Distribution MAnagement

Specialist Diploma in Supply Chain Management DISTRIBUTION AND TRANSPORTATION MANAGEMENT (MA2018) Group Assignment-2
How distribution operations translate their impacts on the external customers to generate internal benefits for the company.
Page 0 of 20
CONTENTS Page no. 1. Introduction -----------------------------------------------------------------------2 1.1) Advantage of Distribution Channel -------------------------------2
2. External Benefits to customer-----------------------------------------------5 2.1) 2.2) 2.3) 2.4) 2.5) 2.6) 2.7) 2.8) Delivery performance----------------------------------------------------5 JIT ---------------------------------------------------------------------------5 Lead time-------------------------------------------------------------------6 Flexibility--------------------------------------------------------------------6 Response time------------------------------------------------------------6 KPI---------------------------------------------------------------------------7 Perfect fulfilment---------------------------------------------------------10 Good Price----------------------------------------------------------------11
3. Internal Benefit for Company-----------------------------------------------12 3.1) 3.2) 3.3) 3.4) 3.5) Cash to cash cycle------- ---------------------------------------------12 Productivity & Efficiency----------------------------------------------12 Inventory turnover-------------------------------------------------------13 Gap model of service quality----------------------------------------15 Service Profit Chain----------------------------------------------------16
4. Conclusion and Recommendation----------------------------------------18 Reference-----------------------------------------------------------------------19
1. Introduction
The main focus on the objectives of the organization relies upon keeping costs to a minimum and the level of the service at the highest quality possible. This is
understood as the key in establishing organizational objectives. As an important component of the supply chain, customers influence on the whole supply chain cannot be ignored because their satisfaction on the service directly affected the business benefits. Thus, the companies all try the utmost to cater to the customers needs by adopting various distribution strategies either in information technology or organizational restructure (adjustment) to improve the different components of the supply chain such as delivery performance, Just in Time (JIT), lead time, flexibility and response time. These factors will be briefly discussed to explain how they will switch the impacts on the external customers into generating the internal benefits of the companies.
1.1) Advantages of a Distribution Channel When a customer is considering buying a product he tries to access its value by looking at various factors which surround it. Factors like its delivery, availability etc which are directly influenced by channel members. Similarly, a marketer too while choosing his distribution members must access what value is this member adding to the product. He must compare the benefits received to the amount paid for using the services of this intermediary. These benefits can be the following: Cost Saving
The members of distribution channel are specialized in what they do and perform at much lower costs than companies trying to run the entire distribution channel all by itself. Time Saving Along with costs, time of delivery is also reduced due to efficiency and experience of the channel members. For example if a grocery store were to receive direct delivery of goods from every manufacturer the result would have been a chaos. Everyday hundreds of trucks would line up outside the store to deliver products. The store may not have enough space for storing all their products and this would add to the chaos. If a grocery wholesaler is included in the distribution chain then the problem is almost solved. This wholesaler will have a warehouse where he can store bulk shipments. The grocery store now receives deliveries from the wholesaler in amounts required and at a suitable time and often in a single truck. In this way cost as well as time is saved. Customer Convenience Including members in the distribution chain provides customer with a lot of convenience in their shopping. If every manufacturer owned its own grocery store then customers would have to visit multiple grocery stores to complete their shopping list. This would be extremely time-consuming as well as taxing for the customer. Thus channel distribution provides accumulating and assorting services, which means they purchase from many suppliers the various goods that a customer may demand. Secondly, channel distribution is time saving as the customers can find all that they need in one retail store and the retailer. Customers can buy in small quantities Retailers buy in bulk quantities from the manufacturer or wholesaler. This is more cost effective than buying in small quantities. However they resell in smaller quantities to their customers. This phenomenon of breaking bulk quantities and selling them in smaller quantities is known as bulk breaking. The customers therefore have the benefit of buying in smaller quantities and they
3
also get a share of the profit the retailer makes when he buys in bulk from the supplier.
Customers receive financial support Resellers offer financial programs to their customers which makes payment easier for the customer. Customers can buy on credit; buy using a payment plan etc.
Resellers provide valuable information Manufacturers who include resellers for selling their products rely on them to provide information which will help in improving the product or in increasing its sale. High-level channel members often provide sales data. On all other occasions the manufacturer can always rely on the reseller to provide him with customer feedback.
Factors Affecting Distribution Facility Ownership
2. External Benefits to customer 2.1) Delivery Performance

