Supply Chain Chapter 4
Such a network is likely to be most effective if existing retail locations are used as pickup sites, because this type of network improves the economies from existing infrastructure.
manufacturer or distributor storage with customer pickup
Such a system is hard to implement because it requires integration of several stages in the supply chain.
manufacturer or distributor storage with customer pickup
The major hurdle is the increased handling cost and complexity at the pickup site.
manufacturer or distributor storage with customer pickup
The appropriate choice of distribution network grows the ________ by satisfying customer needs at the _________.
supply chain surplus lowest possible cost
In the long run, a _______ approach is likely to prevail in the computer hardware and cell phone industry.
tailored
Distribution networks must be able to adapt to changing ________ and ________. An inability to adapt can be very damaging in these times of rapid change.
technology and environments.
If the number of facilities is increased to a point at which inbound lot sizes are also very small and result in a significant loss of economies of scale in inbound transportation, ________ the number of facilities ______ total transportation cost.
increasing; increases
_____ has also started using the tailored approach with customized hardware such as servers built to order, whereas standardized hardware, such as laptops, is produced in low-cost countries and sold through retail stores such as Walmart.
Dell
______ is a key driver of the overall profitability of a firm because it affects both the supply chain cost and the customer value directly.
Distribution
______ occurs between every pair of stages in the supply chain.
Distribution
_______ refers to the steps taken to move and store a product from the supplier stage to a customer stage in the supply chain.
Distribution
Real-time visibility between customers and the warehouse is needed, whereas real-time visibility between the customer and the manufacturer is not. Visibility between the distributor warehouse and manufacturer can be achieved at a much _______ cost than real-time visibility between the customer and manufacturer.
Distributor storage with carrier delivery lower
__________ requires higher levels of inventory than the other options (except for retail stores) because it has a lower level of aggregation.
Distributor storage with last-mile delivery
_______ also offers the manufacturer the opportunity to postpone customization until after a customer has placed an order. Postponement, if implemented, further lowers inventories by aggregating to the component level.
Drop-shipping
_______ generally requires significant investment in information infrastructure.
Drop-shipping
Drop-shipping: A good _______ infrastructure is needed between the retailers and the manufacturer so the retailer can provide product availability information to the customer, even though the inventory is located at the manufacturer.
information
A company selling online incurs additional information costs to build and maintain the ________. The value of setting up online sales is not the same in every industry.
information infrastructure
Changing the distribution network design affects the following supply chain costs:
inventories transportation facilities and handling information
Important costs that managers must consider include ...
inventories, transportation, facilities and handling, and information
Online sales affect the cost of ... It is important to observe that the impact in each case is not necessarily positive.
inventory, facilities, transportation, and information
When there are too many sources, _______ can be difficult to coordinate and implement. ________ is best implemented if there are no more than four or five sourcing locations.
in-transit merge
are the costs incurred in bringing material into a facility
inbound transportation costs
If a firm wants to reduce the response time to its customers further, it may have to ______ the number of facilities beyond the point that minimizes logistics costs.
increase
A firm should add facilities beyond the cost-minimizing point only if managers are confident that the ______ in revenues because of better responsiveness will be ________ than the increase in costs because of the additional facilities.
increase; greater
A decrease in the desired response time ______ the number of facilities required in the network.
increases
Going online thus _______ the cost of reverse flows.
increases
The IT infrastructure required for online sales ______ costs. In the case of an online grocer, this is somewhat more signifiant than with the other online channels, because an online grocer takes on a wider range of functions that shoppers do themselves.
increases
As long as inbound transportation economies of scale are maintained, ______ the number of facilities _______ total transportation cost.
increasing decreases
The reduction of inventories from aggregation is most significant for ______ books with _______. The benefit is less significant for best sellers, for which demand is more predictable
low-demand books with high demand uncertainty
For grocers: The benefits of aggregation are higher for speciality, _______ with ________ uncertainty. These products constitute a small fraction of overall sales at a supermarket.
low-demand items high demand
Although inventory costs are typically _____ with drop-shipping, transportation costs are _____ because manufacturers are farther from the end consumer.
low; high
Two basic types of facilities costs must be included in the analysis:
1) costs related to the number and location of facilities in a network 2) costs associated with the operations that take place in these facilities
Based on the firm's industry and the answers to the two questions, one of six distinct distribution network designs may be used to move products from factory to customer. These designs are classified as follows:
1. Manufacturer storage with direct shipping 2. Manufacturer storage with direct shipping and in-transit merge 3. Distributor storage with carrier delivery 4. Distributor storage with last-mile delivery 5. Manufacturer/distributor storage with customer pickup 6. Retail storage with customer pickup
At the highest level, performance of a distribution network should be evaluated along two dimensions:
1. Value provided to the customer 2. Cost of meeting customer needs
Managers must make two key decisions when designing a distribution network
1. Will product be delivered to the customer location or picked up from a prearranged site? 2. Will product flow through an intermediary (or intermediate location)?
As demand has grown, ________ has opened several warehouses in an effort to get closer to customers, decrease its transportation costs, and improve response time.
Amazon
For e-books, ______ incurs no inventory costs because e-books do not have to be stored physically.
Amazon
Its online sales allow ________ to lower facility costs because it does not need the retail infrastructure that a bookstore chain such as Barnes & Noble must have.
Amazon
______ attracts many customers by offering a selection of millions of books. Customers can search for hard-to-find books or those of special interest. A large physical bookstore, in contrast, can carry fewer than a hundred thousand titles.
Amazon
_______ also uses online sales to lower its inventory and some of its facility costs. For traditional books, transportation costs increase as a result of selling books online. For e-books however transportation cost is not a factor given that they can be downloaded efficiently on the Internet.
