Supply chain management

Submitted To: arsalan najmi

Topic: The role of distribution center in

supply chain management

Submitted BY: Ghazal Shafiq

Id: 022-15110861
Mba(M)
Date: 4nd july,2015

ACKNOWLEDGEMENT:

I express my deep sense of gratitude and sincere thanks to all who motivated
me in various ways in the preparation of this assignment.
It is honored to convey my heartfelt thanks to Sir Arsalan Najmi for having introduced
this topic in the syllabus which helped to acquire wide experience and knowledge and
for having encouraged me to complete this assignment successfully.

Table Of Content

S.No

Topic

Page #

1.

Supply chain management & process

2.

The role of distribution center in supply chain

management

3.

Warehousing
Distribution

4.

Impact of improper warehousing and

distribution center

5.

Distribution centers in supply chain

management

3-5

6.

Key functions of distribution centers

7.

Factors influencing distribution center

6-7

8.

Conclusion

The Role Of Distribution center in supply

chain management

Supply Chain Management

Management of the flow of goods or services between entities in the chain to realize
delivery of end products or services, satisfying customers at minimum cost.

Supply chain process

The Role Of Distribution center in supply chain management

Although warehouses and distribution centers appears to be interchangeable terms,

they do have different characteristics. A warehouse is a commercial building where
goods are stored for some period of time, while the distribution centers trends to store
for goods for short time as per requirement of orders fulfilment i.e on daily basis or
weekly or monthly basis. If only a distribution center is used in supply chain, the
production units would need to constantly produce orders to replenish a distribution
center servicing retail stores. Longer and globally oriented supply chain have often
required usage of warehouses where the output of production units can be stored. Such

warehouses can be used to replenish the orders of distribution centers that can be quite
distant (example long distance container shipping).

Warehousing
A warehouse is a large, spacious and secured building intend for commerce and
government use. It functions as a storage place for large quantities of goods.
There are three types of warehouses i.e public, company-owned and owned by third
party logistic (3PL). The government uses public warehouses to store temporarily. The
business sector usually restores to company-owned or 3PL.
Warehousing may also cover the completion of goods before distribution. The
components and packing materials are just delivered to the building. The assembly and
packing of goods will be done in warehouse. The product cover will still look new and
enticing upon delivery to distribution centers.

Distribution
Distribution refers to the delivery of finished goods to buying centers like retail stores,
markets and super marts. Some manufacturers deliver their goods directly to their
accredited retailers. This is advantageous when retailers business establishment are
just nearby the manufacturers place.
Direct delivery of goods to retailers can save you from warehousing costs. However, if
you are far from distribution centers, you have to deal with the logistic cost and
inventory frequently.
Thus, it is safe to say that warehousing and distribution go hand-in-hand in providing a
more cost effective way of delivering goods. Some warehouses are also utilized as a
buying or retailing center while maintaining its original function.

Impact of improper warehousing and distribution

Major and minor mistakes alike in warehousing and distribution can result high losses.
Incorrect storage can damage the goods. If the damaged goods are sold, they will either
be sold in a much lower price or not be sold at all. The manufacturers will not be able to

get back their investments. Failures to deliver the goods to the right destinations will
cause the business to cover another round of delivery costs to do two things: to bring
back the wrong goods and to deliver the right ones. Due to delay, goods can get
damaged and intended recipients may not want to accept and pay for the delivery.
Another adverse effect of wrong warehousing and distribution is that it can destabilize
the prices of goods. If there is not enough supply due to the incompetence of the
warehousing management, the prices of goods may raise to meet the unchanged
demand of the consumers.

Distribution centers in supply chain management

Distribution refers to the step taken to move and store product from the supplier to the
end customer in the supply chain. Distribution is the key driver of overall profitability of a
firm as it impacts directly both the supply chain cost and the customer experience.
Goods distribution can be used to objectives that ranges from low cost to high
responsiveness.
Distribution centers add little or no value for product brought in bulk amount with little or
no time sensitivity associates with their use. Product insensitive to transportation costs
also typically move directly to customers. Similarly for other product distribution centers
provide value added role making supply chain more effective and efficient.

