Marketing Management
MKTG 6170: Module II:
Supply Chain Management/
Distribution

Supply Chain
◦ An alignment of firms/exchanges
 Exchange perspective

Supply Chain in Reality – A Network
Major flows in a supply chain
 Purpose:

◦ Satisfy customer needs and meeting individual member goals
Supply Chain Management

The Institute for Supply Management
◦ “the design and management of seamless (aka supply chain
integration), value-added processes across organizational boundaries
to meet needs of end customers”.

Council of Supply Chain Management Professionals
(Council of Logistics Management until Dec 2004):
◦ “integration of key business processes from end user through original
suppliers that provides products, services, and information, that add
value for customers and other stakeholders”.
….SCM
Objectives:
 Value
 Profitability
 Importance:
 Complexity
 Efficiencies
 Competencies

….SCM
SCM v/s Logistics v/s Distribution

◦
◦


1.
2.
3.
Domain
Objective
Framework for Understanding SCM
Components:
Network
Business Processes
Management Components
Distribution
◦ Connection between individuals/firms that
contributes to the occurrence of an exchange
◦ Basic function: create customer value/add
value to customer by reducing spacial separation –
physical and time distance – between point of
production and point of consumption
 Place and time utility
Value Addition










Contactual efficiency
Routinization
Categorizing
Assembly/assortment
Breaking bulk/accumulating bulk
Transportation
Processing/storage
Risk reduction
Service/repairs
Reverse logistics
Distribution Design Decisions

Level 1(governance structure): direct
distribution v/s conventional v/s vertical
marketing systems.
◦ Corporate
◦ Contractual
◦ Administered
..design decisions: Level 2-Intensity
of Distribution
Distribution Strategies

Two fundamental distribution strategies:
◦ Items can be directly shipped from the supplier or
manufacturer to end customer
◦ Use intermediate points
Direct Shipment Distribution
Strategies

Advantages:
◦ expenses of operating a distribution center
◦ Lead times.

Disadvantages:
◦ Risk-pooling effects
◦ Manufacturer and distributor transportation costs
Intermediate Inventory Storage Point
Strategies
 Strategies:
◦ Traditional warehousing strategy
◦ Cross-docking strategy
◦ Centralized pooling and transshipment
strategies
Traditional Facilities

factors
◦ Centralized vs. Decentralized Management
◦ Central vs. Local Facilities

Centralized vs. Decentralized
Management
Central vs. Local Facilities

Centralized facilities
◦ Employ both fewer warehouses and distribution centers
◦ Facilities are located further from customers.

Other factors:
◦
◦
◦
◦
◦
◦
Safety stock.
Overhead.
Economies of scale
Lead time.
Service.
Transportation costs.
Cross-Docking

Popularized by Wal-Mart

Warehouses function as inventory
coordination points rather than as
inventory storage points.

Goods spend very little time in storage at
the warehouse
Transshipment
Shipment of items between different
facilities at the same level in the demand
chain to meet some immediate need
 Occurs mostly at the retail level

◦ advanced information systems
◦ Reasonable shipping costs
◦ Integrated supply chain
Distribution-system Performance and
customer-facing capabilities

Performance evaluation on two
dimensions:
◦ Level of customer service
◦ Cost of providing customer service

Capabilities
◦ Responsiveness
◦ efficiency