Delivery performance is regarding the delivery accuracy and efficiency of the supply of product. For customer, the undoubtedly expect the product their order to be delivery carefully with no defect on the product with time efficiency, otherwise, they will widespread their unsatisfactory that lead to the blur of the image or brand of the company, as a result, the sales of the companies will be unavoidably decreased to finally affect the finance performance of the companies. Thus, an excellent delivery performance will surely add value to supply chain as enhance the image of the company to bring benefits to the company.
2.2) JIT (Just In Time)

Just in time (JIT) is an inventory strategy that focuses on improving the business' return on investment by and improving product quality and reducing waste. (Roberts, 2010) Its benefits can be listed as follows: As an order based inventory strategy, it improves the flow of product and significantly decreases the storage facilities, for the customers, the possibility of delay supply and damage of product is minimized because of the JITs system of kanban or specific instruction on the workers and the reduce of the use of associated facilities along the supply chain. (Roberts, 2010)
Also there is another benefit need to mention is the improvement on the product quality and productivity, as the manufacturing time is being cut down. That means the quantity of the product is in the trend of increase to satisfy the customers needs. (Roberts, 2010) eg; Wal-Mart approaches to JIT distribution strategy.
2.3) Lead Time

Lead time in the aspect of supply chain management is described as the time it takes from a customer determining a request of a product until they receive it. (Core Logistics Consulting Pty Ltd, 2011) Specifically, it is divided into three stages, pre-processing, processing and post-processing. The importance of the lead time is attributed its intensive integration as it is involved with different processes of the supply chain such as review, manufacture and transit both in information and production aspects. (Core Logistics Consulting Pty Ltd, 2011) Therefore, the improvement of the lead time management is directly linked to a systematic adjustment on the supply chain to ensure the collaboration among staff to staff, team to team and process to process to be somehow efficient to form up a supply life circle for the customers. Undoubtedly, building up an efficient supply chain with low lead time is a time-consuming process which is in need much effort from different parties within the business to finally satisfying customers expectation on the supply of the ordered products.
2.4) Flexibility
Flexibility of the supply chain is often called as the agility of the supply chain. The ever-changing environments (socio-political, changing demand etc.) are the cause for increasing uncertainty in the market place that makes the flexibility in the supply chain becomes more important. (Kopecka, et al, 2009) It is undoubtedly a disaster if a supply chain being inefficient due to lack of the flexibility that will waste resource and time on the firms even lower companies
image in the industry. Thus, a well-design supply chain with flexibility is critically important to the firms.
2.5) Response Time

