| Introduction | | | | receives all notification statements and invoices from |
| Direct Supply is the process whereby the supplier | | | | the supplier and in turn invoices the dealer. Without the |
| ships goods directly to the dealer without having to | | | | distributor, the supplier's financial systems would |
| transition the goods through the distributor's | | | | become very complicated, with numerous transactions |
| warehouse. This enables the distributor to be the | | | | with many dealers. Additionally some suppliers are not |
| conduit between the supplier and the dealer. The | | | | interested in trading directly with the retail outlets due |
| delivery process can be streamlined without directly | | | | to their low volume. The distributor therefore is required |
| handling goods. | | | | to negotiate with the supplier and manage the financial |
| In the normal supply process, a dealer purchases from | | | | process with individual dealers. |
| a distributor. The order is processed and the goods | | | | Advantages for distributor, supplier and dealer |
| sent to the dealer. If the distributor does not have the | | | | For the distributor, the stock is virtually passed through |
| goods in stock, an order is sent to the supplier who | | | | the warehouse, and the supplier maintains control and |
| then sends the goods into the distributor's warehouse. | | | | responsibility over all of the physical supply chain |
| The goods are unpacked, checked and stored; the | | | | process, just as they would when supplying to the |
| dealer's backorder is processed and the goods are | | | | distributor's warehouses. The cost of additional |
| picked and sent out. | | | | warehousing is eliminated and this benefits both the |
| Direct Supply, by sending goods directly to the dealer | | | | distributor and dealer. Another important benefit is the |
| from the supplier, eliminates additional handling, storage | | | | reduction in the number of goods with expiry times in |
| and repackaging but maintains the logical interaction | | | | the distributor's warehouse. Generally, a distributor |
| with the distributor. The order processing time is | | | | would incur a cost of continually reviewing and |
| dramatically reduced, the goods are delivered faster to | | | | checking goods with respect to expiry and shipping |
| the dealer and the overall supply chain costs are | | | | dates. This is largely eliminated for high demand items |
| reduced. | | | | that can be supplied directly. |
| Cost reductions | | | | While the benefits for the supplier may not be as |
| Cost reductions are the result of the distributor not | | | | obvious one significant advantage is that the time to |
| directly handling the stock, and using the supplier as a | | | | meet distributor supply requirements is spread, |
| virtual warehouse. For the distributor, the logistics costs | | | | potentially, over several branches, which eases |
| of handling and continual movement of goods is | | | | pressure on the supplier's distribution network. This also |
| removed, as are any storage costs, which remain with | | | | results in higher levels of customer satisfaction for the |
| the supplier. This becomes more important when a | | | | distributor and their dealers. Forecasting is also |
| third party logistics operation is being used by the | | | | improved because direct supply provides an indication |
| distributor as each transaction in the warehouse | | | | of the real usage of goods. The supplier can compete |
| attracts specific costs. | | | | more effectively and as such, encourage the use of |
| Furthermore, local suppliers often have multiple | | | | genuine/authorised components. |
| branches and the cost of either supplying to a dealer | | | | The advantages for the dealer include significant cost |
| directly, or to the distributor's warehouse, is about the | | | | reductions, which are passed from the distributor, and |
| same. Transportation costs are decreased because | | | | the delivery of goods is more predictable without the |
| there is now a single transportation process, as | | | | additional distribution process. The dealer can |
| opposed to two. | | | | implement a more cost efficient and streamlined |
| Transportation times are reduced because goods do | | | | ordering process that addresses actual, as opposed to |
| not go through an intermediary warehouse at the | | | | expected, requirements and they also benefit from a |
| distributor level, and as a result, delivery times are far | | | | simplified ordering system and reduced pricing of parts. |
| more predictable. Where the supplier has multiple | | | | Direct Supply, by removing one complete step in the |
| branches the delivery times are improved again, for | | | | traditional supply chain, streamlines the process - the |
| example, interstate dealers for the distributor are being | | | | goods are sent directly from supplier to dealer. The |
| supplied by their local state branch. | | | | distributor still plays a pivotal role, managing the |
| However, not all goods are suited to this process. | | | | process, undertaking price negotiations, handling |
| Those that are a perfect fit for the strategy include | | | | financial transactions and maintaining the |
| locally supplied parts and consumable goods. For | | | | communication channel. The result is a more efficient |
| example, in the automotive industry this might include | | | | supply chain with reduced warehousing, transport and |
| high turnover items such as tyres, oil and batteries. | | | | administrative costs, increased efficiency, faster |
| These can be supplied directly using local authorised | | | | delivery of goods and greater customer satisfaction. |
| suppliers. In addition, some automotive dealers have | | | | Summary |
| expanded that process within the network to | | | | Supplying products directly from the supplier to the |
| incorporate services such as the fitting of tow-bars, | | | | dealer significantly enhances and streamlines the |
| sports kits or spoiler kits. Large components are an | | | | supply chain process. Direct benefits across the board |
| example of goods which may best be handled through | | | | to the supplier, distributor and the dealer include |
| a distributor. For example, it would not be | | | | reduced delivery times that are more predictable as |
| cost-effective for engines to be shipped from an | | | | well as reduced costs in product handling, warehousing |
| overseas supplier directly to a dealer, with the | | | | and transportation. The successful management of the |
| transportation and logistics costs being too great. | | | | entire direct supply process, maintaining control of the |
| How it works | | | | products through administration, financial, warehouse |
| The operation of the Direct Supply system is relatively | | | | and inventory processes can be achieved with a well |
| simple once it has been correctly set up. The order is | | | | structured supply chain management system. The |
| placed through the distributor and then passed to the | | | | benefits are: |
| supplier with a delivery instruction - please deliver to | | | | - Increased efficiency |
| customer. The supplier can then make use of local | | | | - Cost reduction |
| warehouses/branches. The distributor plays a pivotal | | | | - Faster delivery |
| role in the overall business. The distributor is able to | | | | - Increased customer satisfaction |
| negotiate volume based pricing and sets up the | | | | - Reduced handling of goods |
| primary agreement with the supplier. This may even | | | | - Reduced transportation of goods (c) Copyright - IBS |
| allow direct ordering from dealer to supplier, via a | | | | Australia Pty Ltd. All Rights Reserved Worldwide. |
| unique customer identification number. The distributor | | | | |