Amazon
_________ is able to decrease inventories by aggregating physical inventories in a few geographical locations. A bookstore chain, in contrast, has higher inventories because titles are carried at every store.
Amazon
Who has used last-mile delivery in the grocery industry?
AmazonFresh, Peapod, and Tesco
______ has been very successful with its retail channel because it sells a relatively low variety of standardized hardware in large volumes at its stores.
Apple
______ supply chains have been transformed with the advent of online sales and the launching of Amazon.com in July 1995. Since then, Amazon has added many categories to its product offerings, including music, toys, electronics, software, and home improvement equipment.
Book
______ failed in its effort with retail stores because it did not use any of the supply chain strengths of the bricks-and-mortar channel. Instead of just helping people with configuration at its retail stores, _______ would have served its customers better by also carrying recommended configurations of its computers in the stores. This would have immediately satisfied customers who wanted the recommended configuration, while allowing ______ to produce the more customized configurations efficiently.
Gateway
This approach has the greatest benefits for products with high value whose demand is difficult to forecast, particularly if product customization can be postponed.
In-transit merge
________ allowed Dell and Sony to hold all their inventories at the factory.
In-transit merge
Distributors play a much more significant role for consumer goods distribution in a country such as ________ compared with the United States.
India
Given the ease of changing prices and assortments online, the _______ allows a company selling online to manage revenues from its available product portfolio much more effectively than do traditional channels.
Internet
Integrate the _________ with existing physical network.
Internet
Promotion information can be conveyed to customers quickly and inexpensively using the ________ as long as the business has access to its customer network. Groupon is one company that has used social networking online to push promotions to customers.
Internet
The ________ allows manufacturers and other members of the supply chain that do not have direct contact with customers in traditional channels to get customer feedback and build a relationship with the customer. Social networking channels such as Facebook and Twitter allow firms to pitch products and promotions directly to customers.
Internet
Unlike the hardware industry, in which online sales facilitate direct sales by manufacturers, the _______ has not shortened supply chains in the book industry.
Internet
Customers who require a short response time may not use the ________ to order a product. There is no such delay, however, for _________. The Internet has facilitated almost instantaneous access to movies, music, and books in digital form.
Internet information goods
The _______ is particularly effective for products such as music, movies, and books that can be digitized because the two major disadvantages of distributing physical products online-_________-dissapear.
Internet long response times and high transportation cost
Delivery costs (including transportation and processing) can be more than $20 per home delivery in the grocery industry. __________ may be somewhat less expensive in large, dense cities, especially if the distributor has very large sales and carries a wide range of products.
Last-mile delivery
_________ refers to the distributor/retailer delivering the product to the customer's home instead of using a package carrier.
Last-mile delivery
In this option, product is shipped directly from the manufacturer to the end consumer, bypassing the retailer (who takes the order and initiates the delivery request).
Manufacturer storage with direct shipping
In this option, product is shipped directly from the manufacturer to the end consumer, bypassing the retailer (who takes the order and initiates the delivery request). This option is also referred to as drop-shipping.
Manufacturer storage with direct shipping
The retailer carries no inventory. Information flows from the customer, via the retailer, to the manufacturer, and product is shipped directly from the manufacturer to customers.
Manufacturer storage with direct shipping
________ used the Internet to significantly lower its facility and inventory costs relative to Blockbuster.
Netflix
Whereas _______ is ideally designed through its centralized model to supply a wide variety of older movies (either by DVD or streaming), ________ has used DVD vending machines to provide a low-cost channel for recent releases. These vending machines carry only a few hundred titles, consisting of new movies and popular children's videos.
Netflix Rebox
_______ allow a firm to offer greater product variety and improve product availability by centralizing inventories. This is especially beneficial for ________, _______ products.
Online sales; centralizing low-volume, high-variety
______ transportation costs per unit tend to be higher than ______ costs because ______ lot sizes are typically larger.
Outbound; inbound inbound
Whereas a customer picks out the required items at a grocery store, an online seller such as _________ incurs higher handling costs because its employees must pick a customer's order from the warehouse shelves and deliver it to the customer's home.
Peapod
_____ can guide online customers based on what they purchase. Over longer periods, ______ can collect shopping patterns ad suggest products that match a customer's preferences. Such suggestions enhance revenues by increasing customers' impulse purchases.
Peapod
_______ is able to increase revenues by creating a personalized shopping experience for customers and delivering customized, one-to-one advertising and promotions.
Peapod
_______ offers less variety than a typical supermarket.
Peapod
________ allows customers to place orders at any time and have them delivered at home, eliminating a trip to the supermarket.
Peapod
________ and other online grocers use online sales to lower some facility costs, and to an extent, inventory costs. Picking costs and transportation costs, however, are much higher than for traditional supermarkets.
Peapod
________ must bear inbound transportation cost to its fulfillment centers and then outbound delivery costs from the fulfillment centers to customer homes. Outbound delivery costs are _______, because individual orders must be delivered to each customer's home. The task becomes all the more problematic given the different temperature requirements for different types of food.
Peeped high
____________ affect the type of distribution system preferred by customers.
Product price, commoditization, and criticality
They allow customers to go online and reserve movies at specific machines using a credit card. The result is a virtual aggregation of inventories, which improves the matching of supply and demand and reduces inventory expense.
Redbox
Although customer value is affected by many factors, we focus on measures that are influenced by the structure of the distribution network:
Response time Product variety Product availability Customer experience Time to market Order visibility Returnability
Serving as an outlet for online orders allows ________ to improve utilization of its existing logistical assets.
Seven-Eleven manufacturer or distributor storage with customer pickup
In the case of ________, effective distribution provides a very high level of customer responsiveness at a reasonable cost.
