Chemical Case
Case #2: W-G-P Chemical Company
John White, vice president of distribution for W-G-P Chemical Company, was preparing for the annual strategy review session conducted by the firm’s executive committee. He was charged with the task of evaluating his firm’s logistics costs and customer service capability for his firm’s packaged dry and liquid agricultural chemicals.
W-G-P Distribution Systems
Figure 1 outlines the existing logistics system for W-G-P Chemical Company. Four types of facilities: (1) two continuous, company-owned manufacturing plants; (2) nine seasonal contracted manufacturing plants; (3) numerous in-transit distribution centers; and (4) 28 full-time distribution centers. Growing environmental activism has influenced management to reject any relocation of the manufacturing plants.
W-G-P distributes 129 different products or SKUs on a national basis. For distribution considerations, the products may be grouped into two different categories. Category A consists of 13 SKUs of a product called Prevention. The sales of Prevention are highly seasonal and account for 85 percent of W-G-P’s total revenue. The 116 Category B products (called Support) sell throughout the year but also have a seasonal pattern similar to that of Prevention’s sales. Although the sales volume of Category B is only 15 percent of W-G-P’s total revenue, this group of products contributes approximately 30 percent of total before-tax profits. The typical end user of W-G-P’s products purchases a variety of both A and B products. In many cases, the products are used jointly in agricultural applications.
W-G-P’s total product line is marketed through a network of agricultural dealers. The company sells to the dealers, who then resell the products to farmers. The typical dealer provides farmers with a broad line of products, including those that are directly competitive with W-G-P products. Historically, farmers tend to purchase both A and B products 1 to 2 weeks before field
John White, vice president of distribution for W-G-P Chemical Company, was preparing for the annual strategy review session conducted by the firm’s executive committee. He was charged with the task of evaluating his firm’s logistics costs and customer service capability for his firm’s packaged dry and liquid agricultural chemicals.
W-G-P Distribution Systems
Figure 1 outlines the existing logistics system for W-G-P Chemical Company. Four types of facilities: (1) two continuous, company-owned manufacturing plants; (2) nine seasonal contracted manufacturing plants; (3) numerous in-transit distribution centers; and (4) 28 full-time distribution centers. Growing environmental activism has influenced management to reject any relocation of the manufacturing plants.
W-G-P distributes 129 different products or SKUs on a national basis. For distribution considerations, the products may be grouped into two different categories. Category A consists of 13 SKUs of a product called Prevention. The sales of Prevention are highly seasonal and account for 85 percent of W-G-P’s total revenue. The 116 Category B products (called Support) sell throughout the year but also have a seasonal pattern similar to that of Prevention’s sales. Although the sales volume of Category B is only 15 percent of W-G-P’s total revenue, this group of products contributes approximately 30 percent of total before-tax profits. The typical end user of W-G-P’s products purchases a variety of both A and B products. In many cases, the products are used jointly in agricultural applications.
W-G-P’s total product line is marketed through a network of agricultural dealers. The company sells to the dealers, who then resell the products to farmers. The typical dealer provides farmers with a broad line of products, including those that are directly competitive with W-G-P products. Historically, farmers tend to purchase both A and B products 1 to 2 weeks before field