Distribution Network Design in Supply Chains
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Questions and Answers

What is the primary role of a distribution network in a supply chain?

  • To move and store products from suppliers to customers. (correct)
  • To manage financial transactions between suppliers and customers.
  • To manufacture products efficiently.
  • To design new product packaging.

Which two dimensions are used to evaluate the performance of a distribution network?

  • Customer value provided and cost of meeting customer needs. (correct)
  • Technological advancements and market share.
  • Supplier relationships and inventory turnover.
  • Employee satisfaction and environmental impact.

How does the structure of a distribution network affect customer service?

  • It primarily changes the marketing strategy.
  • It only affects the cost of goods.
  • It influences response time, product variety, and availability. (correct)
  • It has no impact on customer service.

Which of the following is NOT a supply chain cost influenced by the distribution network structure?

<p>Production costs. (C)</p> Signup and view all the answers

What generally happens to the required response time as the number of facilities increases?

<p>Response time decreases. (C)</p> Signup and view all the answers

How are facility costs related to the number of facilities?

<p>Facility costs increase proportionally with the number of facilities. (D)</p> Signup and view all the answers

What is the general relationship between the number of facilities and inventory costs?

<p>Inventory costs decrease initially, then increase as the number of facilities increases. (B)</p> Signup and view all the answers

How does transportation cost typically change with an increased number of facilities?

<p>Transportation costs decrease initially and then increase. (A)</p> Signup and view all the answers

As the number of facilities in a distribution network increases, what generally happens to facility costs?

<p>Facility costs tend to increase. (A)</p> Signup and view all the answers

Which of the following is NOT one of the key decisions regarding distribution network design?

<p>Whether to maintain a traditional or online sales channel. (A)</p> Signup and view all the answers

In a 'Manufacturer storage with direct shipping' distribution network, which entity is primarily responsible for delivering the product directly to the end customer?

<p>The manufacturer directly (A)</p> Signup and view all the answers

Which distribution network design involves combining items from different sources during shipping?

<p>In-Transit Merge Network (A)</p> Signup and view all the answers

Which distribution network is best suited for high-volume, low-value products where customers are willing to pick up the items themselves?

<p>Retail storage with customer pickup (B)</p> Signup and view all the answers

What are the three key flows that occur in the context of omni-channel retailing?

<p>Products, Information, and Funds (C)</p> Signup and view all the answers

What is a key characteristic of a 'showroom' model in omni-channel retailing?

<p>Products are ordered at the location for later pickup or delivery. (A)</p> Signup and view all the answers

Which of the following best describes the relationship between response time and product variety in different distribution channels?

<p>Physical channels have faster response times, but online channels offer greater product variety. (A)</p> Signup and view all the answers

An online channel typically enjoys which of the following advantages over traditional retail models?

<p>Faster time to market for new products (A)</p> Signup and view all the answers

When evaluating the selection of a distribution channel, what is an important customer dimension that needs consideration?

<p>The customer's willingness to pay and their sensitivity to service levels. (B)</p> Signup and view all the answers

Flashcards

Distribution

The process of moving and storing products from the supplier to the customer within a supply chain.

Distribution Network's Impact on Profitability

The choice of distribution network directly impacts the costs and customer value within a supply chain, potentially affecting overall profitability.

Customer Value in Distribution Network Design

The degree to which a distribution network effectively meets customer needs in terms of response time, product variety, availability, and overall experience.

Distribution Network Costs

Costs associated with operating a distribution network, including inventory management, transportation, facilities, and information systems.

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Response Time vs Number of Facilities

Generally, a greater number of facilities leads to faster response times because products are closer to customers.

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Inventory Costs vs Number of Facilities

Increasing the number of facilities typically leads to higher inventory costs due to the need to maintain stocks at multiple locations.

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Transportation Costs vs Number of Facilities

A higher number of facilities often results in lower transportation costs because goods travel shorter distances.

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Distribution Network Design

The design and optimization a distribution network considers various factors like customer needs, cost effectiveness, and efficiency, to achieve supply chain objectives.

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Manufacturer Storage with Direct Shipping

A distribution network strategy where the manufacturer directly ships products to customers, bypassing intermediaries. It's often chosen for smaller businesses or products requiring fast delivery.

