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 profits2. Marketing Budgets3. Final retail pricing4. 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 customer'sservice 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

Cross Docking

• Benefits of cross docking1. 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

• 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

•

Cross Docking

Constraints

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

Retail Store

Retail Store

Retail Store

Retail Store

Supplier

Milk Run From single supplier to multiple retailers

Milk Run

Supplier

Retail Store

Retail Store

Retail Store

Retail Store

Retail Store

Retail Store

Supplier

• Benefits of Milk runs1. Reduces cost2. Proximity to suppliers3. Reduces inventory

Milk Run

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 Shipping

Retail Store

Retail Store

Retail Store

Retail Store

Retail Store

Retail Store

Supplier 1

Supplier 2

Direct Shipping

• ADVANTAGES : Elimination of intermediaries Saves timeLess DamageImproved accuracy

Direct Shipping

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.

Direct Shipping

Challenges• 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 other model consists of many routes that are decentralized

• Hub and spoke design simplifies the network of routes

Point to point H&SNo of routes 32 16cost 10000 10000Total 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 delivery trucks 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

Dispensers

Auto, Aero and Turbine

Components

Coating Equipment

Coating Materials

Coating Services

Electro-Mechanical Services

Mining Equipment

Process Technology

Pumps and Systems

Pumps Services

Testing and Production

Services

Separation Technology

Tower Field Services

Turbo machinery Services

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

SULZRE INDIA LTD. - PRODUCTS

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

DIESEL MACHINE 1898

PADDLE STEAMER

STEAM BOILER

STEAM ENGINE - 1990