KLF Electronics distributes its products through five regional warehouses located in Atlanta, Boston, Chicago, Dallas, and Los Angeles. In the current distribution system, the United States is partitioned into five major markets, each of which is served by a single regional warehouse. Customers, typically retail outlets, receive items directly from the regional warehouses in their market area. That is, in the current distribution system, each customer is assigned to a single market and receives deliveries from one regional warehouse.
The warehouses receive items from the manufacturing facility where typically, it takes about two weeks to satisfy an order placed by any of the regional warehouses. In recent years, KLF has seen a significant increase in competition and huge pressure from their customers to improve service levels and reduce costs. To improve service level and reduce costs, KLF would like to consider an alternative distribution strategy in which the five regional warehouses are replaced with a single, central warehouse that will be in charge of all customer orders.
Part A: Describe how you would design a new logistics network consisting of only a single warehouse.
The focus of the network will be designed with the help of complete analysis of the company’s operations. This will aid to design an efficient strategy for the company. The location and size of the warehouse will be decided. The transportation and facility costs will also be calculated. The cost set up will be properly estimated. The network will consist of various facilities like manufacturing center, vendor, distribution center and customers. There will also be a variety of raw materials and finished products that flow among these facilities.
Part B: Provide an outline of such an analysis; what are the main steps?
There are eight steps that will be involved for designing a new logistics activity. In the first step, the currently operating network in the organization should be analyzed. In the second step, the network optimization database should be designed and populated. After this in the third step, the alternatives for network design should be created. In the fourth step, the network optimization model should be adopted. In the fifth step, the tool for network optimization should be selected. In the sixth step, the network optimization should be implemented. In the seventh step, the alternative network designs will be evaluated. In the last and the final step, the reconfiguration costs for the network will be analyzed.
Part C: Specifically, what data would you need?
The following is the data that will be required for this design network:
• A list of all the products of the company.
• The location of the customers.
• Warehousing cost and transportation cost.
• Demands of the customer for each product.
• Size of shipment by product.
• Cost of processing the order.
• Patterns of the orders by size, content and frequency
Part D: What are the advantages and disadvantages of the newly suggested distribution strategy relative to the existing distribution strategy?
ADV: The newly suggested strategy will help the company in a number of ways. It will help in speeding up the production activities of the company. It will reduce the facility cost of the company. The safety stock required in centralized system is also less. It will also reduce the inbound transportation costs.
DISADV: The lead time will increase and it will become difficult for all the customers to easily approach a single warehouse. The activities will become complex and the outbound transportation cost will increase.
2.As the Purchasing Manager in a manufacturing firm, you would be expected to identify and know various...