1. Introduction to Global Supply Chain Management Module Four: Product Sales, Distribution & Customer Relationship Management

2. Class Agenda Distribution defined The Distribution function
June 18
Distribution defined
The Distribution function
S&OP integration & synchronization
Distribution Requirements Planning
Key elements of Customer Relationship Management (CRM)
Strategic & operational considerations

3. Product Sales & Distribution: Sell-Side Activities In a Global Model
MANUFACTURER
DISTRIBUTION
SYSTEM C T O M
MATERIALS
MANAGEMENT
Buy-Side
Sell-Side

4. Distribution Defined
Distribution involves all activities associated with the movement of finished goods and service
parts from locations in a warehouse network to the end customer. Closely linked to other supply
chain areas such as forecasting, warehousing, inventory management, order management and
logistics, distribution is a client-facing function that drives overall Sales & Operations Planning
processes. Integral to the distribution discipline is the ongoing execution of Distribution
Requirements Planning and in particular, gross-to-net exploding and lead-time offsetting.
Dan Gardner, April 2015

5. The “Cascade Effect” of Distribution on Sales & Operations Planning

6. Demand Management Forecasting Order Processing
Delivery Promising (Available To Promise, ATP)
Interface between the marketplace and S&OP

7. Distribution Requirements Planning (Sell-Side)
Distribution Requirements Planning (DRP)-Intended for use with finished goods, DRP
encompasses the activities associated with identifying the replenishment requirements of
(warehouse) locations throughout a company’s logistics network. DRP uses the same logic as
MRP in that it is a time-phased approach to determining inventory needs for each of an
an organization’s stocking locations (satellite warehouse, regional distribution center, et al).
Distribution Requirements Planning relies upon the principles of Gross-to-Net Exploding and
Lead Time Off-Setting to synchronize product quantities and delivery times with actual demand.
Because DRP is often used by companies with multi-level distribution networks (multiple
warehouses), the discipline uses a “Bill of Distribution” to implode time-phased requirements
from satellite warehouses up through the distribution channel to main distribution centers.
Ideally, companies and their supply chain partners employ cloud-based visibility tools to truly
integrate and synchronize their Sales & Operations Planning activities.
Dan Gardner, April 2015

8. Distribution Requirements Planning: Gross-to-Net Exploding
An exercise whereby the original (gross) requirement for a product is reduced by:
Inventory on hand
Confirmed order receipts
Confirmed order releases
Planned order releases
Gross-to-Net Exploding must be integrated with the inventory management function
Integration is achieved through process design and supply chain software applications

9. Distribution Requirements Planning: Lead Time Off-Setting
Orders are placed for products on a date that “off-sets” cumulative lead times with the desired date of receipt
P.O. preparation/acceptance
Production time
Transportation lead time
Customs clearance
Domestics distribution
Lead time off-setting must be integrated with the logistics function
Integration is achieved through process design and supply chain software applications

10. Integrating DRP with Inventory Management: Order Quantities & Order Points
In addition to gross-to-net exploding and lead time off-setting, distribution professionals must also determine order quantities and order points for replenishing finished goods in the distribution network
These activities help to integrate and synchronize DRP with Inventory Management
Economic Order Quantity (EOQ) calculates the optimum replenishment amount by balancing the total cost of an order with that product’s carrying cost

11. Integrating DRP with Inventory Management: Order Quantities & Order Points
An integrating activity between DRP and inventory management, an “Order Point” is reached when a product’s on-hand quantity reaches a pre-determined level
When inventory is depleted down to that pre-determined level, a replenishment order is generated by the system (based on EOQ in the form of a Planned Order Release)

12. Economic Order Quantity
EOQ is a formula that is used to determine a replenishment order quantity for a product that balances the total cost of an order with that product’s carrying cost
Variables in the formula are:
Annual usage in units
Unit cost
Annual carrying cost
Ordering cost per order

13. The Order Point System
When the quantity of an item falls to a pre-determined level (order point), a replenishment order must be placed
The quantity to be ordered is often based on EOQ concepts
The key factor about the O.P. methodology is that it considers product demand during lead time (DDLT)
O.P. also considers Safety Stock (SS) in its calculation

14. The Order Point System Order Point = DDLT + SS
DDLT = Demand During Lead Time
SS = Safety Stock (Safety Stock is carried to
safeguard against supply chain variance(s)…
Forecast, demand, lead time, etc.)

15. Sales Order Process Flowchart: Build-to-Stock B2B Model
Begin
Buyer’s system
generates a
multi-product
purchase order
Back order
Goods
available?
Yes No
End
Wait to
complete order
Seller acknowledges
receipt of P.O.
Seller’s system
“pick-list”
Warehouse
picks & packs
the order
Order
complete?
Generate documents
& ship goods No

16. Order Management & The “Documentation Trail”
In addition to the actual merchandise, documentation plays a key role in the Sales & Distribution process
Sales contract
B2B purchase orders
On-line B2C orders
Commercial invoice
Packing list
Bill of lading
Insurance certificate
Certificate of origin
Proper documentation drives supply chain efficiencies and has a material impact on the “Customer Experience”

17. The “Documentation Trail” & The Customer Experience
Remember, all documents have to adhere to “The 3C’s of Documentation”
Complete, Consistent & Correct
The smallest of paperwork errors can stop a supply chain in its tracks
And ruin your relationship with a customer
The 3C’s of Documentation principle applies to hard copies and digital copies

18. Document Example:
Purchase Order

19. Document Example:
Commercial Invoice

20. Document Example:
Ocean Bill of Lading

21. End of Module Four Congratulations!!!