SUMMARY DISTRIBUTION
MANAGEMENT
1
, Lecture 1: introduction (Chapter 1 and 3 of the book)
1) supply chains in the 21st century
Why integration creates value
Customers have three perspectives of value:
Economic value (traditional value): builds on economy of scale in operations as the
source of efficiency.
→ Quality at a low price
Market value: presenting an attractive assortment of products at the right time and place to
realize effectiveness. convenient product/service assortment and choice.
Relevance value: involves customization of value adding services, over and above basic
product characteristics and physical location, that make a real difference to customers.
Economy value Market value Relevance value
- Lowest total cost - Attractive assortment - Customization
- Economy-of-scale efficiency - Economy-of-scope effectiveness - Segmental diversity
- Product/service creation - Product/service presentation - Product/service positioning
Procurement/manufacturing Market/distribution strategy Supply chain strategy
strategy
Integrated supply chain framework
The general concept of an integrated supply chain is often illustrated by a line diagram
that links participating firms into a coordinated competitive unit. The context if an
integrated supply chain is multi firm collaboration within a framework of key resource
flows and constraints. Business operations are ideally integrated from initial material
purchase to delivery of finished products and services to customers.
2
,Integrated supply chain frame work → Drivers and enablers:
Collaboration: Different departments need to come together in
order to work together.
- It is best for the efficiency, so specific process steps are
not done twice (like quality checks).
- A decrease of costs at one department can cause an
increase of costs at another value. The overall change for
the organization will be similar to zero!!
Within most companies the departments are not working
together.
→ Companies mostly don’t see the advantages of working together.
Enterprise extension: The central thrust of enterprise extensions is to
expand managerial influence and control beyond the ownership boundaries of a single
enterprise to facilitate joint planning and operations with customers and suppliers. Two
basic paradigms:
- Information sharing: the widespan belief that achieving a high degree of
cooperative behavior requires that supply chain participants voluntarily share
operating information and jointly plan strategies.
- Process specialization: the commitment to focusing collaborative arrangements
on planning joint operations with a goal of eliminating nonproductive of non-
value-adding redundancy by firms in a supply chain.
Integrated (logistics) service providers: (NOT PART OF THE EXAM)
The two traditional logistics service providers are transportation and warehousing
specialties:
- Thousands of carriers who specialize in product movement between geographical
locations. Over the years a comprehensive carrier network has emerged,
providing shippers a broad assortment of services, utilizing all available forms,
called modes, of transportation and related technology.
- Traditionally called public warehouses, these forms provide product storage
supplemented with other specialized services. Two significant benefits when
shippers use public services:
o Elimination of capital investment in warehouse buildings
o Ability to consolidate small shipments for combined delivery with
products of other firms that use the same public warehouse.
3PL = third-party service providers: asset-based firms which own and operate
transportation equipment and warehouse buildings
4PL = fourth-party service providers: non asset service firms which specialize in
providing comprehensive information services that facilitate supply chain
arrangements.
3
, RESPONSIVE VS. ANTICIPATORY business models
Anticipatory Business model
- Push models → Trying to forecast the demand
Forecasting’s are always wrong!! Sometimes they are close to
the actual demand, but always wrong!
- Forecast → purchase materials → manufacture → warehouse → sell → deliver
Responsive business model
- Pull models → Produce as a demand is made certain
Seeks to reduce or eliminate forecast reliance by joint planning and rapid
exchange of information between supply chain participants.
- Sell → Buy components/materials → manufacture → deliver
A hybrid model is a combination of both
Postponement strategies
Geographic postponement
- Produce products and then stock them at a strategic location, you keep them in
stock regardless how expensive it is.
- For different reasons, it makes sense to have products on stock at strategic
locations until something triggers it to be used.
Example: spare parts of an airplane, they are stocked at airports and are only used in
emergencies. The costs of an airplane at the ground are higher as having spare parts on
stock
Manufacturing
postponement:
- Move the CODP
(customer order
decoupling point) in
order to lower cost.
