Impact of product characteristics on distribution strategy selection

Nowadays companies must look to develop new distribution strategies in order to achieve the required performance from their supply chain. In this quest, companies wonder about the consistency of their distribution strategies with the types of products they are selling. This article deals with the issue of product segmentation and distribution strategy selection (cross-docking versus traditional warehousing). In the literature many factors have been described that affect product segmentation and supply chain selection. In this article the selection is based on the impact of product shelf space, demand variability, product value, and lead time on the supply chain performance (store inventory, service level). We carry out a simulation investigation to determine the impact of each product characteristic on the supply chain performance for the two different strategies. This article provides a framework to help managers understand the nature of their products and choose the right distribution strategy for each one.