Distribution Strategies

1. 1. Distribution Strategies Sudarshan Ku. Patel PGDMA-1320 NAARM

2. 2. Introduction • In business, distribution strategies are the process of making a
company’s product or service available to consumers either directly, through means such
as an online website, an actual storefront, or the dreaded telemarketer, or indirectly,
through multiple resellers. • Important to the process are channels and intermediaries •
Intermediaries are organizations and individuals • Channels are sets of these
intermediaries, classified by how many there are between the producer and the
consumer of a particular good or service • Oftentimes, most organizations will use a mix
of several different channels, so that they can reach a larger potential consumer base
3. 3. Distribution Strategies 1. Intensive Distribution • A distribution strategy that sees a
product sold in as many outlets as possible; it is used primarily for goods that are appeal
to a broad range of consumers, such as basic supplies, magazines, and snack foods. 2.
Selective Distribution • This distribution method relies on fewer intermediaries, while still
maintaining a respectable amount, and is used primarily for more specialized goods,
such as automobiles and computers. 3. Exclusive Distribution • A strategy wherein a
business selects a limited few intermediaries as partners; oftentimes these intermediaries
will sell only that business’s products to the exclusion of everything else. This distribution
strategy is typical of high end, luxury products, like sports cars and designer clothes.
4. 4. Direct Shipping • Method of distribution in which goods come directly from suppliers to
retail stores • The routing of each shipment & manager only need to decide on quantity to
ship & mode of transportation to use • It eliminates need of intermediate facilities e.g.
warehouses & distribution centers
5. 5. Advantages • Elimination of intermediaries • Saves time • Less Damage • Improved
accuracy Challenges • Large retail stores : It is justified if the retail stores are large
enough. With small size of retail stores cost increases. • Higher costs : Due to system of
direct distribution the costs of transporting the goods may be higher than other systems
of distribution. • Hassle for store personnel : e.g. more deliveries, paperwork, loading &
unloading. • No safety stock
6. 6. Direct Shipping
7. 7. Intermediate Inventory Points Distribution Strategy • All channel strategies that involve
one or more intermediaries to reach the end consumer are classified as the Intermediate
Inventory Point Distribution Strategy. • They are know as that because it essentially
involves one or more additional stocking points as the distributors, retailers all carry
stock. • The selection of the channel partners are key functions in this strategy. •
Logistics from the producer’s point of view involves delivering the desired quantity of
items to the first level distributor’s warehouse.
8. 8. Distribution Strategies Tradional warehousing strategy Centralised pooling and
transhipment strategy Cross docking strategy Traditional warehousing strategy
distribution centers and warehouses hold stock inventory provide their downstream
customers with inventory as needed. Cross-docking strategy warehouses and distribution
centers serve as transfer points for inventory no inventory is held at these transfer points.
Centralized pooling and transshipment strategies may be useful when there is a large
variety of different products
9. 9. TRADITIONAL WAREHOUSING • A traditional warehouse is a typical stock carrying
unit of the supply chain. As far as distribution is concerned this is a place where the
manufactured and ready-to- sell products are stored. • Items are shipped to fulfill orders
from customers (end customers or intermediaries). These warehouses are also called as
distribution centers. • Costs associated with a traditional warehouse include inventory
carrying costs in addition to the facility costs and the transportation costs.
10. 10. FUNCTIONS OF WAREHOUSES 1.Breakbulk 2.Repackaging 3.Assembly 4.Quality
Inspection 5.Material Handling and Maintainance 6.Storage
11. 11. Centralized warehouse Benefits: 1. It improves operating efficiency and inventory
control is felt easier and effective 2. There is no need to carry large stock and there are
no dangers of stock outs resulting in low level inventories 3. Transport facilities are
optimally used as routing and scheduling becomes handy. 4. The firm is better placed to
 meet the demand fluctuations from different market segments at relatively short notice.
Drawbacks: 1. It results in loss of customer service due to spatial considerations and
delays are caused. 2. The firm is deprived of its potential market share 3. . It results in
heavy transport costs unless each delivery is sizeable as the carrier has to cover long
distance.
12. 12. Decentralized warehouse Benefits: 1. The firm serves the customers better
positioning the inventory in their proximity. This is the result of maximum time utility
created by it. 2. The firm is likely to effect savings in freight charges because of bulk
handling 3. It facilitates product movement by block rates Drawbacks: 1. It adds to the
administrative cost as the firm is to manage number of warehouses distantly located with
the acute problem of maintaining high level efficiency 2. It calls for heavy investment as
the firm is to hold inventory at different locations in larger lots.
13. 13. CROSS DOCKING  Inbound goods transferred directly into outbound vehicles
without being stored in DC  Disaggregate goods from one supplier to several retailers 
Aggregate different goods from respective suppliers to one retailer  Economies of scale
(both in- and out-bound)
14. 14. Cont………….  CD is a distribution strategy in which shipments from inbound
suppliers are moved directly to outbound vehicles, with very little if any storage in
between. In the best possible situation, products never touch the floor or a shelf, though
some amount of staging is often use.  Cross-docking favors the timely distribution of
freight and a better synchronization with the demand.  Cross-docking is mainly
dependent on trucking.
15. 15. Cont…………….  Cross docking is the movement of materials from the receiving
docks directly to the shipping dock.  Goods do not need to be placed in storage,
creating a significant cost savings in inventory and material handling .  Reduces direct
cost associated with excess inventory .  Reduces product damages and product
obsolescence
16. 16. TYPES OF CD  Two basic form of Cross Docking- 1. Basic cross dock:  The
packages are moved directly from the arriving vehicles to the departing ones.  This form
of cross docking does not need a warehouse and a simple transfer point is enough. 2.
