Westminster Company is a giant Global manufacturer of health products whose brand has been recognized by the world. As the company they have three different operations which produce and distribute different product lines. Their main strategy on which they are working and which is a major success for them is decentralized management. Now they are re-evaluating their traditional supply chain strategy because the company is getting too much pressure from their large domestic’s customers and global customers. Now the company has to study on customer’s composition and customer service requirement. The Westminster Company has to identify accurate and efficient inventory delivery would be another key to success in future. Westminster Company is trying to implement three major changes for their company which are focus on reducing of their order cycle time, focus on customer requirements and changing to forecast response based on sales information. PROBLEM STATEMENT-
As Westminster Company is facing many problems their main problems are how they are going to implement three major changes they need in their company to be succeed in future as those changes are elaborate in current statement. Moreover, they are also re-evaluating their traditional supply chain for their global customers and domestic customers to improve the efficiency of their supply chain. Using a more centralized strategy by consolidating the current three distribution systems to a single system serving all three companies, using fewer warehouses than are currently being used? Outsourcing some of their activities by using public or third-party warehousing and third-party transportation? Continuing with their current network design?
Alternatives for Problem-
1) Consolidate Inbound and Outbound orders at Central Distribution- In this if the Westminster Company can manage the single network for all three existing companies they can save some cost because they can easily manage the outbound freight shipment for same customers which have the their distribution centres. By doing this the Westminster Company can utilize the maximum cube of trucks and moreover, this will also reduce the number of deliveries for trucks which will help to reduce the cost or they can save the money for transportation. Furthermore, by doing outbound and inbound in which company can cross dock the products as the requirement of customers which will reduce the freight cost too. By doing this step it’s going to reduce transportation cost but will increase the complexity with the consolidations of inbound and outbound.
2) Public Warehousing or Outsource Distribution to Third part logistics- For Westminster Company if they outsource the distribution centre the company can focus on their main core competency and which will help them to succeed in future. Whereas for third party logistics the main benefit will be that they can schedule and their freight can be schedule according to the routes which will help to maximize the truck load and reduce the less than truck load which helps to reduce the freight cost but as outsourcing for 3PL the cost will increase because they are hiring the expertise which helps them a lot.
3) Continue with the same or Current Design-
If we talk about this the company Westminster would make no change in their supply chain but the Westminster Company should focus on their customers to build long term relationship with their key customers and this will help the company to satisfy their customers and customer satisfaction should be more.
Analysis of all Alternatives-
As with these all key alternatives the Westminster Company will improve their supply chain which will become more efficient and the cycle time will reduce. Moreover, by implementing all this alternative ways the Westminster Company will deliver on time to their customers and also there should be more customer satisfaction.
Freight cost will reduce by Truck load and by using maximize the cube and also less than truck load shipment will reduce. Information sharing will help them for forecasting accurate and controlling inventory. Moreover, by all this alternatives the company will get efficient and on time delivery to customers which increase the customer satisfaction too.
As for implementing these changes can cause some problems and issues, moreover this is time consuming process. If clients will remain at old place of warehouse they have to face issues with the delay in delivery to their customers. Some clients don’t want to be part of a long term relationship. Other Questions-
Answer 1- The first question which shows the two new options how impact transfer and customer might freight cost and the answer for this question is given in first alternative and second alternative which is elaborated above. 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 Westminster Company will focus on their major customers and there will be less variance in demand and accuracy will increase.
Answer 3- The replenishment of inventory is anticipatory and is changed to push to pull which means customer driven demand. By customer driven demand there will be less chance of variance in demand and this will reduce the bullwhip effect. The other change should be from paper to paperless transactions which mean with help of “Electronic Data Interchange” the data can be easily share with each other’s. This process is expensive in cost whereas with this process if company will get RFID which gives the clear view for inventory and reduce the cost for theft. This could give proper benefit to Westminster Company because they have single location to apply this EDI and RFID instead of using and implementing at three different locations.