1. Generalizations from Polaroid
Distribution Channel Strategy
Spring Semester
February 2000
L. P. Bucklin

2. Why the Debate? With Almost a one Year Payback!
Market units are being threatened with the loss of control of a valued marketing tool
Ability to respond to emergency calls for inventory
Ability to adapt to packaging requests
Loss of control over resources
Worry over potential for error, weather, mgmt.
Limited benefits provided regional managers by means of the change

3. Comparative Polaroid Logistic Channels
Factory
Factory
Speculative
Inventory System
Postponed
Inventory System
Central
Warehouse
Central
Warehouse
Local
Wholesaler
Local
Warehouse
Local
Wholesaler
Transit Inv.
Key Service Points
Retailer/
Industrial
Supply House
Retailer/
Industrial
Supply House
End-Users

4. Comparative Logistic Service
Speculative inventory logistic channel
Faster response to unexpected needs
More adaptable to local needs
More stable delivery times
Postponed, centralized channel with transit inventories
Lower inventory, warehouse costs
Greater fill rates, but standardized level of service
Higher transport costs due to small parcel system, transit inventory handling

5. Comparative Strategic Dimensions
Postponed channel
Operates as a cost center
Minimize system costs against service objectives
Poorly defined service objectives may obscure true costs of the postponed logistic channel
Speculative channel
Operates in support of local marketing

6. Missing Elements Close examination of customer needs
No survey of customers with reference to service needs
Large German and British customers have optimized their inventories, postponing goods to supply system
Smaller retailers may benefit from multi-week delivery systems, contrary to US experience
No recognition of advantages to providing customers with different service/price options
Proposed British service provides a fast-standardized, high cost response due to second, third shifts
Pressure on 3rd parties for fast turn may force poor use of local transport with delivery trucks not fully laden

7. Other Options? Regional warehouses
Placing warehouses in southern France for Spain and Italy
Locating a warehouse in Denmark
Improving efficiencies in existing system
Reducing transport costs by developing improved local solutions
Improving local inventory management

8. Data from Polaroid

9. Data from Polaroid

10. Logistic Generalizations
When end-user logistic needs are high they:
buy in small lot sizes,
want frequent and fast delivery
Dual, speculative inventory system provides goods close to buyers to respond quickly
Ceteris paribus: Longer speculative channels provide high service at lower costs than shorter channels

11. Savings From Postponement
SBU local warehouses carry speculative inventories for retailers, wholesaler
Local spec inventories serve small markets, suffer from low inventory turnover, productivity
Centralized system postpones inventory commit-ment by shifting EUI order filling up channel
Postponement savings derive from a reduction of system stock, increased turn, productivity
Postponement losses from possible poorer service levels, distant management

12. Postponed Logistic System
Postponed logistic system functions well when:
Order size (units purchased) is high to reduce need for breaking bulk
Volume is high permitting frequent shipment of large scale trucks to match needs
Delivery systems are fast and reliable
System inventory location is transparent

13. Governance Generalizations
Existing strategic units not charged for inventory.
Absence of inventory charge provides no incentive to minimize inventories, enhance productivity
Inventory managers not responsible for costs will sub-optimize
Channel conflict emerges within integrated system when logistic goals of managers differ as between cost savings and service level