and last-mile delivery arm supported by approximately 100
logistics partners. Lazada Group is owned by Alibaba Group Holding Limited.

According to the company's CEO for Logistics Juan Pavez, the “DNA” of Lazada is its logistics and
fulfillment center. He said in an interview with ABS-CBN News that “bringing the best customer
experience would be difficult without logistics, especially in Southeast Asia.” Lazada's 54,000-
sqm warehouse in Cabuyao, Laguna is the platform’s biggest single-fulfillment center in Southeast
Asia with a total storage capacity of five (5) million items. Conveyor belts in the warehouse
streamline the process for faster picking, transfer, and delivery of goods. Sorting of items, to some
extent, is also automated. With over 30,000 sellers in the Philippines, Lazada had to increase its
workforce in peak demands to cater the orders in its platform.

In August 2018, the company established LazStar Academy, in collaboration with Alibaba
Business School and Taobao University. This program aims to build a network of certified expert
trainers among Lazada sellers, who will train and develop the skills of other sellers in the platform.
During the same year, the company opened LazMall which promises the highest-quality shopping

SM Baliwag Complex, Dona Remedios Trinidad Highway, Brgy. Pagala, Baliwag, Bulacan
(+63) 927-533-0342 – (+63) 923-949-5265 [email protected]
 experience, with 100% authentic products, 15-day hassle-free return policy, and next-day delivery
for shoppers. LazMall houses international, local and top-rated online brands as well as authorized
brand distributors, such as Estee Lauder, P&G, Apple, Unilever, Samsung, L'Oreal, and more. The
company truly revolutionize the meaning of comfort and convenience through its massive logistics
capacity and ever-expanding products and services.

Answer the following questions: (3 items x 10 points)

1. Recognize and define the functions of logistics and supply chain present in the case study.
2. Identify and describe the strategy groups present in Lazada’s logistics and supply chain.
3. Propose ways on how Lazada will be able to maintain its leader position in logistics and
supply chain using the concept of Supply Chain 2.0 and Industry 4.0.

Rubric for grading:

CRITERIA PERFORMANCE INDICATORS POINTS
Content Provided pieces of evidence, supporting
8
details, and factual scenarios
Grammar Used correct grammar, punctuation, spelling,
1
and capitalization
Organization of ideas Expressed the points in clear and logical
arrangement of ideas in the paragraph 1
TOTAL 10

VI. Other Reading Materials

Ahmed, G. (2014). Porter’s value chain analysis primary & secondary activity. Retrieved
August 22, 2019, from
http://www.studylecturenotes.com/management/porter%E2%80%99s-value-chain-
analysis-primary- secondary-activity
Bhatti, A. & Hajibashi, M. (2017). Supply chain for a new age. Retrieved August 22, 2019, from
https://www.accenture.com/t20170206t210529 w /id-en/_acnmedia/pdf-42/accenture-
supply- chain-for-a-new-age-2.0.pdf
Business Dictionary. (n.d.). Logistics. Retrieved August 16, 2019, from
http://www.businessdictionary.com/definition/logistics.html
Chartered Institute of Procurement and Supply. (n.d.). Global supply chains. Retrieved August
22, 2019, from https://www.cips.org/en-SG/knowledge/procurement-topics-and-skills/srm-
and-sc-management/global- supply-chains
Council of Supply Chain Management Professionals. (2014). What is supply chain management?
Retrieved July 15, 2019, from https://cscmp.org/CSCMP/Certify/Fundamentals/
What_is_Supply_Chain_Management.aspx?WebsiteKey=0b3f453d-bd90-4121-83cf-
172a90b226a9

SM Baliwag Complex, Dona Remedios Trinidad Highway, Brgy. Pagala, Baliwag, Bulacan
(+63) 927-533-0342 – (+63) 923-949-5265 [email protected]
 Ede, J. & Veen, J. (2018). Supply chain management 1.0 & 2.0. Retrieved August 22, 2019, from
https://www.business-improvement.eu/other/Supply_Chain_Management.php
Westford University College. (2016) The Importance of Customer Service in Supply Chain and
Logistics Management. Retrieved August 22, 2021, from The importance of Customer
Service in Supply Chain & Logistics Management (mywestford.com)
Yilmaz, M. (2014). Importance of Customer Service in Logistics Retrieved August 22, 2022, from
Importance Of Customer Service In Logistics (freightarea.com)

VII. References
Ares, E., Esplugues, C., Pelaez, G., & Tjahjono, B. (2017). What does industry 4.0 mean to supply
chain? Science Direct, 13, pp. 1175-1182. Retrieved August 22, 2019, from
https://www.sciencedirect.com
Christopher, M. (2011). Logistics & supply chain management (4th ed.). Great
Britain: Pearson. Christopher, M. (2015). Logistics & supply chain
management (5th ed.). Great Britain: Pearson.
Krajewski, L., Malhotra, M., & Ritzman, L. (2013). Operations management: Processes and
supply chains (10th ed.). England: Pearson Education Limited.
Myerson, P. (2015). Supply chain and logistics management made easy: Methods and
applications for planning, operations, integration, control and improvement, and
network design. United States: Pearson Education, Inc.
Ortec. (2019). Control tower for supply chains. Retrieved August 30, 2019, from
https://ortec.com/en/dictionary/control-tower-supply-chains
Samsung. (2018). Electricity-efficient compressor can deliver over 20 years of service. Retrieved
August 30, 2019, from https://news.samsung.com/za/electricity-efficient-compressor-
can-deliver-over-20-years-of-service
Supply Chain Council. (2012). Supply chain operations reference model. Retrieved July 15,
2019, from https://docs.huihoo.com/scm/supply-chain-operations-reference-model-
r11.0.pdf
Fenol, J. (2018). Lazada invests ‘massively’ on logistics to enhance customer experience.
Retrieved August 27, 2019, from https://news.abs- cbn.com/business/11/11/18/lazada-
invests-massively-on-logistics-to-enhance-customer-experience.
Lazada. (n.d.). Lazada group. Retrieved August 27, 2019, from https://www.lazada.com/about-us

SM Baliwag Complex, Dona Remedios Trinidad Highway, Brgy. Pagala, Baliwag, Bulacan
(+63) 927-533-0342 – (+63) 923-949-5265 [email protected]