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Retailers with Different Owners May not want to do transshipments Distributor Integration strategies may be adopted Not clear regarding inventory levels A retailer’s strategy depends on competitors’ strategies Which Strategy to Adopt? Different approaches for different products Factors: Customer demand and location Service level Costs = transportation inventory costs Demand Variability Summary of the Distribution Strategies Strategy → Attribute ↓ Direct shipment Cross-docking Inventory at warehouses Risk pooling Take advantage Transportation costs Reduced inbound costs Reduced inbound costs Holding costs No warehouse cost No holding costs Allocation Delayed Delayed Summary Critical to implement effective distribution strategies regardless of the total level of supply chain integration. Strategies: direct shipping warehouses or distribution centers Related decisions Should there be many or only a few warehouses or DC’s? Should inventory be held at these locations, or transshipped? As a retailer, does it make sense to participate in a centralized inventory pooling system? What about a transshipment system? 7-* Chapter 7 Distribution Strategies 7.1 Introduction Focus on the distribution function. Various possible distribution strategies, and the opportunities and challenges associated with these strategies. Two fundamental distribution strategies: Items can be directly shipped from the supplier or manufacturer to the retail stores or end customer Use intermediate inventory storage points (typically warehouses and/or distribution centers). Issues with warehouses Manufacturing strategy (make-to-stock vs. make-to-order) Number of warehouses Inventory policy Inventory turn over ratio Internal warehouses vs. outside distributor Owned by a single firm or by a variety of firms 7.2 Direct Shipment Distribution Strategies Advantages: The retailer avoids the expenses of operating a distribution center Lead times are reduced. Disadvantages: Risk-pooling effec