Marketing ManagementMarketing ManagementMKTG 6170: Module II: MKTG 6170: Module II: Supply Chain Management/ Supply Chain Management/ DistributionDistribution

Supply Chain◦ An alignment of firms/exchanges

Exchange perspectiveSupply Chain in Reality – A Network

Major flows in a supply chainPurpose:

◦ Satisfy customer needs and meeting individual member goals

Supply Chain ManagementSupply Chain ManagementThe 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 .SCM ObjectivesObjectives:Value ProfitabilityImportance:Importance:ComplexityEfficienciesCompetencies

…….SCM.SCM SCM v/s Logistics v/s DistributionSCM v/s Logistics v/s Distribution

◦ Domain◦ Objective

Framework for Understanding Framework for Understanding SCMSCM

Components:Components:1. Network2. Business Processes3. Management Components

DistributionDistribution◦ 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 AdditionValue Addition Contactual efficiency Routinization Categorizing Assembly/assortment Breaking bulk/accumulating bulk Transportation Processing/storage Risk reduction Service/repairs Reverse logistics

Distribution Design Distribution Design DecisionsDecisions

Level 1(governance structure): direct distribution v/s conventional v/s vertical marketing systems.◦Corporate◦Contractual◦Administered

..design decisions: Level ..design decisions: Level 2-2-Intensity of Distribution Intensity of Distribution

Distribution StrategiesDistribution StrategiesTwo fundamental distribution strategies:

◦ Items can be directly shipped from the supplier or manufacturer to end customer

◦ Use intermediate points

Direct Shipment Direct Shipment Distribution Strategies Distribution Strategies

Advantages:◦ expenses of operating a distribution center◦ Lead times.

Disadvantages:◦ Risk-pooling effects◦ Manufacturer and distributor transportation

costs

Intermediate Inventory Storage Intermediate Inventory Storage Point Strategies Point Strategies

Strategies:

◦Traditional warehousing strategy

◦Cross-docking strategy◦Centralized pooling and transshipment strategies

Traditional FacilitiesTraditional Facilities

factors◦ Centralized vs. Decentralized Management◦ Central vs. Local Facilities

Centralized vs. Decentralized Management

Central vs. Local FacilitiesCentral 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-DockingCross-DockingPopularized 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

TransshipmentTransshipment

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 Distribution-system Performance and customer-facing capabilitiesand customer-facing capabilities

Performance evaluation on two dimensions:◦Level of customer service◦Cost of providing customer service

Capabilities◦Responsiveness◦efficiency