Professional Documents
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Designing The Distribution Network & Application To Online Sales
Designing The Distribution Network & Application To Online Sales
Response Time
© 2007 Pearson Education 4-6
The Cost-Response Time Frontier
Hi Local FG
Mix
Regional FG
Local WIP
Cost Central FG
Central WIP
Inventory
Costs
Number of facilities
Transportation
Costs
Number of facilities
Facility
Costs
Number of facilities
Number of Facilities
© 2007 Pearson Education 4-11
Design Options for a
Distribution Network
Manufacturer Storage with Direct Shipping
Manufacturer Storage with Direct Shipping and In-
Transit 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
Retailer
Customers
Product Flow
Information Flow
Customers
Product Flow
Information Flow
Warehouse Storage by
Distributor/Retailer
Customers
Product Flow
Information Flow
© 2007 Pearson Education 4-15
Distributor Storage with
Last Mile Delivery (Fig. 4.9)
Factories
Distributor/Retailer
Warehouse
Customers
Product Flow
Information Flow
© 2007 Pearson Education 4-16
Manufacturer or Distributor Storage
with Customer Pickup (Fig. 4.10)
Factories
Pickup Sites
Customers
Customer Flow
Product Flow
© 2007 Pearson Education Information Flow 4-17
Comparative Performance of Delivery
Network Designs (Table 4.7)
Retail Storage Manufacturer Manufacturer Distributor Storage Distributor Manufacturer
with Customer Storage with Direct Storage with In- with Package storage with last storage with pickup
Pickup Shipping Transit Merge Carrier Delivery mile delivery
Response Time 1 4 4 3 2 4
Product Variety
4 1 1 2 3 1
Product Availability 2 3
4 1 1 1
Customer Experience
5 4 3 2 1 5
Order Visibility 1 5 4 3 2 6
Returnability 1 5 5 4 3 2
Inventory 4 1 1 2 3 1
Transportation 1 4 3 2 5 1
Q2. What do you think of the fact that blue Nile carries more then 30,000 stones
priced $2500 or higher while almost 60% or the products sold from the Tiffany web
site are priced at around $200? Which of the two product categories are better suited
to the strengths of online channel?
Q3. Given Tiffany stores thrived with their focus on selling high end jewellery, what
do you think caused failure of ZALES with its upscale strategy in 2006 ?