Impact of change in the structure of distribution system on incurred cost

Abstract

In multi-tier distribution, in addition to suppliers and consumers there are also intermediaries who participate in the transfer of products from manufacturers to end consumers. The choice of the distribution system depends on the optimisation of the performance indicators for servicing an area, taking into account the technical capabilities of the individual logistics chain links. The paper compares two typical distribution structures in the construction sector. The choice of the structure is a function of the manufacturer’s economic and organisational determinants. The paper presents a model representing the costs of two typical distribution structures in the construction sector. The choice of the structure depends on the company’s outsourcing policy and total costs of all three major system components: the distribution network, transport network, and warehousing. Rationally built and implemented functioning models are a key element of business success in the marketplace. The choice of a suitable strategy is difficult, as it depends on many dynamically changing parameters which directly affect costs. In addition, the relations between the system elements are very complex and interdependent.