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Lecture 43 : Designing Distribution Networks in Supply Chain — Transcript

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0:01[Music]
0:22[Music]
0:25hello dear friends welcome back to nptl
0:27online course on Logistics and Supply
0:29Chain management so in the last session
0:31we started discussion on designing
0:33distribution Network and we explored how
0:37uh picking any uh different type of
0:39distribution network will impact your
0:42services factors and as well as your
0:45cost factors right so here we'll discuss
0:48about some of the uh design options and
0:51then we'll uh see uh how we can evaluate
0:54those different design options right uh
0:57in depending upon the nature of the
0:59product nature of the industry right and
1:02then how we can select the best
1:04distribution Network design so and we'll
1:06end this discussion by uh one case study
1:09right
1:11so distribution Network design so
1:14obviously based on the farm industry or
1:18product nature or what type of services
1:21you want to deliver right so already we
1:24are talking about one end is your cost
1:27parameter another end is your RIS
1:30responsiveness right so if we are
1:32talking about we are hitting this
1:34parameter obviously we we need to you
1:37know consolidate the inventories we need
1:39to consolidate the orders we need to
1:41utilize the economies of scale we need
1:43to uh Club maximum orders during
1:46Transportation right individual order we
1:48cannot process on the other hand if we
1:50are going for responsiveness so we are
1:53providing the customized Services even
1:54we are delivering the individual product
1:57as well so based on that we have these
2:00six options to design the different net
2:03uh network with your uh very kind of
2:06routine you are dealing with you are
2:08going to the shop picking the product
2:10from manufactured storage with direct
2:12shipping from their end and then we'll
2:15include uh the online store also where
2:18you are visiting online and then the
2:20products are delivered from the
2:22distributor retailers or manufacturers
2:24so we'll discuss all these six Network
2:27designs in detail what are the
2:29parameters what what are the uh you know
2:32main points you need to consider as far
2:34as cost is concerned as far as those
2:36performance parameters are concerned
2:39right and then we'll finalize depending
2:42upon the industry nature which product
2:44you should uh which design you should go
2:46for right so when we are saying
2:49manufactur storage with direct shipping
2:52first is here the manufacturing agency
2:55is or company is storing the product so
2:58storing the product that means they are
3:00maintaining the inventory when they are
3:02maintaining the inventory directly order
3:05is going to manufacturer and then they
3:07are processing that order and direct
3:09shipping is done Drop Shipping is done
3:12so this is known as concept is Drop
3:17Shipping right so that means there is no
3:20need of including any intermediator in
3:24terms of retailer distributor
3:25wholesalers those you are not you need
3:29not to include those players right so
3:31some characteristics and consideration
3:33of manufacturer storage with direct
3:35shipping so your manufacturer maintains
3:38it own storage facility hold the
3:40inventory right so inventory cost he is
3:43directly you know responsible for that
3:46having said that that means
3:48manufacturing location will be somewhere
3:50in the center so that means that
3:53inventory cost can be minimized because
3:55you are not maintaining inventory at
3:57different locations first point customer
4:00places order directly with the
4:02manufacturer and then manufacturer will
4:04process and fulfills the order so you
4:07have more control visibility about the
4:11customer information when customer is
4:13visiting that product when customer is
4:15placing the product and then quality of
4:17the product you have direct control over
4:20quality uh over the delivery over the
4:23packaging everything because you are
4:25doing in-house so having said that that
4:28means you have to arrange the shipment
4:30so arranging shipment requires all that
4:34you know infrastructure where you need
4:36to you know go for the logistics
4:39expertise and then you will set up your
4:42own distribution Network right and then
4:45when you are saying that what are the
4:46benefits so obviously you will be saving
4:48cost your margin will be more because
4:51now you are not sharing your margin with
4:53the delivery partners with that
4:55distribution Network right you have
4:58control over inventory control over
5:00quality of the product control over the
5:02delivery control over the overall
5:04customer experience in terms of services
5:07we are evaluating so this is usually the
5:10structure looks like okay we uh doal
5:14lines represent the information flow and
5:16solid lines are representing the product
