Distribution Industry Making the Connections, Selling the Goods

1. DistributionIndustry Distribution IndustryMaking the Connections, Selling the Goods By Janetta Soup & Qiang Han BY Janetta Soup & Qiang Han

2. Outline • The Structure • Global Logistics • Transportation • Technology (E-Commerce) • Case Analysis: Amazon. COM & SCM • Role of State • Transnational Retailing • ???

3. The structure of the distribution Industries • Definition of Distribution • Physicalmovement of materials and goods - transportation infrastructure • Transmission and manipulation of information • Object and Primary Purpose • Minimize logistics costs while delivering maximum customer service • Minimize time-space friction & max speed

4. The Structure of Distribution Industries • Essential Function • Intermediation between buyers and sellers at all stages of the production chain • Driven by the demands of the final consumer (In reality, there are political, and other boundaries to complicate the basic system, such as…)

5. The structure of the distribution Industries • Two Barriers to Distribution : • Physical Conditions: Land/Water interfaces • Political Boundaries: Customs clearance, tariffs, duties, administration and the like

6. The structure of the distribution Industries • Major Types of Organization • Transportation companies – Nedlloyd • Logistics Service Provider – FedEx • Wholesalers – Costco • Trading Companies – Sogo Shosha • Retailers – Wal-Mart • E-tailers – Amazon. COM

7. Global Logistics • What is Logistics: Logistics management describes the integration of activities necessary to ensure the efficient flow of raw materials, in-process inventory, and finished goods from producers to customers. • Seven “R”s Right product, Right quantity, Right condition, Right place, Right time, Right cost Right customers.

8. Global Logistics • Four Major Types of Logistics Service Firm: Port to port, door to door, desk to desk, pocket to pocket.

9. Global Logistics • Trading Companies Trading companies are one the oldest forms of organization in the distribution services • Long – distance trade • Facilitating trade in materials and products

10. Global Logistics • Trading Companies Japanese Sogo Shosha: “General trading Company” • Initially to organize exchange and distribution within the Japanese domestic market • First Japanese companies to invest on a large scale outside Japan • Organize the flow of imports of much-needed primary materials for the resource-poor Japanese economy • Channel Japanese exports of manufactures to overseas markets • “Third-country trade”

11. Global Logistics

12. Global Logistics • Japan Sogo Shosha Perform Four Specific Functions: • Trading and transactional intermediation • Financial intermediation • Information gathering • Organization and coordination of complex business systems

13. Transportation • Transportation provides the movement of goods necessary in the supply chain. • Five basic modes of transportation are: • Airlines • Motor carriers • Pipelines • Railroads • Water carriers

14. Transportation-Continued • All transportation modes can be evaluated on these seven criteria: • Cost - charges for transportation • Speed - time of transit • Reliability - meeting schedules on time • Capability - ability to transport various products • Flexibility - door-to-door delivery • Capacity - ability to carry amount of tons in trip • Frequency - scheduling

15. Transportation Chart

16. Transportation Continued • Intermodal transportation • Using more than one mode of transportation • Piggyback • Container On FlatCar (COFC) • Roll-On-Roll-Off (RO-RO)

17. Technology • Technological innovations have impacted: • Speed • Flexibility • Reliability in the distribution industry.

18. Technology continued • Three key elements of distribution systems • Electronic Data Interchange (EDI)- large quantities of data sent electronically • Bar Code Systems – each product item distinct identity • Distribution Centers – faster and frequent turn over rate

19. Technology continued • E-Commerce (EC) • Definition: Buying and selling goods and services over the Internet. • Categories of EC

20. Technology continued • Methods of fulfilling EC orders

21. Technology continued • Benefits of EC • Companies and publishers have a global presence, and the customer has global choices and easy access to information. • Companies can improve competitiveness and quality of service by allowing access to their services anyplace, anytime. Companies can also monitor customers’ choices and requests electronically. • Supply chain response times are shortened. • Firms can substantially reduce transaction costs, which allows for price reductions or cost savings. Companies that provide purchasing and support services through the Web can save significant personnel costs. • EC levels the playing field for small companies that cannot afford the same infrastructure and marketing programs as their larger counterparts.

