Forums Marketing Distribution in the Supply Chain

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    Distribution in the Supply Chain

    #16226

    Distribution refers to taking the product from supplier stage to customer stage. It is a key driver as it affects both the supply chain costs and customer experience. The appropriate distribution network can be used to achieve a variety of supply chain objectives ranging from low cost to high responsiveness. Due to this, companies in a same industry often select different distribution network.

    Factors Influencing Distribution Network

    Customer Service Component

    1. Responsive Time- How much time it takes to reach customer?
    2. Production Variety- How many different types of products are being offered by the distribution network?
    3. Availability- What is the probability of having product when the customer arrives?
    4. Customer Experience- How is the experience of the customer with the ordering and shipment of the order?
    5. Returnability- How easy it is for the customers to return the item?

    Design option for Distribution Network

    • Manufacturer storage with direct shipment- In this method, the product is stored with the manufacturer only and is directly shipped to the customer. It is also known as drop shipping. It is best suited for a large variety of low demand, high-value items for which customers are willing to wait.
    • Manufacturer storage with direct shipment and in-transit merge- Not like pure dropping, in which the product is directly sold to the customer. In transit, merge refers to that method in which different orders from different locations are combined so that the customer gets a single delivery. It is best suited for low to medium demand, high-value items the retailers are sourcing from a limited number of manufacturers.
    • Distributor Storage with Carrier Option- In this method, inventory is held by the retailers, not the manufacturers. In this method, package carriers are used to transport products from the intermediate location to the final customer. It is suited for medium to fast moving items. It is also best suited when customers want delivery faster than is offered by manufacturer storage.
    • Manufacturer or Distributor Storage with Customer Pickup- In this method, inventory is stored at the manufacturer or distributor warehouse but customers place their order online or on the phone and then travel to designated pick up points to collect their merchandise. It is best suited for coffee shops, convenience shops or grocery shops.

    Supply chain management is crucial to the success of any small-scale manufacturing and can be the deciding factor between a successful project and a project full of delays and claims. An effective supply management system is essential for managing efficient material management to avoid material shortages, misplacements, loss, and theft which might result in increases in crew idle times, loss of productivity and delay of activities. The primary goal is to have the material needed, in the amounts needed, with the quality required, and the time that they are needed. Standardization of the material management system could be a step forward in improving the system and eliminating some of the bottlenecks.

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