5:18flow right so customers are usually
5:22visiting the retailer and then they are
5:24getting all the information related to
5:25the product right so like in uh heavy
5:29items like let's say if you are buying
5:31heavy appliances for your home or if you
5:34are buying you know uh let's say
5:37furniture or tiles or Marvel for your
5:40home right so what you will do you will
5:42visit the retail shop and then you will
5:45see all the different designs right and
5:48then you will finalize the color the
5:50design the quality whatever Marvel you
5:53want right as per that retailer will
5:56record the order and this information
5:58will be given to the uh manufacturer
6:02manufacturer will directly ship the
6:04product to the customer end now because
6:07we are dealing with those kind of
6:09products where if we'll ship the product
6:11first with the to the retailer then from
6:14retailer to the customer then their hand
6:16handling will be there we may break the
6:18Marvel pieces that will happen because
6:20we are loading unloading different
6:22location so if we record order at one
6:25location and we'll serve that to the
6:28final to the from the manufacturer to
6:30the directly to the customer then it
6:32will minimize that cost as well right so
6:35we'll see the different cost parameters
6:38how these will be impacted it will will
6:40talk about inventory now inventory who
6:43is maintaining only manufacturer is
6:45mantaining the inventory so that cost
6:47will be lower down
6:50now uh because uh you are not setting up
6:54different retail shops or distribution
6:57Network or uh order fulfillment centers
7:00so inventories are centralized so cost
7:02will be reduced Transportation very high
7:06cost will be there why because outbound
7:08logistic cost has increased now you are
7:11not shipping product from your retailer
7:13to the customer but you are opting other
7:16model where you are directly shipping
7:18the product from your manufacturer side
7:20to the customer outbound logistic cost
7:23has increased so even if Marvel pieces
7:26maybe different demand is coming so
7:28individual order you are processing
7:30right so if this is the network one
7:32order is coming from here that order
7:35will be processed individually 1,000
7:37kilomet you are covering the distance
7:39another product is coming maybe from 700
7:42km on the same route maybe then even
7:45then another delivery will be done so
7:47these many different individual
7:49deliveries will be done so
7:50Transportation cost will be higher and
7:52because we are not utilizing the full
7:54capacity also the demand here will be
7:56different demand here will be different
7:58here will be different here will be
7:59bigger so then that full economies of
8:03scale you cannot
8:05utilize facilities and handling cost
8:07will be lower because you are not
8:09storing at the customer location nearby
8:12customer location and that way handling
8:15cost is also reduced because only you
8:17are storing the product at the
8:18manufacturer end information huge
8:21investment you need to make in the
8:23information system because you are not
8:27dealing with that you know phys physical
8:29infrastructure of that long distribution
8:31Channel where the retailer is directly
8:34communicating with the customer but here
8:36your information is shared with the
8:38retailer retailer is passing the
8:40information so that same exact
8:42information should be passed otherwise
8:44if I'll place the order for maybe th000
8:48pieces of Marvel and in the end I placed
8:51order for some other color and they
8:54wrongly you know place the order with
8:56the manufacturer with some other color
8:57so then you can see the the cost and
9:00then uh the customer satisfaction level
9:03now these are the services when we'll
9:05pick this manufactur storage with direct
9:07shipping response time will be huge
9:10because manufacturer is here and you are
9:13at 1,000 kilomet so this will take time
9:16four to 5 days so response time is very
9:19very long in case of manufactured
9:21storage with direct shipping product
9:24variety will be very high
9:27because there is no retail shop who is
9:29going to maintain your inventory if
9:31today you are manufacturing th000 units
9:33all, units are available different
9:36variety are available at one location
9:38product availability will be very very
9:40high because if I'll set up different
9:44locations maybe one location I'm having
9:4710 items 10 models other location I'm
9:50having five only here I'm maintaining 50
9:53models here I am maintaining 13 model so
9:56product availability different at
9:58different location
9:59but if I'm maintaining at one location
10:02maybe all the 50 models are available in
10:05that location it is manufacturer
10:07location customer experience good in
10:10terms of because home delivery you are
10:12getting but but if you are dealing with
10:16the product where you your customer
10:18wants to interact with the product
