6.4.1 Direct shipment
In this case, the manufacturer ships directly from the manufacturing plant to the retailer without using a distribution centre or a warehouse. The approach appears reasonable as it apparently would reduce costs associated with warehousing or intermediate distribution centres. The time related to order processing will also be reduced when goods are shipped directly to retail stores.
Figure 6.2 Direct shipping network
(adapted from Chopra & Meindl 2001)
This is a valid approach provided the supplier is able to respond quickly and cost effectively. Chopra and Meindl (2001) argues that this distribution strategy is suitable if retail stores are large enough to make optimal replenishment lot size close to a truckload size. Using LTL carrier, the cost and transit time both increase.
In your text
See example 5-12 , page 134 in your text.
There is another strategy which is a variation of the direct shipment model designed to reduce costs of distribution. This is known as milk run or drop shipping .
Figure 6.3 Milk runs to multiple retailer
(adapted from Chopra & Meindl 2001)
A milk run is a route in which a truck delivers products from a supplier to a number of retail outlets. This allows reduction in cost by eliminating the need for direct small shipments using LTL shipments. Toyota uses milk runs both in Japan and in the USA to support its JIT manufacturing (Chopra & Meidl 2001).
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