Distribution / Logistics for

Management Consultants
Main things you should know to participate in a consulting project

1
Supply chain is extremely complex, especially in the era of
multichannel and globalization. Therefore, you have to become
very analytical and innovative to find savings and improvements
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It consists of 5 that supply chain consist of

Distribution / Procurement /
Production Planning
Logistics Purchasing

Sales Forecasting Customer service

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In this presentation I will talk about Distribution / Logistics

Distribution / Procurement /
Production Planning
Logistics Purchasing

Sales Forecasting Customer service

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Thanks to this presentation you will
learn main issues in Distribution /
Logistics that may occur during a
consulting project

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Introduction to Distribution
Model

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Distribution is the physical part of the supply chain. Its
aim is to get the right products to the factory or
customers on time, unharmed, fast while keeping as little
inventory as possible

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I will discuss 5 subject

Goals of Distribution Basic laws of Different types of

Model distribution distribution

Where you can find

Typical problems in
savings in
Distribution
distribution

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This presentation is a part of my online course devoted to Supply
Chain. For more check the link with discount below. You will find
there a lot of cases with calculations in Excel provided.

Supply Chain for Management

Consultants
$190
$15

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9
Goals of Distribution Model

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The primary goals of distribution are cost minimization and
proper execution of orders

▪ Minimize the cost per

unit of transportation

Costs
minimization

% of order Cost related to

execution the inventory

▪ On Time ▪ Cost of warehousing

▪ In Full ▪ Cost of frozen capital
▪ Free of Error ▪ Cost of lost sales

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 For transportation we have simple goals that can be
measured using the OT-IF-EF framework

% order execution OT IF EF

▪ Delivered on time ▪ In Full – meaning ▪ Error Free –

the exact number exactly what was
as it was supposed asked for with all
to be delivered accompanying
documents

72,9% 90% 90% 90%

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You would also look at the cost per unit. I recommend
decomposing it so you can say more about the drivers of this
cost

COST = COST km or miles LOAD

x x
TONNE km or miles LOAD TONNE

▪ Here you want ▪ Here you want ▪ Here you want

to minimize the to minimize the to increase the
cost of 1 km number of km usage of the
that a single shipment (load)
shipment (load) – have more
has to go tons there
through

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Basic laws of distribution

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 There are 4 basic laws that we can observe in Logistics
Relationship between Number of Facilities Relationship between Number of Facilities
and Inventory Costs and Facility Costs

Inventory
Costs Facility Costs

Number Number
of Facilities of Facilities
Relationship between Number of Facilities Variation in Logistics Cost and Response Time
and Transportation Costs with Number of Facilities
Transpor-
tation Cost Response time

Total
Logistics Cost

Number Number
of Facilities of Facilities
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Different types of distribution

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 Let’s have a look at the 2 examples of direct shipping

Direct shipping Direct shipping with milk run

Suppliers Retail Stores Suppliers Retail Stores

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 Let’s have a look at 2 examples shipment via DC

All shipment via DC Milk runs from DC

Suppliers Retail Stores Suppliers Retail Stores

DC DC

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 There is no ideal distribution scheme. Each and every has its
pros and cons
Pros Cons

▪ No intermediate warehouse ▪ High inventories (due to large lot size)

Direct shipping ▪ Simple to coordinate ▪ Significant receiving expense

▪ Lower transportation costs for small lots ▪ Increased coordination complexity

Direct shipping with milk ▪ Lower inventories
runs

▪ Lower inbound transportation cost ▪ Increased inventory cost

All shipments via central DC through consolidation ▪ Increased handling at DC
with inventory storage

▪ Very low inventory requirement ▪ Increased coordination complexity

All shipments via central DC ▪ Lower transportation cost through
with cross-dock consolidation

▪ Lower outbound transportation cost for ▪ Further increase in coordination

Shipping via DC using milk small lots complexity
runs

▪ Transportation choice best matches ▪ Highest coordination complexity

Tailored network needs of individual product and store

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Where you can find savings in
distribution

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 In distribution there are number of standard places where you can
find savings
▪ Consolidate transportation contracts and negotiate prices
Cost per kilometer ▪ Change trucks
▪ Reduce fuel consumption

▪ Check of real km with the planned ones

▪ Move orders to another distribution center/plant
Number of kilometers ▪ Change routing
▪ Sell return trips
Logistics

▪ Consolidate transports to the same direction / region

Truck utilization ▪ Introduce second level in trucks

▪ Improve of pallets controls

Waste in transport

Distribution

Stock outs
▪ Find optimal levels of stocks with respect to loss revenue
due to stock out and cost of frozen capital

Frozen capital

▪ Centralize warehouses
Warehousing Warehousing space ▪ Negotiate price
▪ Reorganize warehouses

▪ Improve the control of expiry date

Waste in warehousing ▪ Introduce FIFO
▪ Improve security checks

▪ Reallocate resources to other locations

Allocation of equipment

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Typical problems in Distribution

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 There are a few typical problem usually occur in logistics

Potential Problem Analysis needed

▪ Lack of control over the flow of goods in ▪ Level of control over goods in distribution channels (access to
distribution channels stocks in warehouses in specific channels)

▪ Not optimal distribution model (distribution ▪ Identification of alternative distribution models (Best practices
channel structure, location, distribution centers analysis, Competition analysis)
number. Analysis of distribution stage etc.)

▪ Employed resources (people, cars, fork lift ▪ Analysis of employed resources usage (f.e. Number of
trucks etc.) are higher than needs shipments per one car, number of loading per one fork lift
truck etc.)

▪ Low usage of cars ▪ Analysis of cars utilization (number of goods transported vs.
Logistics cars capacity)
▪ Analysis of car loading methods
▪ Analysis of car packing / palletizing methods

▪ Analysis of routes planning process, random analysis of real

routes

▪ Low planning of car routes ▪ Low customer service level (OTIFEF)

▪ Low customer service level (OTIFEF) ▪ Analysis of OTIFEF (execution of dispatch on ticme, fully,
without mistakes)

▪ Low level of returnable packaging return ▪ Packaging sent vs. returned

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 There are a few typical problem usually occur in stock management
Potential Problem
▪ Not optimal stock level (too less – shortages,
too much – risk of outdating, frozen capital,
wrong exploitation of depot etc.)
▪ Low usage of warehouse space
Stock
management
▪ Employed resources (people, cars, fork lift
trucks etc.) are higher than needs
▪ High warehouse losses (shortages, damages,
utilization etc.)
▪ High value of spoiled goods (f.e. outdated)
Analysis needed
▪ Analysis of the lever of order realization (number of executed
vs. number of accepted ) – Analysis of lost sales
▪ Analysis of products availability within last months
▪ Analysis of stock level vs. average monthly sale (sale coverage
with stocks, outdating risk)
▪ Analysis of the way in which stock level are evaluated
▪ Stocks levels vs. warehouse capacity (number of pallets stored
vs. theoretical number of pallet places), Analysis of warehouse
organization
▪ Analysis of the usage of employed resources (i.e.. number of
loadings per one forklift, etc.), benchmarking between
warehouses / production plants
▪ Analysis of warehouse losses costs and reasons
▪ Analysis of costs related to spoiled goods
24
For more check the link with discount below. You will find there a lot
of cases with calculations and Excel provided.

Supply Chain for Management

Consultants
$190
$15

Click to check my course

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