Free Essay

Cost of Distribution

In: Business and Management

Submitted By vral89
Words 1137
Pages 5
Cost of Distribution

The cost of distribution for our proposed three Food Pantries are as follows. These are estimated costs based on other similar programs based out of neighboring countries or Ethiopian food supply organizations that are established in the same category as our proposed organization. The distribution costs include road transport to our facilities, storage costs of the supply, housing for distributors, and electricity. We would most likely require vehicular transport to each of our facilities from where we would also store food till they can be used and distributed to the needy families and people.

One association we primarily focused on was the World Food Programme which supplies aid to many countries including Ethiopia. By viewing the 2011 annual report section for Ethiopian food security and distribution we were able to estimate a cost for distribution. The estimated cost for the food distribution is roughly around $500,000.00. The total cost was calculated by taking information supplied by WFP and their annual report, which consisted of a 3 year program which they signed with the Federal Democratic Republic of Ethiopia in 2007 and mainly with a breakdown of electricity cost, housing cost, vehicle purchase cost, and facility cost. We were able to also accounted for other costs for distribution such as housing for distributors, gas, transport cost, and electricity. We gathered this information from looking up costs from the 2011 annual report for WFP and real estate and property sales in Ethiopia, along side gas cost and kwh per month and cost for it. Initially we had calculated the cost of having a truck driver to somewhere around $43,000.00 but after locating a housing location for the volunteers and employees in Addis Ababa. We decided that it would be more cost effective to just have those same volunteers drive the six vans where two would go to a different location daily and that would provide transport for the food and the volunteers to and from the facilities. The cost of six Chevy cargo vans that are being sold in Ethiopia with high mileage but in perfect condition otherwise would total at $89340.00 based on the listing price of the single van we multiplied it by 6 to get this total. With the use of a fuel calculator for the vans and with google maps we placed the distance of Gondar and the facility from the warehouse in Addis Ababa at 750km, and it calculated an expense of $177.00 round trip, with six vans it will be $1,062..00. From Addis Ababa to Nefas Meewcha it is 710km including the facility location and it is calculated at $167.00 round trip, totaling at $1,002.00. From Addis Ababa to Maychew it is 690 km and is calculated at $163.00 round trip and totaling at $978.00 for the six vans. If the trips to the facilities were done every week then the total cost of for the year is $158,184.00 for six van. For storage we accounted for the acquisition cost of the storage of the supplies in the the storage cost. The cost of the warehouse is 1.3 million birr which calculates to $74713.00. Based on a facility that we found, and after emailing the agent about the correct cost, in Ethiopia with 3500sq feet for 42,000.00 birr per facility each year as rent and since we would have three totaling 1,260,000.00 birr per year. Totaling at $72413.79 per year in US dollars. So a total cost for storage would be $147,126.79 per year. For housing we based our figure on a listing for an apartment complex that we found and could purchase and rotate volunteers and employees for housing. A brand standard apartment building in Addis Ababa with a 4 unit apartment in each floor with a lounge, guest house office, 40 bed rooms, and 20 bath rooms. Rent for the location was negotiable and by email the listing agent informed me that the final price that the owner was willing to go to was $75,000.00 a year with proper financing, and could have it furnished with the basic amenities such as beds and easily acquirable kitchen equipment for another $455.00 a month or $5460.00 totaling at $80460 per year. This location would provide convenience since vans could be driven to the facilities by the workers for that day and driven back by them to return back home. For storage at the warehouse we calculated that it would be just around 10,000 kwh per month and $4800.00 a year for electricity. We determined this by using the current cost of electricity per kwh in Addis Ababa, Ethiopia, which is 0.04 cents per kwh. We estimated that the amount of kwh per month would be around 10,000 since we have planning on having lights and a large cooler to keep perishable foods good. We calculated 10,000 kwh by adding the amount of energy required for a standard 10ft by 10ft walk in cooler and tacking on a few more kwh for miscellaneous usage of electricity. Then for the facilities we estimated that the kwh per facility for a month would be 6,000 kwh based on the average consumption of electricity for a double floor home in the Addis Ababa that has air conditioning. We also included energy for the use of fridges for the storage of foods at the facilities to calculate the kwh and by multiplying the 6,000 by 3, then 12 months, and again by 0.04 cents we get $8640.00 a year for the use of electricity. So the exact total we calculated was $488,550.79 and we added a few more for miscellaneous costs totaling at $500,000.00. The total estimated cost for distribution we found was significantly less than what we planned on and was a surprise to us all. Our estimated costs based on WFP annual reports and our calculations has supplied us with a complete idea of where this organization can go and what it will cost for the organization to be running and supplying food to the needy and starving people in Ethiopia.

