Question

Scientific Glass Key Issue: evaluate alternative distribution systems (i.e., distributed , centralized, or outsourced distribution system) • Study Questions: • What are the advantages and disadvantages of distributed vs. centralized DC's? In particular, what are the costs under different distribution systems? • What is your recommendation and why? • Any other alternatives?

(DC= demande cruve )

Answer 1

Distribution systm can be centralised or decentralised in the broad sense, but in an open economy outsourced distribution system also exists.

Centralised distribution is when the power of decision making lies with the top authority whereas in decentralised system power gets sub divided among the top authority as well as the lower divisons in the supply chain.

In centralised economy, the flow of decision making is vertical and in decentralised, it is open and free. In the former, decision making is slow and in latter it is faster. In the former there is proper coordination and the central power authority shows leadership skills while in the latter it is about sharing burden and responsibility. Former is small sized and latter is large sized organisation.

For example In case of a warehouse, the advantages in terms of cost are reducing operating costs and better customer services while disadvantage is increasing shipping costs because of centralised location.

whereas advantage of decentralised economy is reduction in the late delivery of material handling and augmenting ability to store products attract firms to decentralised economy but the biggest problem is operating costs.

My recommendation would be to choose outsourcing distribution system as it helps to reduce costs of distribution and enhance the ability to handle inventory levels. Greater access to solutions and low capital expenditure and corrobaration of shipments help gain economic benefits by bringing warehouse and transportation needs under one roof.