10:20before buying then experience is not
10:22good because if you are buying your
10:24furniture so then experience is not good
10:26if you are placing order you are just
10:28picking some photographs and then you
10:30are placing order how this will happen
10:32that's why in online industry Furniture
10:35industry the penetration is only 1 to 2%
10:39right time to Market very fast very less
10:43time it will take why because if today I
10:47uh launched the product today it is
10:49visible through my website that this
10:50model has been launched order visibility
10:54that uh uh it platform you need to D
10:57where you can track every single
10:59individual packet
11:01returnability uh expensive and difficult
11:04because now 1,000 kilomet that product
11:07travel to the customer location and now
11:09customer is not ready to accept that so
11:12it will not be stored at the retailer
11:13location it will go back to manufacturer
11:16so then in that way it can be expensive
11:18but again we are thinking about the pure
11:21strategy scenario right if I'll say if
11:24any return product is coming nearby
11:27location I can maintain small inventory
11:28of the returned products and if any
11:30order comes from uh nearby location in
11:33future I can meet those that demand so
11:36then there is certain deviation with
11:39that design distribution network but
11:42here we are talking about the pure this
11:44manufactured storage with direct
11:45shipping network but obviously the when
11:49any player will pick the strategy they
11:51can mix some positive points of some
11:53Network other positive point of some
11:55other network second is manufacturer
11:58storage with the direct Shi shipping and
11:59in transit
12:01merge it is similar to the first one but
12:05the difference is in transit merge means
12:08let's say if I have placed 50 items
12:13grocery items order on Amazon Fresh
12:16right so maybe those 50 item Amazon has
12:20taken from let's say four vendors so now
12:24these items uh will be you know uh
12:28reaching at the Fulfillment center at
12:31different time okay so what my
12:34fulfillment center will do as long as he
12:37is receiving from vendor one he will
12:39process to customer then it is it has
12:43received maybe from vendor two and
12:45vendor three at the same time almost
12:47same time it can consolidate and will
12:49send the other order to the customer
12:51third fourth vendor so that means one
12:54order I got three multiple
12:56deliveries right so that way customer
12:59experience is not good okay if I'm
13:02talking about that aspect so what in in
13:06transit merge will do in transit they
13:08will wait for all the orders here they
13:10will merge orders coming from different
13:12Sellers and finally one order delivery
13:16will be done from to the customer it's
13:18not you are visiting the customer
13:20location multiple times that means still
13:23you are maintaining the quality still
13:25you have control over the inventory
13:27right but you you can minimize the
13:30transportation cost why because now you
13:32are consolidating different orders in
13:35your fulfillment center okay so that way
13:38customer experience is also enhanced but
13:41for ensuring that you need to set a very
13:44strong communication and collaboration
13:46Network when your manufacturer one is
13:49transporting when your manufacturer 2 is
13:51transporting that complete information
13:54you must have because you are waiting
13:56for the fourth vendor manufacturer
13:59and then the you have received the item
14:02from first three but you are still
14:04waiting for fourth you have no updates
14:06on that so then that those items are
14:09also delayed so in that way customer
14:11experience will be affected right
14:13negatively affected so realtime tracking
14:16obviously is required because you need
14:18to consolid consolidation of orders the
14:21basic point is you need very strong
14:24information
14:25channel so this is the system will look
14:27like your design network uh what
14:30customer will do customer will process
14:32the information with the retailer again
14:34the same network okay different
14:36customers are there they are placing
14:38order with the retailer retailer will
14:40channelize these orders to different
14:42manufacturers right if grocery items are
14:45there will be rooted to some uh grocery
14:48manufacturer if clothes are there will
14:50be rooted to some clothing industry if
14:53toys are included in that toys will be
14:55rooted to some other Industry Home
14:57Appliances are there anything so will'll
14:59be rooted to different factories
15:01different manufacturers and in transit
15:03you will merge all the orders and then
15:05we'll make one delivery to enhance the
15:07customer experience so in that way
15:10inventory cost will be similar to drop
15:13shipping because manufacturer is still
15:14maintaining the inventory you are not
15:16maintaining a different location
15:17Transportation somewhat lower why lower
