Network Design in Supply Chain

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18.12.2011

Füsun Ülengin

MANUFACTURER OR DISTRIBUTOR STORAGE WITH
CUSTOMER PICKUP

18.12.2011

Füsun Ülengin

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

Füsun Ülengin

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

Füsun Ülengin

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.

18.12.2011

Füsun Ülengin

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

Füsun Ülengin

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...
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