22. Case Analysis – Amazon. COM • Amazon. COM Distribution offers traditional retailers a cost advantage • Shipping costs on a per unit basis are much higher for an Internet firm that ships individual orders directly to consumers Traditional Systems Internet Systems Central Warehouses Distribution Centers Retail Outlets Customers

23. Case Analysis – Amazon. COM • Time • Reduce Lead Time • Quick and efficient consumer response • Dependability • Safe delivery, safe purchase • Communication • 2 way link between Amazon and its customers • Forecast customer needs • Convenience • Minimize searching effort for buyer with technology

24. Case Analysis – Amazon. COM • Technology: Amazon. COM uses software to more accurately forecast purchasing patterns by region, allowing it to give suppliers better information about delivery dates and volumes. • Third Party Providers: Amazon. COM uses third-party logistics providers to transport the orders directly to their customers; they often send packages via Mail, UPS, FedEx, and Airborne Express. • Transportation Time: 99% of the orders were shipped and delivered on time. • Inventory Management: Seven huge distribution centers, keep inventory of more than 2.7 million products - key differences between Amazon. COM and its competitor.

25. Case Analysis – Amazon. COM • Tracking your order at Amazon.com

26. Supply Chain Management (SCM) • SCM is the Distribution Centre for Wal-Mart • Located in Calgary, AB • Centre is just under 1 000 000 square feet • Ships to many Wal-Mart stores across western Canada

27. SCM continued • Step up from JIT system • Focuses on: • Cross-docking • Pick-to-light • Put-to-light

28. Role of States • Regulation • Transportation & Communications • Retailing • Regulatory framework • Control over own National space • Safety & Efficiency

29. Role of State continued • Deregulation • Air transportation industry • Two examples: • US vs. UK • US vs. Hong Kong

30. TransnationalRetailing • Retailing is the final link in the production chain. • Retailing has always had a predominantly domestic orientation. • Some of the world’s largest retailers in terms of sales revenues continue to be entirely embedded in their domestic market.

31. Transnational Retailing • Two dimensions to the transnational operations of retailing firms • Selling VS. Sourcing

32. Transnational Retailing • Motivations for Transnationalization of a Retail Firm’s Operation: • Saturation of the domestic market • Intensification of competition in the domestic market • Regulatory constraints in the domestic market • Perception of profitable opportunities overseas • Desire to exploit a firm’s specific advantages in new markets • Ways for retailers to Enter a Foreign Market: • Build a new store • Merge with or to acquire an existing firm in the target market • Enter into a collaboration with a domestic firm within the target market through licensing and franchising

33. Transnational Retailing • In 1999, only four retail firms were among the world’s top 100 transnational corporations. • In terms of TNI: Rank TNI Company Country 53 52.7 Royal Ahold Holland 76 36.4 Metro Germany 90 25.8 Wal-Mart U.S

34. Transnational Retailing

35. ??? Transportation Tycoon Findings From Fun (FFF)

36. Pop Quiz • What are the seven “R”s for Logistics? Right product, Right quantity, Right condition, Right place, Right time, Right cost, Right customers. • What are the five modes of transportation? Airline, motor carrier, pipeline, railroad, water carrier. • What are the two barriers in the distribution industry? Physical barrier, political barrier. • What are the ways for retailers to enter a foreign market? (Name 2 out of 3) Build a new store Merge with or to acquire an existing firm in the target market Enter into a collaboration with a domestic firm within the target market through licensing and franchising

37. Pop Quiz • What are the differences between pick-to-light and put-to-light? Put to light: emptying the box Pick to light: filling the box • Name 2 out of the 4 types of logistics service firms Traditional transportation, asset based, skill based, and network logistics provider • In what ways has technology impacted the distribution industry? Speed, reliability, flexibility.

38. Question?

39. Sources • Dicken, Peter. Global Shift. Fourth edition. The Guilford Press • Bloomberg, David. Stephen, Lemay. Joe B. Hanna. Logistics. Prentice Hall.