Aveneu Park, Starling, Australia

Distribution and buyers. DCs help a supply chain

Distribution
centres act as an extra between suppliers and buyers. DCs help a supply chain
by achieving inbound transportation to a point close to the final location, as
each supplier typically sends a large shipment to the DC that contains product
for all locations it serves. By cross-docking in DCs, little inventory needs to
be held and products can flow faster in the supply chain. Cross-docking also
saves on handling costs because products do not need to be moved in and out of
storage. However, it requires a significant degree of coordination and
synchronization between the incoming and outgoing shipments.

 

Typical
Seven-Eleven stores are small and offers more than 3000 different types of
daily necessities. It is difficult for stores to have idle spaces for
large-scale inventory so all goods must be frequently replenished through DCs.

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Seven-Eleven’s
goal of carrying products in its stores to match the needs of customers as they
vary by location and time of day, it has to replenish its stores several times
a day. So products from different suppliers are aggregated on trucks according
to the required temperature to help achieve frequent deliveries at a reasonable
cost.

 

Also,
by using DCs, it decreases the transportation costs by ensuring that product
availability closely matches customer demand.

Joint
distributions can also significantly reduce the number of delivery vehicles
used, mitigate traffic congestion and protect the environment by saving energy,
as side-effects. Moreover, it reduces the delivery costs and enables rapid
delivery of a variety of products, mainly fresh food.

 

Unlike DC transport, direct
store delivery means that all shipments come directly from the supplier to each
buyer location. In a direct shipment network, the shipping of each shipment is
specified and the supply chain manager only needs to decide on the quantity to
ship and the mode of transport to use. The major advantage of this option is
the elimination of intermediate warehouses and its simplicity of operation and
coordination. However, it’s justified only if the demand at the buyer locations
is large enough that optimal replenishment lot sizes are close to the maximum
load capacity of the truck from each supplier to each location. With small
buyer location, it tends to have high costs. From the angle of the carriers,
they want to deliver in a large quantity, which will result in high supply
chain inventory.

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