Work Cited

1. "2008 Chevrolet Cargo Van Express." Frassifieds. Web. 11 Apr. 2012. .

2. "Gas Prices in Ethiopia." NUMBEO. Web. 15 Apr. 2012. .

3. "Property No. 280." LiveInEthiopia.com Leases Warehouse Ethiopia, Addis Ababa Administration, Addis Ababa. Web. 1 May 2012. .

4. "Property Title : A Brand New G+5 ImYK 1784." Ezega Real Estate. Web. 2 May 2012. .

5. "Property Title : Huge Warehouse for Sale- HN IMNZ 652." Ezega Real Estate. Web. 1 May 2012. .

6. www.wfp.org. World Food Programme, 28 Mar. 2012. Web. 20 Apr. 2012. .…...

Similar Documents

Premium Essay

Distribution

...Transportation 14. Warehouse & Storage. Primary activities – WH / TRANSPORTATION / INV. CONTROL / ORD.PR. Major costs – either contribute to TC or are essential for effective coordination. 1. Customer Service Output of L system – time and place utility – value of products only when they are in the hands of customer – supports customer satisfaction. 2. Demand Forecasting Complex issue – many interactions among functions and forecast variables. (Pre & Post Needs) – link to marketing, mfg, fcstg & planning. 3. Order Processing – Cycle – Key area Customer – Status of stock – communication – credit – R & Payables - EDI tools - CONTRIBUTE TO REDUCTION IN LEAD / CYCLE TIME. 4. Transportation - (adds place utility to a product) – when needed Pt of origin to Pt of consumption – Selection of mode – rail, sea, air, road (truck), waterways, pipeline, surface Routing selection – N W E S – circular – quickest Regulations – compliance Largest single cost element 5. Warehousing – Own, Shared, Rented (costs differ) supports time & place utility – big cost Activities relate to Automation – training – layout – related issues 6. Materials Handling – non-value adding activity – yet incurs costs Movement of RM,WIP, FG within Operations Eliminate – minimize – minimum travel distance – speedier processes Reduce – eliminate costs of mishandling, loss thru pilferage / damage 7. Packaging Aesthetic – protection during transit (long......

Words: 571 - Pages: 3

Premium Essay

How Wal-Mart Uses Distribution Centres to Reduce Transportation Costs and at the Same Replenish Inventories Frequently

...HOW WAL-MART USES DISTRIBUTION CENTRES TO REDUCE TRANSPORTATION COSTS AND AT THE SAME REPLENISH INVENTORIES FREQUENTLY 1.0 Introduction Daskin, Snyder and Berger (2003) noted that achieving efficiency and effectiveness in the movement of goods from source through processing, fabrication, finished goods assembly, distribution centres, wholesalers, retailers and right down to the final consumers is highly important in today’s global world especially considering that cost of goods/products in a number of instances can be higher than the value placed on the goods/products by the final consumer. Similarly, Chopra and Meindl (2010, p.41) stated that the ability of supply chain to perform in relation to responsiveness and efficiency is determined by how the logistical and cross functional drivers of supply chain namely facilities, inventory, transport, information, pricing to mention just a few interact with one another. Furthermore, Daskin, Snyder and Berger (2003) also offered that taking decisions on locations constitute the most “critical and difficult” of all decisions required in making supply chain effective and efficient largely because other decisions on the other drivers such as inventory, information, pricing can be more easily changed in response to changes in the market, raw materials, labour to mention just a few. Chopra (2001) offered that distribution entails the process of moving and storing products right from the supplier down to the final consumer......

