Distribution
Industry
Distribution Industry
Making the Connections, Selling the Goods
By Janetta Soup &
Qiang Han
BY Janetta Soup & Qiang Han
Outline
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The Structure
Global Logistics
Transportation
Technology (E-Commerce)
Case Analysis: Amazon. COM & SCM
Role of State
Transnational Retailing
???
The structure of the distribution
Industries
• Definition of Distribution
 Physical movement of materials and goods - transportation
infrastructure
 Transmission and manipulation of information
• Object and Primary Purpose
 Minimize logistics costs while delivering maximum customer
service
 Minimize time-space friction & max speed
The Structure of Distribution
Industries
• Essential Function
 Intermediation between
buyers and sellers at all
stages of the production
chain
 Driven by the demands of
the final consumer
(In reality, there are political,
and other boundaries to
complicate the basic
system, such as…)
The structure of the distribution
Industries
• Two Barriers to Distribution :
 Physical Conditions:
Land/Water interfaces
 Political Boundaries:
Customs clearance, tariffs, duties, administration
and the like
The structure of the distribution
Industries
• Major Types of Organization
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Transportation companies – Nedlloyd
Logistics Service Provider – FedEx
Wholesalers – Costco
Trading Companies – Sogo Shosha
Retailers – Wal-Mart
E-tailers – Amazon. COM
Global Logistics
• What is Logistics:
Logistics management describes the integration of activities
necessary to ensure the efficient flow of raw materials, in-process
inventory, and finished goods from producers to customers.
• Seven “R”s
Right product,
Right condition,
Right time,
Right customers.
Right quantity,
Right place,
Right cost
Global Logistics
• Four Major Types of Logistics Service Firm: Port
to port, door to door, desk to desk, pocket to
pocket.
Global Logistics
• Trading Companies
Trading companies are one the
oldest forms of organization in the
distribution services
 Long – distance trade
 Facilitating trade in materials
and products
Global Logistics
• Trading Companies
Japanese Sogo Shosha: “General trading
Company”
 Initially to organize exchange and distribution within the
Japanese domestic market
 First Japanese companies to invest on a large scale outside
Japan
 Organize the flow of imports of much-needed primary materials
for the resource-poor Japanese economy
 Channel Japanese exports of manufactures to overseas markets
 “Third-country trade”
Global Logistics
Global Logistics
• Japan Sogo Shosha Perform Four Specific
Functions:
Trading and transactional intermediation
Financial intermediation
Information gathering
Organization and coordination of complex
business systems
Transportation
• Transportation provides the movement of
goods necessary in the supply chain.
• Five basic modes of transportation are:
 Airlines
 Motor carriers
 Pipelines
 Railroads
 Water carriers
Transportation-Continued
• All transportation modes can be evaluated
on these seven criteria:
 Cost - charges for transportation
 Speed - time of transit
 Reliability - meeting schedules on time
 Capability - ability to transport various products
 Flexibility - door-to-door delivery
 Capacity - ability to carry amount of tons in trip
 Frequency - scheduling
Transportation Chart
Advantages
Disadvantages
Airlines
Very fast
Frequent departures
Reasonably reliable
High Cost
Limited capabilities
Small volume shipments
Motor Carriers
Most flexible
Fairly fast
Fairly reliable
Fairly costly
Size & weight restricted
Weather sensitive
Very reliable
High capacity
Low cost
Frequent departures
Very slow
Low capability
Low flexibility
Railroads
High capability
High flexibility
Low cost
Low reliability
Sometimes slow
Water Carriers
High capability
High capacity
Low cost
Slow
Low flexibility
Low reliability
Pipelines
Transportation Continued
• Intermodal
transportation
 Using more than one
mode of
transportation
 Piggyback
 Container On FlatCar
(COFC)
 Roll-On-Roll-Off (RORO)
Technology
• Technological innovations have impacted:
 Speed
 Flexibility
 Reliability
in the distribution industry.
Technology continued
• Three key elements of distribution systems
 Electronic Data Interchange (EDI)- large
quantities of data sent electronically
 Bar Code Systems – each product item distinct
identity
 Distribution Centers – faster and frequent turn
over rate
Technology continued
• E-Commerce (EC)
• Definition: Buying and selling goods and services
over the Internet.
• Categories of EC
Technology continued
• Methods of fulfilling EC orders
Technology continued
• Benefits of EC
 Companies and publishers have a global presence, and the customer has global
choices and easy access to information.
