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Current physical distribution structure.
At present, the company used five of its own trailers to distribute product in the six states
in which it operated. Its network of 30 delivery sites were the depots of the main
supermarket outlets that the company supplied. These were all based in main centres of
population. Details of the market sizes in millions of value, the road distance in miles (one
way), and the rail-link in miles (if in existence) are provided in Table 6A.
Table 6A. Branchwater market analysis.
Centre
Market size
Deliveries
Distance
Rail
Water
$ million
No/ year
miles
miles
(miles)
A
55
250
75
125N/a
B
35
164
80
140
300
C
40
155
40
55
150
D
65
283
90
200
300
E
25
127
45
60n/a
Each lorry carried 40,000 kilos of water - about 11,500 bottles. Between them, they had
driven 138,000 miles in the last year. Average travel speeds were fairly high at around 45
mph (speed limits on highways in the US being 55 mph maximum). Though there were no
limitations on the total number of hours per employee, the company had a general rule that
drivers should not work more than 10 hours a day. This meant a daily round trip limitation
of 450-500 miles. Maintenance costs had risen over the last 2 years as breakdown rates
increased with extra mileage. As a result, the company used subcontractors in
emergencies. The overall annual costs of the current operation were: vehicles - including
depreciation - $150,000; drivers $120,000; fuel $20,000; maintenance $60,000; and
emergency delivery $45,000 per annum.
Future plans
The company had identified four new areas for sales expansion, each of which had been
extensively researched. Three of the four areas were west of the factory, (Areas F-H), the
other (Area I) was far to the south. The main statistics of these areas are in Table 6B.
Table 6B. New centres for development.
Centre
Population
Market
Deliveries
Distance
Rail-link
Water
million
($million)
(miles)
(miles)
(miles)
F
85
150
155
225
450
650
G
65
130
180
240N/a
330
H
60
155
240
355
270n/a
I
105
170
490
470
600
1000
The problems of supplying these areas would be acute. On the basis of the salesforce
volume forecast, additional vehicle mileage would be in excess of an extra 250,000 miles.
The company would have to invest in more vehicles, more drivers, more maintenance, and
incur far higher delivery charges unless it chose an alternative distribution method, or
combination of methods.
Distribution alternatives
A number of distribution alternatives had been identified. The first option was to investigate
the use of rail. Rail speeds were lower than road averaging 20 mph, but the network could,
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