We are manufacturer of durable goods and operating business since last thirty years. Our firm business model based on selling through few exclusive distributors. They have gained exclusive distribution deals to achieve wide coverage in their geographic. Overtime the distributor tend to be uncooperative, not customer oriented, and selective in their distribution strategies. We are considering improving our business model by reducing the echelons in the distribution channel and opt for modern retailing concepts. What steps should we taken to improve or echelons performances?
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One of the arguably great challenges of supply chain management (SCM) is the lack of demand visibility. As is often the case, manufacturer are left to use distributor forecast data as the demand input data, which leads to the delayed and distorted picture of the actual end consumer demand. More distorted demand in supply chains with traditional and less modern distributors.
The demand distortion is by a large proportion caused by complex, and longer distribution chain. It is difficult to estimate the exact impact of echelon elimination in distribution channels, but it will definitely increases the performance of supply chain and improves the profitability.
With gaining maturity in supply chain more profitable operations can be established by opting digital supply chain. Modern e-retail concepts with centralized DCs that have appeared in recent years show considerably better performance due to echelons elimination.