Product, operation, and demand relationships between manufacturers and retailers

This paper presents a framework for identifying the most adequate distribution structure between manufacturing and retailers, considering different characteristics of product, operation, and demand. Based on the random generation of different scenarios, it is indicated the adequacy of direct, echeloned, and mixed distribution structures to a given set of demand uncertainty, lead time variability, holding costs, and transportation costs. Sensitivity analyses are also performed to address managerial issues, such as the mission of a Local DC and the convenience of lead time demand pooling. Findings suggest an increase of mixed distribution structures to the detriment of purely direct/echeloned ones.

► This paper analyzes distribution structures between manufacturing and retailers. ► Local DC mission and lead time demand pooling are cornerstones for decision making. ► They depend on intricate countervailing product, demand, and operation forces. ► B2C initiatives may obfuscate purely direct and echeloned distribution structures. ► Mixed distribution structures prevailed in almost 75% of scenarios analyzed.