15:20because you are combining multiple
15:22orders and then making one delivery not
15:24multiple deliveries facilities and
15:26handling cost will be higher why for
15:29consolidating the orders now you need
15:31one storage house where all the orders
15:33are coming you are tracking those orders
15:35putting orders together and then again
15:37making it one order and processing
15:40information strong investment is
15:42required because you need to track the
15:44orders response time similar response
15:47time will be there as we were getting
15:49the manufacturer storage with the direct
15:51shipping because those many days it will
15:53take directly it is coming from the
15:55manufacturer product variety similar to
15:58drop shipping
15:59because still manufacturer is uh holding
16:01the variety product availability will be
16:04same high product availability because
16:06manufacturer is storing the customer
16:09experience is enhanced like I told you
16:12in in way of they are getting now single
16:14delivery instead of multiple deliveries
16:17time to Market same order visibility
16:20same because still manufacturer is there
16:23now you are producing something it is
16:25order it is ready to be uh so sold in
16:29the market and returnability obviously
16:32returnability is similar to your Drop
16:34Shipping only because there is still the
16:36direct man inventory is coming from the
16:38manufacturer so if you are returning it
16:40will go directly to the manufacturer the
16:43third option we have is distribu
16:45distributor storage with the carrier
16:47delivery now instead of manufacturer
16:50here distributor is storing the
16:53inventory now that manufacturer is
16:55losing control over inventory and little
16:58control over for the delivery and
17:00quality right so Services uh uh they are
17:04providing to the customers right so for
17:07Carrier delivery maybe distributor is
17:09doing the carrier delivery or you are
17:11hiring the third party to make the end
17:14miles delivery so what are the some uh
17:16key consideration under this obviously
17:19inventory will be held by now the
17:21distributor so product are transported
17:23to customer using package carriers or
17:25logistic provider those can be third
17:28party Logistics provider distributor
17:30manage the logistics of receiving
17:32storing and shipping the product because
17:35now distributor is managing the
17:37inventory and then benefits will be now
17:40because distribut earlier manufacturer
17:42was somewhere in the center now
17:44Distributors may be we have many
17:46Distributors nearby to the customers so
17:49inventory will be maintained at
17:50different location response time will
17:53reduce and inventory cost will increase
17:56right order fulfillment will be better
17:59so when you are considering the cost
18:03parameters warehouse management
18:05inventory cost this coordination cost
18:08with coordination means with carriers
18:09right who is going to make the final
18:11delivery right and then distributor may
18:14add some value adding services in terms
18:16of consolidation kitting packaging that
18:19can be done right and this design option
18:22allows for efficient distribution across
18:25different geographical reasons right
18:28because now you are uh you need know to
18:31set up your own distribution Network
18:33because third party is doing that or
18:35your distributor is doing that local
18:37distributor and then you can maintain
18:40higher level of product variety
18:41availability so how it is different
18:44earlier product was directly coming to
18:46customer now it is not the case again
18:49information is going to retailer
18:50retailer is replenishing the inventory
18:52or retailer or distributor they are
18:55maintaining inventory here right so from
18:58here the orders are shipped to the
19:00customer so this is simple structure
19:03inventory cost will be higher because
19:06now we are maintaining inventory at
19:07multiple location but as long as your
19:10fast moving goods are there you you can
19:12maintain the inventory there is no
19:14problem with the inventory cost but if
19:16the goods are taking time you know for
19:19the final consumption demand is not that
19:22high so then inventory cost will be
19:24higher Transportation cost lower than
19:27the manufacturer storage because because
19:28now the outbound logistic cost is
19:31reduced because the distance has reduced
19:35facilities and handling will be higher
19:38compared to the last two Network because
19:40now we are uh locating the inventory at
19:43near the customers in at the
19:45distribution location where handling
19:47will be done right information you need
19:50not to invest that much because simple
19:53information structure will do because
19:54you have introduced one or two more
19:56players in that uh Network right
20:00response time will be less faster
20:02delivery will be there product variety
20:04will be reduced availability will be
