Designing Distribution Networks & Applications To E-Business
Designing Distribution Networks & Applications To E-Business
Designing Distribution Networks & Applications To E-Business
DESIGNING DISTRIBUTION
NETWORKS & APPLICATIONS TO E-
BUSINESS
BPB32303
Learning Objectives
1. Identify the key factors to be considered when
designing a distribution network
2. Discuss the strengths and weaknesses of various
distribution options
3. Understand the effect of online sales on the design of
distribution networks in different industries
The Role of Distribution in the Supply Chain
Required
Number of
Facilities
Response Time
Cost Inventory
Facility
Number of Facilities
Factors Influencing Distribution Network Design
• A firm must evaluate the impact of different options of
distribution network on customer service and cost.
• Profitability of the delivery network:
• Revenue from met customer needs
• Network costs
Factors Influencing Distribution Network Design
• Elements of customer service influenced by
network structure:
Response time
Product variety
Product availability
Customer experience – how easy can customer place
and receive order
Time to market
Order visibility – ability to track order
Returnability
Factors Influencing Distribution Network Design
Network structure affect supply chain costs:
Inventories
Transportation
Facilities and handling
Information
Design Options for a Distribution Network
• The design of distribution network choices from the
manufacturer to the end consumer must consider two key
decisions:
1. Will product be delivered to
the customer location or
picked up from a
prearranged site?
Inventory L
Cost Factor
Manufacturer
Transportation H
Facilities and handling L
Information H
Retailer
Response time H
Product variety H
Service Factor
Product availability H
Customer experience M
Customers Order visibility L
Returnability L
Factories
Inventory L
Cost Factor
Transportation M
Facilities and handling M
Information H
Retailer In-Transit Merge by Carrier Response time H
Service Factor
Product variety H
Product availability H
Customer experience H
Order visibility L
Customers
Returnability L
Factories Inventory M
Cost Factor
Transportation L
Facilities and handling M
Information M
Warehouse Storage by
Response time M
Distributor/Retailer
Service Factor
Product variety M
Product availability M
Customer experience H
Customers Order visibility M
Returnability M
Product Flow Information Flow
Distributor Storage with Last Mile Delivery
Inventory H
Cost Factor
Factories
Transportation H
Facilities and handling H
Information M
Response time L
Distributor/Retailer
Service Factor
Product variety L
Warehouse
Product availability L
Customer experience H
Order visibility M
Customers Returnability M
Factories
Inventory ?
Cost Factor
Transportation L
Facilities and handling ?
Retailer Information H
Cross Dock DC
Response time L
Service Factor
Product variety H
Pickup Sites Product availability H
Customer experience L
Order visibility H
Customers Returnability H
Manufacturers Inventory H
Cost Factor
Transportation L
Facilities and handling H
Information ?
Response time L
Service Factor
Distributor Distributor Product variety L
Warehouse Warehouse
Product availability H
Customer experience ?
Order visibility L
Retailer Retailer Retailer
Returnability H
Consumers
Impact of Online Sales on Customer Service
• Response time to customers
– Physical products take longer to fulfill than retail store
– No delay for information goods
• Product variety
– Easier to offer larger selection
• Product availability
– Aggregating inventory and better information on customer
preferences improves product availability
Impact of Online Sales on Customer Service
• Customer experience
• Improved access, customization, and convenience
• Order Visibility
• Returnability
• Harder with online orders
• Proportion of returns likely to be much higher
Impact of Online Sales on Customer Service
• Direct Sales to Customers
• Social networking channels allow firms to directly pitch products
and promotion
• Facilities
• Costs related to the number and location of facilities in a network
• Costs associated with the operations in these facilities
Impact of Online Sales on Cost
• Transportation
• Lower cost of “transporting” information goods in digital form
• For non-digital, aggregating inventories increases outbound
transportation
• Information
• Share demand, planning, and forecasting information throughout
its supply chain
• Additional costs to build and maintain the information infrastructure
Using Online Sales to Sell Computer Hardware
Using Online Sales to Sell Computer Hardware
• Impact of online sales on customer service
• Delay in fulfilling customer request