 Companies can improve competitiveness and quality of service by allowing
access to their services anyplace, anytime. Companies can also monitor
customers’ choices and requests electronically.
 Supply chain response times are shortened.
 Firms can substantially reduce transaction costs, which allows for price
reductions or cost savings. Companies that provide purchasing and support
services through the Web can save significant personnel costs.
 EC levels the playing field for small companies that cannot afford the same
infrastructure and marketing programs as their larger counterparts.
Case Analysis – Amazon. COM
• Amazon. COM
Distribution offers traditional retailers a cost advantage
 Shipping costs on a per unit basis are much
higher for an Internet firm that ships individual
orders directly to consumers
Traditional Systems Internet Systems
Central Warehouses
Distribution Centers
Retail Outlets
Customers
Case Analysis – Amazon. COM
• Time
 Reduce Lead Time
 Quick and efficient consumer response
• Dependability
 Safe delivery, safe purchase
• Communication
 2 way link between Amazon and its customers
 Forecast customer needs
• Convenience
 Minimize searching effort for buyer with technology
Case Analysis – Amazon. COM
• Technology: Amazon. COM uses software to more
accurately forecast purchasing patterns by region,
allowing it to give suppliers better information about
delivery dates and volumes.
• Third Party Providers: Amazon. COM uses third-party
logistics providers to transport the orders directly to their
customers; they often send packages via Mail, UPS,
FedEx, and Airborne Express.
• Transportation Time: 99% of the orders were shipped
and delivered on time.
• Inventory Management: Seven huge distribution centers,
keep inventory of more than 2.7 million products - key
differences between Amazon. COM and its competitor.
Case Analysis – Amazon. COM
• Tracking your order at
Amazon.com
Supply Chain Management (SCM)
• SCM is the Distribution Centre for WalMart
• Located in Calgary, AB
• Centre is just under 1 000 000 square feet
• Ships to many Wal-Mart stores across
western Canada
SCM continued
• Step up from JIT system
• Focuses on:
Cross-docking
Pick-to-light
Put-to-light
Role of States
• Regulation
Transportation & Communications
Retailing
• Regulatory framework
Control over own National space
Safety & Efficiency
Role of State continued
• Deregulation
• Air transportation industry
• Two examples:
US vs. UK
US vs. Hong Kong
Transnational Retailing
• Retailing is the final link in the production
chain.
• Retailing has always had a predominantly
domestic orientation.
• Some of the world’s largest retailers in
terms of sales revenues continue to be
entirely embedded in their domestic
market.
Transnational Retailing
• Two dimensions to the transnational
operations of retailing firms
• Selling VS. Sourcing
Transnational Retailing
• Motivations for Transnationalization of a
Retail Firm’s Operation:
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Saturation of the domestic market
Intensification of competition in the domestic market
Regulatory constraints in the domestic market
Perception of profitable opportunities overseas
Desire to exploit a firm’s specific advantages in new markets
• Ways for retailers to Enter a Foreign
Market:
 Build a new store
 Merge with or to acquire an existing firm in the target market
 Enter into a collaboration with a domestic firm within the target
market through licensing and franchising
Transnational Retailing
• In 1999, only four retail firms were among
the world’s top 100 transnational
corporations.
• In terms of TNI:
Rank TNI
Company
Country
53
52.7
Royal Ahold Holland
76
36.4
Metro
Germany
90
25.8
Wal-Mart
U.S
Transnational Retailing
Pop Quiz
• What are the seven “R”s for Logistics?
Right product, Right quantity, Right condition, Right place, Right
time, Right cost, Right customers.
• What are the five modes of transportation?
Airline, motor carrier, pipeline, railroad, water carrier.
• What are the two barriers in the distribution industry?
Physical barrier, political barrier.
• What are the ways for retailers to enter a foreign market? (Name 2
out of 3)
Build a new store
Merge with or to acquire an existing firm in the target market
Enter into a collaboration with a domestic firm within the target
market through licensing and franchising
Pop Quiz
• What are the differences between pick-to-light and putto-light?
Put to light: emptying the box
Pick to light: filling the box
• Name 2 out of the 4 types of logistics service firms
Traditional transportation, asset based, skill based, and
network logistics provider
• In what ways has technology impacted the distribution
industry?
Speed, reliability, flexibility.
Sources
• Dicken, Peter. Global Shift. Fourth edition.
The Guilford Press
• Bloomberg, David. Stephen, Lemay. Joe
B. Hanna. Logistics. Prentice Hall.