Products are less
customer specific.
4
MANAGEMENT
1
, Lecture 1: introduction (Chapter 1 and 3 of the book)
1) supply chains in the 21st century
Why integration creates value
Customers have three perspectives of value:
Economic value (traditional value): builds on economy of scale in operations as the
source of efficiency.
→ Quality at a low price
Market value: presenting an attractive assortment of products at the right time and place to
realize effectiveness. convenient product/service assortment and choice.
Relevance value: involves customization of value adding services, over and above basic
product characteristics and physical location, that make a real difference to customers.
Economy value Market value Relevance value
- Lowest total cost - Attractive assortment - Customization
- Economy-of-scale efficiency - Economy-of-scope effectiveness - Segmental diversity
- Product/service creation - Product/service presentation - Product/service positioning
Procurement/manufacturing Market/distribution strategy Supply chain strategy
strategy
Integrated supply chain framework
The general concept of an integrated supply chain is often illustrated by a line diagram
that links participating firms into a coordinated competitive unit. The context if an
integrated supply chain is multi firm collaboration within a framework of key resource
flows and constraints. Business operations are ideally integrated from initial material
purchase to delivery of finished products and services to customers.
2
,Integrated supply chain frame work → Drivers and enablers:
Collaboration: Different departments need to come together in
order to work together.
- It is best for the efficiency, so specific process steps are
not done twice (like quality checks).
- A decrease of costs at one department can cause an
increase of costs at another value. The overall change for
the organization will be similar to zero!!
Within most companies the departments are not working
together.
→ Companies mostly don’t see the advantages of working together.
Enterprise extension: The central thrust of enterprise extensions is to
expand managerial influence and control beyond the ownership boundaries of a single
enterprise to facilitate joint planning and operations with customers and suppliers. Two
basic paradigms:
- Information sharing: the widespan belief that achieving a high degree of
cooperative behavior requires that supply chain participants voluntarily share
operating information and jointly plan strategies.
- Process specialization: the commitment to focusing collaborative arrangements
on planning joint operations with a goal of eliminating nonproductive of non-
value-adding redundancy by firms in a supply chain.
Integrated (logistics) service providers: (NOT PART OF THE EXAM)
The two traditional logistics service providers are transportation and warehousing
specialties:
- Thousands of carriers who specialize in product movement between geographical
locations. Over the years a comprehensive carrier network has emerged,
providing shippers a broad assortment of services, utilizing all available forms,
called modes, of transportation and related technology.
- Traditionally called public warehouses, these forms provide product storage
supplemented with other specialized services. Two significant benefits when
shippers use public services:
o Elimination of capital investment in warehouse buildings
o Ability to consolidate small shipments for combined delivery with
products of other firms that use the same public warehouse.
3PL = third-party service providers: asset-based firms which own and operate
transportation equipment and warehouse buildings
4PL = fourth-party service providers: non asset service firms which specialize in
providing comprehensive information services that facilitate supply chain
arrangements.
3
, RESPONSIVE VS. ANTICIPATORY business models
Anticipatory Business model
- Push models → Trying to forecast the demand
Forecasting’s are always wrong!! Sometimes they are close to
the actual demand, but always wrong!
- Forecast → purchase materials → manufacture → warehouse → sell → deliver
Responsive business model
- Pull models → Produce as a demand is made certain
Seeks to reduce or eliminate forecast reliance by joint planning and rapid
exchange of information between supply chain participants.
- Sell → Buy components/materials → manufacture → deliver
A hybrid model is a combination of both
Postponement strategies
Geographic postponement
- Produce products and then stock them at a strategic location, you keep them in
stock regardless how expensive it is.
- For different reasons, it makes sense to have products on stock at strategic
locations until something triggers it to be used.
Example: spare parts of an airplane, they are stocked at airports and are only used in
emergencies. The costs of an airplane at the ground are higher as having spare parts on
stock
Manufacturing
postponement:
- Move the CODP
(customer order
decoupling point) in
order to lower cost.
Products are less
customer specific.
4