In the aspect of the response time of the supply chain, it is about the communication and information transfer between the external customer and the firms, and the internal communication among the different departments or teams within the firm. The importance of the response time of the supply chain is being underlined by the everlasting development of the information technology in business arena. Therefore, for the companies, the competition on the adopting or updating information technologies regarding supply chain is much fiercer. Thus, how to catch up on the information technologies competition is cracking the managers brain. In order to reduce the response time of the supply chain, the companies use following approaches: As mentioned above, the adoption of the updating information
technologies regarding supply chain. Well-training the staffs to be able use the information technologies
easily and generating a sense of responsibility and collaboration. Restructuring the organization to make it more flexible and balanced
to resist any impact from the external customers to finally change to the motivation of the workers. Thus, after adopting these approaches both in technical and organizational aspects, the communication and information exchange along the supply chain will be more speedy to reduce the response time to finally decrease the complain from customers and improve the overall quality and quantity of the supplied products.
2.6) KPI
KPI must to the extent necessary for an understanding of the development, performance or position of the companys business, include: (a) Analysis using financial key performance indicators
7
(b) Where appropriate, analysis using other key performance indicators, including information relating to environmental matters and employee matters.
Key performance indicators means factors by reference to which the development, performance or position of the business of the
customer/company can be measured effectively. Customer can then judge the reliability for themselves and make any necessary adjustments in their own analysis. Where data has been specifically assured by independent third parties, identifying this may also assist the customers. It is also worth noting that our experience shows that customers are often as interested in the trend of a KPI as the absolute performance being reported.
Supply Chain Output KPIs: 1) Procurement & Supplier Management KPIs Number of suppliers managed / purchasing FTE Supplier in full Supplier on time Supplier rejections Average variable cost of placing order with supplier Cost of purchasing as % of gross sales Total procured spend as % total business costs Account payable days
2) Inventory Management & Forecasting Number of SKUs / Line Items Stock turn over - finished goods Stock turn over - raw materials Level of accuracy in Catalogue Stock available at customers first request Sales Forecasting Accuracy by SKU and volume Inventory obsolescence Inventory management cost as % of gross sales
Inventory holding costs (IHC) as % of gross sales Interest charge for IHC Inventory holding costs (IHC) as % of inventory value Average inventory value Raw material days (if relevant) Work in progress days (if relevant) Finished goods days
3)
Warehouse / DC KPIs Number of order processed in DC per day / FTE Time product availability for sales after receipted Order picking accuracy rate Service level - DIFOT (delivery in full on time) Inventory items incorrectly located Inventory items with incorrect stock balances Warehouse shrinkage Total warehouse time lost per person thru injury How many times is product handled? Picking productivity by pickers and all staff Inventory accuracy rate at Item level Average lead time in DC Number of DC in network DC / Warehousing cost as % of gross sales or GP
4)
Transport KPIs Number of customers order dispatched per day / FTE How often trucks are fully loaded Amount of back loading On time deliveries Total Cost as a % of gross sales or GP
5)
Customer Service KPIs
Number of customers order processed per day / FTE Average lead time for all orders Order entry accuracy Delivered in full to customer - by case / unit Delivered in full to customer - by line / SKU Delivered in full to customer - by order Delivered on time to customer Time window that defines on time In full - on 1st request or negotiated or std? Percentage of customer claims Product returns Product Damage Invoice accuracy Customer Service Cost as a % of gross sales or GP Accounts receivable days Retrieval of signed PODs Stock Outs
2.7) Perfect Fulfilment

Fulfilment of distribution services give customer a measurable advantage saving time, money, and resources, by allowing the focusing on marketing, promotion, development and productivity. It can be done by outsourcing the storage, order processing/customer service and shipments. Customer can focus on growing core business while confident on inventory management system. Warehouse management systems software solutions improve product movement and storage operations through efficient management of information and completion of distribution tasks. Barcodes and RFID are the automatic identification tools of choice in distribution to help track, locate, and move
10
product quicklywith near-perfect accuracy rates to their consumers.. Perfect Fulfilments improve to delivery speed and delivery reliability for customer e.g; Zaras use the fast replenishment (twice a week) system for inventory with 2-3 day lead time (High speed fulfilment to market).Amazon are also efficient and reliable order fulfilment in product selection and availability. Customers want to receive the exact products and quantities that they ordered, not substitute items, incorrectly shipped items, or wrong quantities. Timeliness is a critical component of customer service.
Perfect order index (POI) Perfect order index (POI) delivered to the right place at the right time in defect-free condition with the correct documentation, pricing, and invoicing
2.8) Good Price

By using the low cost manpower and raw material resources, products are around 60-70% of the international market prices. By doing the same business, if the customer's previous net profit level is around 25%, by purchasing the components, the net profit level will be increased by 50-80% that is around 4050% net profit by outsourcing to high resources in low cost. And this great reduction of purchasing costs will also increase customers market
competitiveness strongly. To offer the good price to customers, some following factors are needed; Supply chain driven Effective manufacturing and logistics system Vendor partnerships
11
Good inventory management system(Cross Docking technology) to
reduce the inventory carrying cost
E.g. Wal-Marts the effective cost controlling method can offer every day low price to customers.
3. Internal Benefit for Company 3.1) Cash to Cash Cycle

