Network Design in Supply Chain

18. 12. 2011 Fusun Ulengin MANUFACTURER OR DISTRIBUTOR STORAGE WITH CUSTOMER PICKUP 18. 12. 2011 Fusun Ulengin MANUFACTURER OR DISTRIBUTOR STORAGE WITH CUSTOMER PICKUP ? Inventory is stored at the distributor or manufacturer ? Orders are shipped to designated pickup points where customers come and pick up their order 18. 12. 2011 Fusun Ulengin MANUFACTURER OR DISTRIBUTOR STORAGE WITH CUSTOMER PICKUP ? Cost factors ? Inventory; is low, aggregation at the manufacturer or distributor ? Transportation is lowest when using package carrier due to aggregation at pickup locations Facility and handling; facility costs are high if pick-up location does not exist already. Handling costs at pickup locations are high. ? Information system; More elaborative and sophisticated, extra system at the pickup locations. ? Service factors ? Response times; comparable to delivery with package carriers ? Customer experience; worse since customer has to pickup the item himself. On the other hand, since customer do not need to wait at home for delivery and customer can pay cash at the pickup location instead of paying online in advance, some customers may like pickup option better. Time to market is similar to other options with manufacturer storage ? Order visibility is very important. Customers should be informed when their orders arrive. ? Returns are easier to handle at pickup location. Returns can be aggregated and shipped back from pickup locations. 18. 12. 2011 Fusun Ulengin RETAIL STORAGE WITH CUSTOMER PICKUPS ? Inventories are stored in retail stores, customers walk into the store to pick the items they want or items they have ordered online or by phone. Mixed order placement options. Most traditional option. 8. 12. 2011 Fusun Ulengin RETAIL STORAGE WITH CUSTOMER PICKUPS ? Cost Factors ? Inventory costs are higher than other options as the inventories are disaggregated and held locally ? Transportation costs are lower than other solutions. Inexpensive modes can be used to replenish inventories at retail outlets. ? Facility costs are high. Many local facilities. ? Information system; Minimal if there is no online ordering option. For online option more complex information system especially for order visibility. ? Service Factors Response times are very good. Same day pickup for most products. ? Product variety is lower than other options. ? Product availability is costly to keep high. ? Customer experience depends on if the customer likes to shop or not. ? Time to market is highest. ? Order visibility is important if online ordering is allowed. ? Returns can be handled at the stores easily. 18. 12. 2011 Fusun Ulengin E-BUSINESS AND THE DISTRIBUTION NETWORK ? Impact of E-Business on Customer Service ? Response time; For product that can be downloaded very fast.
For physical products takes longer to fulfill an order than regular retail stores. ? Product variety; easier to offer variety than brick-and-mortar store. (Amazon; imagine the retail store with the same variety offered by Amazon) ? Product availability; Better information gathering and forecasting. Better mach between supply and demand, improved product availability. ? Customer experience; ? ? ? Access; 24 hour access. Geographically eliminating the access limits. Customization; customization of product and shopping experience. Dell, Amazon – displays related products) Convenience; Making the purchase at where you are.. Increased speed of conducting business. (e. g. Use of previous data for address info) ? Time to market; Fast. A new product can be made available as soon as a the first unit is ready. Dell exploits this feature. ? Order visibility; Critical to provide. Internet makes this happen. ? Returnability; Harder issue compared to traditional stores since items are sent from a central location usually. More returns with online purchases. 18. 12. 2011
Fusun Ulengin E-BUSINESS AND THE DISTRIBUTION NETWORK ? Impact of E-Business on Customer Service ? Other benefits of e-business ? ? ? 18. 12. 2011 Enhanced revenues for manufacturers by eliminating intermediaries and having direct contact with customer. Dell v. s. HP. Flexible pricing, promotion and product portfolio ? Airline last-minute low cost seat, Dell’s ability of dynamic pricing depending on the component availability and demand. Efficient fund transfers; Quicker and cheaper. Fusun Ulengin E-BUSINESS AND THE DISTRIBUTION NETWORK Impact of E-Business on Cost ? Inventory; Better mach of supply and demand, geographical aggregation lowers inventories. Ability of postponement also helps reducing inventory costs. ? Facilities and Handling ? ? ? ? Less and centralized facilities, fewer intermediaries lower facility cost. E-business can reduce the handling costs in order fulfillment by having the customer do some part of the process, e. g. checking product availability, entering details of the order. Smoothing the rate of order fulfillment, thus reducing the resource requirements.

Unlike the retail stores orders don’t have to be processed as soon as they arrive. On the downside, for some products like groceries, an e-business has to carry out some tasks currently performed by the customers at retail stores. E. g. Picking the items customer wants and carrying home. ? Transportation; Usually higher cost due to increased outbound transportation costs. For downloadable products, significantly less transportation cost. ? Information; Shared demand information, better coordination and collaboration reduces the overall supply chain costs.
The cost of setting up the information system required can be significant. 18. 12. 2011 Fusun Ulengin E-BUSINESS AND THE DISTRIBUTION NETWORK ? The value that e-business brings is not the same in every industry. ? Dell; a success story while Webvan is a failure ? E-business-Scorecard can be used to help decide if e- business is appropriate for your business, how it effects your distribution network in costs and customer services. ? All the costs and customer service factors are given a integer score from +2 (very positive) to -2(very negative) 18. 12. 2011 Fusun Ulengin