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In-Transit Merge Network

A distribution network strategy where a manufacturer uses multiple distribution centers to merge products from various origins before delivering to customers. This helps reduce transportation costs for bulky items.

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Distributor Storage with Carrier Delivery

A distribution network strategy where a distributor holds inventory and handles customer orders. Shipments are then coordinated with a carrier for final delivery to customers.

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Distributor Storage with Last Mile Delivery

A distribution network strategy where a distributor stores products and undertakes the final leg of the delivery process, carrying goods directly to customers. It's suitable for products requiring frequent or quick deliveries.

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Manufacturer/Distributor Storage with Customer Pickup

A distribution network strategy where customers pick up products directly from the manufacturer's or distributor's warehouse. It reduces transportation costs for customers and allows for bulk purchases.

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Retail Storage with Customer Pickup

A distribution network strategy where customers buy products from retail stores and pick them up directly. Common for large retailers and fast-moving consumer goods.

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Omni-Channel Retailing

A retail strategy that uses multiple channels to interact with customers and fulfill their orders. These channels can be traditional retail stores, online websites, mobile apps, or a combination thereof.

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Channel Complementarity

The ability of various distribution channels to complement each other by offering distinct advantages in different aspects of customer service.

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Response Time to Customers

Refers to the time it takes for a customer to receive a product after placing an order. Different channels have varying response times, with physical locations often being faster.

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Product Variety

The ability to provide a wide selection of products to customers. Online channels often have an advantage in this area due to their ability to aggregate inventories from multiple sources.

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Study Notes

Distribution Network Design in Supply Chains

  • Distribution moves and stores products from supplier to customer, impacting profitability and customer value.
  • Distribution network selection can optimize supply chains for cost or responsiveness.

Factors Affecting Distribution Network Design

  • Distribution network performance is measured by customer value and cost.
  • Customer service factors (response time, product variety/availability, experience, time-to-market, order visibility, and returnability) are influenced by network structure.
  • Supply chain costs (inventories, transportation, facilities, and information) are affected by network structure.

Relationships Between Factors and Number of Facilities

  • Figures show relationships between desired response time, inventory costs, transportation costs, facility costs, and the number of facilities.
  • A trade-off exists between response time and costs. Increased facilities generally decrease response time and increase costs. Conversely, fewer facilities increase response time and reduce costs.

Distribution Network Design Options

  • Key decisions include: delivery method (customer location or pickup) and intermediary use (or intermediate locations).
  • Six design options are:
    • Manufacturer storage with direct shipping
    • Manufacturer storage with direct shipping and in-transit merge
    • Distributor storage with carrier delivery
    • Distributor storage with last-mile delivery
    • Manufacturer/distributor storage with customer pickup
    • Retail storage with customer pickup

Omni-Channel Retailing

  • Omni-channel retailing uses multiple channels (information, products, and funds) to interact with customers.
  • Examples of Omni-channel alternatives include:
    • Traditional Retail (face-to-face, high inventory, low transportation costs)
    • Showrooms (face-to-face, low inventory, more transportation and information infrastructure)
    • Online Information + Home Delivery (high transportation costs)
    • Online Information + Pickup (reduced outbound transportation).

Performance Comparison of Channels

  • Response time: physical goods are quicker to pick up, while information goods are faster online.
  • Product variety: online offers greater variety.
  • Product availability: aggregation of inventory increases availability.
  • Customer experience: channels offer complementary strengths.
  • Time-to-market: online/showrooms are generally faster.
  • Order visibility: critical for showrooms and online, automatic in retail.
  • Returnability: easier with physical locations.
  • Direct Sales: manufacturers can use remote information exchange.
  • Funds transfer: internet/smartphones are efficient.

Framework for Omni-Channel Retailing

  • Product and customer characteristics (demand uncertainty, value, information complexity, willingness to pay) influence channel selection.

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Description

Explore the crucial aspects of distribution network design in supply chains, focusing on factors that impact customer value and costs. Learn about the relationship between service factors, cost factors, and the number of facilities needed to optimize efficiency in supply chain management.

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