International Conference on Mechanical, Industrial and Energy Engineering 2014

ICMIEE-PI-140410 26-27 December, 2014, Khulna, BANGLADESH

Analyzing Distribution Networks of Supply Chain in Perspective of Bangladesh

1*
Farjana Nur, 2N.U.I Hossain

1*
Department of Industrial Engineering & Management, Khulna University of Engineering & Technology, Bangladesh
2
Department of Mechanical Engineering, Khulna University of Engineering & Technology, Bangladesh

Abstract:

Supply chain is the sequence of processes involved in the production and distribution of a commodity. And designing
distribution network is one of the crux factors of supply chain management. Shortly, a distribution network is the
system that a company uses to get products from the manufacturer to the retailer. A fast and reliable distribution
network is essential to a successful business because customers must be able to get products and services when they
want them. With a view to designing a supply chain, we need to consider how all supply chain drivers should be used
together to support the competitive strategy of a company and maximize supply chain profits. This paper aims to
discuss various mode of distribution networks of supply chain in perspective of Bangladesh and their recent
transformation into another mode due to introduction of new business types.

Keywords: Distribution Network, Drop Shipping, Manufacturer, Distributor, Retailer.

1. Introduction  Information (Data and analysis of all drivers

in a supply chain)
There are two key factors needed to be considered to
design the supply chain network. And performance of a
Distribution network design options must therefore
distribution network is evaluated through these two
be compared according to their impact on
dimensions. These two dimensions are:
customer service and the cost to provide this level
of service.
1.**Customer needs that are met (Customer Service):
 Response time (Time it takes for a customer to
Changing the distribution network design directly
receive an order)
 Product variety (Number of different products
affects the following supply chain cost.

that are offered)

 Product availability (Probability of having a
product in stock)
 Customer experience (Ease of placing and
receiving orders)
 Order visibility (Ability of customers to track
their orders)
 Returnability (Ease of returning unsatisfactory
merchandise)

2.**Cost of meeting customer needs (supply chain

cost):
 Inventory (All raw materials, WIP, and Fig 1. Factors that affect distribution network
finished goods)
 Transportation (Moving inventory from point
2. Literature Review
to point)
 Facility & handling (Locations where product In 1982, the term "supply chain management" was
is stored, assembled, or fabricated) first coined by Keith Oliver . However, the
concept of a supply chain in management was of

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 International Conference on Mechanical, Industrial and Energy Engineering 2014
ICMIEE-PI-140410 26-27 December, 2014, Khulna, BANGLADESH

great importance long before, in the early 20th Step 1: Identify scope and current network
century, especially with the creation of the constraints
assembly line. The characteristics of this era of Step 2: Determine your goals
supply chain management include the need for Step 3: Gather data on the current network
large-scale changes, re-engineering, downsizing situation
driven by cost reduction programs, and widespread Step 4: Cleanse and verify the data
attention to Japanese management practices. Then Step 5: Select design tools
starts integration era. In this era of supply chain Step 6: Build baseline models
management studies was highlighted with the Step 8: Model potential strategic network
development of electronic data interchange (EDI) scenarios
systems in the 1960s, and developed through the Step 9: Model potential strategic network
1990s by the introduction of enterprise resource scenarios
planning (ERP) systems. This era has continued to Step 10: Determine capital investment
develop into the 21st century with the expansion of requirements
Internet-based collaborative systems. This era of Step 11: Recommend and develop your
supply chain evolution is characterized by both implementation plan
increasing value added and cost reductions through
integration. Then in 1990s specialization era,
phase1 began. In this era, companies began to 4.Types Of Distribution Network:
focus on "core competencies" and specialization.
They abandoned vertical integration, sold off non- Answers that are ratified based on those two
core operations, and outsourced those functions to previous key questions, there are six
other companies. This changed management distinctive distribution networks are used to
requirements, by extending the supply chain move products from manufacturer to
beyond the company walls and distributing consumer or end user.
management across specialized supply chain
partnerships. After that, specialization era, phase2
began which is known as supply chain Those six types of distribution networks are
management as service. Specialization within the presented in below figure:
supply chain began in the 1980s with the inception
of transportation brokerages, warehouse
management, and non-asset-based carriers, and has
matured beyond transportation and logistics into Manufacturer
Storage With
aspects of supply planning, collaboration, Direct Shipping
& In-Transit
execution, and performance management. Merge
Distributor
Manufacturer
Storage With
Storage With
Customer
Direct Shipping
Pickup
3. Design Options For a Distribution Network:
Supply
There are two key decisions associated with Chain
Network
designing a distribution network


Retail Storage Distributor
Will the product be delivered to the With Customer Storage With
Pickup Last Mile
customer location or picked up from Manufacturer Delivery
a preordained site?