Seven-Eleven Japan
_________s are large enough to enjoy most of the inventory benefits that aggregation offers, without having the additional delivery cost incurred by an online grocer.
Supermarkets
It may seem, at first, that a customer always wants the highest level of performance along all these dimensions. However...
THIS IS NOT THE CASE
Among the supermarket chains, _______ has taken the lead in combining online sales with physical supermarkets to serve customers in a variety of ways. Customers could shop at a supermarket, order online for home delivery, or pick up from a designated location. Traditionally, they picked groceries at existing supermarkets for home delivery.
Tesco
_______'s use of its physical assets to satisfy both online orders and people who want to shop in a supermarket is an effective integration of online sales within a supply chain network. Another example of an effective tailored strategy is Walmart, which allows customers to pick up online orders at its retail stores. The Internet is used to expand the variety available to customers at a Walmart store. Walmart stores stock popular items, whereas customers can order online the colors or sizes that may not be available in the store. This allows Walmart to centralize low-demand items while increasing the variety available to customers. Each channel is tailored to carry the products it handles best.
Tesco's
Transportation costs are somewhat lower for _______ compared with those for _________ because an economic mode of transportation (i.e truckloads) can be employed for inbound shipments to the warehouse, which is closer to the customer.
distributor storage manufacturer storage
are the sum of inventory, transportation, and facility costs for a supply chain network.
Total logistics costs
________ costs are a significant fraction of the cost incurred by online grocers. This makes it difficult for an online grocer to compete with a supermarket on prices.
Transportation
Online sales have been most effective for _________, when customers are willing to wait some time before delivery.
high-value products with uncertain demand
In the case of ______, distribution allows the company to provide high availability levels of relatively common products at a very low cost.
Walmart
________ uses local storage for its fast-moving products while delivering a wider variety of products from its central location for pickup at the store. Similarly, W.W. Grainger keeps its inventory of fast-moving items at pickup locations, whereas slow-moving items are stocked at a central warehouse.
Walmart
___________ is an example of a company that, through trial and error, adapted its distribution network to take advantage of the Internet along with its existing retail store network.
Walmart
Two of the world's most profitable companies that have built the success of their business around outstanding distribution design and operation.
Walmart & Seven-Eleven Japan
Examples of companies that offer multiple options of order placement include __________. In either case, customers can walk into the store or order online. A B2B example is W.W. Grainger: Customers can order online, by phone, or in person and pick up their order at one of W.W. Grainger's retail outlets.
Walmart and Tesco.
Online sales affect customer experience in terms of _________, _________, and ________.
access, customization, and convenience
It is important to have __________ distribution networks.
adaptable
In the 1980s, large bookstore chains such as Borders and Barnes & Noble establishes themselves at the expense of mom-and-pop bookstores primarily through _____.
aggregation
Each firm should have ______ the number of facilities that minimizes total logistics costs.
at least
Firms that target customers who value short response times need to locate facilities ______ to them. These firms must have _______ facilities, each with a _____ capacity.
close many; low
Most companies are best served by a _________ of delivery networks. The _______ used depends on __________ and the _______ that the firm is targeting.
combination combination; product characteristics; strategic position
The main advantages of a network with ___________ are that it can lower the delivery cost and expand the set of products sold and customers served online.
consumer pickup sites
The Internet and cell phones can enhance the _______ and ______ the cost of revenue collection, especially in small amounts. More efficient than handing out cash or vouchers.
convenience; lower
includes the ease with which customers can place and receive orders and the extent to which this experience is customized It also includes purely experiential aspects
customer experience
The online channel also improves the _______ by providing 24-hour access and allowing a more customized experience. Selling a product online, however, _______ the response time relative to a retail store.
customer experience increases
A manager must consider the ______ to be met and the ______ of meeting these needs when designing the distribution network.
customer needs; cost
As it compares different distribution network options, a firm must evaluate the impact on ....
customer service and cost
The ________ and ________ are the primary measures used to evaluate different delivery network designs.
customer service and cost components
Online sales offer far greater advantages when selling ________ than when selling _______. This fact is explained by the following key differences between the two products: 1) product differentiation in hardware can be postponed until after the customer has placed an order, whereas physical books are currently published well in advance of a sale 2) transportation cost represents a much higher portion of the cost of books and a relatively small portion of the cost of hardware
customized computer hardware physical books
Online sales have not helped profits for traditional books to the same extent as in the _________ industry.
customized hardware
To _______ inventory costs, firms try to consolidate and limit the number of facilities in their supply chain network.
decrease
As the number of facilities increases, total logistics costs first ______ and then ______.
decrease; increase
Facility costs ______ as the number of facilities is _____ because a consolidation of facilities allows a firm to exploit economies of scale.
decrease; reduced
Increasing the number of warehouse locations ______ the average outbound distance to the customer and makes outbound transportation distance a ______ fraction of the total distance traveled by the product.
decreases smaller
Increasing the number of facilities ______ the response time and transportation cost but ________ inventory and facility cost.
decreases; increases
Companies in the same industry often select______
different distribution networks
For the impact of online sales on customer service: we also look at factors such as ________ and the ability to offer _______ that help companies selling online.
direct sales flexible pricing
Customer convenience is high with _______ storage because a single shipment reaches the customer in response to an order.
distributor
From an inventory perspective, _______ storage makes sense for products with somewhat higher demand. This is seen in the operations of both Amazon and W.W. Grainger. They stock only the slow- to fast-moving items at their warehouses, with very-slow-moving items stocked farther upstream.
distributor
Relative to manufacturer storage, _________ storage requires a higher level of inventory because of a loss of aggregation.
distributor
Time to market under ________ storage is somewhat higher than that under manufacturer storage because of the need to stock another stage in the supply chain.
