Supply Chain Management
Unit-II
Ashutosh Kumar Jha
Unit-II Syllabus
• Distribution-Basic Concept
• Designing the Distribution Network
• Distribution Network in Practice
• Role of Distribution Network
• Factors Influencing Distribution Network
• Modeling for Supply Chain
Distribution
• Distribution refers to the step taken to
move and store a product from the
supplier stage to a customer stage in
supply chain.
• It is a key driver of overall profitability of a
firm because it directly impacts both
supply chain cost and the customer
experience.
Distribution
Designing the Distribution Network
• There are two key decisions in
designing a Distribution Network.
• Will Product be delivered to the customer
location or picked up from a pre –ordered
site?
• Will Product flow through intermediary?
Types of Distribution Network Design
Manufacturer Storage with Direct Shipping
Manufacturer Storage with Direct Shipping
and in-transit merge
Distribution storage with Package Carrier
Delivery
Distribution storage with Last Mile Delivery
Manufacturer/Distributor storage with
customer pickup
Retail Storage with Customer Pickup
Manufacturer Storage with Direct
Shipping
• Product is directly shipped from the manufacturer to
the end customer, bypassing the Retailer.
• This option is also referred to as drop shipping with
product delivered directly from the manufacturer to the
customer location.
• Retailer are independent from manufacturer , carries
no inventory.
• All Inventory are stored with Manufacturer.
Manufacturer Storage with Direct
Shipping
Manufacturer Storage with Direct
Shipping and in-transit merge
• In Transit Merge combines piece of the order
coming from different location so that
customer gets a single delivery.
• Example: When a Customer order a PC from
Dell and a Monitor form SONY, Package Carrier
picks up PC from Dell factory and Monitor
form SONY factory and then merge the two at
hub before single delivery to customer.
Manufacturer Storage with Direct
Shipping and in-transit merge
Distribution storage with Package
Carrier Delivery
• In This model, Inventory is not held by
manufacturer at the factories but is held by
distributors/retailers in the intermediate
warehouse and package carriers are used to
transport product from the intermediate
location to the final customer.
Distribution storage with Package
Carrier Delivery
Distribution storage with Last Mile
Delivery
• Last Mile Delivery refers to distributor/retailor
delivering the product to the customer’s home
instead of using a package carrier.
Manufacturer/Distributor storage with
customer pickup
• In this approach, inventory is stored at the
manufacturer or distributor warehouse but
customer place their orders online or on the
phone and then come to designated pickup
points to collect their orders.
Retail Storage with Customer Pickup
• In this Method, Inventory is stored locally at
retail stores.
• Customer walk into the retail store or place an
order online or on the phone and pickup it up
at the retail store.
Distribution Network in Practice
• The Ownership Structure of the distribution
network can have as big an impact as the
type of distribution.
• The Choice of Distribution Network has very
long term consequences.
Distribution Network in Practice
(Continued)
• Consider whether an excusive distribution
strategy is advantageous.
• Product Price, Commoditization and
criticality have an impact on the type of
distribution system preferred by customers.
Role of Distribution Network in Supply
Chain
• Facility Role: What Role should each facility
Pay? What Processes are performed at each facility?
• Facility Location: Where should facilities be
located?
• Capacity Allocation: How much capacity
should be allocated to each facility?
• Market and Supply Allocation: What
Market should each facility serve? Which supply
sources should feed each facility?
Factors Influencing Network Design
Decisions
• Strategic Factors:
• Technological Factors:
• Macroeconomic Factors:
• Political Factors
• Infrastructure Factors:
• Competitive Factors:
Modeling for Supply Chain
Modeling for Supply Chain
• Modeling for supply chain management
involves creating mathematical,
computational, or conceptual
representations of various aspects of a
supply chain to analyze, optimize, and
improve its efficiency, effectiveness, and
responsiveness
Network Optimization Models
• These models help design
and optimize the
configuration of the supply
chain network, including the
location and capacity of
facilities like factories,
warehouses, and distribution
centers, as well as the
allocation of suppliers and
customers to these facilities.
Inventory Models
• These models focus on
determining the optimal level
of inventory to be held at
different stages of the supply
chain to balance costs and
service levels. Examples
include Economic Order
Quantity (EOQ) models,
Just-in-Time (JIT) inventory
models, and reorder point
models.
Simulation Models
• Simulation models replicate the
dynamics of a supply chain using
computer software to study the impact of
different decisions and scenarios on
performance metrics like cost, lead time,
and service level. Discrete event
simulation and agent-based modeling
are commonly used techniques.
Mathematical Optimization Models
• These models use mathematical
programming techniques such as linear
programming, integer programming, or
nonlinear programming to optimize
supply chain decisions like production,
inventory management, transportation,
and distribution.
