Jan 12, 2018 in Business

Distribution Strategy

Completing the scenario for Wonderful Widgets was challenging because understanding the distribution capabilities required by a supply chain took much guesswork. There was no previous knowledge and information of the types of activities that must be completed, the volume of product flows and the expectations of customers. In this context it is far easier to create a network that will perform well without major revision (Coyle et al, 2008).

The information network layout does provide the transshipping start or end points. Sabri & Shaikh (2009) says that the parameters required for Wonderful Widgets to effectively implement transshipping such as global capacity and the initial state described by capacity vector are not clearly indicated. Cross-docking being an alternative presents a challenge there is no enough information the distribution center. The transshipment decision in the company has a dominant strategy that is each stores optimal proposed transshipment quantity is independent of other stores proposed transshipment quantity. 

There is need for information about the inbound receiving process, outbound shipping process and storage acts which acts as an intermediary between the two processes (Sabri & Shaikh, 2009). The major challenge with cross-docking is that there is no sorting or consolidation at the distribution center. There is also lack of information about the sorting and bulk breaking at the distribution center.

The information network layout for both transshipping and cross-docking lacks the understanding of how to merge in the available transit. This presents another challenge because it should indicate how merging items from different sources such as  supplier, plant, distribution centers as well as how existing inventory in storage at the distribution center can be merged into single customer shipment without compromising on order integrity and delivery reliability (Sabri & Shaikh, 2009).             

How additional information factor into effective distribution strategies

The additional information helps in the understanding of how inventory positioning focuses on the issue of where inventory is located within the distribution channels. Through the use of centralized management at a single location such as the origin point offers the advantage that the product is distributed to customers across the network from this central stocking point (Coyle et al, 2008). The additional information helps us to gain understanding that centralized management offers greater control over the inventory and reduced demand variability due to risk pooling.

Centralized management distribution centers will offer the company greater control over fulfillment processes and inventories. Coyle et al argues that economies of scale can be achieved if the volume of activity is high enough (2008).  Keeping just one central inventory rather than holding the goods in multiple facilities creates inventory carrying cost savings that offset the increased cost associated with longer delivery distances.

According to Skjott-Larsen (2007) centralized management with a major warehouse is ideal for Wonderful Widgets because it uses one central distribution center within a region to fill orders and deliver to customers. The company should focus on a centralized management distribution center servicing all customers within a time window of 24-72 hours, depending on the location of the customers (Skjott-Larsen, 2007).

In order to make centralized management distribution cost-effective, Wonderful Widgets needs high product throughput, requires stable demand and should be located in or near a dense market area. Coyle et al (2008) indicated that effective distribution strategy requires the company to have distribution expertise, the resources to build facilities and the desire to operate them. Coyle et al (2008) indicated that well managed warehouses and centralized management can hold goods in anticipation of customer orders, provide a buffer of safety stock to protect against contingencies and handle small quantity orders efficiently from transportation and fulfillment standpoints.

In conclusion, centralized management will be more effective for Wonderful Widgets than cross-docking and transshipping. This is because in cross docking, infrequent, large deliveries by the supplier are typically replaced with smaller and more frequent deliveries, driven by the replenishment of actual issues to store hence presenting a major challenge. The challenge with transshipping is that the device used has to execute double operations leading to high operating costs and more time required to carry out the operations. On the other hand centralized management promises accurate, optimal and reliable delivery promises through matching demand with supply and properly managed distribution center reservations.

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