distributor
Processing and handling costs are comparable to those of the manufacturer storage unless the factory is able to ship to the end customer directly from the production line. In that case, ________ has higher processing costs.
distributor storage
Unlike manufacturer storage, under which multiple shipments may need to go out for a single customer order with multiple items, ___________ allows outbound orders to the customer to be bundled into a single shipment, further reducing transportation cost.
distributor storage
_________, however, requires much less inventory than a retail network.
distributor storage
Order visibility becomes easier than with manufacturer storage because there is a single shipment from the warehouse to the customer and only one stage of the supply chain is directly involved in filling the customer order.
distributor storage with carrier delivery
Returnability is better than it is with manufacturer storage because all returns can be processed at the warehouse itself. The customer also has to return only one package, even if the items are from several manufacturers.
distributor storage with carrier delivery
Under this option, inventory is held not by manufacturers at the factories, but by distributors/retailers in intermediate warehouses, and package carriers are used to transport products from the intermediate location to the final customer.
distributor storage with carrier delivery
____________ is well suited for slow-to fast-moving items.
distributor storage with carrier delivery
can handle somewhat lower variety than manufacturer storage but can handle a much higher level of variety than a chain of retail stores
distributor storage with carrier delivery
makes sense when customers want delivery faster than is offered by manufacturer storage but do not need delivery immediately
distributor storage with carrier delivery
the entire order is aggregated at the warehouse before being shipped
distributor storage with carrier delivery
Original equipment manufacturers (OEMs) tend to carry most spare parts at a local distribution center typically located no more than a couple of hours' drive from their dealers and often managed by a third party. The local distribution center is responsible for delivering needed parts to a set of dealers and makes multiple deliveries per day.
distributor storage with last-mile delivery
Processing costs, however, are much higher than those for a network of retail stores because all customer participation is eliminated.
distributor storage with last-mile delivery
The automotive spare parts industry is one in which __________ is the dominant model. It is too expensive for dealers to carry all spare parts in inventory.
distributor storage with last-mile delivery
Using this option, facility costs are somewhat lower than those for a network with retail stores but much higher than for either manufacturer storage or distributor storage with package carrier delivery.
distributor storage with last-mile delivery
Response time under ________ storage is better than under ________ storage because _______ warehouses are, on average, closer to customers, and the entire order is aggregated at the warehouse before being shipped.
distributor; manufacturer distributor
Order tracking becomes harder to implement in a ______ system because it requires complete integration of information systems at both the retailer and the manufacturer.
drop-ship
W.W. Grainger does not store very-low-demand items at its warehouse, relying on manufacturers to _______ those products to the customer.
drop-ship
A key issue with regard to ______ is the ownership structure of the inventory at the manufacturer. If specified portions of inventory at the manufacturer are allocated to individual retailers, there is little benefit of aggregation even though the inventory is physically aggregated.
drop-shipping
For ________: There can be some savings of handling costs as well, because the transfer from manufacturer to retailer no longer occurs. Handling cost savings must be evaluated carefully because the manufacturer is now required to transfer items to the factory warehouse in full cases and then ship out from the warehouse in single units.
drop-shipping
For slow-moving items, inventory turns can increase by a factor of six or higher if ______ is used instead of storage at retail stores.
drop-shipping
In-transit merge can be used by companies implementing _________.
drop-shipping
Manufacturer storage allows a high level of product variety to be available to the customer. With a ______ model, every product at the manufacturer can be made available to the customer without any limits imposed by shelf space.
drop-shipping
Manufacturer storage is also suitable if it allows the manufacturer to postpone customization, thus reducing inventories. It is thus ideal for direct sellers that are able to build to order. For _____ to be effective, there should be few sourcing locations per order.
drop-shipping
Response times tend to be long when ______ is used because the order must be transmitted from the retailer to the manufacturer and shipping distances are generally longer from the manufacturer's centralized site. Another issue is that the response time need not be identical for every manufacturer that is part of a customer order. Given an order containing products from several sources, the customer will receive multiple partial shipments over time, making receiving more complicated for the customer.
drop-shipping
Supply chains save on the fixed cost of facilities when using _______ because all inventories are centralized at the manufacturer. This eliminates the need for other warehousing space in the supply chain.
drop-shipping
The inability of a manufacturer to develop single-unit delivery capabilities can have a significant negative effect on handling cost and response time. Handling costs can be reduced significantly if the manufacturer has the capability to ship orders directly from the production line.
drop-shipping
______ allows a new product to be available to the market on the day the first unit is produced.
drop-shipping
_______ provides a good customer experience in the form of delivery to the customer location. The experience suffers when a single order containing products from several manufacturers is delivered in partial shipments.
drop-shipping
For drop-shipping: The benefits from centralization are highest for _______, _______ items with ________ demand.
high-value, low-demand unpredictable
The biggest advantage of _______ is the ability to centralize inventories at the manufacturer, which can aggregate demand across all retailers that it supplies. As a result, the supply chain is able to provide a ____ level of product availability with _____ levels of inventory.
drop-shipping high; lower
With _______, a customer order including items from several manufacturers will involve multiple shipments to the customer. This loss in aggregation of outbound transportation also _______ cost.
drop-shipping increases
Product availability is never an issue with _______, and variety can be added at low marginal cost. In fact, the Internet has allowed the availability of books that are not guaranteed a high enough demand to make them viable for traditional publishers.
e-books
Whereas the Internet provided some advantage to Amazon for the sale of physical books, this advantage has magnified with the growth in _______ books (e-books).
electronic
From a facility cost perspective, distributor storage is not appropriate for ...
extremely slow-moving items
Amazon customers trade off ________ for _______.
fast response times for higher levels of variety
Distributor storage provides savings on the transportation of _________ items relative to manufacturer storage.