Manufacturer
Will product flow through an Storage With
Package
intermediary? Carrier
Delivery

Most importantly there are eleven steps are

considered to align a distribution network for
Competitive Advantage.
Fig 2. Types of supply chain distribution
network.

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4.1 Manufacturer Storage with Direct 4.2 .Manufacturer Storage with Direct
Shipping (Drop Shipping) Shipping and In-Transit Merge

M=Manufacturer C=Consumer

Fig 3. Manufacturer Storage with Direct Fig 4. Manufacturer Storage with Direct
Shipping Shipping and In-Transit Merge

Product Flow: Product Flow:

Information flow:--------------- Information flow:---------------

Example: Example:
-Western Marine (Large Ship/ Vessel) -Energypac Power Genretaion Limited.
-Ananda Shipyard (Large Ship/ Vessel) (EPGL) assemblies generator by sourcing
engine and alternator from different
Characteristics of this distribution networks manufacturers.
are stated below: -Aftab Automobiles merge engine and


various automobiles parts produced by
Products are shipped directly to the consumer different manufacturers to assembly Toyota &
from the manufacturer

Hino Vehicles.
Retailer is an information collector:
– Passes orders to the manufacturers Characteristics of this distribution networks
– It does not hold product inventory are stated below:


Inventory is centralized at manufacturer
 Drop shipping offers the manufacturer the Shipments from multiple manufactures are
opportunity to postpone customization merged before making a single delivery to the
 consumer

Effective for high value, large variety, low
demand products Shipments to Mergers are larger so economies
 of scale is achieved

High transportation cost
Mergers increase facility costs
 Response time may go up

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4.3 . Manufacturer or Distributor Storage 4.4 Distributor Storage with Last Mile
With Customer Pickup Delivery (Home delivery)

Fig 5. Manufacturer Storage with Direct Fig 6. Distributor Storage with Last Mile
Shipping Delivery

Product Flow: Product Flow:

Information flow:--------------- Information flow:---------------

Example: Example:
-Bangla CAT (Sole distributor of Caterpillar -Milk delivery
Products in Bangladesh) -Chaldal.com
-Clarke Energy (Sole distributor of Jenbecher) -Niloy grocery home service.
-Walton Product
Characteristics of this distribution networks :


Characteristics of this distribution networks :
Warehouse delivers to customers instead of
 Customers come to pick up sites (warehouse, carrier
retailer) to get the products – Warehouses are located closer to
– If consumers are willing to pick up consumers
the products, let them do so. – Transportation costs go up because
Otherwise, they would be charged for warehouses are not as effective as
the delivery costs package carriers in aggregating loads
 to have economies of scale

Order tracking is crucial. Consumers must be
alerted when their order is ready for pick up. Warehouse may need to own a trucking fleet
Once a consumer arrives at the pick up site, so the physical infrastructure costs are higher.
the products must be quickly located. Products must be flowing fast to
 Significant amount of information is required justify the infrastructure
 Increased handling cost – Processing cost are high

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4.5 Distributor Storage with Carrier 4.6 Retail Storage with Customer Pickup
Delivery

Fig 7. Manufacturer Storage with Direct Fig 8. Manufacturer Storage with Direct
Shipping Shipping
Product Flow:
Product Flow:
Information flow:---------------
Information flow:---------------
Example:
Example: -Agora Retail Store (Rahimafrooz),
-Sundorban Querier Service -Shopno Retail Store (ACI),
-Continental Querier Service -Meena Bazar
-SA Poribahan, Querier Service
Characteristics of this distribution networks
Characteristics of this distribution networks are stated below:
are stated below:
 Customers pick up product from retailers
 Inventory is held at a warehouse which ships – Low transportation cost
to customer by carriers – High facility cost
 With respect to direct shipping – Relative easy returnability
– Inventory aggregation is less – Increased inventory cost
– Higher inventory costs  No order tracking necessary
– Facility costs are higher – If the product is available at the
– Less information to track retailer, the consumer buys.
 Warehouses are physically closer to Otherwise goes to another retailer
consumers which leads to  Effective for fast moving items
– Faster response time
– Lower transportation cost
 Not effective for slow moving items

