Logistics Planning: Analyzing the Effects of Customer Influence
In assessing whether customers influence logistical planning and the location of logistics centers, the decision of a manufacturer, distributor and retailer are the basis of this analysis. Dell, a global leader in high tech manufacturing is compared to Ingram Micro, one of the world’s largest high tech distributors and value-added resellers. The retailer included in the analysis is Walmart.
The Paradox of Customer Centricity and Logistics
Customers have varying levels of influence on the location and operating characteristics of logistics centers globally. These variations are defined by the nature and characteristics of a given industry, new product introduction cycle times and the costs involved in supporting logistics operations. For high tech manufacturers for example, the most critical success factors of their business model are maximizing inventory turns while also ensuring rapid release of new products (Kapuscinski, Rachel, Carbonneau, Moore, Reeves, 2004). Logistics centers gravitate towards the base of suppliers that are most critical to the launch of new products and those that can accelerate the new product development and inventory turn processes of manufacturers.
Dell’s decision to create logistics centers throughout Asia to support this aspect of their business is an example of how high tech manufacturing is using logistics center efficiency and performance to drive higher levels of customer responsiveness (Kapuscinski, Rachel, Carbonneau, Moore, Reeves, 2004). Dell’s approach is to accelerate existing products’ inventory turns while also ensuring a stable supply of components for new products as well. Dell has created named continually invests in process efficiencies within their Dell Supplier Logistics Centers (SLC) to drive greater accuracy of configurations and responsiveness to the customer. Logistics centers are located globally to expedite product development, delivery and quality, all aimed at exceeding customers’ expectations on a consistent basis.
For Ingram Micro, the world’s largest distributor of high tech products and one of the leading value-added resellers of enterprise technology solutions globally, the decision of where to locate their logistics facilities is a complex one. Their legacy is in traditional multi-tier distribution channel management, where the location of the warehouses had to coincide with the locations of retailers and corporate accounts. Yet today the company is increasingly moving towards could computing which frees them from the location-specific requirements, which the majority of their business is predicated on (Casacchia, 2012). Ingram Micro is in the middle of a multi-year strategic shift from having logistics entirely located near retailers and larger customers to being more virtual. While Ingram has grown through acquisition globally, the locally-based approach to distribution in California and New York continue to be the foundational structure of the logistics systems of the company.
Walmart is the retailer included in this analysis and has a logistics model that is the most customer-centric of all three the role of each Walmart Supercenter is to also serve as a distribution center with the majority of employees being part time, splitting their time between working the store floor and also helping to unpack and unload shipments to the store (Chuang, Donegan, Ganon, Wei, 2011). Walmart has created a business model that makes each large retail location also a stocking product center This is done to minimize stock-outs and also ensure the highly seasonal nature of their business can be anticipated and reacted to quickly. Walmart requires their suppliers to also support direct store distribution (DSD) and Vendor Managed Inventory (VMI) to further ensure products are on the shelves for customers when they need it (Chuang, Donegan, Ganon, Wei, 2011).
Casacchia, C. (2012). Ingram cloud adds Amazon, Salesforce.com. Orange County Business Journal, 35(25), 3-3,10.
Ming-Ling Chuang, Donegan, J.J., Ganon, M.W., & Wei, K. (2011). Walmart and carrefour experiences in china: Resolving the structural paradox. Cross Cultural Management, 18(4), 443-463.
Kapuscinski, R., Rachel, Q.Z., Carbonneau, P., Moore, R., & Reeves, B. (2004). Inventory decisions in dell’s supply chain. Interfaces, 34(3), 191-205.
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