Words: 1140 - Pages: 5

Free Essay

Distribution

...[pic] ASSIGNMENT ON DISTRIBUTION CHANNEL FOR MILK AND FLOWER Submitted by: Distribution Channel for Milk Milk-Marketing System Eighty percent of milk is marketed through the highly fragmented unorganized sector, which includes local milk vendors, wholesalers, retailers, and producers themselves. On the other hand, the organized dairy industry, which accounts for about 20 percent of total milk production, comprises two sectors: government and co-operatives. Even though co-operatives provide a remunerative price to the producer, the unorganized sector plays a major role in milk marketing because of three factors. The first factor is the pricing policy of the co-operatives: their purchase price is based on the fat content of the milk, whereas the private sector pays a flat rate per liter of milk. The second factor, which motivates the milk producers to sell milk to private vendors, involves the type of milk animals reared by the producer. Crossbred cows yield more milk with a lower fat than do buffalo. The crossbred cow population has increased over years because of artificial insemination and improvements in management practices. The third factor is payment policy. The private sector can pay their producers every day, whereas the co-operatives pay weekly or fortnightly. Producers sometimes have to fight with the co-operatives to get their......

Words: 1234 - Pages: 5

Premium Essay

Distribution

...LINK BROJ 3, CITIRAJ U LITERATURI ! 2.2.2 Directs Sales The direct model refers to the fact that Dell does not use the retails channel, but sells its PCs directly to customers through its website, Dell.com, as Figure 4 shows. This way the intermediary steps that may add time and cost are eliminated, and Dell is directly linked to its customers. Figure 4: Distribution channel of Dell vs. a traditional company [31] In fact, Dell sells directly to all its customers, “from home-PC users to the world’s largest corporations” [54]. This way it creates a direct relationship with each individual customer, which turns out to be a great source of competitive advantage. As Michael Dell has stated, this direct relationship “creates valuable information” about the customer, thus Dell knows who the end users are, what they have bought from Dell and what their preferences are, a fact that allows Dell to offer add-on products and services, and stay, in general, closer to the customer [27]. As Lawton et al [29] suggest, this “provides Dell with a wealth of marketing and product development information”. Dell distinguishes three rough customer segments: large organizations (large companies or government institutions), small and medium businesses, and personal consumers; the mix of customers served is wide (no customer represents more than 1-2% of Dell’s revenues) and there is a focus on large customers (70% of Dell’s......

Words: 1242 - Pages: 5

Premium Essay

Distribution

...reseller of a product or products that have already been researched and developed significantly reducing your capital outlay and risk. If you are a small business or are starting out in business you can resell products for larger companies that have the resources to support and maintain them after the point of sale enabling you to increase your revenues without increasing your ongoing work load. The ability to resell products or services online with out the need for stock or premises means makes it possible to start as business as a reseller from home with virtually no risk or investment. By finding merchants on The Reseller Network you may be able to resell for international companies at better rates enabling you to maximise your revenue. The cost of marketing to generate product and brand awareness is reduced by the collaboration of reseller partnerships promoting the same products or services. How to become a reseller Register as a reseller with The Reseller Network It’s free and takes only a minute to enter your details and access a wealth of opportunities which could increase your revenue. Find the right product If you have an existing business or customer base and are looking for additional products consider your customer demographic and look for value added products with synergy to your existing business, but don’t be surprised if in your search you are inspired by something unexpected and we certainly agree with innovation and evolution in business. If you are......