faster-moving
Firms that target customers who can tolerate a long response time require only a _____ locations that may be ______ from the customer. These companies can focus on ______ the capacity of each location.
few; far increasing
Amazon is able to turn its inventory about twice as frequently as Barnes & Noble because it has far _____ facilities.
fewer
A retail store or supermarket must staff its sales counters so more cashiers are available when more customers are shopping. As a result, these stores require _______ staffing during peak periods. With online sales, if a reasonable buffer of unfilled orders is maintained, the rate of order fulfillment can be made significantly smoother than the rate at which orders arrive, which reduces the peak load for order fulfillment and thus _______ resource requirements and cost.
greater reduces
Online sales offer fewer benefits when selling ______ compared with books and computer hardware.
groceries
Returnability is ______ with online orders, which typically arrive from a centralized location. It is much ______ to return a product purchased at a retail store. The proportion of returns is also likely to be much ______ for online orders because customers are unable to touch and feel the product before their purchase.
harder easier higher
A _____ manufacturer can use the tailored approach outlined earlier to take advantage of the strengths of both online sales and traditional retail and distribution channels.
hardware
For _________, specialized, or critical products, customers are willing to have a relationship solely around that particular product. For __________, commoditized products like office supplies most customers prefer a one-stop shop.
high-value low-value
Distribution networks that ship directly to the customer are better suited for a large variety of ______ products that have ________ and ________ demand. These networks carry _____ levels of inventory but incur _____ transportation cost and provide a ______ response time.
high-value; low ; uncertain low; high; slow
Distribution networks that carry local inventory are suitable for products with ______ demand, especially if ______ is a large fraction of total cost. These networks incur _____ inventory cost but ______ transportation cost and provide a ______ response time.
high; transportation higher; lower; faster
An online grocer such as Peapod has significantly _________ transportation costs than a supermarket.
higher
IT costs are _______ for an online grocer. As in the other examples, IT costs are not a deal breaker for this business model.
higher
On the downside for some products, such as groceries, online sales require the firm to perform tasks currently performed by the customer at retail stores, affecting both handling and transportation costs. In such situations, companies selling online will incur ______ handling and delivery costs than a retail store.
higher
Online sales offer some revenue-enhancement opportunities in the grocery industry. Costs are significantly _______ for an online grocer than for a supermarket.
higher
The Amazon supply chain incurs _______ transportation costs than does a bookstore chain selling through retail stores. Local bookstores do not have the cost of individually shipping books to customers.
higher
Processing costs at Peapod to fulfill an order are significantly ________ than those for a supermarket and overwhelm the savings from needing fewer facilities. Online sales result in a loss of customer participation compared to a supermarket and raise overall _______.
higher facility costs
In-transit merge: Facility and processing costs for the manufacturer and the retailers are similar to those for drop-shipping. The party performing the in-transit merge has _____ facility costs because of the merge capability required. Receiving costs at the customer are lower because a single delivery is received. Overall supply chain facility and handling costs are somewhat _____ than with drop-shipping.
higher higher
Compared to a business with many retail outlets, an online seller with aggregated inventories tends to have ______ transportation costs (across the entire supply chain) per unit because of the increased _____ costs.
higher outbound
Information costs are _______ to support the Netflix operations relative to Blockbuster. With the growth in digital streaming, information costs are likely to ________.
higher increase
A careful study indicates that a _______ model combining retail stores and the online channel can be very effective.
hybrid
A sophisticated information infrastructure is needed to allow _______. In addition to information, operations at the retailer, manufacturers, and the carrier must be coordinated.
in-transit merge
Although an increase in coordination is required, ______ decreases transportation costs relative to drop-shipping by aggregating the final delivery.
in-transit merge
As with drop-shipping, the ability to aggregate inventories and postpone product customization is a significant advantage of _____
in-transit merge
Compared with drop-shipping, ________ requires a higher demand from each manufacturer (not necessarily each product) to be effective.
in-transit merge
Customer experience is likely to be better than with drop-shipping, because the customer receives only one delivery for an order instead of many partial shipments.
in-transit merge
Order visibility is an important requirement. Although the initial setup is difficult because it requires integration of manufacturer, carrier, and retailer, tracking itself becomes easier given the merge that occurs at the carrier hub.
in-transit merge
Response times, product variety, availability, and time to market are similar to those for drop-shipping. Response times may be higher if the shipments from the various sources are not coordinated.
in-transit merge
Returnability is similar to that with drop-shipping. As with drop-shipping, problems in handling returns are likely, and the reverse supply chain will continue to be expensive and difficult to implement.
in-transit merge
The ______ of a Dell PC with a Sony monitor was appropriate because product variety was high, but there were few sourcing locations with relatively large total demand from each sourcing location.
in-transit merge
The investment in information infrastructure is higher than that for drop-shipping.
in-transit merge
Unlike pure drop-shipping, under which each product in the order is sent directly from its manufacturer to the end customer, _______ combines pieces of the order coming from different locations so the customer gets a single delivery.
in-transit merge
Aggregation allows e-grocers to lower their inventory costs only marginally compared with a typical supermarket. If online grocers focused primarily on speciality items such as ethnic foods, the inventory benefits of aggregation would be ________.
larger
A grocery store using ________ performs all the processing until the product is delivered to the customer's home, unlike a supermarket, where the customer does much more work.
last-mile delivery
A third party serving a wide variety of retailers may also be able to provide _______ effectively, given its ability to amortize its distribution costs across a large stream of deliveries.
last-mile delivery
Amazon, with high sales across a wide variety of product categories, seems better equipped for _________ than Peapod, which carries only grocery items.
last-mile delivery
Among all the distribution networks, transportation costs are highest for ___________, especially when delivering to individuals. This is because package carriers aggregate delivery across many retailers and are able to obtain better economies of scale than are available to a distributor/retailer attempting _________.
