Supply chain & Logistic Management

Individual Assignment
DESIGN OPTIONS FOR A DISTRIBUTION NETWORK

MASTER OF BUSINESS ADMINISTRATION

POSTGRADUATE INSTITUTE OF AGRICULTURE

UNIVERSITY OF PERADENIYA

G.G.G.N.M.C.L.K Nawarathna

Student number # 17253

 1. Manufacturer storage with direct shipping
Manufacturer storage with direct shipping
Manufacture rs

Example: - Retailer - Forbes Marshall Lanka (Pvt) Lt – Total

solution for the Boilers Retailer

Manufactures: India - Steam equipment / UK – drivers / German

monitoring system. China – pipe line/ gauges Cus tome rs
Information Flow .........
Product Flow

Customers: Brandix / Insee cement / CEB. / Boiler uses.

Cost Factor Performance

Inventory Forbes Marshall Lanka run without inventories. The ownership of inventories is at
manufacturer.
Transportation Transport cost is high. once the order is place to retailer or local urgent ship good to
customer
Customer happy because Drop shipping delivery. Logistic part handle by manufacture.
Facilities and handling Good for high-value, Lower facility costs because of aggregation. Some saving on
handling costs is high.

Information Information flow is haling via internet trailer collect orders. Due to too much technical
data collecting bit long process. Time wastage is high.
Service Factor Performance
Response time Response time may vary by product. In average response time higher.
Product variety They have long range of suppliers and manufactures. Sometime same product few
manufactures then variety is high. though website customer can view all the details.
Product availability Product availability is high. manufacture is maintaining to maintain inventory.
Customer experience Product is technical. Supplier bargaining power little higher.
Returnability Returnability high. If any quality failure retailer attending fast.

2. Manufacturer storage with direct shipping and In-transit merge

Example - Kapruka.lk
Manufacturer storage with direct shipping and in transit merge

Kapruka.lk is merge with different partners for their business Manufacturers

categories like bakery items, Jewelry shops/ fancy items
/clothing. Then shipments from multiple manufactures are
merged before making a single delivery to the consumer. Mergers Retailer

Specially Kapruka registered clothing supplier location around

Maharagama area. Maharagama and Kottawa that supplier has Customers
Information Flow .........
Product Flow
own warehouse. common products they are sending over there.
once Kapruka got order to kandy. They collect from warehouse and deliver to end customer.

Cost Factor Performance

Inventory Kapruka as retailer carry without inventories. The ownership of inventories is at
manufacturer. Similar to drop shipping
Transportation Lower transportation cost because Kapruka doesn’t want visit every supplier. Because
Shipments to Mergers are larger so economies of scale are achieved. Shipments from
multiple manufactures are merged before making a single delivery to the consumer
Facilities and handling Due to Mergers before shipments from different manufactures from different locations
of Kapruka may reason to increase facility costs.
Information Information flow is high accuracy than drop shipping.
 Service Factor Performance
Response time Due to the transaction flow of Kapruka, response time may go up. It’s can be similar or
higher than drop shipping
Product variety High availability due to long range of suppliers and manufactures. Sometime same
product with few manufactures then variety is high. As an example Kapruka has many
more different suppliers for bakery items. Customers have wider range of variety to
select products.
Product availability Product availability also high only for common qualities.
Customer experience Customer receives the order by single delivery to the door step by Kapruka.
Returnability In this model Kapruka take responsibility and Returnability is quit high .
Order visibility Similar to drop shipping or somewhat more difficult

3. Distributor storage with carrier delivery

Distributor storage with carrier delivery
Example – Nestle Company: premium market
Manufacturers

Customer: Star class hotels

Nestle Sri Lanka used distributors or retailors to hold their inventories. Distributor Distributor
Warehouse Warehouse
These outsource are houses are physically closer to Customers which
leads to Faster response time and lower transportation cost. Inventory
is held at a warehouse which ships to customer by carriers Information Flow .........
Customers Product Flow

Cost Factor Performance

Inventory Inventory is not held by the Nestle company but is held by their distributor/retailer in
intermediate warehouses. Higher inventory capacity is needed for distributors than the
Nestle manufacturer, since demand uncertainty is aggregated at a lower level. Since
items are in the FMCG category moment is fast.
Transportation Lower transportation costs when compared to manufacturer storage because warehouses
are physically closer to Customers. Package carriers are used to transport items from the
retailer to the customer
Facilities and handling Facility costs are higher with respect to direct shipping
Information With respect to direct shipping less information to track. Simpler structure compared to
manufacturer storage.
Service Factor Performance
Response time Better for medium to fast moving items. Better response time when compared to
manufacturer storage.
Product variety Distributor storage can handle somewhat lower variety than manufacturer storage but
it is better than a chain of retailers.

