Role of Distribution in Supply Chain

Distribution in the supply chain is like the delivery system of a big operation. It's all about
getting products from where they're made or stored to where they need to be—whether
that's to a store, a warehouse, or directly to customers' homes. It involves planning routes,
choosing the right transportation methods, managing warehouses, and making sure
everything gets where it's supposed to go on time. Basically, it's about making sure things
move smoothly from point A to point B.

Steps to design a supply chain network

1. Clearly Define Your Objectives: Start by setting clear goals for your supply chain. What do
you want to achieve? This could include reducing costs, improving customer service,
increasing efficiency, or expanding into new markets.
2. Gathering Supporting Data: Collect all the relevant information you need to design your
supply chain. This includes data on demand patterns, market trends, customer
preferences, supplier capabilities, transportation costs etc.
3. Model Your Supply Chain: This involves mapping out the flow of products from suppliers
to customers, as well as the various processes and resources involved along the way. You
can use tools like flowcharts to help visualize and analyze your supply chain model.
4. Analyze Your Supply Chain Network: Look for opportunities to streamline processes,
optimize resource allocation, and reduce costs while still meeting your objectives. This
might involve looking for areas of improvement.
5. Implement and Refine: This might involve making changes to your infrastructure,
systems, processes, or relationships with suppliers and customers. After implementation,
continue to monitor and evaluate your supply chain performance.

7 Solid Factors in designing a supply chain network

Location and Distance: Where you put your factories and warehouses matters a lot. It affects
how much it costs to move things around and how long it takes. Being close to suppliers,
customers, and transportation centers is important.
Current and Future Demand: It's crucial to know how much people want to buy now and
predict what they'll want in the future. This helps plan how much stuff to keep in stock and
where to send it.
Service Requirements: Different products need different treatment. Valuable items might
need extra security. Making sure products get what they need keeps customers happy and
keeps you competitive.
Size and Frequency of Shipment: How much stuff you send and how often you send it affects
costs. Sending a lot at once can save money, but smaller shipments might need different
plans.
Warehousing Costs: Running warehouses costs money. This includes renting or buying space,
paying workers, keeping the lights on, and managing inventory.
Trucking Cost: Choosing the right trucks and routes helps control costs and make sure things
arrive on time.
Mode of Transportation: You have choices on how to move things: by truck, train, plane, or
ship. Each has its pros and cons, like how fast they are, how much they cost etc.

Customer Service Components

Response Time: This is how quickly a company replies to a customer's inquiry or issue. It's
about being speedy in addressing customer needs.
Product Variety: This means offering a wide range of products for customers to choose from.
It's like having many flavors of ice cream to suit different tastes.
Product Availability: It's important for customers to find what they want when they want it.
Product availability means having items in stock and ready to buy.
Customer Experience: This is how customers feel when they interact with a company. It's
about making them happy and satisfied throughout their journey, from browsing to buying
and beyond.
Time to Market: This is how quickly a company can bring new products to customers. It's like
getting the latest phone out to people as soon as possible after it's made.
Order Visibility: Customers like to know where their order is and when it will arrive. Order
visibility means keeping customers informed about the status of their purchase.
Return Ability: Sometimes customers need to return items. Return ability is about making
this process easy and hassle-free for them, so they're more likely to come back in the future.

Designing Options
A) Manufacturer Storage with Direct Shipping
Imagine you're a company making a product. With manufacturer storage and direct shipping,
you have a few ways to get those to your customers.
1. Manufacturer Storage: This is where you keep your products after making them. You
might have a big warehouse where you store all the products until they're ready to be
sent out.
2. Direct Shipping: Instead of sending products to a middleman (like a distributor or
retailer) first, you ship them directly from your warehouse to the customer
Performance Characteristics
Faster Delivery: Since you're sending products straight from the manufacturer to the
customer, it can be faster than going through a middleman. Customers get their products
sooner, which makes them happy.
Lower Costs: Cutting out the middleman can save you money. You don't have to pay fees or
share profits with distributors or retailers. This can make your product cheaper for customers
or give you more profit.
Better Control: You have more control over the entire process. You know exactly how many
product you have in stock and where they're going. This helps you plan better and avoid
running out of product when customers want them.

B) Manufacturer Storage with Direct Shipping and In-Transit Merge

In this setup, the manufacturer stores their products in their warehouse after production.
However, instead of shipping each product directly to individual customers, they utilize a
concept called "in-transit merge."
In-Transit Merge: Rather than sending each product separately, the manufacturer might use
a strategy called in-transit merge. This means that instead of sending each product directly to
each customer, they send multiple products to a central location or hub.
Merge and Ship: At this central hub, the product from different orders are merged together.
Then, they're sent out for delivery to individual customers. This way, the manufacturer can
save on shipping costs.

