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THE EVALUATION OF EFFECTIVE DISTRIBUTION OF GOODS USING WAREHOUSE

CHAPTER ONE

INTRODUCTION

1.1     BACKGROUND OF THE STUDY

For any organization to be effective there should be effective distribution management process to convey finished products from the manufacturer to the final consumers. This is because without distribution the best product will not be delivered and the marketing mix will break down and fail. As a result of this, firms are increasingly adopting supply chain management to reduce cost, increase market share and sales, and build solid customer relations (Ferguson 2000). Supply chain management can be viewed as a philosophy based on the belief that each firm in the supply chain directly and indirectly affects the performance of all the other supply chain members, as well as ultimately, overall supply chain performance (Cooper et al, 1997). The effective use of this philosophy requires that functional and supply-chain partner activities are aligned with company strategy and harmonized with organizational structure, processes, culture, incentive and people (Abell 1999).

Distribution channel consists of a group of individuals or organizations that assist in getting the product to the right place at the right time. Distribution plays a vital role, primarily because it ultimately affects the sales turnover and profit margins of the organization. If the product cannot reach its chosen destination at the appropriate time, then it can erode competitive advantage and customer retention.

The retail industry is responsible for the distribution of finished products to the consumer as well as the public. The retail sector comprises of general retailers (managed by individuals/families), departmental stores, specialty stores and discount stores. In practice, many organizations use a mix of different channels; in particular, they may complement a direct salesforce, calling on the larger accounts, with agents, covering the smaller customers and prospects. However, the major challenge now facing the retail industry is the power of the customers or buyers. This is because the customers are becoming increasingly knowledgeable, impatient, not wishing to wait for the suppliers’ products for any period of time.

In today’s highly competitive global marketplace, the pressure on organizations to find new ways to create value and deliver it to their customers grows ever stronger. The increasing need for industry to compete with its products in a global market across cost, quality and service dimensions has given rise to the need to develop more efficient warehousing strategies. Warehousing has come to be recognized as a distinct function with the rise of mass production systems. Warehousing is the storage of goods, whereas distribution center precedes a post-production warehouse for finished goods held for distribution. Therefore, warehousing and distribution centres basically have the same function of goods and products storage (Coyle at el, 2003). The warehouse and distribution centres are very important nodes in a supply chain network. They perform valuable functions that support the movement of materials, storing goods, processing products, de-aggregating vehicle loads, creating stock keeping unit assortments and assembling shipments (Andre Langevin and Riopel Diana, 2005). The efficient management of warehouses helps to optimise the existing production and distribution processes and greatly assist in the goal of cost reduction and service enhancement.

In today’s competitive environment, companies must operate at maximum efficiency and provide superior service to ensure profitability. Three factors has been found to affect efficiency and effectiveness of the warehouse operations with respect to fast moving consumer goods industry such as simplicity/complexity of the warehouse management systems, product slotting techniques and layout planning of the warehouse (Lakmal AGDP and Wickramarachchi WADN, 2011). The organizations ability to effectively manage the warehouse, reduce costs and fulfillment operations is critical to their success. It is pertinent to mention that the organizations face great challenges in managing warehouses. The role and importance of warehouses in American economy has been altered to great extent due to changes in the way of raw materials, intermediate goods, and finished products (John and Bowen, 2008). In the current scenario when customer satisfaction and service have become a prime reason for a business to stand apart from its competition, the need for effective warehouse management is largely seen more as a necessity. Thus, the warehouse operating system must be designed for receiving inventory, timely order fulfillment to automated validation of warehouse activities and accurate inventory control to achieve peak performance across the entire enterprise.

Warehousing network plays a major role in the success of the physical distribution of products. It is observed that the leading firms adopt and implement the different warehousing strategies such as capacity switching, hub networking, cobbling and outsourcing (Sople V.V, 2010). Both the analytic and simulation models are proposed for improving warehouse design practices. Analytic models are usually design-oriented, explore many alternatives quickly to find solutions. On the other hand, simulation models are usually analysis oriented. They provide an assessment of a given design, but usually have limited capability for exploring the design space. There is an important need to integrate both approaches to achieve more flexibility in analyzing warehouse problems (Gu Jinxiang, 2010). Therefore, this study focuses on the evaluation of effective distribution of goods using warehouse (a case study of Target Limited Venture).

1.2     STATEMENT OF THE PROBLEM

Due to the popularity of e-commerce (Michalski, 2010, p. 4-6, and Coyle, Bardi, Langley, 2003, p. 157-163) and the annually increasing level of turnover in this sales channel the leading distributors of goods from various industries are massively opening e-shops. They cannot afford that customers who used to come to their brick-and-mortar stores use the services of the e-shop of its competitor due to a change in habits. It would seem that it is easier for the big players operating traditional distribution networks in the B2B channel to adapt to B2C solutions (business to customer). As practice shows, these companies are also facing problems arising, for instance, from the retail size of orders, which in many cases requires the total reconstruction of warehousing and transport processes. Furthermore, an additional complication is the fact that these companies also serve customers in the traditional and e-commerce channel.

Talking with a lot of executives at multinational companies interested in expanding their business presence in Nigeria, one of the main issues they have is finding a good and credible distributor or agent to help them reach their business goals in Nigeria. It is not an understatement to say that the roads in Nigeria are not in very good shape for efficient distribution. Nigeria is no different from other frontier markets that struggle with inadequate infrastructure. Bad roads significantly increase transportation cost for distributors. This cost of transportation is further increased because of a fragmented market that is not always connected to the major road networks. These problems make it glaring that there is a need to carry out a study on the evaluation of effective distribution of goods using warehouse (a case study of Target Limited Venture).

1.3     OBJECTIVES OF THE STUDY  

The general objective of this study is to examine the evaluation of effective distribution of goods using warehouse (a case study of Target Limited Venture). The specific objectives of the study include the following:

1.     To find out the distribution strategies adopted by Target Limited Venture.

2.     To examine the objectives of efficient warehousing operations with respect to Target Limited Venture.

3.     To ascertain the challenges facing effective distribution of goods in Target Limited Venture.

4.     To identify the warehousing network strategies followed in Target Limited Venture.

5.     To determine the possible solution to the challenges facing effective distribution of goods in Target Limited Venture.

1.4     RESEARCH QUESTIONS

The relevant research questions related to this study include the following:

1.     What are the distribution strategies adopted by Target Limited Venture?

6.     What are the objectives of efficient warehousing operations with respect to Target Limited Venture.?

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