Distribution Network/Channel

Design

2007 Pearson Education

4-1

Channel sales
Industry Telecom
Markets Wireless, Cable, Tel.
Companies C1, C2.Cn
Geography 6 Region
Challenge multiple market, multiple Cos. Multiple
region
How u get your product in the market?
How you penetrate in the market ?
2007 Pearson Education

4-2

What is Channel Management ?

The
design,
development
and
evaluation of product flow system to
enhance customer value through
effective
customer
acquisition,
retention and development
Single channel management
MCM

2007 Pearson Education

4-3

What MCM Include In Distribution

Framework ?
Store
Web
Catalog
Sales force
Third party agency
Call centre etc

2007 Pearson Education

4-4

Customer Management Framework

through Multiple channels
Analyze
Customer

Develop
appropriate
customer
segmentation
for
multichannel
strategy and
Design

2007 Pearson Education

Develop
Multichann
el Strategy
1.Efficiency,
Segmentation,
or customer
satisfaction
2. Asses
competition

Design
Channels
1. Which
channel
employed
2. What
should be the
function of
each channel
3. Should
customer be
right
channeled

Implement

Marketing
Program
Organizationa
l coordination
Marketing
mix
coordination

Evaluate

Single view of
customer
Channel
accounting

4-5

Key Issues in Multichannel Customer

Management Framework
1. Analyze Customer
Segments formed on the basis of channel usage
Different channels most likely have different needs
(e.g. convenience vs. services )
Channel segments are actionable and marketers can
design marketing program by channel
Channel-based segments are substantial as long as
each channel attracts a significant customer base
Lesson: This is all about customer segmentation on
the basis of channel usage (traditional view)
2007 Pearson Education

4-6

Analyze customer
Preferences
Responsiveness
Growth potential
Lesson: This is all about customer segmentation on
the basis of channel development (modern view)

2007 Pearson Education

4-7

2. Developing multichannel
strategy
Three potential vision driving multichannel strategy
Efficiency
Customer satisfaction
Segmentation

2007 Pearson Education

4-8

Developing multichannel strategyFactors Influencing Channel Efficiency

Channel Efforts as cost reduction
Inventories (higher the number of facilities in a supply chain the
inventory cost increases )
Transportation (increasing the number of facilities decreases the
total transportation cost )
Facilities and handling (Facility costs decreases as the number of
facilities is reduced )
Information (longer the channel higher the information cost)

2007 Pearson Education

4-9

Developing multichannel strategyFactors Influencing customer satisfaction

Elements of customer service influenced by channel design :

Response time
Product variety
Product availability
Customer experience
Order visibility
Return ability

2007 Pearson Education

4-10

Service and Number of Facilities

Number of
Facilities

Response Time
2007 Pearson Education

4-11

Developing multichannel strategyFactors influencing Customer segmentation

Multichannel as a device for segmenting the market
Both for current customer base and new customers

2007 Pearson Education

4-12

Assignment
Explain the following

Number of facilities vs.

Number of Facilities vs.
Number of Facilities vs.
Number of facilities vs.
Number of facilities vs.

2007 Pearson Education

Product Variety
Product availability
Customer experience
Order visibility
Return ability

4-13

Outline
The Role of Distribution Channel in the Supply
Chain
Factors Influencing Distribution Network Design
Design Options for a Distribution Network
E-Business and the Distribution Network
Distribution Networks in Practice
Summary of Learning Objectives

2007 Pearson Education

4-14

The Role of Distribution

in the Supply Chain
Distribution: the steps taken to move and store a
product from the supplier stage to the customer stage
in a supply chain
Distribution directly affects cost and the customer
experience and therefore drives profitability
Choice of distribution network can achieve supply
chain objectives from low cost to high responsiveness
Examples: Dell distribute PCs directly to end
consumers whereas HP distributes through reseller
P & G distributes through supermarkets as well as
through distributors for small buyers
2007 Pearson Education

4-15

Factors Influencing
Distribution Network Design
Distribution network performance evaluated along
two dimensions at the highest level:
Customer needs that are met
Cost of meeting customer needs

Distribution network design options must therefore be

compared according to their impact on customer
service and the cost to provide this level of service

2007 Pearson Education

4-16

Factors Influencing
Distribution Network Design
Elements of customer service influenced by network structure:

