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Distribution Network

Design in practice
Indian Supply Chain context
Literature review
Prepared byHarshul Lath 2015083
Sindhu Priya Pratap 2015054
SCM - B

Designing a Network- I
Distribution refers to the steps taken to move and store a product
from the supplier stage to a customer stage in the supply chain
Good distribution can be used to achieve a variety of supply chain
objectives ranging from low cost to high responsiveness
Performance of a distribution network should be evaluated along
two dimensions:
Customer needs that are met
Cost of meeting customer needs

The customer needs that are met influence the company's revenues,
which along with cost decide the profitability of the delivery network.

Designing a Network- II
There are two key decisions when designing a distribution network Will product be delivered to the customer location or picked up from a preordained site?
Will product flow through an intermediary (or intermediate location)?

Based on the choices for the two decisions, there are six distinct distribution
network designs that are classified as follows1.
2.
3.
4.
5.
6.

Manufacturer storage with direct shipping


Manufacturer storage with direct shipping and in-transit merge
Distributor storage with package carrier delivery
Distributor storage with last mile delivery
Manufacturer / distributor storage with customer pickup
Retail storage with customer pickup**

** Main focus- as sector chosen by us is FMCG and it uses this type of network

FMCG Distribution Network Flow


Chart

Interpretation
Factory- The products are manufactured here.
Warehouse/ C & F- Warehouse is a large structure where the companies keep their finished good
inventories. These can be company owned or third party services. Carrying & Forwarding agents
keep companys shipping costs low, by providing a range of available transportation modes with
services related to shipping, like packaging, and acting as experts in clearing customs
Super Stockist- They buy products from the company and sell it to sub stockists. They dont deal
in products from multiple companies and are exclusive
Stockist- They buy products from a super stockiest or directly from the company and sell them to
wholesellers/retailers
Co- op stores- These stores buy in bulk and sell directly to the consumers at a lower cost than the
regular retailer.
Rural Stockist- These are smaller players active in rural markets and purchase goods usually from
Super stockists
Wholeseller- They buy products from different stockists and sells them further to retailers. They
are involved with multiple companies and usually are not exclusive to a particular manufacturer
Retailer- They buy from wholesellers/stockists and sell the goods to end users.

Salient features of such Network


Local storage increases inventory costs because of lack of aggregation.
For very fast moving items, however, there is marginal increase in inventory even with local storage.

Transportation cost is much lower than other solutions because


inexpensive modes of transport can be used to replenish product at the
retail store.
Facility costs are high because many local facilities are required.
A minimal information infrastructure is needed if customers walk into
the store and place their order
Very good response times can be achieved in this case because of local
storage
Product variety stored locally will be lower than other options
Returnability is fairly good using this option

One anomaly- AMWAY!!


ABO- Amway Business Owner
Amwayfollowscombinedstrategy
of direct selling and multi-level
marketing for distribution
EveryAmway Business
Owner(ABO)
becomesapartofAmways
distribution network.