Sandor Boyson and Tom Corsi, R.H. Smith School of Business, UMD
Distributor Business
/ Financial Strategy |
Distributor Sourcing of
Product from Suppliers |
Distributor Inventory
Management Strategies
& Issues |
Distributor Sales to
Market Customers |
| A. Geographic Scope |
Assume conditions of consistently available supply; There will be a response to your RFQs from suppliers. |
A. Demand Pull
- Distributor wins bids from customer
- Source needed inventory from suppliers to meet bid requirements
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Assume that customer evaluations of distributor bids will be based on distributor meeting requested delivery date; and price. |
1.Regional Focus for Sourcing and Customer Sales
- Customer service orientation/ Quick response orientation
- Transportation Cost Minimization
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Supplier Response to Distributor Request For Quotes includes the following:
- Base Price
- Transportation Cost
- Total Cost
- Transit Time
- Promised Delivery date by Supplier to Distributor
- Actual Delivery date to Distributor varies based on reliability of supplier
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B. Inventory Push
- Accumulate Inventory
- Sell off Inventory on-hand to market customers
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Customer Request For Quotes to Distributors specify types and quantities of product required; and customer need by date
Distributor response to market RFQ includes
1.Total Order Price, including transportation which is automatically added to the base price quoted by Distributor.
2. Promised Delivery Date, the Actual Delivery Date depends on inventory availability and transit times; transit times are defined in the game: 24-36 hours for intra-continental delivery; and 48-56 hours for inter-continental delivery. |
2.National Focus for Sourcing and Customer Sales
- Expanded Customer base
- Expanded Supplier Base
- Higher Transportation Cost / Longer Transit Time
- Economies of Scale in Purchasing
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C. Mixed-Strategy
- For fast moving products, you accumulate inventory.
- For slow moving products, you win bid first then accumulate inventory to meet sales requirements.
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3.Global Sourcing and Regional Sales
- Lower Purchase Costs
- Lower Purchase Costs
- Higher Transportation Costs/Longer Transit Time
- Greater Risks of Late Deliveries
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4.Regional Sourcing and Global Sales
- Expanded Market
- Sufficient Availability of Low Cost Suppliers
- Higher Transportation costs
- Customer Service Risks
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Other Inventory Considerations:
- Inventory depreciation is rapid: 2% a week across the Game’s four product categories.
- All shipments from supplier to distributor and distributor to supplier are air shipments.
- Transportation time & costs have a fixed and variable component: The fixed component is higher for inter-continental shipping and includes time and costs of customs clearance The variable component is related to shipping distance e.g. greater the distance of shipment, higher the transport costs. There is a discount for larger shipment sizes: discounts are given for shipments above 100 pounds and above 1000 pounds. To get these discounts, Distributors should look for opportunities to respond to larger size customer orders; and to send out RFQs of larger size to suppliers.
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| 5.Global Sourcing and Global Sales
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| B. Product Scope |
1.All Inclusive
- Desktop($650) Average Supplier Price to Distributor (exclusive of Transportation Charges and Time
- Individual suppliers deviate from average price based on their operating performance and location
- Laptop($1000)
- Linux($850)
- Multi-Media($1200)
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2.Product Specialization
- Focus on sub-set of available products
- Could focus on high-end/higher margin products
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