Distribution Management Yashpal Ghate (M-11-16)
Distribution Management• Distribution can be defined as –the channel structure used to transfer products from an organization to its customer• Getting the right product to the right place at the right time.• Distribution decision has significant implication on: 1. Product margins and profits 2. Marketing Budgets 3. Final retail pricing 4. Sales management practices.
Distribution Strategies• Cross Docking• Milk Runs• Direct Shipping• Hub and spoke Model• Pool Distribution
FedEx• FedEx Supply Chain provides centralized, multi-client global distribution centers with scalable warehouse and order management capabilities.• When integrated into customer operations, FedEx Critical Inventory Logistics and Fulfillment Services execute as a seamless extension of business, providing late order cut-off times that extend customers service day and an end-to-end supply chain designed to meet your specific needs.
Cross Docking• 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
Cross Docking• Two basic form of Cross Docking1. 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
Cross Docking• Benefits of cross docking1. Helps to improve the speed of flow of the products2. 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
Cross Docking 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•
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.
Milk Run Retail Store Retail Store Supplier Retail Store Retail Store Retail StoreMilk Run From single supplier to multiple retailers Retail Store
Milk Run Retail Store Retail StoreSupplier Retail Store Retail Store Supplier Retail Store Retail Store
Milk Run• Benefits of Milk runs1. Reduces cost2. Proximity to suppliers3. Reduces inventory
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 centres.
Direct ShippingSupplier 1 Retail Store Retail StoreSupplier 2 Retail Store Retail Store Retail Store Retail Store
Direct Shipping• ADVANTAGES :Elimination of intermediariesSaves timeLess DamageImproved accuracy
Direct ShippingChallenges• 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.
Direct ShippingChallenges• Hassle for store personnel : e.g. more deliveries,paperwork,loading & unloading.• No safety stock
Hub & Spoke Model• H&S network involves a series of nodes (hubs), connected by arcs (spokes) that represent viable transportation alternatives between two nodes.
Hub & Spoke Model• Companies centralize large distribution centers which essentially do three things – receive goods/information coming from many suppliers – consolidate goods/information according to the location where they are to be shipped – ship them individually to their final destination.
Processes that use Hub and Spoke• Manufactured goods: – e.g. Retail• Services: – e.g. Airlines,Cargo Airlines
How it Works• Pure Hub and Spoke vs. Hybrid Hub and Spoke E.g. Parcel or shipping industries E.g. Airline industry
Hub and Spoke vs. Point to Point•One model consists of centralized transportation while the othermodel consists of many routes that are decentralized• Hub and spoke design simplifies the network of routes Point to point H&S No of routes 32 16 cost 10000 10000 Total Cost 320000 160000 Save 160000
Benefits• Having a hub and spoke can decrease the complexity of distribution.• Transportation cost reduced • There is less time spent in transport which directly reduces the cost of the activity• Management costs • Management specialists generally focus on one location for distribution logistics
Benefits• Economies of scale – By having larger loads, you take advantage of lower per unit costs• Proximity to customer. -- Goal being to supply to a maximum amount of customers in a minimum amount of time.
Drawbacks• Disruption at the hub• Bound by hub capacity• Cargo must pass through the hub before reaching its destination, results in longer journey.• Inflexible, changes at the hub, or even in a single route affects the whole network.
Pool Distribution• Pool distribution is the distribution of orders to numerous destination points within a particular geographic region.• Characteristics include a high frequency of regular shipments in LTL quantities, typically in the 150 to 10,000 pound range.
Pool Distribution• Instead of shipping direct from origin shipper to consignee, orders are shipped on consolidated trailers direct to regional terminals.• There, the pool is offloaded,segregated and sorted by consignee, then reloaded onto local deliverytrucks for delivery to the ultimate destinations.
Benefits• When manufactures have multiple shipments bound for a specific region, it is simple, cost effective alternative to LTL.• Speed merchandise to retail outlets.• Meet customer delivery requirements.• Reduce delivery cost to customers.
SULZER CORPORATION• Sulzer ltd. Is a Swiss industrial engineering and manufacturing firm• Founded by Salomon sulzer-bernet in 1775 and established as sulzer brothers ltd. In 1834 in Switzerland.• Sulzer pumps - pumping systems (it produces centrifugal pumps and mixers for the oil, hydrocarbon and fertilizer industries at a global scale)• Sulzer metro - turbine & transmission components• Sulzer chemtech - components and services for separation columns and static mixing• Sulzer turbo services - manufactures spares for turbines and rotating electrical equipment.
VISION AND VALUES• Vision Our customers recognize us for our leading technologies and services, delivering innovative and sustainable solutions.• Strategic priorities – Technology leadership – Outstanding services – Continuous operational improvements – Cross-divisional cooperation• Values – Customer partnership – Committed people
PRODUCTSAgitators Mixers and Process TechnologyDispensers Pumps and SystemsAuto, Aero and Turbine Pumps ServicesComponents Testing and ProductionCoating Equipment ServicesCoating Materials Separation TechnologyCoating Services Tower Field ServicesElectro-Mechanical Services Turbo machinery ServicesMining Equipment General Mechanical Services
CASE STUDY• First plant in India – Kondhapuri (Pune)• First weaving machine – 1953 (TW11)• Prime objective to add local value addition to existing range products• Sulzer sold its machine Raymond (1963) Dig jam (1965) Bombay dyeing (1968)• Recent net profit – 7.08 crore
TECHNOLOGY• EDOSnet _ electronic direct ordering system
BENEFITS OF EDOSnet• Continuous supervision• Services open for 24hours• Track the status of the consignment• Continuous updating of data• Communication cost reduction• Multi-lingual• Number of queries reduction
DISTRIBUTION NETWORK• Invested 50-60 crore on distribution system• Storage- 23 million spare part• Storage consist of various sections and sections has been divided into 8 rack• Mainframe developed between 2 racks• Use of robot for picking the material• Conveyor belt with sensors• Main distributors- DHL, FedEx, Panel pina
DISTRIBUTION NETWORK Courier service– Though the cost associated with this distribution system are high, the customer gets the delivery of the goods at the doorstep.– This system of distribution is especially useful when the spare parts are urgently required as the production has stopped due to the failure of a particular part. Air freight service– Cheaper system as custom clearance is handled by customer itself– It provide faster service in comparison with other modes of transportation