Flow Through cross Dock.  When material arrive and they are in large packages , these
packages are opened and broken into smaller quantities , sorted consolidated to deliver
them to different customer and transferred to vehicles.
17. 17. CD
18. 18. CD
19. 19. CD
20. 20. Typical applications
21. 21. CONSOLIDATION ARRANGEMENT
22. 22. DECONSOLIDATION ARRANGEMENT
23. 23. ADVANTAGES OF CD 1. Helps to improve the speed of flow of the products
2.Reduce cost a) Labour is removed from the job of storage b)helps to eliminate the two
most expensive distribution operations. 3. Helps to reduce the amount of finished goods
inventory that is required to be maintained as safety stock
24. 24. Cont………….  Minimization of warehousing and economies of scale in outbound
flows (from the DC to the customers).  The costly inventory function of a DC becomes
minimal, while still maintaining the value-added functions of consolidation and shipping.
 Inbound flows (from suppliers) are thus directly transferred to outbound flows (to
customers) with little, if any, warehousing.  Shipments typically spend less than 24
hours in the distribution center, sometimes < 1 hour.
25. 25. Pre- and post-distribution • In pre-distribution cross-docking, the customer is assigned
before the shipment leaves the vendor, so it arrives to the cross-dock bagged and tagged
for transfer. • In post-distribution cross-docking, the cross-dock itself allocates material to
its stores. • For example, a cross-dock at a Wal-Mart might receive 20 pallets of Tide
detergent without labels for individual stores. Workers at the cross-dock allocate 3 pallets
to Store 23, 5 pallets to Store 14, and so on
26. 26. The Cross-docking requirements • The systems for a successful cross-docking on a
large scale include: • automated material handling. • warehouse management systems
(WMS). • order processing systems. • quality controls systems. • strong relationships
between supply chain partners.
27. 27. Automated material handling systems • An automated cross-docking system typically
consists of a series of conveyors for receiving and sorting cases. • Barcode scanners
read an identification code on each case to track the product through the cross-dock
system and, based on information from a WMS or an order system, the automated
system sorts the cases to trucks or pallets for shipping.
28. 28. WMS • Controlling the flow is critical in cross-docking. • A WMS accomplishes this by
receiving product information via WEB or EDI and keeping track of product movement. • •
It supports the real-time requirements of cross-docking, receiving order details from
customers and later informing them of the shipment's carrier and arrival date and time. •
The WMS also tracks warehouse performance, including labor and dock utilization.
29. 29. Partner relationships • Failing to establish a good working relationship with your
supply chain partners can lead to failure in a cross-dock endeavor. • The sharing of
information, clear communication, confidence in the quality and conformance of goods,
and product availability are a few characteristics that produce effective cross-docking
30. 30. Constraints • Cross docking requires a strong IT base and real time information
sharing facilities. • Is appropriate for appropriate for products with large predictable
demands . • Requires a great degree of coordination and synchronization between the
incoming and outgoing shipments which ,in turn relies on better information and planning.
31. 31. Milk Run • A milk run is a route in which a truck either delivers product from a single
suppliers to multiple retailers • Multiple suppliers to single retailers.
32. 32. Cont…
33. 33. MILK RUN STRUCTURE BENEFITS • Reduces cost • Proximity to suppliers •
Reduces inventory
34. 34. Inventory Pooling • Inventory pooling is similar to risk pooling. • It involves
consolidating multiple DC’s to a single DC in order to minimize uncertainty • Aggregation
of demand reduces uncertainty • Inventory pooling helps reduce the average inventory
holding • Average inventory increases in proportion to the square root of the number of
locations in which inventory is held. • Inventory pooling has a diminishing returns effect.
Most of the benefits occur by consolidating a few locations. Total pooling in most cases is
neither necessary nor beneficial.
35. 35. Distributed versus Pooled Inventory
36. 36. The Impact of Inventory Pooling Impact on safety stocks ƒ Impact on cycle stocks
37. 37. Impact on safety stock
38. 38. Cont..
39. 39. Conclusion…..
40. 40. Impact on Cycle Stocks
41. 41. Examples..
42. 42. Cont…….
43. 43. Transportation • Transportation is the movement of goods from one location to
another. • Modes- air, rail, road, water, cable, pipeline • To find the best way to fulfill the
demand of n demand points using the capacities of m supply points. • Generally a
variable cost of shipping the product from one supply point to a demand point or a similar
constraint should be taken into consideration.
44. 44. Transportation & Transhipment • A transportation problem allows only shipments that
go directly from supply points to demand points. In many situations, shipments are
allowed between supply points or between demand points. Sometimes there may also be
points (called transhipment points) through which goods can be transhipped on their
journey from a supply point to a demand point.
45. 45. Cont……… • Supply point: it can send goods to another point but cannot receive
goods from any other point • Demand point It can receive goods from other points but
cannot send goods to any other point • Transhipment point: It can both receive goods
from other points send goods to other points
46. 46. Transhipment • Transhipment is the shipment of goods or containers to an
intermediate destination, then to yet another destination. • Reasons for transhipments:- •
Change the means of transport during the journey (transloading) • To combine small
shipments into a large shipment (consolidation) • Dividing the large shipment at the other
end (deconsolidation)
47. 47. Example…….. • Ex.- A container load of goods arrive at a port & get split & loaded in
trucks to multiple destinations or the entire container can be loaded to a single truck
bound for a specific destination.
48. 48. Transportation problem 1 2 A B C 25 15 10 30 20 9 7 8 10 5 supplies demands