Results

7.1.1. Demand mapping

Actual and potential demand of Company X’s products were investigated to find their centers of gravity, which would make for optimal distribution center locations.

The demand mapping done in the thesis showed that the geographic distribution of ac-tual sales and demographic data differ from each other greatly. As Company X has only information on the locations of distributors and cannot access the locations of customers, demographic data can be used to approximate the distribution of end-customers.

In Russia, population is divided so that 75% of the population is situated west of the Urals and 25% east of the mountain range – which is roughly the opposite of how area is distributed. Also, wealth and development are distributed unevenly, and they are con-centrated in Moscow. Other metropolises and growth centers exist, but Moscow’s share is disproportionately large compared to its population – which is also sizeable. One oth-er region with a discontinuity between wealth and population are the resource-rich re-gions in western Siberia, such as Tyumen Oblast, where the gross regional product is high but human development is low.

When centers of gravity based on demographic data are calculated, the single center of gravity is situated near the Tatarstan plant. If Russia is divided in two along the Urals, the western center of gravity is situated near Moscow and the eastern center of gravity is situated roughly north of Novosibirsk.

Even though demographic parameters are distributed unevenly over Russia, the distribu-tion of Company X’s sales is even more extreme. Over half of the sales are to the three largest Moscow-based distributors, and very little is sold beyond Novosibirsk. Thus the centers of gravity for sales are different from the ones based on demographic data: The single center of gravity is near Nizhniy Novgorod, and the western and eastern centers

of gravity are in Moscow and near Tyumen, respectively. Thus the single center of grav-ity is pulled more toward Moscow and the eastern center of gravgrav-ity is hundreds of kilo-meters to the west as oppose to demographic data.

The results of these sales mappings were used to determine the locations of distribution centers in the alternatives developed. Especially in alternative 2, the distribution centers in Moscow and Chelyabinsk are based on the centers of gravity for Company X’s sales.

The results for the different alternatives are described next.

7.1.2. Results of the different alternatives

Next, summative visual presentations of the alternatives are given, each in their own figures. Each figure shows a conceptual map of the alternative. In the map, distribution centers and production locations are marked with red circles. Blue arrows entering them indicate inbound transportation and red arrows leaving them symbolize outbound trans-portation. Pictograms show the transportation mode in question, namely sea or road transportation. Railroads are considered a possibility, but they are not shown separately as to keep the map simple.

Under each map, some key information of the alternatives is given. Those are the num-ber and location of the distribution centers, average inbound distance and average DC-distributor distance. Lastly in the figures, the positives and the negatives of each alterna-tive are considered, as is in figure 7.1., which is the first figure in the series and summa-rizes the base case.

Figure 7.1. A summary of the base case (map base from Wikimedia 2007)

In the base case, a commodity distribution center is situated near the Tatarstan plant and a distribution center for imported products is at its current location in Saint Petersburg.

As the base case is built with Company X’s simplicity and convenience in mind, the natural implication is that the distributors still come to collect their products from the distribution centers. Thus the base case is identical to the current situation with the ex-ception that a Tatarstan distribution center exists in addition to the one in Saint Peters-burg, and the distributors have to visit both of them if they wish to have access to the full offering of Company X.

Figure 7.2. show a summary of alternative 1, which is based on simplicity for Company X, and it is also simpler to the distributors than the base case.

Figure 7.2. A summary of alternative 1 (map base from Wikimedia 2007)

Alternative 1 is similar to the base case with the exception that the only distribution cen-ter is situated in Tatarstan, and Company X transports the imported products there from Saint Petersburg. This means more transportation costs for Company X, but the basic configuration is simpler since there is only one distribution center. As was with the base case, this alternative is one with little change compared to current affairs, and distribu-tors coming to collect the products fit the solution well.

Lastly, alternative 2, which is also the proposed alternative, is summarized in figure 7.3.

Figure 7.3. A summary of alternative 2 (map base from Wikimedia 2007)

Alternative 2 is the most daring alternative with completely new distribution center lo-cations in Moscow and Chelyabinsk and the possibility of delivering the products to dis-tributors. However, it is also the most strategically far-sighted alternative, and it is the one that could yield the highest benefits in light of winning new business and serving clients. Alternative 2 is described in more detail next in the plan of action.