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© 2007 Pearson Education 14-1 Supply Chain Operation DELIVER
Chapter 7 - Deliver
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Supply chain management
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Chopra 2nd Edition, Chapter 14Limiting the distribution to only one
intermediary in the territory
Intensive distribution
Distribute from as many outlets as possible to provide location
convenience
Selective distribution
*
When a single outlet is given an exclusive franchise to sell the
product in a geographic area, the arrangement is referred to as
exclusive distribution
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Example of Exclusive Distribution
Products such as specially automobiles, some major appliances,
certain brands of furniture eg IKEA,
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Enhance product’s image & allow higher markups
Promotes dealers loyalty, better forecasting, better inventory and
merchandising control
Restricts resellers from carrying competing brands
*
Betting on one dealer in each market
Only suitable for high price, high margin, and low volume
products
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Example of Intensive Distribution
Intensive distribution is appropriate for products such as chewing
gum, candy bars, soft drinks, bread, film, and cigarettes where the
primary factor influencing the purchase decision is
convenience
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Disadvantages:
Characteristically low price and low-margin products that require a
fast turnover
Difficult to control large number of retailers
Intensive Distribution
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Selective distribution may be used for product categories such as
clothing, appliances, televisions, stereo equipment, home
furnishings, and sports equipment.
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More control and less cost than intensive distribution
Concentrate effort on few productive outlets
*
May not cover the market adequately
Difficult to select dealers (retailers) that can match your
requirement and goals
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investment decisions
operating policies
Costs considerations:
Trip-related: labour and fuel
supply chain design
transportation mode choice
Cost considerations:
Facility: e.g. warehouse operating costs
Processing: loading/unloading, invoicing, etc.
Responsiveness; Delivery guarantees
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Direct Shipment with Milk Runs
Delivery from single supplier to several retailers
Central Distribution Centre (DC)
Central Distribution Centre with Milk Runs
Tradeoffs? Number and location of DC’s?
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Choice of transportation mode
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Choice of Transportation Mode
A manager must account for inventory costs when selecting a mode of
transportation
A mode with higher transportation costs can be justified if it
results in significantly lower inventories
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Tailored Transportation
The use of different transportation networks and modes based on
customer and product characteristics
Factors affecting tailoring:
Role of IT in Transportation
The complexity of transportation decisions demands to use of IT
systems
IT software can assist in:
Identification of optimal routes by minimizing costs subject to
delivery constraints
Optimal fleet utilization
Risk that the shipment is delayed
Risk of disruptions
Alternative routings
In case of hazardous materials the use of modified containers,
low-risk transportation models, modification of physical and
chemical properties can prove to be effective
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Design a transportation network that can handle
e-commerce