Stocks are kept as a buffer along the supply chain

in various warehouses, factories (work in process) and

retail store shelves.

These inventories can cost between a minimum of
15% up to 40% of their value per year

Storage space
Handling cost
Energy cost ( heating and refrigeration)
Stock slippage
Insurance

Stock Management
Two (2) basic approaches

1. Pull system
2. Push system

Traditional Stock Management
Two (2) basic approaches

1. Pull system

The stock management model for the pull system is
normally geared to establish re-order level (ROL) and
re-order quantity (ROQ)
Traditional Stock Management
Example
Stock drops to a certain level, re-order is triggered of a
predetermined amount. The ROQ takes into account
past demands and the lead times for a re-order to be
satisfied
Quantity of order is determined by the production
schedule
Traditional Stock Management

Transport Planning
is a key decision area of distribution management.
Transportation is a non-value-added item to the cost of
the product.
Storage, inspection and transportation all add cost but
do not add value.
Some of these costs will be unavoidable;
Materials have to be moved
Goods have to be distributed

but storage, handling and movement only add to the
cost, and not to the value of the product

Transport Planning
The main factors in transport decisions are
1. Transport mode selection
2. Trucking routing
3. Delivery planning
Transport Planning
The main factors in transport decisions are
1. Transport mode selection
Railway
Air transport
Road transport
River
Canal
Coastal
Shipping
Pipelines (oil)
Transport Planning
The main factors in transport decisions are
1. Transport mode selection
2. Trucking routing
3. Delivery planning
The routing and scheduling
of delivery vehicles to
customers is extremely
variable
Computer-based procedures to optimize delivery to customers
1. Maximize the utilization of vehicle time and space
2. Ensuring customer service
Transport Planning
The main factors in transport decisions are
1. Transport mode selection
2. Trucking routing
3. Delivery planning
factory
Local
Depot
supplier
Distribution
Center
D1
D2
D3
D4
Distribution Routes
T1
T2
T3
Strategic Aliiance
1. Third-party logistics (3PL)
2. Retailer-Supplier partnerships (RSP)
3. Distributor Intergration (DI)
4. Customer Relationships Management (CRM)

In order to achieve an integrated supply chain the
various players need to work together
The four most important types of distribution
management strategic alliances are;
Strategic Aliiance
3PL is simply the use of an outside company to
perform all part of the firms material management
and product distribution function.
Modern 3PL arrangements involve long-term
commitments and often multiple functions or
process management.
Third-party logistics (3PL)
3PL is most prevalent among large companies
like warehousing, transportation, raw material provider,
etc.
Strategic Aliiance
Advantages
Cost and time savings for the client
Low capital commitment
Ability of client to focus on core business
3PLs provide flexibility
Disadvantage
Loss of control
Third-party logistics (3PL)
Strategic Aliiance
Its the formation of strategic alliances between the
retailers and their suppliers.
Types of Retailer-Supplier Partnerships
Retailer-Supplier partnerships (RSP)
Quick Response Strategy
Continuous Replenishment Strategy Or Rapid
Replenishment
Advanced continuous replenishment strategy
Vendor-managed Inventory System.
Strategic Aliiance
Retailer-Supplier partnerships (RSP)
Quick response: Suppliers receive POS data from
retailers to synchronize their production and inventory
activities with actual sales at the retailers

Continuous replenishment: Suppliers receive POS data
and use these data to prepare shipments at previously
agreed-upon intervals to maintain specific levels of
inventory

Advanced continuous replenishment: Continuous
replenishment with targeted, gradual decrease in
inventory levels

Vendor-managed inventory: Supplier decides on the
appropriate inventory levels of each of the product and the
appropriate inventory policies
Strategic Aliiance
Retailer-Supplier partnerships (RSP)
Strategic Aliiance
Advantages
Fully utilize system knowledge (retailer)
o Manufacturer may predict demand better
Reduce bullwhip effect (supplier)
o Reduced inventory and/or increased service level
Focus on retailing rather than logistics (retailer)
Ability to coordinate replenishments to different
retailers (supplier)
Disadvantages
Expensive advanced information technology is
required.
Supplier/retailer trust must be developed.
Supplier responsibility increases.
Expenses at the supplier often increase.





Strategic Aliiance
This appreciates the value of the distributors and
their relationshipwith the end users and provides
them with the necessary support to be successful.
Distribution Integration (DI)
Strategic Aliiance
Distribution Integration (DI)
Parts are shared across the distributor network
Specialized service requests are steered to appropriate
dealers or distributors.

What is required?
Trust
Pledges
Guarantees from the manufacturer
Advanced information systems

Disadvantages
Incentives for dealers
Skills and responsibilities are taken from some
dealers/distributors.
Strategic Aliiance
Customer relationship management is about building
and maintaining profitable long-term customer
relationships;
Customer Relationship Management
OBJECTIVE
To develop a customer-centred organization that
ensures every opportunity is used to delight
customers, foster customer loyalty and build long-
term relationships that are mutually beneficial
Strategic Aliiance
Customer Relationship Management
GOAL
To ensure that each individual customerss current
and future wants and needs can be satisfied.
Strategic Aliiance
Customer Relationship Management
Activity-based costing (ABC Analysis)
To identify the top customers
Cumulative % of customers
20 60 100
A
B C
80
B
95
100
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Strategic Aliiance
Customer Relationship Management
Cumulative % of customers
100
100
C
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tail of unprofitable customers, reduces the
total profit contributions.