The cash to cash cycle (cash conversion cycle) is an-easy-to-use metric to calculate how long cash is tied up in the main cash producing and cash consuming areas: receivables, payables and inventory. The Cash to Cash Cycle = Receivable Days + Inventory Days - Payable Days. A firms Cash-to-Cash Cycle is one of the key measurements of the operating efficiency of the extended value chain, and measures the time the operating capital (cash) is out of reach for use by the business . Excellence in logistics and distribution management is very critical to ensure optimum operational costs, achieve on-time delivery and improve customer satisfaction. For a country like India where the average logistics cost is estimated to be ~14% of GDP as against 8-9% in developed countries, efficient management of logistics is a strategic compulsion to retain competitiveness for any firm focused on the domestic market or exports.
3.2) Productivity and efficiency
12
To get high Productivity & Efficiency in distribution system, it is needed to build on top of a network and tries to hide the existence of multiple autonomous computers. It appears as a single entity providing the user with whatever services are required. A network is a medium for interconnecting entities (such as computers and devices) enabling the exchange of messages based on wellknown protocols between these entities, which are explicitly addressable (using an IP address, for example). There are various types of distributed systems, such as Clusters, Grids, and P2P (Peer-to-Peer) networks, distributed storage systems and so on. A cluster is a dedicated group of interconnected computers that appears as a single supercomputer, generally used in high performance scientific engineering and business applications. A grid is a type of distributed system that enables coordinated sharing and aggregation of distributed, autonomous,
heterogeneous resources based on users QoS (Quality of Service) requirements. Grids are commonly used to support applications emerging in the areas of e-Science and e-Business, which commonly involve
geographically distributed communities of people who engage in collaborative activities to solve large scale problems and require sharing of various resources such as computers, data, applications and scientific instruments. P2P networks are decentralized distributed systems, which enable
applications such as file-sharing, instant messaging, and online multiuser gaming and content distribution over public networks. E.g. of bottlenecks (i.e., effectively limitations) Centralized components: a single mail server Centralized tables/data: a single URL address book Centralized algorithms: routing based on complete information
3.3)
Inventory turnover
To Find the Right Inventory level, the company must also find the balance between
13
Maintaining a wide assortment of stock but not spreading rapidly moving goods too thin. Increasing inventory turnover but not sacrificing service level. Keeping stocks low but not sacrificing service or production efficiency. Obtaining lower prices by making volume purchases but not ending up with slow-moving inventory Having a adequate inventory on hand but not getting caught with obsolete items. A good distribution system will help enable the Inventory Turnover increase. Increasing inventory turnover will reduce stock, but the way set up for automatic replenishment of stock can have a profound effect on the costs. Inventory Control helps the company make the best decision for the business like
It will give the company forecasts of demand based on historical information, from the customers forecasts of their needs, or from demand-driven manufacturing systems
It helps you set EOQ (economic order quantities) and calculates the best times to order new inventory. It deploys calculation rules according to the product type you specify. But the company can adapt the rules to your own needs and simulate their effect before you put them into practice
It steers the company towards appropriate safety stock levels for different products based on their lead-times and variations in demand.
14
3.4)
Gap Model Of Service Quality
An excellent distribution system is extremely important for a company to be profitable. The below mentioned is the correlation of services for a distribution network with customers.
15
The five gaps that organizations should measure manage and minimize:
Gap 1(Knowledge Gap) is the distance between customers expectations and Company perceptions of Customer. Gap 2(Service Design & Standard Gap) is between management perception and the actual specification of the customer experience. Gap 3(Service Performance Gap) is from the experience specification to the delivery of the experience - Management needs to audit the customer experience that their organization currently delivers in order to make sure it lives up to the spec. Gap 4( Communication Gap) is the gap between the delivery of the customer experience and what is communicated to customers - All too often organizations exaggerate what will be provided to customers, or discuss the best case rather than the likely case, raising customer expectations and harming customer perceptions. Gap 5( Service Quality Gap ) is the gap between a customer's perception of the experience and the customer's expectation of the service - Customers' expectations have been shaped by word of mouth, their personal needs and their own past experience. Routine transactional surveys after delivering the customer experience are important for an organization to measure customer perceptions of service. Each gap in the customer experience can be closed through diligent attention from management.
The gaps can be narrowed with Crosbys 14 quality steps emphasized zerodefects through: Management commitment Teamwork Training
Adequate Measurement
16
3.5) Service Profit Chain
The service-profit chain establishes relationships between profitability, customer loyalty, and employee satisfaction, loyalty, and productivity. The links in the chain (which should be regarded as propositions) are as follows: Profit and growth are stimulated primarily by customer loyalty. Loyalty is a direct result of customer satisfaction. Satisfaction is largely influenced by the value of services provided to customers. Value is created by satisfied, loyal, and productive employees. Employee satisfaction, in turn, results primarily from high-quality support services and policies that enable employees to deliver results to customers. The service-profit chain is also defined by a special kind of leadership that emphasizes the importance of each employee and customer.
Excellent distribution systems will meet the satisfactions and create values in service profit chain.
17
4. Conclusions and Recommendations

