The following alternatives can help SG for dealing with the inventory problems are: centralized warehousing in Waltham, decentralized warehousing, and outsourcing warehousing. Centralized logistics organization implies that the company maintains a single logistics department which controls supply chain activities from entire company from a home base. One key defining benefit is its cost efficiency with having less transportation, less duplication of roles, and only one department facility, companies are able to save more money. In contrast, the disadvantage of centralize logistics is failure of quick response to customers and local conditions. For SG, centralized warehousing in Waltham, according to Beane, is that “This would allow SG to pool its inventory in order to meet demand.”. In the contrast, the disadvantage is that this option will increase the customer respond time. Decentralized logistics involves the use of individual logistics divisions which make their own separate decisions on logistical. Decentralized departments are located worldwide. Utilizing a range of transportation in order to distribute the products. A key advantage of decentralized logistics approaches is the faster order execution with continuous consumer demand for quick response delivery. These centralized departments are able to provide enough global facilities to deliver products to the customers. There are the challenges of decentralized logistics. First, majority of the time they
Answer 2- If there should be a single location for all three companies the inventory holding cost will reduce because the product is placing at one location instead of different three locations. Moreover, by doing this the insurance and misplacing of product of cost reduce but in transit of inventory will increase because the shipments are truck load and the distance between customers and distribution centre is far. Furthermore, with this the service level improved which means order fulfilment process improved too. In addition to this, the
Inbound logistics today is highly inefficient. Most retailers use multiple systems to manage the process and so suffer from fragmented visibility. Prioritisation and scheduling of orders are done on an ad hoc basis, with little consideration of current demand and inventory, while scarce resources, such as dock door and yard capacity, are often poorly utilised.
Centralization with one warehouse: Centralize the North American warehousing with one warehouse in Waltham by closing down the regional warehouses. In this way, the inventory requirements could be pooled to meet the demand.
Due to the large quantity of freight and the long distance that it must travel to arrive to its destination exporters and importers alike have found logistic service providers essential to engage in international trade (Rodriguez, Comtois, Slack, 2013). While some Logistics service providers focus only on the area of transportation others specialize in freight consolidation, distribution management, and warehousing (Robinson, 2014). They have enough market knowledge, information and communication systems to offer supply chain solutions tailored to the specific needs of any company be it small or large (Rodriguez, Comtois, Slack,
The advantages of a centralized warehouse is higher service levels and lower inventory holding costs due to aggregating customer demand and pooling risk. That is, if customer demand is high in one region and lower in another, there will be no need to hold excess inventory in a regional warehouse; the variation in demand will balance out and reduce the requirements for excess inventory. Additionally, the fixed costs of maintaining one central warehouse/distribution center will be lower than five regional warehouses.
In order for a supply chain to run as efficiently as possible, considerations must be in place to ensure the logistics function is operating in an appropriate manner. Part of this is ensuring that the distribution centre is located in an area that allows the greatest efficiency, all the while still meeting operational and strategic needs (Van Thai & Grewal, 2005, p. 4)
Locating a central distribution center will increase the control over inventory for Consolidated. Having small point of operations will reduce the amount of inventory that will be maintained at the sites. Each location will have different needs and only stocking the immediate customer needs at each location will reduce overall costs. The purchasing discount will be easier to maintain if all shipments come to one location which will also save the company money. Having a couple small vans deliver to regional locations within an hour is less costly than ordering extra just to meet the minimum purchase discount. The cost of shipping to small locations will be minimal and will save the company and customers money in the long term. If the contractors know of items that they will need for a job they can inform Consolidated and the special items can be delivered to the job site or picked up at the regional office. Communication is key and willing to provide the best service in a timely manner will reduce cost and increase profit.
The recommended decision after a series of cost analysis of different warehouse options is to maintain only one centralized warehouse at Atlanta with Global Logistics. Have the
Outsourcing the warehousing functions: In this option, all warehousing actions will be outsourced to Global Logistics (GL) and distribution will start from main warehouse at
Outsource warehousing to Global Logistics (GL) which will provide a centralized warehousing in Atlanta: Goods will be transported in bulk from Waltham to Atlanta and GL would take responsibility of inventory-control and delivery to the customers. This way SG would not have to bear the warehouse rental charges and could focus on increasing sales and develop newer products to meet customer needs.
(Bowersox, D.J., Closs, D.J., and Cooper, M.B. (2010). Supply Chain Logistics Management. (3rd Edition) New York, NY: McGraw-Hill/Irwin.
Define what the impact on inventory and warehouse cost would be? Fixed costs are generally a concern with warehousing. Many companies are streamlining their manufacturing and distribution network by consolidating and centralizing their logistics operations. (Ou, 2002) Warehouse consolidation is a key component of the logistics strategy. When the products are high in value and when transportation costs are insignificant compared to inventory and ordering cost, consolidation can be pursued with great enthusiasm. Also, outsourcing warehouse functions has proven to be a good idea when the product in question has a seasonal, cyclical, or uncertain sales nature. One recent example of manufacturing consolidation is Colgate-Palmolive establishing a new facility in Greenwood County. “Greenwood County had a building that was a perfect fit for our needs, offers us a talented workforce and excellent market access” said Mike Corbo, Vice President-Global Supply Chain, for Colgate-Palmolive. (Skipper, 2013) That “perfect fit” comes thanks to
Fragmented logistics structure is where multiple departments handle the logistics activities in the organization. In such a structure the functions of each department tend to concentrate in their own areas and there is isolation from rest of the departments. Hence, this structure has communication issues which can reduce the efficiency of the overall system.
When managing logistic in an organization there are hundreds of aspects that need to be taken into account. Here is a particular aspect of Toyota Motor Engineering & manufacturing North America Inc. (TEMA) logistic management that is centralised and de-centralised logistic. According to [3], centralised logistic means that the all or most of the authorised
We have several logistics and supply chain management practices that increase the competitive advantage of a business. They include among others lean thinking, information quality, customer relations, strategic alliance and information sharing (Elizabeth, p.14). This section discusses lean thinking and customer relations in the manufacturing and retail markets respectively. The discussion is also based on a critical analysis of recent literature review in logistics and supply chain management.