Distribution centers add efficiency by consolidating product for shipment to customers,

reducing transportation costs and performing value addition to service (e.g. branding,
labeling, assembling, packaging, etc).
Distribution centers also make the supply chain more effective. The strategic placement
of distribution centers allows the positioning of products and services close to major
markets and customers. Optimization strategies are utilized to position product
availability and delivery as a competitive advantage while also optimizing the cost
trade-off associates with transportation, facilities, equipment workforce and other
critical cost variables. Distribution centers also facilitate the time utility by storing until it
is demanded.
Product type often determines the need for and specific role of distribution centers in
the supply chain. Characteristics to be considered includes:

Seasonality in either production and consumption.

Demand variability
Manufacturing economics
Marketing and promotion initiatives
Transportation economics
Service requirements
Customizability and variants of products

Products that have extremely high services requirements from a time perspective
present unique challenges since they often effect the efficiency, performance and cost
of customers operations.
Postponement is also becoming a critical issue and value added service for distribution
centers when demand is unpredictable it often makes sense to assemble and ship to
order. Inventories remain generic providing more flexibility and reducing costs.
Postponement is particularly effective in supporting customer product configuration and
branding requirements.
Company capabilities to determine distribution center requirements are essential for
achieving successful networks and operations. Distribution center requirement includes
location, design and operations, determining the information and technology
requirement, and measuring performance.

Location: Distribution center location is determined based on location of market

and customer, location of supplier, volume of product, transportation rates and
the product characteristics, Local conditions includes cost of labor, land and
building, IT infrastructure, transportation structure and government policies.

Design and operation: The product, how it is received, the nature of customer
orders, service levels and transportation mode are the primary determinants of
distribution center design and operation. Product characteristics include weight,
packaging, shelf life, temperature, etc. How the product is received is critical to
both inbound operation efficiency and space utilization.
Information and technology: Information is the critical driver for successful
distribution center operations. Short-term forecast provide information to
determine labor and space requirements over short term planning horizon. Longterm forecasts are used for capacity planning (distribution center size, workforce
and equipment requirements). Information technology is critical in achieving
distribution center performance. Warehouse management system directs where
products should be store and provide the necessary functionality for the
completion and optimization of receiving, storing and shipment operations,
additional functionality may permits use of hand held devices, bar coding to
optimize efficiency and reduce errors.
Measuring performance: Distribution centers primary objective is to provide
right product, at the right place, in right time and damage free. Distribution center
most common performance measure includes handling productivity, space
utilization, accuracy, damage, service, cost and inventory. Handling productivity
measured in units or lines picked per hour. Space utilization is evaluated based
on total space available storage. Accuracy includes measure of location and
record accuracy, percentage of item pick correctly and percentage order pick
correctly. Damage measure includes percentage item picked undamaged when
receive by customer and percentage of order picked undamaged merchandise.
Service measures includes fill rate which is based on number order that were
filled completely.

Key Function Of Distribution centers

A distribution center offers value-added services: A well organized and

managed distribution center will provide services like transportation, crossdocking, order-fulfilment, labeling and packaging along with services are
necessary to complete the order cycle including order processing, order
preparation, shipping, receiving, transportation, returned goods processing and
performance measurement.
A distribution center is customer focused: Distribution center mission is to
provide outstanding services to its customers.
A distribution center is technology-driven: distribution centers of today must
have in place state of art order processing, transportation management.
A distribution center is relationship-centric: Distribution center must remain
focused on its customer requirements. Distribution center link between supplier
and customer, and its management not only fulfil the customer need efficiently
and cost-effective methods of meeting those needs.

Factors Influencing Distribution Center

Performance of distribution network should evaluated in two dimension
Meet customer needs
Cost meeting customer needs
Customer needs that met influence companys revenue, which along with decided
cost the profit of delivery network. Customer service consist of many components.
Some of them are influenced by structure of distribution network, these includes:
Response time (i.e time between customer places order and receives
delivery)
Product variety (i.e number of different products that customer desires from
distribution network)
Product availability (i.e availability of products in stock when a customer
order arrives)
Customer experience (i.e the ease with which customer places and receives
their order)
Order visibility (i.e ability of customer to track their order from placement to
delivery)
Return ability (i.e customer can return unsatisfactory goods and ability of
distribution channel to handle such return)

Conclusion
Distribution centers add value to the supply chain management between a supplier
stage and customer stage. Improvement in supply chain performance due to some
reasons:
Reduction in inbound transportation cost.
Reduction in outbound transportation cost because distribution center combines
products from many suppliers in to single outbound shipment.
Somehow it allows to lower cost by planning production more effectively.
By carrying product near to the point of sale distributors provides better
responsive time than manufacturers can.
Distribution centers may able to offer one stop shopping with products from
several manufacturers.