last-mile delivery
Given the limited radius that can be served with ________, more warehouses are required compared to when package delivery is used.
last-mile delivery
In areas with high labor costs, it is hard to justify _______ to individual consumers on the basis of efficiency or improved margin.
last-mile delivery
Of all the options discussed, returnability is best with __________, because trucks making deliveries can also pick up returns from customers.
last-mile delivery
Order visibility is less of an issue, given that deliveries are made within 24 hours.
last-mile delivery
Product variety is generally lower than for distributor storage with carrier delivery.
last-mile delivery
Response times for ________ are faster than those for package carriers.
last-mile delivery
Returns are still more expensive to handle in this manner than at a retail store, where a customer can bring the product back.
last-mile delivery
The cost of providing product availability is higher than for every option other than retail stores.
last-mile delivery
The customer experience can be good using this option, particularly for bulky, hard-to-carry items.
last-mile delivery
The information infrastructure with ________ is similar to that for distributor storage with package carrier delivery. However, it requires the additional capability of scheduling deliveries.
last-mile delivery
The order-tracking feature does become important to handle exceptions in case of incomplete or undelivered orders.
last-mile delivery
Time to market is even higher than for distributor storage with package carrier delivery because the new product has to penetrate deeper before it is available to the customer.
last-mile delivery
Transportation costs may also be justifiable for bulky products for which the customer is willing to pay for home delivery.
last-mile delivery
Transportation costs of _______ are best justified in settings where the customer is purchasing in large quantities. This is rare for individual customers, but businesses such as auto dealerships purchase large quantities of spare parts on a daily basis and can thus justify daily delivery. Home delivery to individual customers can be justified for bulky items such as five-gallon jugs of water in the US and large bags of rice in China. In each instance, ________ is cheaper and more convenient than customers picking up their own bottles or bags.
last-mile delivery
Unlike package carrier delivery, _________ requires the distributor warehouse to be much closer to the customer.
last-mile delivery
_________ is easier to justify when the customer is a business like an auto dealer purchasing large quantities.
last-mile delivery
__________ may be justifiable if customer orders are late enough to provide some economies of scale and customers are willing to pay for this convenience.
last-mile delivery
The information infrastructure needed with distributor storage is significantly ______ complex than that needed with manufacturer storage. The distributor warehouse serves as a buffer between the customer and the manufacturer, decreasing the need to coordinate the two completely.
less
Supermarkets have the advantage of having to bear only inbound transportation cost for products, with customers providing transportation from the supermarket to their homes. Inbound transportation costs tend to be ______ because supermarkets have large deliveries that enable them to exploit economies of scale in transportation.
low
The standard models can be produced using a _______ - cost approach even if it involves longer lead times. Selling standardized models through distributors and retail stores allows the supply chain to be more ______ and save on transportation costs, which are more significant for these configurations.
low responsive
Online grocers cannot compete with supermarkets on price and can succeed only if there are enough people willing to pay a premium for the convenience of home delivery. They can provide some cost advantage when selling speciality groceries, whose demand tends to be ______ and ______.
low and uncertain
The appropriate distribution network can be used to achieve a variety of supply chain objectives ranging from ___________.
low cost to high responsiveness
are the costs of sending material out of a facility
outbound transportation costs
Compared with a supermarket chain, an online grocer such as Peapod can ______ inventories by aggregating the inventory in a few large replenishment centers. The degree of aggregation, however, is less than that achieved by Amazon for books or Dell for hardware, because Peapod needs fulfillment centers in every urban area it serves to get food to customers in acceptable condition.
lower
Facility costs at Amazon are growing, although they are still much ________ than the facility costs for a bookstore chain.
lower
Online sales can _____ a firm's inventories if it can postpone the introduction of variety until after the customer order is received. The time lag between when a customer places the order and when he or she expects delivery offers a company selling online a window of opportunity to implement postponement.
lower
Online sales can ______ inventory levels by aggregating inventories far from customers if most customers are willing to wait for delivery.
lower
Online sales can also _______ a firm's order fulfillment costs because it does not have to fill an order as soon as it arrives.
lower
Peapod's online sales allow it to ______ facility costs because it needs only warehouse facilities and can save on the cost of retail outlets such as supermarkets.
lower
With regard to ongoing operating costs, customer participation in selection and order placement allows a company selling online to ______ its resource costs relative to staffing retail stores.
lower
The main advantages of in-transit merge over drop-shipping are _________ and _______.
lower transportation cost and improved customer experience
The Internet has significantly _______ the cost of "transporting" ______ goods in digital form, such as movies, music, and books.
lowered; information
A significant information infrastructure is needed to provide visibility of the order until the customer picks it up.
manufacturer or distributor storage with customer pickup
Facility costs are high if new pickup sites have to be built. A solution using existing sites can lower the additional facility costs.
manufacturer or distributor storage with customer pickup
For a company such as Seven-Eleven Japan or Walmart, the marginal increase in transportation cost is small because trucks are already making deliveries to the stores, and their utilization can be improved by including online orders.
manufacturer or distributor storage with customer pickup
Good coordination is needed among the retailer, the storage location, and the pickup location.
manufacturer or distributor storage with customer pickup
In countries like Japan, where Seven-Eleven has more than 15,000 outlets, it can be argued that the loss of customer convenience is small, because most customers are close to a pickup site and can collect an order at their convenience.
manufacturer or distributor storage with customer pickup
In particular, such a network can be effective for firms like Seven-Eleven Japan, Walmart, and W.W. Grainger, which have both a network of stores and an online business. Unfortunately, such retail sites are typically designed to allow the customer to do the picking and need to develop the capability of picking a customer-specific order.
