Scribd
Upload
12 views

SCM Mod 2

Uploaded by

nedunurisoumya
Copyright
© © All Rights Reserved
Available Formats
Download as PDF, TXT or read online on Scribd
12 views

SCM Mod 2

Uploaded by

nedunurisoumya
Copyright
© © All Rights Reserved
Available Formats
Download as PDF, TXT or read online on Scribd
You are on page 1/ 4

1)

Distribution plays a crucial role in a supply chain, as it involves the steps required to move and
store products from suppliers to customers. Distribution occurs at every stage of the supply
chain, such as transporting raw materials from suppliers to manufacturers and delivering
finished goods to customers. It directly impacts both the cost and customer satisfaction.

For example, companies like Wal-Mart and Seven-Eleven Japan have built their success on
efficient distribution systems. Wal-Mart provides high product availability at a low cost, while
Seven-Eleven achieves high responsiveness to customer demand through a well-designed
distribution network. In the apparel industry, distribution-related costs can account for up to 35%
of total revenue, affecting markdowns and lost sales.

Effective distribution increases profitability by minimizing costs and meeting customer demands.
It also involves two phases of design: selecting the distribution strategy (e.g., selling directly or
through intermediaries) and choosing specific locations and capabilities for facilities​)

2)

the design of a distribution network in a supply chain is influenced by several factors that directly
impact customer satisfaction and operational efficiency. Here are key factors that influence the
design:

1. Customer Needs: The distribution network must meet customer needs such as
response time (how quickly they receive products), product variety, product availability,
and convenience. For example, firms like Amazon may prioritize product variety over
speed, while Barnes & Noble focuses on faster response time through local storage.
2. Costs: Distribution network design must balance between inventory, transportation,
and facility costs. Increasing the number of facilities can reduce transportation costs
but increase inventory and facility costs, as seen with companies like Amazon that
strategically increase facilities to improve customer response times but control
facility-related costs through consolidation.
3. Geographical Location: The location of supply sources, markets, and the availability of
transportation infrastructure heavily influence the network design. For example,
companies like Coca-Cola position bottling plants near local markets to minimize
transportation costs.
4. Macroeconomic Factors: Taxes, tariffs, and exchange rates also impact the network.
Firms often choose locations to minimize duties and leverage incentives, as seen in
cases where companies set up facilities in free-trade zones or countries offering tax
incentives like Ireland.
5. Technological Factors: The available production technology affects the choice of
having few or many facilities. For industries with economies of scale, like semiconductor
manufacturing, fewer large facilities are preferred, while sectors with lower fixed costs,
like bottling, might require more local facilities .

These factors, when carefully considered, help businesses optimize distribution networks to
meet customer demands while minimizing costs and increasing profitability.

3)

Network design plays a critical role in a supply chain by determining the physical arrangement
of the supply chain's infrastructure, such as the location of facilities, their roles, and the
allocation of capacity to different locations. These decisions impact how efficiently a supply
chain can operate and how well it can meet customer demand. The primary objectives of
network design are to reduce supply chain costs and enhance responsiveness.

Key decisions involved in network design include:

1. Facility Role: Deciding what role each facility will play in the supply chain (e.g.,
manufacturing, storage, or distribution). For example, Toyota’s flexible plants can serve
both local and global markets, which allows the company to adapt to changing demand.
2. Facility Location: Choosing the location of facilities is crucial because it affects both
costs and responsiveness. For example, Toyota’s decision to build plants in the U.S.
helped it reduce transportation costs and improve responsiveness to the U.S. market.
3. Capacity Allocation: Determining how much capacity to assign to each facility ensures
that customer demands are met without over-investing in infrastructure, which can lead
to poor utilization.
4. Market and Supply Allocation: Allocating markets to facilities helps minimize costs by
balancing transportation, inventory, and facility expenses. For example, Netflix added
distribution centers to reduce transportation costs as its subscriber base grew but later
closed some as demand for DVD rentals declined due to streaming services

4)

Designing a distribution network in a supply chain involves selecting the structure that helps
move products from the supplier to the customer in the most efficient way possible. There are
several key design options for a distribution network:

1. Manufacturer Storage with Direct Shipping (Drop-Shipping): Here, the manufacturer


ships directly to the customer. The retailer holds no inventory. This is common in online
retailing (e.g., Nordstrom’s online orders for slow-moving items). It reduces inventory
holding costs but has higher transportation costs due to individual shipments.
2. Manufacturer Storage with Direct Shipping and In-Transit Merge: In this model,
products from multiple locations (e.g., different manufacturers) are combined in transit
and delivered as a single order. This model is suitable for products that are often
purchased together, like a computer and its accessories.
3. Distributor Storage with Carrier Delivery: Distributors hold inventory and deliver
products via third-party carriers (e.g., Amazon's fulfillment centers). This balances
transportation costs with delivery speed, providing lower costs than manufacturer
storage but with some inventory holding costs.
4. Distributor Storage with Last-Mile Delivery: In this design, products are stored at a
distributor and delivered directly to the customer using local transportation services. This
model works well in high-density urban areas for quick deliveries, such as grocery
delivery services.
5. Manufacturer/Distributor Storage with Customer Pickup: Customers order products
online, and these are shipped to a designated pickup location like a retail store (e.g.,
Walmart's online orders with in-store pickup). This reduces transportation costs but
requires infrastructure for pickups.
6. Retail Storage with Customer Pickup: This traditional model involves local retail stores
holding inventory where customers pick up items. It provides the quickest response time
but involves higher inventory and facility costs.

Each design has its own strengths and weaknesses, depending on factors like customer
demand, product variety, and transportation costs .

5)
Factors Influencing Network Design Decisions:

1. Strategic Factors: A company's competitive strategy heavily influences network design.


For instance, cost-leadership firms often choose low-cost facility locations, even if these
are distant from key markets. Companies focusing on responsiveness, like Zara, place
facilities near markets to quickly react to demand changes.
2. Technological Factors: Available production technologies impact design. If economies
of scale are significant, fewer, larger facilities are preferred (e.g., semiconductor
manufacturing). Conversely, industries with low fixed costs, like bottling plants, often opt
for many local facilities.
3. Macroeconomic Factors: Taxes, tariffs, exchange rates, and shipping costs influence
location choices. For example, high tariffs may encourage companies to set up local
manufacturing plants to avoid duties. Many global firms, such as BMW, have benefited
from tax incentives when choosing facility locations.
4. Political Factors: Stability and political risks, including regulations and trade policies,
play a role. Companies avoid placing facilities in areas with high political risk or unstable
regulations.
5. Infrastructure Factors: Access to essential infrastructure like roads, ports, and skilled
labor is critical. For example, companies like Coca-Cola consider the availability of local
suppliers and logistics when setting up bottling plants.

Framework for Network Design Decisions:


1. Phase I: Define Supply Chain Strategy – The supply chain strategy must align with the
competitive strategy. Decisions here include determining whether functions are
outsourced or in-house and anticipating global competition.
2. Phase II: Regional Facility Configuration – Identify regions for facility placement,
considering demand forecasts, economies of scale, and potential risks such as tariffs or
political instability.
3. Phase III: Select Desirable Sites – This involves selecting specific sites within chosen
regions. Companies assess local infrastructure, workforce availability, and community
support.
4. Phase IV: Location Choices – The final phase selects precise locations and allocates
capacity, maximizing profitability while balancing demand, logistics, and facility costs.

Example: For a company like Coca-Cola, the framework helps decide whether to establish a few
large facilities serving broad regions or multiple smaller local bottling plants, depending on
costs, demand, and logistics .

You might also like