20:07reduced because now you are not
20:09maintaining the variety at the
20:11manufacturer location you are
20:12maintaining variety at the distributor
20:14location and sometime you are getting
20:16all the models sometime you are not
20:18getting all the models so that
20:19availability is question customer
20:21experience better than the first two
20:24because if you want you can go to the
20:26distributor location can feel the
20:28product can touch the product right time
20:31to Market it will take higher time to
20:34you know to Market that product because
20:37today you launch the product it may take
20:3910 days or 15 days to maintain the same
20:42inventory in throughout all the markets
20:46order visibility is easier because now
20:48many as long as you will keep on adding
20:52more intermediators so the visibility is
20:54more because you can check uh with whom
20:57the product is right right now
20:59returnability will be easier because now
21:01you will not return 1,000 km back to the
21:05manufacturer but it will be returned to
21:07the local distributor the fourth is
21:09distributor storage with the last mile
21:11delivery so usually last uh also be
21:14discussed and this one also last mile
21:16delivery usually like Amazon you can see
21:19where distributor may be storing the
21:22product and then you are delivering the
21:23product they are placing the order you
21:25are delivering the product to the
21:26doorstep so again inventory is held by
21:29the distributor so your per main target
21:33is how efficiently you can store and
21:35manage the products and then uh
21:39Distributors are only responsible for
21:41picking packing recording the order and
21:43processing the order so that means the
21:45last leg of the delivery process is also
21:48ensured by the Distributors only it is
21:50up to the distributor whether they are
21:51going for their own distribution Network
21:54last mile delivery or they are going to
21:57take the services by the third party uh
22:00Logistics provider right so in that way
22:03faster order fulfillment will be there
22:05because you are placing order online
22:07maybe and then the order will be
22:09processed not from the manufacturer from
22:11the local distributor right and reduced
22:14Transportation cost because outbound
22:17Logistics distance has been uh reduced
22:20because response time will be lesser
22:22customer satisfaction will be there so
22:24here what decisions we need to take we
22:27need to go for efficient ient route
22:29planning how we can maximize the you
22:31know order delivery in that way that on
22:34particular route we can deliver the
22:36maximum orders managing delivery
22:38personal maintaining delivery
22:40infrastructure and ensuring the customer
22:42communication through the end mile
22:44delivery right so distributor may offer
22:47some value adding services like we told
22:49if you are uh taking some home
22:51appliances so installation Assembly
22:54Product customization can be there right
22:56and then because you are locally
22:58maintaining the inventory so uh that
23:00long distance Transportation outbound
23:02distance trans uh that Logistics cost
23:04will be reduced right and then uh
23:07usually I talked about Amazon you can
23:10use that if it is you know retailer
23:12storage or distributor storage inventory
23:14they are selling when they are tying up
23:16with the local
23:18vendors strong coordination between the
23:20distributor delivery personnel and
23:22customers required now as we'll keep on
23:25adding more players like retailer distri
23:28uors customers manufacturers are there
23:31then we need to you know uh uh talk
23:34about more about coordination when only
23:36one or two players are there
23:37coordination can be done easily right so
23:40to maintain that we have some root
23:42optimization software realtime tracking
23:45system we can track the products this is
23:47how it is happening distributor storage
23:50with last mile delivery Distributors are
23:52storing at different locations and then
23:55to One Market they are serving through
23:57their local distribution partner who are
23:59doing the uh last mile delivery right so
24:03talking about inventory cost will be
24:05higher because at different location you
24:07are maintaining Transportation cost uh
24:10very high because uh individual order
24:14you are processing but if you are if
24:16we'll talk about the outborn logistics
24:18cost that will be reduced right but
24:21customer experience is enhancing by
24:23doing the last mile delivery facility
24:25handling and cost will be higher because
24:28you are uh consolidating the order in
24:31your local facility Hub and then you are
24:34processing
24:36information that strong Information
24:38Network is not required but yes because
24:41now many players are there to you know
24:44uh transparently uh process the
24:47information you need to set up that
24:49information Channel response time very
