Distribution Structures
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Distribution Structures Patrik Jonsson Logistics and Supply Chain Management Chapter 10 Distribution utility values Form utility – value refinement Place utility – available at the right place Time utility – available at teh right time Ownership utility – transfer to customer Marketing/sales – ownership Production – form Distribution – place and time p213 Division of utilities Division of utility-performing activities divided between functions in a company But it can also be divided between companies in the supply chain p213 The distribution gaps The division of activities in the supply chain is one of the fundamental problems in the planning of distribution structures How to bridge the gaps? Using intermediaries? Five gaps Manufacturer vs. customer Pace gap – different intervals Distance gap – widespread market Quantity gap – produce more than deliver Range gap – wide product range Variant gap – access to more variants p214 Figure 10.1 Gaps Roles Utilities Quantity gap Aggregation role Place utility Distance gap Spreading role Time utility Contact role Ownership utility Range gap Consolidation role Variant gap Creating variants role Form utility The intermediary roles Aggregation role – delivers according to needs Spreading role – stock-keeping, short delivery Contact role – direct customer support Service-providing role – order-specific configuration Consolidation role – represents several companies p215 Figure 10.5 Manufacturer Manufacturer Manufacturer Manufacturer Wholesaler Customer Web shop Retailer Customer Customer Retailer Customer Figure 10.6 Manufacturer Manufacturer Manufacturer Representatives Agent Industrial distributer Customer company Customer company Customer company Transaction and material flow channels Transaction flow channels The flow of informastion around the administration parts of order-to-deliver process Material flow channels Relates to the physical parts of the order-todeliver process p218 Separate transaction and material flow channles Two general alternatives Direct material flow channels Direct transaction channles p221 Figure 10.7 a) b) Manufacturer Manufacturer Intermediary Intermediary Customer company Customer company Transaction/ Information flow Customer company Customer company Material flow Stock Direct material flow channel The intermediary may represent different suppliers at the same time of sale and ordering, and as such provide a type of one-stop shopping See figure 10.7a p221 Direct transaction channel Transaction channels initiary going to the product-supplying company While the material flow channel goes from intermediary company to the customer p223 See figure 10.7b p221 Figure 10.8 a) b) Manufacturer Manufacturer Intermediary intermediary Customer company Customer company Customer company c) Customer company Transaction/ Information flow Large stock Manufacturer Inter- mediary Customer company Material flow Small stock Customer company Shared transaction and material flow channels Traditional warehousing and distribution Figure 10.8a Cross-docking with sorting Figure 10.8b Direct cross-docking and merge-in-transit Figure 10.8c Cross-docking with sorting (10.8b) There is no real inventory control In principle an almost stockless flow of materials via an intermediary The size of the stocks depends on coordinastion of inbound delivers p224 Direct cross-docking and merge-in-transit Commonly used for fast-moving consumer goods Large quantities are delivered daily Broken down into smaller customer orders Reloaded to regional delivery trucks Several suppliers are delivering to distribution centers where goods are merged (figure 10.9 p227) p226 Figure 10.9 Manufacturer Inter- Customer company mediary Customer company Material flows in cross-docking Manufacturer Inter- Customer company Manufacturer mediary Customer company Material flows in merge-in-transit Warehouse structures High degree of centralisation: Fewer storage points will mean that material flowa will be grater at each place of storage The size of stock will be smaller to maintain the desired delivery service The number of non-value-adding activities will be reduced p228-229 –figure 10.10 + 10.11 Figure 10.10 Service level Centralised distribution structure 100 % Decentralised distribution structure Size of stocks Small Large Figure 10.11 Costs High Transportation costs Inventory carrying costs Storage costs Low Low High Degree of decentralisation Changing conditions for intermediaries During the past decade the existence and value of intermediarieshas been quistioned Se figure 10.13 on page 232 for examples Figure 10.13 a) Manufacturer Wholesaler Retailer Consumer b) Manufacturer Wholesaler Retailer Consumer c) Manufacturer Wholesaler Retailer Consumer Postponement and speculation strategies Speculation strategy: Postponement strategy: means that value-adding or material-moving activities are carried out without any commitment from a customer means waiting as long as possible before performing value-adding and material-moving activities in the supply chain p235 Figure 10.15 Speculation Delivery of finished product from downstream distributor stock Delivery of finished product from manufacturer stock or from up-stream distributor stock Customer specific product made from standard components stored at down-stream distributor Customer specific product made and distributed by manufacturer (or upstream distributor) Manufacturing Postpone ment Speculation Postponement Material flow Value-adding distributors The use of value-adding distributors has increased significantly in many different industries during the last decade Not least as the consequences of market demands for more product variants and more customer-specific products p238
