1. Chapter Objectives
LEARNING OBJECTIVES
LO1 Explain the importance of distribution and the interrelationships between distribution channels, supply chain management and logistics management LO2 Identify how distribution channels add value to businesses and consumers LO3 Describe distribution channel design and management decisions and strategies LO4 Explain how logistics and supply chain management affect distribution strategy
These questions are the learning objectives guiding the chapter and will be explored in more detail in the following slides.

2. Supply Chain Management
LO4
Supply Chain Management
Ask students: Why would a supply chain be more efficient with a distribution centre rather than simply delivering directly to stores?
Answer: The distribution centre serves as a place to accumulate merchandise from many vendors and then allocate it to stores in the quantities they need. Imagine the congestion if every vendor had to deliver to every store.

3. Supply Chains Add Value
LO4
Supply Chains Add Value
Without supply chain management, firms would face significant complications in getting their goods to consumers where they want them.
Group activity: Each member of the group represents a supply chain link (e.g. manufacturer, retail distribution centre, retailer, transporter, end customer). Remove one link and attempt to move an object like a pen from one end to the other. Experiment with removing different links. What happens?

4. Supply Chains Streamline Distribution
LO4
Supply Chains Streamline Distribution
Reduce number of transactions
Increase value for consumers
More efficient and effective
Customers expect to have their goods delivered and services performed on time.
Ask students: What happens when the supply chain breaks down? Imagine you order a textbook from Amazon, which promises to deliver it by Saturday, before your classes start on Monday. What happens in terms of your satisfaction with Amazon if some link in the supply chain breaks down and you don’t receive your book until Tuesday?
Ask students: How does supply chain management reduce inventory levels? What effect does supply chain management have on sales?
Answer: An efficient supply chain can lower overall inventory in the system because merchandise is delivered when it is needed (just-in-time). By having an efficient supply chain, the retailers stay in stock, and sales increase.
FedEx Commercial

5. Supply Chain Management Affects Marketing
LO4
Supply Chain Management Affects Marketing
Fulfilling delivery promises
Meeting customer expectations
Reliant on an efficient supply chain
Customers expect to have their goods delivered and services performed on time.
Ask students: What happens when the supply chain breaks down? Imagine you order a textbook from Amazon, which promises to deliver it by Saturday, before your classes start on Monday. What happens in terms of your satisfaction with Amazon if some link in the supply chain breaks down and you don’t receive your book until Tuesday?

6. Logistics: Making Information Flow
Each step requires the collection and dissemination of information.
Group activity: List the information that each member of the supply chain hopes to gain from each flow. Now list the information each member disseminates during each flow.

7. Volvo Logistics Corporation
Group activity: Visit the Volvo Web site. What services does the company offer to both its suppliers and its customers?

8. Electronic Data Interchange
LO4
Electronic Data Interchange
Cycle time
Quality of communications
Easily analyzed and used
Advanced shipping notice
Intranet
Extranet
The growth of EDI systems has allowed for advanced tracking of information. Each system can seamlessly integrate with others, which creates value for both customers and the firm.
Ask students: Exactly how does EDI increase value for end customers?
Answer: Since EDI facilitates information, it makes it easier for retailers to plan their deliveries (advance shipping notice) and plan their inventories. Other information is handled through EDI as well. The bottom line is the retailer has the merchandise the customer wants when he/she wants it, and in the quantities that are demanded.

9. Managing Supply Chains Through Strategic Relationships
LO4
Managing Supply Chains Through Strategic Relationships
Strategic Relationships
Mutual Trust
Open Communications
Common Goals
Credible Commitments
Explain how, like supply chain relationships, like personal relationships are stronger when there is mutual trust, open communication, common goals, and credible commitments. Have students provide specific examples.

10. Making Merchandise Flow
Remind students that supply chains enable the flow of not just information but also goods. Keeping goods flowing is not a simple task.
Ask students: Under what circumstances might a manufacturer deliver directly to stores (flow 2) rather than to a distribution centre (flow 1)?
Answer: 1.Because the retailer demands it Because merchandise is bulky (furniture) or needs to be delivered daily (tortillas)

11. The Distribution Centre
LO4
The Distribution Centre
Management of inbound transportation
Receiving and checking using UPC and RFID
Storing and Cross-Docking
Getting Merchandise Floor Ready
Preparing to ship
Shipping to store
This slide introduces the structure companies use to set up distribution channels. More in depth slides follow.
Distribution centres are not best if the retailer has few outlets and/or the stores are consolidated.
The following list are some advantages of having a distribution centre:
more accurate sales forecasts due to many stores
lower inventory in each story therefore lower overall inventory costs
overstock and under-stock is less of a problem
it is less expensive to store in a remote warehouse then expensive retail location.
Group Project – Ask student to draw out the distribution centre for a pair of Nike shoes that are at a Footlocker distribution centre. For each stage, ask them to list 3 things that will happen to the item and 1 thing that might go wrong!
This YouTube video (check link before class) is a segment on ABC news on a Walgreens warehouse where 40% of their employees are disabled. This video is a nice way to link CSR and supply chain.