24:51quick because locally you are
24:53maintaining the inventory product
24:54variety will be lesser than the first
24:57second third option because you are
24:59storing at different location somewhere
25:02product may be available sometime
25:04product may not be available customer
25:06experience is very good because you are
25:08shipping product directly to the
25:10customer location time to Market will
25:12take more time because you are taking
25:15time to ship the product order
25:17visibility you can easily Implement that
25:20if you know you have implemented like
25:22Amazon Flipkart Walmart kind of system
25:26returnability is easy you need not to
25:27visit to to the shop just you uh return
25:30on the uh platform you click on the
25:33return and then it will be returned back
25:35to the uh uh distributor or retailer
25:38wherever you are maintaining the
25:40inventory the fifth option is manufactur
25:42distributor storage with customer pickup
25:45now what will happen in this case here
25:48retailer are storing the inventory now
25:51they are doing the cross talking and
25:53here we have some customer pickup sites
25:55for kakur there is one Center in kakur
25:58and customers will because sometime what
26:01is happening customers are not available
26:04on their mentioned address they never
26:06know whether they will be at home during
26:08that time they will be in office they
26:10will be somewhere else right in the
26:13market so what they want anywhere if you
26:16are consolidating my orders maybe within
26:192 three days I'll go to that convenient
26:21store where I will pick up my all the
26:23packets right so uh that way you are not
26:26getting the uh home delivery right so uh
26:31the customer experience will not be
26:33better in that way but yes because any
26:36day I can go there and then I can pick
26:38my products so inventory again you need
26:41to maintain the inventory Transportation
26:43cost will be lower because no customer
26:45is picking the product facility and
26:47handling cost will be high because you
26:50are maintaining now nearby pickup
26:52locations also where you need to
26:53maintain the inventory and information
26:55you need to invest into in uh
26:58information infrastructure because you
27:00need to consolidate the orders and then
27:03keep updated your customer that your
27:05orders have received uh at the pickup
27:08location response time similar to the
27:10last one uh uh higher right because it
27:15will take time to reach to the pickup
27:17location product variety will little
27:19lesser product availability will be
27:20lesser because now you are not storing
27:22at manufacturing location customer
27:25experience will be lower in this kind of
27:27network because you are not getting home
27:29delivery time to Market it will take
27:32more time because again you are not
27:35storing it at the manufacturer location
27:38then order visibility will be difficult
27:40but yes throughout distrib your network
27:43you are maintaining that virtual Network
27:45where your product is so you can track
27:47that returnability will be easier given
27:50that pickup location can handle the
27:52returns as well if they are handling it
27:55so last one is retail storage with
27:57customer pickup sites and the the local
28:01uh routine item how we are buying we are
28:03going to shop and then we are picking up
28:05the product that is how retailer is
28:07maintaining the inventory sometime he's
28:09out of stock sometime he's having excess
28:11inventory the best thing here is the
28:13cross selling opportunity you might have
28:15seen when we are going to you know buy
28:18any item if you talk about clothing
28:20industry so then they are saying that if
28:22you'll shop for 3500 so you'll get
28:25coupon for 2,000 and next any uh time
28:28you can you know uh get the concession
28:31on that right or maybe if you if your
28:34order will raise up to 5,000 we'll give
28:37you one bag free we'll give you this
28:39item free that item free so that cross
28:41selling can happen when you are going
28:44for retail storage so all those
28:46parameters we we discussed about the
28:48last one where the retailer or
28:50distributor is storing right will be
28:52same but customer pickup when you are
28:54talking about the consolidation Center
28:56or customer pickup sites similar to your
28:59retail shops where you are going and
29:01buying the product right but yes here
29:03the one difference is maybe you are
29:04visiting the retail shop and then you
29:06may face the out of stock item but in
29:09case of customer pickup site last one
29:11you are sure that your order has reached
29:13customer pickup site and you will get
29:15your order definitely right so these are
29:17all options we have right so when
29:20talking about selecting particular
29:22distribution Network obviously first we
29:25need to figure out what are the demand
29:27from the customer
29:28demand in terms of those Services level
