Analysis of distribution strategies in the industrial paper and plastics industry

The costs, benefits and strategic role of intermediate echelons in distribution networks are not well understood in many industries. This paper describes a study of such multilevel systems in the industrial paper and plastics industry. We quantify the impact of redistributors, who buy products from manufacturers and sell them exclusively to other distributors. The methodology was applied to an industry-wide study. We derived statistics based on optimal distributor policies for channel choice and stock control. Based on our analysis, we found that effective use of redistribution, in conjunction with these policies, has the potential to generate savings of $446 million for the industry.