Distribution. Functions and forms. Distribution channels and distribution enterprises.
DEFINITION DISTRIBUTION the activities associated with the movement of material, usually finished products or service parts, from the manufacturer to the customer. These activities encompasss the functions of transportation, warehousing, inventory control, material handling order administration, site and location analysis, industrial packaging, data processing and the communications network necessary for effective management. (APICS dictionary)
It includes all activities related to physical distribution, as well as the return of goods to the manufacturer. In many cases, this movement is made through one or more levels of field warehouses (syn: physical distribution).
DISTRIBUTION is „filling the gaps„ (M. Christopher) TIME GAP SPACE GAP QUANTITY GAP ASSORTMENT GAP INFORMATION GAP
DISTRIBUTION FUNCTIONS: BEFORE TRANSACTION filling the information gap (providing information concerning product), the space gap (moving products from place they were manufactured to place they are to be sold) and time gap (making products available when they are needed/ requested) TRANSACTIONAL connected with trade activities (not connected with logistics) and filling the quantity gap (the difference between how much/ many customers buy and how much/ many manufacturers provide) and the assortment gap (the difference between what one customer buys and manufacturer sells) AFTER TRANSACTION include: service (important for customers): providing spare parts etc. data processing (important for distribution system)
products information Before transaction transaction After transaction customer
DISTRIBUTION FORMS (products allocation on the market) Exclusive distribution The number of products available is limited, they are available only in predefined locations. Selective distribution The number of products available is NOT limited, HOWEVER they are available only in predefined locations. Intensive distribution Products are available everywhere
What determines distribution form? - producer - product - law regulations
DEFINITION: Channels of distribution: any series of firms or individuals that participates in the flow of goods and services from the raw material supplier or producer to the final user or consumer (APICS dictionary)
CHANNELS OF DISTRIBUTION integrate : Flow of products (material products or services) Flow of value (money) Flow of information: controlling products movements, coming from customers/ final users coming from suppliers
Key words/ issues: Distribution definition. Gaps to fill Distribution functions Distribution forms Channel of distribution definition
Case study You owe a school. What are the distribution functions of your company: • Before transaction, • Transactional, • After transaction? Identify the gaps they are filling in.
QUESTIONS • Service level – what is it? • Relation between service level and logistics? • How to measure service level? • Can we accept <100%?
Customer service level • A desired measure (usually expressed as percentage) of satysfying demand through inventory or by the current production schedule in time to satisfy the customers’ requested delivery dates and quantities. • In make-to-stock environment, level of service is sometimes calculated as the percentage of orders picked complete from stock upon receipt of the customer order, the percentage of line items picked complete or the percentage of total dollar demand picked complete.
Customer service level • In make-to-order and design-to-order environment, level of service is the percentage of time that the customer-requested or acknowledged date was met by shipping complete product quantities.
CALCULATIONS FORMULAS: • Demand per year (PR) • Number of supplies (ld) • Total number of orders not picked complete (per year) (NB) • Number of orders not picked complete per supply (nb) • Standard deviation (1) • Standardized number of orders not picked complete (2)
PROCEDURE • Identify expected number of orders not picked complete (N) • Calculate the demand per year • Identify the supply lot (D) • Calculate the number of supplies • Calculate the number of orders not to be picked complete • Calculate the number of orders not to be picked complete per supply • Calculate standard deviation • Calculate standardized number of orders not picked complete • Identify and interprete customer service level
EXAMPLE The company analyzed sells butter. The demand per week is on average 1460, but the deviation is 480. The delivery is 6300 and the delivery cycle is 3 weeks but the deviation is 1 week. The strategy of the company allows for 2% of demands not picked complete. What is the risk (for customer) of not being served?
Another set of data: • N = 1% • Demand per week = 5000 • Deviation = 1500 • Number of supplies = 10 • Delivery cycle = 1 • Deviation = 0 To calculate: • Service level • The number of orders not to be picked complete