CASE STUDY WESTMINSTER

Abdelwahab, W. M., M. Sargious. 1990. Freight rate structure and optimal shipment size in freight transportation. Logist. Transportation Rev. 6(3) 271-292.

The National Motor Freight Classification (NMFC), as determined by the Surface Transportation Board (STB), is the tariff system that has classification and description of commodities based on four main characteristics. These are density of the commodity, liability, handling and storability of the commodity. Carrier companies negotiate the rate and terms of transporting the commodities on the basis of these four characteristics. It is important to mention that product density is the dominant factor that determines use of carrier’s vehicle and cost per hundredweight. Higher product density results in lower cost per hundredweight but higher capability of

The supply chain management is considered as a management concept from past two decades as the customers are concerned about timely and safe delivery. The competitiveness has been increasing among the companies to deliver the products as quickly as possible to the customers all around the world. This has made the supply chain management as a vital tool for the management. This is also measured as a competitive parameter for the companies.

(b) Cost of Finished Goods Sitting Idle in the Warehouse: They are able to ship out   finished products effectively.

Alex Coldfield, the VP of SCM, Westminster with team of high level managers has decided to improvise their supply chain capabilities to face these issues in a prominent way. They are analysing their customer composition and customer service requirements and align it more towards cost reduction. Alex also plans to implement three strategies to align the network redesign.

If the number of units/TEU increases, the lesser holding cost of Zaragoza mitigates the higher transportation cost of Zaragoza. Also, the transportation cost of Zaragoza comes down if the number of units/TEU or number of units/Truckload increases.

With the same inventory levels, whether in a store or in a warehouse, the warehouse can drive the cost of this up, beyond that of in a store. Service charges are a cause of this inflated cost. The advantage the warehouse option has here, is there is plenty of space available to keep extra inventory versus what a store can hold, to guarantee a cushion of product in order to fill any customer demands. Also, centralizing stock allows easier monitoring of the stock levels for different products and due to service levels implemented in a warehouse, inventory checks can be easier in the warehouse.

2. Shipping Cost Savings = inventory carrying cost = item value X 0.30 X 6 days

5. Proposed location of the new warehouse and transportation distances from the new location to each retail outlet/customer

The customer could possibly experience longer wait times to receive their products. If this is the strategy assumed by the company, they must be able to handle larger quantities of products to fulfill the same amount of requirements abled to handle prior to the consolidation of warehouses. The personnel on the facilities that remain open must have the adequate training to support larger orders as well. The order fill rate will have a positive impact because since products will be ordered more frequently the warehouses will maintain those products readily available based on POS and customer consumption.

Finding ways to shorten routes and delivery times between stores would also been a benefit for the company. When I would attempt to fix

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 cost in transportation rates will increase for MARS Inc. with this change. The Portland supplier’s location to MARS Inc. based on the current situation charges “per hundredweight is $10 for carload lots of 50,000 pounds. The less than carload rate is $15 per hundredweight.” While anything coming from the Columbus supplier was offered just-in-time delivery service at no charge to MARS Inc. Also, this will affect the EOQ’s because dealing with the Columbus supplier they were located close enough that they offered JIT delivery which allowed the reduction minimizing “work-in-process inventories (waste) by reducing lot sizes in order to increase production efficiency and product quality.” Now, with the change, it will force MARS Inc. to spend money on warehousing and carrying cost due to the one week replenishment cycle the Portland supplier has.

* Since no inventory is maintained at near-by locations, the goods will have to be fetched from central warehouse thereby increasing lead time.

Define the effect of transportation on the situation Greater prospects are available for truckload shipping volumes with consolidated distribution centers and assorted product shipments. This would necessitate fewer outbound shipments, with each in larger quantities for better transportation savings. The possible longer distances from distribution centers to customer locations might be the only disadvantage to transportation cost.