Impact and Adoption of Flexibility in a Rigid and Centralized Distribution Network : A Case Study on a Global Manufacturing Company

University essay from KTH/Industriell Management; KTH/Industriell Management


For manufacturing firms to succeed in the global marketplace it is important that they have an efficient supply chain that is well adapted to the characteristics of the products.

This thesis explore the companies' challenge to adapt its supply chain to the characteristics of  heir products. A case study has been conducted on a global manufacturing company's distribution network. The company, which is in focus of the study, has conducted extensive effort with standardization and centralization of the distribution network to improve the performance indicators. Consequently, the study focuses on examining how the factors, standardization and centralization, impact the performance indicators in the distribution network.

The empirical results show that the company's distribution network is designed to operate efficiently for Make-To-Stock (MTS)  products.  Nonetheless,  the  network  does  not  work as efficiently for Make-To-Order (MTO) products. These products are forced through a  series of non-value activities. The lack of flexibility in the network leads to manually bypasses, which increases both the workload and risk. Therefore, the performance  indicators are improved  by  a  more  flexible  design  adapted  to  the  product  characteristics and customer needs.

The study identifies four barriers preventing the company to adapt its distribution network to a more flexible design

An excessive focus on economies of scale

Imbalance between central and regional capabilities in the organization

Rigid processes and lack of software support

Complexity in transfer pricing and revenue sharing between entities

Finally, the study contributes with suggested actions aimed to increase the flexibility of the company's distribution network.

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