Performance Characteristics
Efficient Shipping: In-transit merge allows the manufacturer to consolidate shipments, which
can reduce shipping costs and improve efficiency. By merging multiple orders into one
shipment, they can optimize transportation routes and save on fuel and resources.
Faster Delivery: While still maintaining direct shipping to customers, the in-transit merge
process can also speed up delivery times. By streamlining the shipping process and reducing
the number of individual shipments, customers may receive their orders more quickly.
Cost Savings: By consolidating shipments and optimizing transportation routes, the
manufacturer can save money on shipping expenses. This can lead to lower costs for both the
manufacturer and the customers, making products more affordable and competitive in the
market.
C) Distributor storage with package carrier delivery
In this model, instead of the manufacturer handling storage and shipping directly to
customers, the products are first sent to distributors for storage. The distributors then handle
the logistics of storing the products and arranging for package carriers to deliver them to the
customers.
Distributor Storage: Upon receiving the products, the distributors store them in their
warehouses or distribution centers until they're needed.
Package Carrier Delivery: When a customer places an order, the distributor picks the product
from their inventory, packages it, and then arranges for a package carrier to deliver it to the
customer's address.

Performance Characteristics
Local Presence: Distributors are often strategically located closer to the customers, which can
result in faster delivery times compared to shipping directly from the manufacturer's location.
This local presence can also help in managing returns or exchanges more efficiently.
Reduced Shipping Costs: Shipping in bulk to distributors and then using package carriers for
final delivery can sometimes be more cost-effective than shipping directly from the
manufacturer to individual customers. Distributors may have negotiated better shipping rates
due to the volume of shipments they handle.
Scalability: Distributors can handle a large volume of products and orders, making them well-
equipped to scale operations to meet fluctuating demand or seasonal peaks.

D) Distributor storage with last mile delivery

In this model, the manufacturer sends products to distributors for storage, and the
distributors handle the last leg of the delivery process, known as the "last mile," to get the
products directly to the customers' doorsteps.
Last Mile Delivery: When a customer places an order, the distributor picks the product from
their inventory, packages it, and then arranges for last mile delivery. Last mile delivery
involves transporting the product from the distributor's facility directly to the customer's
location, typically their home or business address.

Performance Characteristics
Local Expertise: Distributors often have intimate knowledge of their local areas, allowing
them to navigate efficiently through neighborhoods and handle specific delivery challenges
like traffic patterns or delivery preferences.
Cost-Efficiency: Leveraging distributors for last mile delivery can result in cost savings for
manufacturers by reducing the distance traveled and optimizing delivery routes, ultimately
lowering overall transportation expenses.
Customer Convenience: Last mile delivery allows for flexible delivery options such as evening
or weekend delivery slots, enhancing convenience for customers who may not be available
during traditional delivery hours.

E) Manufacturer/Distributor storage with customer pick-up

In this model, the manufacturer or distributor stores products in their facilities, and customers
have the option to pick up their orders directly from these locations instead of waiting for
delivery.
Manufacturing/Distribution: The manufacturer or distributor receives products from
suppliers or produces them in-house. These products are then stored in their warehouses or
distribution centers.
Customer Pick-Up: Customers visit the designated pick-up location, which could be the
manufacturer's factory, a distribution center, or a retail outlet operated by the distributor.
They present their order confirmation or identification, and the staff retrieves their order for
them to collect.

Performance Characteristics
Flexibility: Offering customer pick-up provides flexibility for customers who prefer to collect
their orders at their convenience. They can choose a pick-up time that suits their schedule
without having to wait for a delivery.
Cost Savings: Eliminating the need for home delivery can lead to cost savings for both the
manufacturer/distributor and the customer. There are no shipping fees involved, and the
manufacturer/distributor may also save on transportation and labor costs associated with
delivery.
Instant Satisfaction: Customer pick-up offers immediate access to purchased items.
Customers can receive their orders on the same day they place them, enhancing the overall
shopping experience and satisfaction.

F) Retail storage with customer pick-up

In this model, retail stores serve as storage locations for products, and customers have the
option to purchase items online and then pick them up directly from the store.
Retail Store as Storage: Retail stores stock products in their inventory for sale to customers
who visit the store in person. These products are displayed on shelves or in designated areas
within the store.
Order Processing and pick-up: After receiving online orders with pick-up requests, the
retailer's staff processes the orders and prepares the items for pick-up. This may involve
retrieving the products from the store's inventory, packaging them if necessary, and labeling
them for easy identification. Afterwards customers come to pick their orders.

Performance Characteristics
Convenience: Retail storage with customer pick-up offers convenience for customers who
prefer to shop online but want the flexibility to collect their purchases at their convenience.
They can avoid shipping fees and receive their orders quickly without waiting for delivery.
Reduced Shipping Costs: By leveraging existing retail store infrastructure for order pick-up,
retailers can save on shipping costs associated with home delivery. This cost-saving benefit
can be passed on to customers through lower prices or other incentives.
Increased Foot Traffic: Offering in-store pick-up encourages customers to visit the retail store,
potentially leading to increased foot traffic and additional sales opportunities. Customers may
browse additional items or make impulse purchases while picking up their orders.