12. Making Merchandise Flow
Inbound Transportation
Receiving and Checking
Storing and Cross-Docking
Inbound Transportation - Dispatcher coordinates deliveries, Manufacturer may pay transportation expenses or retailers negotiate directly with trucking companies and pay expenses.
Receiving and Checking - After goods arrive at their destination, the recipient must account for them. RFID has the potential of tracking merchandise throughout the supply chain. Items wouldn’t have to be physically checked. A distribution centre or a store could know exactly where and how many of an item it has because each item has an RFID tag. Some are concerned, however, about consumer privacy—being able to track a consumer that is wearing apparel with and RFID tag.
Storing and Cross-Docking - One of the most important functions of the supply chain is to hold merchandise until the next link in the chain is ready for it. But many firms strive to hold merchandise a minimum amount of time because holding merchandise in a distribution centre is expensive and the merchandise is not available for sale. So cross-docking distribution centres are part of just-in-time delivery systems.
Ask students: Which type of distribution centre is best for minimizing inventory in the supply chain?
Answer: cross-docking

13. Receiving and Checking
LO4
Receiving and Checking
Receiving
Arrival receipt
Checking
Undamaged
Ordered = received
Radio Frequency Distribution (RFID) Tags
Container computer chips
After goods arrive at their destination, the recipient must account for them. RFID has the potential of tracking merchandise throughout the supply chain. Items wouldn’t have to be physically checked. A distribution centre or a store could know exactly where and how many of an item it has because each item has an RFID tag. Some are concerned, however, about consumer privacy—being able to track a consumer that is wearing apparel with and RFID tag.

14. Making Merchandise Flow (continued)
Getting Merchandise Floor Ready
Shipping Merchandise to Stores
Inventory Management (JIT Systems)
Getting Merchandise Floor Ready – Many firms now require that manufacturers ship floor-ready merchandise, which shifts the burden of ticketing and marketing to the manufacturer. Ask students: What cost implications do these requirements have for manufacturers and retailers?
Shipping Merchandise to Stores – Technology facilitates shipments to stores by tracking item sales and thus triggering replacement orders. Ask students: How do automatic ordering systems benefit manufacturers, retailers, and customers?
Answer: Manufacturers can plan their production schedules. Retailers get more accurate forecasts. Customers get the merchandise they want, when they want it.
Inventory Management (JIT Systems) - Because they use smaller but more frequent shipments, JIT systems reduce stock-out situations which in turn increases customer satisfaction.
Ask students: Can you think of any potential problems with this inventory management approach?
Answer: The systems can be expensive and the supply chain partners must be committed to accurate data or they won’t work. Also, if the system isn’t working properly, out-of-stocks can occur.

15. Inventory Management Through Just-In-Time Systems
LO4
Inventory Management Through Just-In-Time Systems
Inventory management systems track goods throughout stores, warehouses, and DCs. As its name implies, just-in-time inventory management ensures goods get delivered only when they are needed.
Just-in-time (JIT)
Quick response (QR)

16. Benefits of JIT Systems
LO4
Benefits of JIT Systems
Reduced lead time
Increased product availability and lower inventory investment
Because they use smaller but more frequent shipments, JIT systems reduce stock-out situations which in turn increases customer satisfaction.
Ask students: Can you think of any potential problems with this inventory management approach?
Answer: The systems can be expensive and the supply chain partners must be committed to accurate data or they won’t work. Also, if the system isn’t working properly, out-of-stocks can occur.

17. Supplier Managed Inventory
LO4
Supplier Managed Inventory
How to get a perishable product produced in one country delivered to another on time and still fresh?
This slide sets up the Case in Point which follows.
Perishable products pose unique challenges to supply chain management, especially those manufactured in one part of the world and sold in another.

18. Case in Point: Guinness
LO4
Case in Point: Guinness
99% of the product left the UK on time but only 59% arrived on time.
Challenge
Answer
Results
Partner with SAP using their See Why software began to identify issues in container shipments to U.S. and track demand and delivery.
By taking control of its own inventory management, Guinness can better serve its customers’ demand, track inventory, and ensure product freshness.
Group activity: Why was it crucial for Guinness to step in to control its own inventory?
Guinness’s unique taste only lasts while the beer is fresh. Stale Guinness would have negative impacts on the overall brand image.
Set up a Supplier Management Inventory system in the U.S. Allowing Guinness to maintain stock and predict demand for the U.S. market. Better able to schedule shipping and contain costs.