Distribution Logistics she aod alticaey n oshd vanoun gyterno to move funished g
ID: 2544205 • Letter: D
Question
Distribution Logistics she aod alticaey n oshd vanoun gyterno to move funished goods from the plant to the retalers s shopping basket. Most commonly, they used a warehouse ufacturers sent truckloads of goods to a retailer warehouse. At that storage and inventory management, including transportation, stocking, distribution system, in which man t, the retailers took over and merchandising of goods at their stores. Some U.S. retailers (and many in Europe, where space process whereby retailers timed and ted shipments from different manufacturers so that the products were unloaded on one end more of a constraint) experimented with cross docking, a was coordina of the receiving dock, immediately reconfigured into store shipments containing the products of various manufacturers, then reloaded onto the retailer's trucks and shipped to the stores. Cross docking eliminated the need for and costs involved in storage at the retailer warehouse. (See Exhibit 3 for graphic on cross-docking) Finally, in direct-store-delivery (DSD) systems, manufacturers bypassed the retafil warehouse altogether and delivered products directly to stores. In this case, manufacturers stocked shelves and automatically replenished the area, maintaining a pre-arranged minimum inventory level at each retail location. PepsiCo is primarily a DSD company; in North America, about 80% of its products were delivered directly to the store or shelf. PepsiCo used DSD for most of its beverage and Frito-Lay products while using warehouse delivery for Quaker products including Gatorade, although it was in the process of moving Gatorade to DSD starting with its small format customers (convenience stores and small retailers) in January 2011. Although DSD cost PepsiCo more in terms of labor and handling costs, managers believed that using DSD also increased volume sales for both PepsiCo and its retail partners. Greco explained, "We're expecting at least an 8% lift in sales volume by moving Gatorade to DSD in small format stores-2% to 3% would be from increased reach, 2% to 3% from reduction of stock-outs and increased merchandising, and another 2% to 3% from increased throughput. industry analysis has shown that the DSD system saved retailers time, labor costs, shipping and transportation costs, and inventory carrying costs-advantages that few of PepsiCo's competitors 0 would match across both the food and beverage businesses.Explanation / Answer
Distribution Logistics :
1. CPG manufacturers used various systems to move its finished goods stock to retailers and ultimately the consumers.
a.Most commonly used system by them was the Warehouse Distribution System where goods were stored at the retailers warehouse.
b. Some US Retailers & many in Europe face the above system as a problem as for them inventory storage was a constraint & hence, they tried Cross Docking System.This process not only reduces material handling but also reduces need to store the products in warehouse.
c. Finally, Direct-Store-Delivery (DSD) was used. Wherein, manufacturers stocked the shelves and automatically replenished area, maintaining a pre-arranged minimum inventory level at each location.
2.Pepsico is primarily a DSD, it uses this system for almost 80% of its products. For all Beverages & Frito-Lay products DSD was used. Warehouse delivery was in use for Quaker products including Gatorade which was in process of moving towards DSD starting with small format customers in Jan 2011.
3. Inspite of higher costs, DSD increased volume sales for both Pepsico & the retailers. Greco further explained advantages of moving Gatorade to DSD in small format
stores : There would be a total 8% lift in sales volume :
From reduction of Stockouts & increased merchandising.
Industry analysis showed that, using DSD saved retailers time, labor costs, shipping & transportation costs &, Inventory carrying costs. These were some advantages that few of Pepsico's competitors would match across both food & beverages businesses.
From reduction of Stockouts & increased merchandising.
2% to 3% From increased throughput.