Words: 2507 - Pages: 11

Free Essay

Distribution

...would award the contest winner a free trip for two to next year’s Super Bowl. Each can of the cinnamon peanuts contained an insert with a serial number that could be matched with the winning number on Peanut’s Web site. To meet the estimated first week demand for the new product, manufacturing started making product one month before the introduction. Demand for the two days preceding the Super Bowl was estimated to be 2 million 18 ouncecans. Demand after the Super Bowl was estimated to be 1 million cans per week. Manufacturing capacity for the new product is 500,000 cans per week. Peanut’s price per can to its retail customer would be $1.50, which would allow for a gross margin of $0.75 per can. Peanut’s cost to produce each can is $0.35. Inventory carrying costs per can are $0.05. Peanut’s finance department was concerned that the heavy promotion and high build-up of inventories would eliminate almost all of the profit Peanut would make on each can. Their directive to the product manager was that the product had to maintain its profit, or it would be pulled from the market. Ladang kacang ( kacang) adalah pemproses besar kacang tanah di Atlanta , Georgia. produk utama kacang ini adalah dipanggang (plain dan masin ) kacang tanah diedarkan dalam beg 6 auns dan tin 18 auns . Kedudukan pasaran dominan kacang adalah hasil daripada tumpuan terhadap kesegaran produk dan ketersediaan di kedai-kedai . Jabatan pembangunan produk kacang itu mencipta produk kacang baru yang kayu...

Words: 771 - Pages: 4

Premium Essay

Distribution

...supplier to store For IKEA, distribution is an important part of the equation of creating home furnishing articles at prices which are as low as possible. Today approximately 10,000 IKEA products are manufactured by 1,600 suppliers and transported to 186 IKEA stores around the world, often via one of the company’s 27 central warehouses and distribution centres. At IKEA, distribution is all about making the route from the manufacturer to the customer as short as possible. In the early days of IKEA, the “warehouse” was a shed on Elmtaryd Farm in the south of Sweden where the founder of the company, Ingvar Kamprad, lived with his parents. In those days products were despatched from Elmatryd with the help of the county milk van that visited the farm each day. Things have changed a bit since then, however. Today IKEA operates 27 distribution centres in a total of 16 countries. From here IKEA products are delivered to 186 stores around the world – 165 IKEA Group stores and a further 21 stores operated by other franchisees. IKEA works in various ways not only to rationalise and simplify distribution, but also to minimise the impact this part of the business has on the environment. The secret is to calculate as exactly as possible how many products will be needed to satisfy demand. This eliminates any unnecessary costs for production and warehousing. The hallmarks of IKEA distribution are: – a global distribution network – large volumes – flat packages – low costs. The aim, of......

Words: 543 - Pages: 3

Free Essay

Distribution

...reduced claims. Intermodal is an ideal form of transportation for imports, exports, cross continental shipments for example from Miami, FL to Portland, OR. This simplified for of transportation can be a key to success in any supply chain management or logistic plan. Many freight forwarders favour intermodal transportation because of lower cost and increased security of the products being transported. Intermodal transportation is actually one of the top five trends impacting the transportation industry today. For the past couple of years, the transportation industry has been hit with driver shortages, increased demand, shrinking truck capacity and increased fuel prices. This is forcing shippers who would otherwise refrain from using multiple modes of transportation to rethink their logistic strategies. Other reasons intermodal transportation is gaining momentum include: cost savings, environmental benefits, and highway safety results. Shippers can take advantage of lower rates, more predictable pricing, and the flexibility of loading and unloading goods in a dropped trailer environment, which reduces handling costs. This significant cost savings can greatly outweigh the speed by which shippers can move their goods via truck. In addition, as the U.S. continues focusing green initiatives, intermodal is seen as a more environmentally friendly mode of transportation. Trucks emit an average of 20 lbs. of carbon dioxide per 100 ton-miles, at the same time trains only emit an......

