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10 Cards in this Set
- Front
- Back
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Distribution strategy lower or higher in what system (centralized or decentralized) - Safety stock - Service level - Overhead costs - Customer lead time - Transportation costs - Economies of scale |
- Safety stock: lower with centralization - Servicelevel: higher service level for the same inventory investment with centralization - Overhead costs: higher in decentralized system - Customer lead time: response times lower in the decentralized system - Transportation costs: not clear, in most cases higher. Consider outbound and inbound costs. - Economies of scale:Through consolidation |
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Distribution strategy definition |
A distribution strategy defines how you are going to move products from point of creation to points of consumption,in a cost-effective manner: transportation |
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Two (3) basic distribution strategies |
- Direct shipment distribution strategies directly from manufacturer to retailer - Intermediate inventory storage point strategies - Traditional warehousing - Cross Dock - Inventory Pooling - Transshipment (Another way to implement inventory pooling strategies) |
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Decision for Traditional Warehousing (5) |
- Key factors: - Inventory management - Risk pooling - Other factors: - Centralized vs Decentralized Management - Inventory decision: where which inventory is held (VMI)? - Central vs Local Facilities: Central or local stock |
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Pro’s (2) & Con’s (1) Direct Shipment |
Advantages: - Avoid the expenses of operating a distribution center - Lead times are reduced. Disadvantages: - Transportation costs increase |
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Direct shipment used when (2) |
- Retail store requires fully loaded trucks - Lead time is critical:perishable goods |
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Cross-Docking
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- Warehouses function:Inventory coordination point Not inventory storage point
- Goods remain in the dock(move from inbound to outbound dock) - Often at outsourced transportation by transportation company (HUB System) - Reduces transportation costs Increase system cost (invest in HUB SYSTEM)Difficult to coordinate |
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Cross-docking, great but... (6) |
- Significant start-up investment - Very difficult to manage - Distribution centers, retailers and suppliers must be linked with advanced information system - Fast and responsive transportation system - Forecasts are critical - Effective only for large distribution systems, in which a large number of vehicles are delivery and picking up goods at any one time |
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Transshipment |
- Shipment of items between different facilities at the same level in the supply chain to meet some immediate need
- Occurs mostly at the retail level - Can be achieved: - With advanced information systems - Shipping costs are reasonable - Retailers have same owner |
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What strategy to adopt (picture) |
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