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5.0 Comparing among distribution network in

prospective of Bangladesh 6.0 Share of various supply chain distribution
network of Bangladesh
Table 1.Comparison among distribution network
storage with last storage with customer pick with customer
Manufacturer/Distributor Retail storage

pickup

1-5
1
4
4

1
1
4
1
6
1
Manufacturer
Storage with
Direct Shipping
(3%)
up

4
1
1
5
6
2
1
1
5
5
Manufacturer
Storage with
Direct Shipping
and In-Transit
Merge (12%)
mile delivery

Manufacturer or
Distributor

3% Distributor
12%
2
3
3
1
2
3
3
5
4
2

Storage With
Customer
17% Pickup (17%)
52%
Manufacturer storage Distributor storage

Distributor
with carrier

5% Storage with
delivery

11% Last Mile

3
2
2
2
3
4
2
2
3
3

Delivery (5%)

Distributor
storage with direct with direct shipping &

Storage with
In transit Merge

Carrier Delivery
(11%)
4
1
1
3
4
5
1
3
2
4

Retail Storage
with Customer
Pickup (52%)
Manufacturer

shipping

4
1
1
4
5
5
1
4
1
4
Customer experience

Facility & Handling

Product availability

Fig 9. Contribution of various distribution network in

Product variety

Order visibility
Response time

Transportation
Return ability

Bangladeshi market (% wise) .

Information
Inventory
Criteria

According to recent survey of supply chain network

among various district of Bangladesh below
calculative percentage can be obtained.

1=Strongest Performance,6=Weakest Performance

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Table 2. Product characteristics & customer preference +2: Very suitable;

+1: Somewhat suitable;
with Customer
Retail Storage

0: Neutral;
Pickup

-1: Somewhat unsuitable;

+2
+1

+1

+2
-1
-2

-1

-1
-2
-2: Very unsuitable
Carrier Delivery
Storage with
Distributor

7.0 Conclusion
+1

+1

+2

+1

+1
+2
-1
0

The purpose of this study is to identify the factors that

influence supply chain distribution network and
analyzing and comparing various distribution method
Distributor Storage

in comparing to Bangladeshi perspective. Since many

with Last Mile

of those factors are under the control of the seller,

Delivery

identifying them may help sellers improve the outcome

+1

+1

+1

+2
-1
-2
0

of their sales. However, in recent days in Bangladeshi

business market, one supply chain network is
converting into another supply chain network due to
ease of end user. For an example, due to invent of more
Distributor Storage

online shops recently the network of distributor

Manufacturer or

With Customer

customer pickup is now converting into distributor

storage with last mile delivery. Therefore, it may
Pickup

+1
+1

+2

+2
-1

-2

-1

assume from the study that customer will certainly

0

involve themselves that network is much more

convenient for them .
with Direct Shipping and

References
Manufacturer Storage

In-Transit Merge

[1]. Chopra, S., & Meindl, P. (2001). Supply chain

management:Strategy, planning, and operation. Upper
+1

+1

+2
-1

-1

-2
0

Saddle River, NJ: Prentice-Hall.

[2] .Lummus, R., & Vokurka, R. (1999). Defining
supply chain management: A historical perspective
and practical guidelines. Industrial Management
& Data Systems, 99, 11-17
[3]. Arntzen, B.C., Brown, G.G., Harrison, T.P.,
Manufacturer Storage with

Trafton, L.L., 1995. Global supply chain management

Direct Shipping

at digital equipment corporation. Interfaces 25, 69–93.

[4]. Keskinocak, P., & Tayur, S. (2001). Quantitative
analysis for internet-enabled supply chains. Interfaces,
+1
+2

+2

+2
+1
-2
-1

-1

-2

31(2), 70-89.
[5]. Williams, Jack F., 1981. Heuristic Techniques for
Simultaneous Scheduling of Production and
Distribution in Multi-Echelon Structures: Theory and
Empirical Comparisons, Management Science, 27(3):
336-352.
[6] Towill, Denis R., 1996. Time Compression and
Medium Demand Product

Quick Desired Response

Supply Chain Management - A Guided Tour, Supply

Many Product Sources
High Demand Product

Low Demand Product

High Product Variety

Low Customer Effort
High Product Value
Very Low Demand

Chain Management, 1(1): 15-27.

Criteria

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