Product availability
Customer experience
Returnability
Order visibility
Lower than manufacturer storage because availability depend on storage capacity of
retailor or distributor of Nestle company. Extra investment is needed for larger
availability of retailors
Better customer experience than manufacturer storage with drop-shipping. Because
retailors located to nearly to the customers.
Easier than manufacturer storage customer can return to directly to retailors or
distributors.
Easier than manufacturer storage
 4. Distributor storage with last-mile Distributor storage with last-mile delivery

Manufacturers
delivery
Example – Insee cement
Distributor Distributor
Warehouse Warehouse

Market segment: Construction sites/ project base

customers Distributer deliver product nearby site one
Customers
time. Information Flow .........
Product Flow

Cost Factor Performance

Inventory Registered distributor for all main cities hold inventories for Insee cement.
Transportation Higher than any other distribution option. Insee cement integrated with the existing
distribution network. Transportation costs go up because warehouses but to get
comparative advantage distributer absorb the cost.

Facilities and Higher than all options but lower than chain of retail options. Hard to justify this option
handling when labor cost is high.
Information Similar to distributor storage with package carrier delivery.

Service Factor Performance

Response time Very short response time. Very quick, in 1 day. When there is large customer demand
from construction sites at higher price quickly deliver the order from Insee cement trough
distributor.
Product variety Somewhat less than distributor storage but larger than retail. Products must be flowing
fast to justify the infrastructure.

Product availability Lower than other options except retail stores. Extra investment is needed for larger
availability for distributors
Customer experience God customer experience because warehouse delivers to customers instead of carrier.
Returnability Easier than other options because d, more expensive and difficult than retail network.
Order visibility Easier than manufacturer storage or distributor with carrier delivery.

5. Manufacturer/distributor storage with customer pickup

1.Example – Vogue Jewelers, Vogue Manufacturer/distributor storage with customer pickup
jewelers based their business on making
Manufacturers
customized jewelry for weddings and other
customer requirements. Once customers need
jewelries go there and put order. Customers
Retailer Cross- Dock
must be alerted when their order is ready for DC

pick up Customers come to pick up outlets to

get the products. Order tracking is crucial. Pickup sites
Picup Sites

Customers must be alerted when their order Information Flow .........

Product Flow
is ready for pick up.

2. Example - Dambulu Furniture. Customers

Dambulu furniture making high end customized furniture according to customer orders. Once order done,
noticed to consumer arrives at the pickup site, the products must be quickly located. Significant amount of
information is required and increased handling cost because of customized product based.
 Service Factor Performance
Response time Similar to package carrier delivery with manufacturer or distributor storage. Same day
delivery is possible for items stored at cross doc site. When customer alert about order can
pick up the same day from both example companies Dambulu and Vogue.
Product variety Similar to other manufacturer or distributor storage options.
Product availability Similar to other manufacturer or distributor storage options.
Customer Lower than other options due to absence of home delivery. Discrepancy is less if pickup
experience points are dense. Both companies Vogue and Dambulu customers satisfied with the products
Returnability Easy if pickup points can handle returns.
Order visibility Essentially required but difficult

Cost Factor Performance

Inventory Inventory costs are low due to appropriate aggregation. Inventory is stored at the
manufacturer or distributor warehouse (cross dock). As example Vogue jewelers and
Dambulu furniture store their products their own cross docks/ outlets. customer place orders
and come to designated pickup points to collect their orders.
Transportation Transportation costs are low due to appropriate aggregation. Customers come and pick up
their orders of furniture from manufacturer( Dambulu Furniture)
Facilities and Can be very high if new facilities have to be built. The increase in the handling cost at the
handling pickup site can be large. Normally Dambulu furniture has large physical stores and vogue
located their stores within main cities with high class customer background.
Information Significant amount of information and high investment is required due customized product
Based.

6. Retail storage with customer pickup

1.Example - Toyota Lanka
Retail storage with customer pickup

These companies store products from different factories.

Manufacturers
Then customer pick up vehicle from show rooms. If the
product is available at the retailer, the consumer buys.
DC
(Factories: Japan/ Taiwan/ Malaysia DC: - Wattala,
Showrooms: Kandy/ Kurunegala/ Moratuwa.) Retailer Retailer Retailer

2. Singer Sri Lanka plc also can take account to this model.(
Factories in different countries DC :- Colombo
Customers Information Flow .........
Showrooms :- all over the country ) Product Flow

Cost Factor Performance

Inventory Higher than all options. Show rooms space limited. All vehicles coming directly to DC.
Then only move to the showrooms.
Transportation High transportation cost. Customers walk into the retail store or place. DC to showroom
transportation need special vehicle and host is high.
Facilities and handling Higher than other options. Insurance / security/ maintain, rental cost is incurred because
showrooms of Toyota, Singer located within the main cities.
Information High investment is required for online and phone orders

Service Factor Performance

Response time Response time high due to long transaction process. if good available same day pick is possible
Product variety Lower than all other option. Because of limited suppliers.
Product availability Very expensive to provide high levels, but both companies spending money on this to avoid
high competition.
Time to market Highest among the other option. Specially Toyota Lanka.
Returnability Easy if pickup points can handle returns