manufacturer or distributor storage with customer pickup
In some cases, this option is considered more convenient because it does not require the customer to be at home at the time of delivery.
manufacturer or distributor storage with customer pickup
In this approach, inventory is stored at the manufacturer or distributor warehouse, but customers place their orders online or on the phone and then travel to designated pickup points to collect their merchandise.
manufacturer or distributor storage with customer pickup
In this case, a response time comparable to that using package carriers can be achieved.
manufacturer or distributor storage with customer pickup
Increased processing costs and potential errors at the pickup site are the biggest hurdle to the success of this approach.
manufacturer or distributor storage with customer pickup
Inventory costs using this approach can be kept low, with either manufacturer or distributor storage to exploit aggregation.
manufacturer or distributor storage with customer pickup
Order visibility is extremely important for customer pickups. The customer must be informed when the order has arrived, and the order should be easily identified once the customer arrives to pick it up.
manufacturer or distributor storage with customer pickup
Orders are shipped from the storage site to the pickup points as needed.
manufacturer or distributor storage with customer pickup
Processing costs at the manufacturer or the warehouse are comparable to those of other solutions.
manufacturer or distributor storage with customer pickup
Processing costs at the pickup site are high because each order must be matched with a specific customer when he or she arrives. Creating this capability can increase processing costs significantly if appropriate storage and information systems are not provided.
manufacturer or distributor storage with customer pickup
Returns can potentially be handled at the pickup site, making it easier for customers. From a transportation perspective, return flows can be handled using the delivery trucks.
manufacturer or distributor storage with customer pickup
For nondigital products, aggregating inventories increases ______ transportation relative to ______ transportation.
outbound; inbound
There is some loss of customer experience, because unlike the other options discussed, customers must pick up their own orders. On the other hand, customers who do not want to pay online can pay by cash using this option.
manufacturer or distributor storage with customer pickup
Time to market for new products can be as short as with manufacturer storage.
manufacturer or distributor storage with customer pickup
Transportation cost is lower than for any solution using package carriers because significant aggregation is possible when delivering orders to a pickup site. This allows the use of truckloads or less-than-truckload carriers to transport orders to the pickup site.
manufacturer or distributor storage with customer pickup
Variety and availability comparable to any manufacturer or distributor storage option can be provided.
manufacturer or distributor storage with customer pickup
A ______ ________ network is likely to have difficulty handling returns, hurting customer satisfaction. The handling of returns is more expensive under ______ because each order may involve shipments from more than one manufacturer.
manufacturer storage drop-shipping
Given its performance characteristics, _________ is best suited for a large variety of low-demand, high-value items for which customers are willing to wait for delivery and accept several partial shipments.
manufacturer storage with direct shipping
Given its performance characteristics, _______ is best suited for low-to medium-demand, high-value items the retailer is sourcing from a limited number of manufacturers.
manufacturer storage with in-transit merge
Amazon carries _______ to ________ titles in inventory, but it purchases low-demand titles from publishers in response to a customer order.
medium- to high-demand
Only ______ companies end up using a single distribution network.
niche
A firm can introduce a new product much more quickly _______ as compared with doing so via _________.
online physical channels
The rise of _______ has affected both customer service and costs in supply chains.
online sales
For both consumers and companies, ______ can increase the ease with which one does business. Customers do not have to leave home or work to make a purchase. For many companies selling online, such as Peapod, _____________ from past purchases is used to significantly speed up order placement for the customer.
online sales information
A company selling ______ finds it easier to offer a larger selection of products than a _______ _______. Offering the same selection at a store would require a huge location with a correspondingly large amount of inventory.
online; bricks-and-mortar store
The ______ channel is most effective for selling new products or customized hardware configurations whose demand is hard to forecast, with the ______ channel selling low-cost, standard configurations whose demand is easier to forecast.
online; retail
is the ability of customers to track their orders from placement to delivery
order visibility
_____ is important in the context of manufacturer storage, because two stages in the supply chain are involved in every customer order. Failure to provide this capability is likely to have a significant negative effect on customer satisfaction.
order visibility (Drop-shipping)
Obviously, an independent distributor wants to optimize its _______ enterprise, not necessarily the entire supply chain. Attempting to optimize over a distribution network with multiple enterprises requires great skill in coordinating the incentives of each of the players and in creating the right relationships.
own
The ________ structure of the distribution network can have as big an impact as the type of distribution network.
ownership
Equally important is who ______ each stage in the distribution network. Distribution networks that have exactly the same physical flow but different ownership structures can have vastly different performance. For example, a manufacturer that owns its distribution network can control the network's actions. However, if the manufacturer does not own the distribution network, as is more often the case, a wide variety of issues must be taken into account to optimize over the network.
owns
The Internet offers an opportunity to create a ________ buying experience for each customer. Firms that focus on mass _______ can use the Internet to help customers select a product that suits their needs.
personalized customization
The inventory benefits of aggregation are small for items with ______ demand and _____ value. Thus, drop-shipping does not offer a significant inventory advantage to an online grocer selling a staple item such as detergent.
predictable; low
is the probability of having a product in stock when a customer order arrives
product availability
By aggregating its inventory, a company selling online improves __________. Beter information on ________ also allows firms selling online to improve availability.
product availability customer preferences
The Internet channel has allowed companies like Dell to make price changes quickly and efficiently based on.... By being available all day, the online channel allows Dell to serve customers at a much lower cost than retail stores.
product availability and demand
A network designer needs to consider __________ as well as __________ when deciding on the appropriate delivery network. The various networks considered have different strengths and weaknesses.
product characteristics; network requirements
is the number of different products or configurations that are offered by the distribution network
product variety
Our goal is to provide managers with a logical framework for selecting the appropriate distribution network given ______, ______, and ______.
product, competitive, and market characteristics.