29:31response time variety quality and then
29:34uh uh the cost and then time to market
29:38then order visibility returnability all
29:40these parameters we keep in mind then we
29:43need to keep in mind the other factor
29:45which is cost Factor we we talked about
29:47the logistics cost inventory cost
29:50warehousing cost Transportation Cost
29:52Storage cost facility cost handling cost
29:55right so you need to make the balance
29:57between the these two parameters and
30:00then specific dynamics of the industry
30:03if you are dealing with a kind of
30:05perishable items so then you forget
30:07about the cost immediately you need to
30:10response time should be very very less
30:13so whenever customer is placing the
30:14order your order fulfillment center
30:17should be very near to the customer so
30:18that
30:19immediately the delivery can be ensured
30:23right so whatever design you are picking
30:27you need to make sure that it is
30:29aligning with the overall uh strategy if
30:32Amazon Fresh is saying that within same
30:36their delivery that has to be because
30:38Amazon Fresh right fresh means if you
30:41are saying that today you place the
30:42order tomorrow you'll get that what is
30:44fresh then right so then you need to opt
30:47that kind of distribution Network where
30:49your facilities are very near to the
30:51customer from where you are delivering
30:53the product so you can see one uh you
30:56can rate different kind of of you know
30:58delivery designs distribution network
31:01with respect to all those parameters one
31:03respond to the highest preferred and
31:06four is means six is means uh very poor
31:10performance if you talk about response
31:12time highest performance will be given
31:15when you have the retail storage with
31:17customer pickup you are going to retail
31:19shop within 10 seconds you are getting
31:21the product within 10 seconds because
31:23you will just ask the shopkeeper I want
31:25this product if the product is available
31:27within 10 second you will get that but
31:29talking about online or where you are
31:32placing the order it will take minimum 2
31:34days 3 days 4 days it will be higher so
31:37you can just go through all different
31:39parameters product availability if we
31:41will talk about or variety retail shop
31:45minimum because retail shop chances are
31:48there you are visiting in the evening
31:50you may get milk packets or you may not
31:52get but if you are placing order online
31:55always availability and variety is is
31:58there right so different parameters are
32:01there already I discussed all those
32:02parameter you can just go through this
32:04is a kind of survey they have included
32:06in their chapter right so Mandel and
32:09choa so another thing is depending upon
32:13the product if it is high demand product
32:16so which type of location you should
32:19pick you should pick means prefer
32:21location is retail shop with customer
32:25pickup if it is high demand that means
32:28you can store high inventory because you
32:30know that anyhow you will consume that
32:32inventory but if you are you know
32:35talking about that product uh in Trent
32:39merge negative uh score is given because
32:43those designs are not suitable for high
32:46demand product likewise you can see if
32:48low customer effort is required or
32:51quality wise or variety wise or the size
32:53of the product different types of
32:55configuration of the products you can
32:57pick different networks and you can see
33:00some of the design networks are giving
33:02you positive point on some parameters
33:04and some are giving positive on other
33:07parameters right so this is the case
33:09study we'll just go through how uh dell
33:13is selling the computer hardware and
33:16through online we'll just focus on
33:18online system where you can record your
33:21specification and then they will provide
33:23you through their online distribution
33:25Network right so response time if it is
33:27customized Hardware so that means in
33:31that case uh any delay in the delivery
33:34should not be accepted and customer is
33:36not ready to accept that because it is
33:38very you are placing order for a PC
33:40which is very you know uh very
33:43standardized if it is standardized so
33:46customer will not wait they want
33:48immediate delivery but if it is
33:50customized so then they can wait because
33:53now you have given your configuration
33:55you then accordingly they will assemble
33:57it you can wait 2 3 days because you are
33:59getting the customized product product
34:02customization Del liveres the internet
34:05to offer a variety of customized service
34:07Services because through their internet
34:10they are directly recording the orders
34:12just take very simple example if you are
34:16placing order to uh through zomato and
34:18you are giving
34:20instructions uh cooking instructions to
34:22the kitchen so directly it is going to
34:25the kitchen sometime they are doing it