In conclusion, undoubtedly, good distribution and transport operations will benefits a company in areas such as greater vehicle utilization, improved and more responsive customer service, reduced transportation expenses and reduced capital investment in equipment. As the recommendations, the followings are presented as further improvements. Improve the companys growth strategy:

Improvement of distribution channel strategy Identification of most appropriate partners Generation of additional revenue streams Consolidation of the market leadership Development of the company value and image Organic expansion
Identify and structure new commercial opportunities:

Contrast competition and gain market share Inverse trends of margins erosions Address changing customer needs Share costs among companys business
Increase the companys internal expertise:

Additional knowledge and new angles of analysis Structured framework transferable to similar internal initiatives Improved global vision and understanding Awareness of distribution channel partner strengths and weaknesses Capitalization on internal skills and synergies
18
Reference
Text book, MA2018 ,Distribution and Transportation Management http://www.impgroup.org/uploads/papers/7315 http://www.scdigest.com/assets/FirstThoughts/10-03-04.php http://www.corelogistics.com.au/Inventory_management_lead_time_reduction.htm l http://www.brighthub.com/office/project-management/articles/72083.aspx http://www.tutorsonnet.com/marketing_homework_help/distribution/advantages_di sadvantages_distribution_channel_assignment_help_tutoring.htm http://www.ibs.net/solutions/distribution-supply-management/inventory-control/
19

Distribution MAnagement

Hochgeladen von

Dokumentinformationen

Copyright

Verfügbare Formate

Dieses Dokument teilen

Dokument teilen oder einbetten

Freigabeoptionen

Stufen Sie dieses Dokument als nützlich ein?

Sind diese Inhalte unangemessen?

Copyright:

Verfügbare Formate

Distribution MAnagement

Hochgeladen von

Copyright:

Verfügbare Formate

Specialist Diploma in Supply Chain Management DISTRIBUTION AND TRANSPORTATION MANAGEMENT (MA2018) Group Assignment-2

4. Conclusion and Recommendation----------------------------------------18 Reference-----------------------------------------------------------------------19

Factors Affecting Distribution Facility Ownership

2. External Benefits to customer 2.1) Delivery Performance

2.2) JIT (Just In Time)

2.3) Lead Time

2.5) Response Time

Customer Service KPIs

2.7) Perfect Fulfilment

2.8) Good Price

Good inventory management system(Cross Docking technology) to

reduce the inventory carrying cost

3. Internal Benefit for Company 3.1) Cash to Cash Cycle

3.2) Productivity and efficiency

Gap Model Of Service Quality

3.5) Service Profit Chain

4. Conclusions and Recommendations

Identify and structure new commercial opportunities:

Increase the companys internal expertise:

Das könnte Ihnen auch gefallen