Supply Chain Management
4-1
Part 4
Designing the Distribution Network
in a Supply Chain
The Role of Distribution in Supply Chain
4-2
•Distribution is the movement of goods and services
from the source through a distribution channel, right
up to the final customer.
•Distribution directly affects cost and the customer
experience. (In retail industry, distribution affects about 35
percent of the revenue).
•Choice of distribution network can achieve supply
chain objectives from low cost to high
responsiveness.
Elements of customer service influenced
by distribution network
4-3
•Response time: is the time needed to fulfill the
customer’s need.
•Product variety: is the number of different products
which are available for the customers.
•Product availability: is the probability that the
product is in the stock, i.e. the customer can be
served immediately.
•Customer experience: is the ease with which
customers can place and receive orders.
Elements of customer service influenced
by network structure
4-4
•Time to market: is the time required to bring a new
product to the market.
•Order visibility: is the ability of customers to track
the order from placement to delivery. (E.g. DHL)
•Returnability: is the ease with the customer can
return the unsatisfactory merchandise.
Design Options for a Distribution Network
4-5
1. Manufacturer storage with direct shipping
2. Manufacturer storage with direct shipping and in–
transit merge
3. Distributor storage with carrier delivery
4. Distributor storage with last-mile delivery
5. Manufacturer/distributor storage with customer
pickup
6. Retail storage with customer pickup
