The Role of Distribution in the Supply Chain

Distribution refers to the steps taken to move and store a product from the supplier stage to a customer stage in the supply chain. Distribution occurs between every pair of stages in the supply chain. Raw materials and components are moved from suppliers to manufacturers, whereas finished products are moved from the manufacturer to

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Factors Influencing Distribution Network Design in the Supply Chain

At the highest level, performance of a distribution network should be evaluated along two dimensions: Value provided to the customer Cost of meeting customer needs Thus, as it compares different distribution network options, a firm must evaluate the impact on customer service and cost. The customer needs that are met influence the company’s reve­nues,

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Design Options for a Distribution Network in the Supply Chain

In this section, we discuss distribution network choices from the manufacturer to the end con­sumer. When considering distribution between any other pair of stages, such as supplier to manu­facturer or even a service company serving its customers through a distribution network, many of the same options still apply. Managers must make two key decisions

Online Sales and the Distribution Network in the Supply Chain

In this section, we use ideas discussed earlier in the chapter to see how the Internet has affected the structure and performance of various distribution networks. The goal is to understand what drove the successful introduction of online sales in some networks and not others, and how these networks are likely to evolve. Similar

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Distribution Networks in the Supply Chain in Practice

The ownership structure of the distribution network can have as big an impact as the type of distribution network. The bulk of this chapter deals with different types of physical net­works and subsequent flows to distribute products successfully. However, equally important is who owns each stage in the distribution network. Distribution networks that have

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Distribution network of Blue Nile and Diamond Retailing

A customer walks into your jewelry store with printouts of diamond selections from Blue Nile, a company that is the largest online retailer of diamonds. The list price for the customer’s desired diamond is only $100 above your total cost for a stone of the same characteristics. Do you let the customer walk, or

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The Role of Network Design in the Supply Chain

Supply chain network design decisions include the assignment of facility role; location of manu­facturing-, storage-, or transportation-related facilities; and the allocation of capacity and mar­kets to each facility. Supply chain network design decisions are classified as follows: Facility role: What role should each facility play? What processes are performed at each facility? Facility location:

Factors Influencing Network Design Decisions in the Supply Chain

In this section we examine a wide variety of factors that influence network design decisions in supply chains. 1. Strategic Factors A firm’s competitive strategy has a significant impact on network design decisions within the supply chain. Firms that focus on cost leadership tend to find the lowest cost location for their manufacturing facilities,

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Framework for Network Design Decisions in the Supply Chain

The goal when designing a supply chain network is to maximize the firm’s profits while satisfy­ing customer needs in terms of demand and responsiveness. To design an effective network, a manager must consider all the factors described in Section 5.2 and those discussed in Chapter 4. Global network design decisions are made in four

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Models for Facility Location and Capacity Allocation in the Supply Chain

A manager’s goal when locating facilities and allocating capacity should be to maximize the overall profitability of the resulting supply chain network while providing customers with the appropriate responsiveness. Revenues come from the sale of product, whereas costs arise from facilities, labor, transportation, material, and inventories. The profits of the firm are also affected

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Making Network Design Decisions in the Supply Chain in Practice

Managers should keep the following issues in mind when making network design decisions for a supply chain. Do not underestimate the life span of facilities. It is important to think through the long­term consequences of facility decisions because facilities last a long time and have an enduring impact on a firm’s performance. Managers must

Managing Growth at SportStuff.com

In December 2008, Sanjay Gupta and his management team were busy evaluating the performance at Sport- Stuff.com over the previous year. Demand had grown by 80 percent. This growth, however, was a mixed blessing. The venture capitalists supporting the company were very pleased with the growth in sales and the resulting increase in revenue.

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Designing the Production Network at CoolWipes

Matt O’Grady, vice president of supply chain at Cool- Wipes, thought that his current production and distribu­tion network was not appropriate, given the significant increase in transportation costs over the past few years. Compared to when the company had set up its produc­tion facility in Chicago, transportation costs had increased by a factor of

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The Impact of Globalization on Supply Chain Networks

Globalization offers companies opportunities to simultaneously increase revenues and decrease costs. In its 2008 annual report, P&G reported that more than a third of the company’s sales growth was from developing markets with a profit margin that was comparable to developed mar­ket margins. By 2010, sales for the company in developing markets represented almost

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The Offshoring Decision: Total Cost of Global Supply Chains

This importance of comparative advantage in global supply chains was recognized by Adam Smith in The Wealth of Nations when he stated, “If a foreign country can supply us with a commodity cheaper than we ourselves can make it, better buy it of them with some part of the produce of our own industry,

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Risk Management in Global Supply Chains

Global supply chains today are subject to more risk factors than localized supply chains of the past. These risks include supply disruption, supply delays, demand fluctuations, price fluctua­tions, and exchange rate fluctuations. As was evident in the financial crisis of 2008, underesti­mating risks in global supply chains and not having suitable mitigation strategies in

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Discounted Cash Flows in Global Supply Chains

Global supply chain design decisions should be evaluated as a sequence of cash flows over the duration of time they will be in place. This requires the evaluation of future cash flows account­ing for risks and uncertainties likely to arise in the global supply chain. In this section, we dis­cuss the basics of analysis

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Evaluating Supply Chain Network Design Decisions Using Decision Trees

In any global supply chain, demand, prices, exchange rates, and several other factors are uncer­tain and are likely to fluctuate during the life of any supply chain decision. In an uncertain envi­ronment, the problem with using a simple DCF analysis is that it typically undervalues flexibility. The result is often a supply chain that

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To Onshore or Offshore: Evaluation of Global Supply Chain Design Decisions Under Uncertainty

In this section, we discuss a supply chain design decision at D-Solar, a German manufacturer of solar panels, to illustrate the power of the decision tree analysis methodology for designing global supply chain networks while accounting for uncertainty. D-Solar faces a plant location decision in a global network with fluctuating exchange rates and demand

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Making Global Supply Chain Design Decisions Under Uncertainty in Practice

Managers should consider the following ideas to help them make better network design deci­sions under uncertainty. Combine strategic planning and financial planning during global network design. In most organizations, financial planning and strategic planning are performed independently. Strategic planning tries to prepare for future uncertainties but often without rigorous quan­titative analysis, whereas financial planning

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