Words: 454 - Pages: 2

Premium Essay

Distribution

...distributors; evaluating how accessible and effective they are and establishing relationships and signing contracts with the companies who offer the best combination of price and service.  3. Materials management as a definition is the process which integrates the flow of supplies into, through and out of an organization to achieve a level of service which ensures that the right materials are available at the right place at the time in the right quantity and quality and at the right cost. * Material Management is responsible for purchasing the highest quality equipment and products at the lowest possible cost for the organization.  4.  supply management describes the methods and processes of modern corporate or institutional buying. This may be for the purchasing of supplies for internal use referred to as indirect goods and services, purchasing raw materials for the consumption during the manufacturing process, or for the purchasing of goods for inventory to be resold as products in the distribution and retail process. * Supply management deals primarily with the oversight and management of materials and services inputs, management of the suppliers who provide those inputs, and support of the process of acquiring those inputs. The performance of supply management departments and supply management professionals is commonly measured in terms of amount of money saved for the organization 5. Flow production involves a continuous movement of items through the......

Words: 2103 - Pages: 9

Premium Essay

Distribution Strategy

...1.0 Introduction The implementation of a distribution strategy without the coordination of other components of the marketing mix tends to produce a strategy without harmony. A disjointed marketing strategy will not reach the success levels that were expected. Organizations have come to realise the impact of distribution management as a source of competitive advantage with companies like Delta, Lobels and Bakers Inn employing distribution managers and personnel. This is because it has become more difficult to find a unique source of competitive advantage in an era where it is easy to copy strategies and products. Marketing managers are now looking to coordinate the promotion strategy with the distribution strategy, specifically push or pull strategy in relation to distribution strategies that include, intensive, selective or exclusive. Now the combination of these strategies is most important in an environment where the retailer and other relevant intermediaries are faced with so many product options to stock on their floor space. It then becomes apparent that the marketing manger that is able to gain the best and most floor space using one strategy, and persuade end customers to seek out and purchase the organization’s products in another strategy, becomes successful in gaining market share and meeting their objectives. This paper will define distribution management and its components. It will look at the impact of the Bullwhip Effect or the Forrester Effect, the......

Words: 3931 - Pages: 16

Premium Essay

Distribution

...week 4 Distribution Randy Weatherford University of Phoenix week 4 Distribution Channels of distribution of sales for designer jeans for Starbucks new Starbutts. The key for distribution is to align the manufacture to the sales, shortest point where the manufacturer to the customer purchasing the product. First, Starbucks will assess the competitors line of product to identify all channels of categories so Starbucks can identify their where they can be successful. Competitors' distribution channels. As a starting point, make a list of any competitors that could compete directly with you for the same customers. Then divide these competitors into categories based on the distribution channels they currently use. The result will be a picture of which channels are being successfully used in your type of business and location. (2015, p. 1) The lines of distribution are as follows, first of all direct lines to currently own retail outlets, wholesale outlets, Direct mail through flyers or catalogs, telemarketing, Cyber marketing, and cable or TV advertisement. Each of these avenues provide value to the sale of the product. The wholesale and retail outlets provide a direct link between the customer and the manufacture but this can be the more expensive direction because the products provided are manufactured and shipped to the retail stores without orders in place. Direct mail through catalog or flyers provide the customers the options and saves Starbucks the capitol......

Words: 512 - Pages: 3

Premium Essay

Distribution Strategy

...Distribution Strategy Name Institution Distribution Strategy A distribution channel is the path through which goods and services are transported from the producer to consumer and how the payment gets to the producer or seller. Distribution channels can also be known as marketing distribution channels or marketing channels. In marketing, goods and services can be distributed using two main types of channels that include direct and indirect distribution channels. According to Richardson and Gosnay (2010) direct distribution is achieved when goods or services leaves the producer and goes directly to the customer without the involvement of a middleman. For instance, a barber and car wash utilizes direct distribution because the customer receives the service directly from the producer. Indirect distribution, on the other hand, involves middlemen or intermediaries within the distribution channel. In the wood sector, for instance, the intermediaries would be the lumber manufacturer, the retailer and furniture maker. The larger the number of intermediaries within the distribution channel, the higher the price is prone to be for the ultimate customer (Richardson & Gosnay 2010). This is because of the value adding that crop up at each stride within the makeup. Moreover, there are other important types of distribution which include intensive, selective and exclusive distribution. The marketer can chose either of these depending on factors such as the......