Response time
Product variety
Product availability
Customer experience
Order visibility
Return ability

2007 Pearson Education

4-17

Factors Influencing
Distribution Network Design
Elements of costs affected by network structure:
Inventories (higher the number of facilities in a supply chain the
inventory cost increases )
Transportation (increasing the number of facilities decreases the
total transportation cost )
Facilities and handling (Facility costs decreases as the number of
facilities is reduced )
Information (longer the distribution channel higher the
information cost)

2007 Pearson Education

4-18

Service and Number of Facilities

Number of
Facilities

Response Time
2007 Pearson Education

4-19

Assignment
Explain the following

Number of facilities vs.

Number of Facilities vs.
Number of Facilities vs.
Number of facilities vs.
Number of facilities vs.

2007 Pearson Education

Product Variety
Product availability
Customer experience
Order visibility
Return ability

4-20

Design Options for a

Distribution Network
Manufacturer Storage with Direct Shipping
Manufacturer Storage with Direct Shipping and InTransit Merge
Distributor Storage with Carrier Delivery
Distributor Storage with Last Mile Delivery
Manufacturer or Distributor Storage with Consumer
Pickup
Retail Storage with Consumer Pickup
Selecting a Distribution Network Design
2007 Pearson Education

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Manufacturer Storage with

Direct Shipping
Manufacturer

Retailer

Customers

Product Flow
Information Flow
2007 Pearson Education

4-22

Performance Characteristics of
Manufacturer storage with DSN
Cost Factor

Performance

Inventory

Transportation

Facilities and Handling

Information

Service Factor

Performance

Response Time
Product Variety
Product availability
Customer experience

Order Visibility
Return ability
2007 Pearson Education

4-23

In-Transit Merge Network

Factories

Retailer

In-Transit Merge by
Carrier

Customers

Product Flow
Information Flow
2007 Pearson Education

4-24

Performance Characteristics of
In-Transit Merge
Cost Factor

Performance

Inventory

Transportation

Facilities and Handling

Information

Service Factor

Performance

Response Time

Product Variety

Product availability

Customer experience

Order Visibility

Return ability

2007 Pearson Education

4-25

Distributor Storage with

Carrier Delivery
Factories

Warehouse Storage by
Distributor/Retailer

Customers
Product Flow
Information Flow
2007 Pearson Education

4-26

Performance Characteristics of
Distribution storage with carrier Delivery
Cost Factor

Performance

Inventory

Transportation

Facilities and Handling

Information

Service Factor

Performance

Response Time

Product Variety

Product availability

Customer experience

Order Visibility

Return ability

2007 Pearson Education

4-27

Distributor Storage with

Last Mile Delivery
Factories

Distributor/Retailer
Warehouse

Customers
Product Flow
Information Flow
2007 Pearson Education

4-28

Performance Characteristics of
Last Mile Delivery
Cost Factor

Performance

Inventory

Transportation

Facilities and Handling

Information

Service Factor

Performance

Response Time

Product Variety

Product availability

Customer experience

Order Visibility

Return ability

2007 Pearson Education

4-29

Manufacturer or Distributor Storage

with Customer Pickup
Factories

Retailer

Cross Dock DC

Pickup Sites

Customers

2007 Pearson Education

Customer Flow
Product Flow
Information Flow

4-30

Performance Characteristics of
Customer Pickup
Cost Factor

Performance

Inventory

Transportation

Facilities and Handling

Information

Service Factor

Performance

Response Time

Product Variety

Product availability

Customer experience

Order Visibility

Return ability

2007 Pearson Education

4-31

E-Business and the Distribution

Network
Impact of E-Business on Customer Service
Impact of E-Business on Cost
Using E-Business: Dell, Amazon, Peapod, Grainger

2007 Pearson Education

4-32

Distribution Networks in Practice

The ownership structure of the distribution network
can have as big as an impact as the type of distribution
network
The choice of a distribution network has very longterm consequences
Consider whether an exclusive distribution strategy is
advantageous
Product, price, commoditization, and criticality have
an impact on the type of distribution system preferred
by customers
2007 Pearson Education

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Summary of Learning Objectives

What are the key factors to be considered when
designing the distribution network?
What are the strengths and weaknesses of various
distribution options?
What roles do distributors play in the supply chain?

2007 Pearson Education

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