NRI Papers
No.109 September 1, 2006
  Re-Common Sense Drives the Distribution Industry
— Reforming the Distribution Industry by 2010 —
Noriaki HINO
   The distribution industry is suffering from a slump in profits, and each company is striving to reform its business in order to restore profitability. If we consider future changes in the management environment, however, there are actually very few opportunities to recover profits by conventional means. From the mid- and long-term perspectives, this will require drastic reforms to stabilize management.
   For these purposes, optimization should not be limited to within a single company, but must instead be applied throughout the supply chain if profits are to be made. Doing so is expected to increase the profit ratio by 7 percent.
   The goal of total optimization is to reduce those costs in the entire supply chain that have their origins in Japanese business practices. This kind of restructuring is called "re-common sense in distribution." The worldwide introduction of GDS (enabling the sharing of product information) is another chance to introduce "re-common sense in distribution."
   By 2010, the Japanese distribution industry is expected to have adopted the spiral-type restructuring common in the US and especially in Europe, although in a form that is uniquely influenced by the demands of Japanese business. In the future, the relationship a company has with the channel captain will be vital for managing the distribution business. This is because that relationship will be the driving force in restructuring the distribution business. In addition, we will have to prepare IT platforms and scientific ways of doing business as well as establishing a new kind of governance.
   "Distribution" is the process by which a product travels from a manufacturer to the consumer, and wholesalers and retailers involved in this process are collectively referred to as those engaged in the distribution industry. This paper examines the distribution situation overseas, considers the current problems facing the distribution industry, attempts to forecast the form that the industry will have by 2010, and describes the survival strategies available to retailers.

I The Struggling Distribution Sector Directions
II Retailers Exposed to Adverse Conditions
III Accelerated Trends towards Overall Optimization of the Supply Chain
IV Spiral Restructuring in Europe and Heresies in the US
V Retailers, Wholesalers, Trading Companies and Funds Are Prime Movers in Restructuring
VI What Must the Distribution Industry Achieve as We Approach 2010?


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