Words: 1472 - Pages: 6

Premium Essay

Cost

...CLASSIFICATION OF COSTS: Manufacturing We first classify costs according to the three elements of cost: a) Materials b) Labour c) Expenses Product and Period Costs: We also classify costs as either 1      Product costs: the costs of manufacturing our products; or 2      Period costs: these are the costs other than product costs that are charged to, debited to, or written off to the income statement each period. The classification of Product Costs: Direct costs: Direct costs are generally seen to be variable costs and they are called direct costs because they are directly associated with manufacturing. In turn, the direct costs can include: Direct materials: plywood, wooden battens, fabric for the seat and the back, nails, screws, glue. Direct labour: sawyers, drillers, assemblers, painters, polishers, upholsterers Direct expense: this is a strange cost that many texts don't include; but (International Accounting Standard) IAS 2, for example, includes it.  Direct expenses can include the costs of special designs for one batch, or run, of a particular set of tables and/or chairs, the cost of buying or hiring special machinery to make a limited edition of a set of chairs. Total direct costs are collectively known as Prime Costs and we can see that Product Costs are the sum of Prime costs and Overheads. Indirect Costs: Indirect costs are those costs that are incurred in the factory but that cannot be directly......

Words: 767 - Pages: 4

Free Essay

Physical Distribution

...CONTENTS 1. MEANING-PHYSICAL DISTRIBUTION 2. A SYSTEM APPROACH (COMPONENTS) 3. COMPONENTS :- TRANSPORTATION i. MEANING ii. FUNCTIONS iii. MODES – MEANING,FEATURES,ADVANTAGES & DISADVANTAGES * ROAD * RAIL * WATER * AIR PHYSICAL DISTRIBUTION MEANING: Physical distribution is the set of activities concerned with efficient movement of finished goods from the end of the production operation to the consumer. Physical distribution takes place within numerous wholesaling and retailing distribution channels, and includes such important decision areas as customer service, inventory control, materials handling, protective packaging, order procession, transportation, warehouse site selection, and warehousing. Physical distribution is part of a larger process called "distribution," which includes wholesale and retail marketing, as well the physical movement of products. Physical distribution activities have recently received increasing attention from business managers, including small business owners. This is due in large part to the fact that these functions often represent almost half of the total marketing costs of a product. In fact, research studies indicate that physical distribution costs nationally amount to approximately 20 percent of the country's total gross national product (GNP). These findings have led many small businesses to expand their cost-cutting efforts beyond their historical focus on......

Words: 3172 - Pages: 13

Premium Essay

Warehouse and Distribution

...Supply Support: Warehousing and Distribution Chris Scott and Arni Jonsson Oklahoma State University Aviation Logistics AVED 4153 Dr. Jerry McMahan February 22, 2012 Abstract Supply support is only one of the 10 elements in logistics. Warehouse is just a part of supply support. The purpose of warehousing is to move goods from suppliers to customers, while meeting the customer’s demands in a timely manner. Things involved in warehousing are receiving of material, storage of material, inventory of material, packaging of material, and the manpower needed to perform the tasks along with the equipment. You also need to consider the training needed for these jobs and for the equipment involved in the jobs. There are a lot of important steps in warehousing in order to keep the customer satisfied. Everything must be done correctly to save time and to keep track of all material. Introduction Warehousing is a big part of logistics. Warehousing as many different responsibilities and functions. What is involved in warehousing is not only storage, which is what most people think. There is a lot more to it than that. Warehousing involves receiving material, storing material, inventorying material, picking material, packaging and shipping material. It also involves training to do these things plus training to operate the equipment required to accomplish the things listed above. Safety is also a big issue in warehousing...

Words: 5102 - Pages: 21