An Application of Distribution Network through a Distribution Center to Reduce Transportation and Distribution Costs: A Case Study of Retail Stores in Cambodia

Abstract

This research aims to 1) examine the feasibility of transitioning a direct transportation network to transportation and distribution with a distribution center network, using Freshmart retail stores in Cambodia as a case study; 2) investigate the potential for reducing empty backhaul trips and ordering costs with the establishment of a distribution center; and 3) manage inventory to ensure consistent customer service. Data were gathered through 1) collecting and reviewing internal business information and relevant databases; 2) conducting interviews with operational staff; and 3) participating in observations of transportation processes. The study utilized cost accounting methods, a factor rating approach for location selection, and calculations of the payback period to identify the most appropriate site for the distribution center and evaluate costs and savings. These findings serve as a framework for establishing the distribution center and adjusting the distribution network.

          Findings revealed that Banteay Meanchey Province is the optimal location for the distribution center; The establishment of the distribution center would incur a cost of 762,480 baht; Restructuring the transportation network to incorporate a distribution center would lead to a reduction in empty truck trips and lower ordering costs, resulting in total savings of 2,593,949 baht; The company is expected to recover its investment within 0.4 years.; and each retail branch has sufficient inventory to consistently meet customer demand.