Enhancing distribution network performance: a quantitative approach to developing a distribution strategy model

Abstract

Purpose-This paper examines distribution network and distribution strategy choice problem in the presence of uncertain demands. The authors discuss the implications of cost and capacity-utilisation in locating centralised or decentralised distribution centres, which are inherently associated with different distribution strategies.Methodology-A case study approach is adopted, and several scenarios for distribution network and distribution strategy are designed, thus enabling us to perform in-depth analysis using mathematical modelling and simulation techniques. Based on the data from a real case study company, herein referred to as 'Corporation A', five typical scenarios are designed to represent different combinations of distribution networks and distribution strategies. The five scenarios are mathematically simulated to evaluate their costs and capacity-utilisations. A distribution strategy model (DSM) is then developed accordingly to support decision making for enhancing distribution performance. Findings-The results show the potential of the developed distribution strategy model (DSM) in supporting consistent maximisation of distribution operations despite uncertainties in demands in a dynamic market environment, and hence lowering inventory and transportation costs. Whilst findings show the importance of using numerical approach in obtaining an optimum location for distribution centres, the study eventually revealed the necessary need to inject adequate level of informed local knowledge based on experience into decision making. Attributes such as costs, labour productivity, policy government, proximity to markets and suppliers are crucial in making the informed decision necessary for an optimum distribution facility location. Conclusion-Uncertainties in demand put huge pressure on distribution-networks, with consequent significant costs and service implications. In search for solution to complex distribution problems, deploying a widened array of scenarios for scrutiny is necessary in reaching a robust and optimized solution. Given volatility in the contemporary supply chain, there are both theoretical and practical needs to actively consider, reconsider or re-design various distribution network for improved performance.