34:27sometime they are not doing it because
34:29or if very standard if they have placed
34:31customer has placed order without any
34:34cooking instructions so that means it is
34:36very easy already whatever you are doing
34:38you need to continue the same way same
34:40is the case with the Dell when they
34:41selling through online time to Market
34:44obviously we discussed about when you
34:47are selling through online introducing
34:50new product anytime you can do even in
34:52the midnight if you are launching the
34:53product you can launch through online
34:56cost efficiency only centralized
34:58location you can maintain cost
35:01efficiency and then you are providing
35:02Services 24 by7 cash flow quickly you
35:06can get the cash because order will be
35:09delivered even if it is cood order will
35:12be handed over once you received the
35:14cash talking about impact on online
35:17sales on cost inventory cost because
35:20aggregation at the Del store
35:22manufacturing house so centralized
35:25inventory cost will be minimum
35:28postponement until I'm not getting the
35:30order I'm not processing the
35:31manufacturing so that means that order
35:34Pro uh order I'm processing once I'll
35:37get the order only so that is a kind of
35:40reactive Pro process so in that way you
35:43can minimize the inventory cost facility
35:45cost those many facilities you need not
35:48to set up because you are maintaining
35:50the inventory at Del store or
35:52manufacturing location or assembly
35:55location right but yes you need to
35:57invest significantly by setting up that
36:00information Channel because customer
36:03will record their preferences there only
36:05their configuration there only
36:08Transportation cost will be very very
36:10high outbound Logistics is increasing
36:14because directly coming from the
36:16manufacturer Dell so then Transportation
36:19cost will increase information cost
36:21obviously you need to if you are using
36:25that reactive process once customer will
36:27record the order then you will start the
36:29manufacturing that means their inputs
36:31are important to note you need to invest
36:34heavily so impact on online sales on
36:36performance at Dell High valued and
36:38customized Hardware advantages online
36:41sales significantly improve
36:44responsiveness and reduce cost right
36:46because you are maintaining inventory at
36:48the centralized location and you are
36:52providing the customized product and
36:54then postponement and aggregation of the
36:56inventory can happen but the challenge
36:58is the uh online sales are less
37:02pronounced and the main strength of the
37:04inventory reduction is not as impactful
37:07while poor responsiveness because why
37:10poor responsiveness because you are
37:12placing order today you will take
37:14minimum 2 three days to deliver that
37:16order so right so when we are talking if
37:19we can conclude this Dell online sale
37:22model offers substantial Advantage for
37:25high value customized Hardware
37:28where you are going for customization
37:30when you are talking about the standard
37:31products you can go through your retail
37:34offline stores where you can maintain
37:36the inventory because you know that that
37:38inventory any day can be consumed in the
37:41market so you can just see on response
37:43time what is the impact means on all the
37:46parameters impact of on online sales on
37:49performance response time
37:51negative because you need to wait
37:53product variety availability experience
37:56will be very high customization because
37:59directly customer is involved in that so
38:02you can customize your product right so
38:05those services are get you are getting
38:07but transportation and all that again
38:09negative experience because Logistics
38:11cost will be higher so you we can just
38:14conclude here is setting up any
38:16distribution Network obviously we need
38:18to uh consider two aspects one is your
38:22cost other aspect is to deliver those
38:26customer services the different cost are
38:29there where we consider Logistics cost
38:32and Manufacturing cost obviously we have
38:34not included in that right so those cost
38:36are also there so uh I'll not suggest
38:40any pure strategy for any product or any
38:42industry but yes somewhere the mix of
38:44these we we can take where customization
38:47is required where we can go for
38:49standardized product where more
38:50varieties required accordingly we can
38:53blend the combination of these you know
38:55different design options and we can
38:58leverage on different distribution
39:00design networks and can be a very strong
39:03strength of any any company any any
39:06product who is selling through online or
39:08offline when you are ensuring that the
39:11quality And Timely delivery of the
39:13product and services so this is the
39:15reference again the same book so that's
39:18all for this session thank you very much

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