An inappropriate network can have a significant negative effect on the _______ of the firm, as is evident in the failure of companies such as Blockbuster and Webvan.
profitability
The Internet allows companies such as Dell and Apple to bring new products to market _____. This is particularly important in the ________ industries, in which many products have short life cycles of a few months.
quickly computer and cell phone
A company selling online can _______ network facility costs by centralizing operations, thereby _______ the number of facilities required. For example, Netflix is able to satisfy demand for DVD rentals from about 50 warehouses, whereas Blockbuster needed thousands of retail outlets to serve customers.
reduce; decreasing
A company selling online _______ facility costs if there is no significant loss of customer participation. Transportation costs ______; this is particularly significant for ______ products with _______ demand.
reduces increase; low-value; predictable
As the number of facilities in a supply chain increases, the _______.
required inventory increases
is the amount of time it takes for a customer to receive an order
response time
Whereas the Internet allows a new product to be offered as soon as it is produced, the ______ channel requires the entire supply chain to be stocked before customers can access the product.
retail
The main advantage of a network with _________ is that it can lower delivery costs and provide a faster response than other networks.
retail storage
A minimal information infrastructure is needed if customers walk into the store and place orders. For online orders, however, a significant information infrastructure is needed to provide visibility of the order until the customer picks it up. Some investment in infrastructure required for online and phone orders.
retail storage with customer pickup
Customer experience depends on whether or not the customer likes to shop.
retail storage with customer pickup
Customers walk into the retail store or place an order online or by phone and pick it up at the retail store.
retail storage with customer pickup
Facility costs are high because many local facilities are required.
retail storage with customer pickup
For fast- to very-fast-moving items, however, there is marginal increase in inventory, even with local storage.
retail storage with customer pickup
Good response times can be achieved with this system because of local storage. i.e. companies offering same-day pickup from their retail locations
retail storage with customer pickup
In this option, often viewed as the most traditional type of supply chain, inventory is stored locally at retail stores.
retail storage with customer pickup
It is more expensive than with all other options to provide a high level of product availability.
retail storage with customer pickup
Local storage increases inventory costs because of the lack of aggregation.
retail storage with customer pickup
Order visibility is extremely important for customer pickups when orders are placed online or by phone.
retail storage with customer pickup
Product variety stored locally is lower than that under other options.
retail storage with customer pickup
Returns can be handled at the pickup site. Overall, returnability is fairly good using this option.
retail storage with customer pickup
Such a network is best suited for fast-moving items or items for which customers value rapid response.
retail storage with customer pickup
The major disadvantage is the increased inventory and facility costs.
retail storage with customer pickup
Time to market is the highest with this option because the new product must penetrate through the entire supply chain before it is available to customers.
retail storage with customer pickup
Transportation cost is much lower than with other solutions because inexpensive modes of transport can be used to replenish product at the retail store.
retail storage with customer pickup
is the ease with which a customer can return unsatisfactory merchandise and the ability of the network to handle such returns
returnability
The customer needs that are met influence the company's _________, which, along with cost, decide the ______ of the delivery network.
revenues profitability
Interactions between a buyer and a seller take time and resources. As a result, it is much more convenient for a buyer to deal with a ________ enterprise that can deliver a full line of products.
single
A key point to note is that the relative benefit of aggregation is _____ for high-demand items with low variability but _____ for low-demand items with high variability.
small large
Compared with those for the manufacturer storage, facility costs (of warehousing) are _________ with distributor storage because of a _____ of aggregation.
somewhat higher loss
The other two drivers, ________, also affect the choice of the distribution system.
sourcing and pricing
Even for _______ products, manufacturers should introduce new models on the Internet; as demand for some of them grows, these models should be added to the ______ channel. Another option is to introduce recommended configurations of new models at retail stores, while selling all customized configurations on the Internet. The manufacturer is thus able to decrease inventories by aggregating all high-variability production and satisfying that demand online. These models should be built to order using as many common components as is feasible.
standardized; retail
The benefits of aggregations are further diminished by the fact that the majority of products sold at a supermarket are staple items with _______ demand. Thus, aggregation provides a small benefit in terms of improved forecast accuracy and reduced inventories.
steady
Distribution is a key driver of the overall profitability of a firm because it affects both the _______ and the ________ directly.
supply chain cost customer value
The major disadvantage of in-transit merge is ...
the additional effort during the merge itself.
is the time it takes to bring a new product to the market
time to market
The process of designing a distribution network has ______ broad phases. In the first phase, the broad structure of the supply chain network is ______. This phase decides the number of stages in the supply chain and the role of each stage. The second phase then takes the ________ and converts it into specific locations and their capability, capacity, and demand allocation.
two visualized broad structure
For ________-volume books, there is no better channel than online as e-books.
very-low
Drop-shipping: The customer should also have _____ into order processing at the manufacturer, even with the order being placed with the retailer.
visibility
The Internet makes it possible to provide _______ of order status. From a customer's perspective, it is crucial to provide this ________ because an online order has no physical equivalent to a customer shopping for an item at a retail store.
visibility
An online seller can share demand information throughout its supply chain to improve _______. The Internet may also be used to share planning and forecasting ________ within the supply chain, further improving coordination. This helps reduce overall supply chain costs and better match supply and demand. Information is an enabler of many of the benefits of online sales discussed so far.
visibility information
This phase decides the number of stages in the supply chain and the role of each stage.
visualized
_________ storage limits to some extent the variety of products that can be offered.
warehouse
From an inventory perspective, _________ is suitable for relatively fast-moving items that are needed quickly and for which some level of aggregation is beneficial. Auto parts required by car dealers fit this description.
warehouse storage with last-mile delivery
