Distribution Network Redesign for Marketing Competitiveness

Shang, Jennifer, T. Pinar Yildirim, Pandu Tadikamalla, Vikas Mittal, & Lawrence H. Brown (2009) "Distribution network redesign for marketing competitiveness" Journal of Marketing, March, 73(2), 146-163. (2009)

18 Pages Posted: 16 Oct 2013

See all articles by Jennifer Shang

Jennifer Shang

University of Pittsburgh - Katz Graduate School of Business

Pinar Yildirim

University of Pennsylvania - The Wharton School

Pandu R. Tadikamalla

University of Pittsburgh - Operations, Decision Sciences, and Artificial Intelligence Group

Vikas Mittal

Rice University

Lawrence Brown

GlaxoSmithKline Company

Date Written: March 1, 2009

Abstract

This article reports on a marketing initiative at a pharmaceutical company to redesign its distribution network. Distribution affects a firm’s cost and customer satisfaction and drives profitability. Using a nonlinear mixed-integer programming model, the authors develop a distribution network with a dual emphasis on minimizing the total distribution costs and improving the customer service levels. Specifically, they address the following issues: They (1) determine the optimal number of regional distribution centers the firm should operate with, (2) identify where in the United States the firm should locate these distribution centers, (3) allocate each retailer/customer distribution center to an appropriate regional distribution center, and (4) determine the total transportation costs and service level for each case. Finally, they conduct a sensitivity analysis to determine the impact of changes in problem parameters on the optimality of the proposed model. This marketing initiative at the studied firm reduced the total distribution costs by $1.99 million (6%) per year, while increasing the customer on-time delivery from 61.41% to 86.2%, an improvement of 40.4%.

Keywords: location theory, optimization, decision calculus, network design, supply chain model

Suggested Citation

Shang, Jennifer and Yildirim, Pinar and Tadikamalla, Pandu R. and Mittal, Vikas and Brown, Lawrence, Distribution Network Redesign for Marketing Competitiveness (March 1, 2009). Shang, Jennifer, T. Pinar Yildirim, Pandu Tadikamalla, Vikas Mittal, & Lawrence H. Brown (2009) "Distribution network redesign for marketing competitiveness" Journal of Marketing, March, 73(2), 146-163. (2009). Available at SSRN: https://ssrn.com/abstract=2340629

Jennifer Shang

University of Pittsburgh - Katz Graduate School of Business ( email )

Pittsburgh, PA 15260
United States

Pinar Yildirim

University of Pennsylvania - The Wharton School ( email )

3641 Locust Walk
Philadelphia, PA 19104-6365
United States

Pandu R. Tadikamalla

University of Pittsburgh - Operations, Decision Sciences, and Artificial Intelligence Group ( email )

United States

Vikas Mittal (Contact Author)

Rice University ( email )

6100 South Main Street
250 McNair
Houston, TX 77005-1892
United States

Lawrence Brown

GlaxoSmithKline Company ( email )

5 Moore Drive
RTP, NC 27709
United States

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