SCM 11
Myles Hartog
Supply Chain Management
Mini Case 11.1
02/17/2015
BathKing Industries (BKI) is a manufacturer of bathroom accessories that sells their products primarily to the large home center chain stores; Home Depot, Lowe’s, and their smaller competitors. Chip Norek, the president of the company, has a decision to make with respect to BKI’s distribution system. A small chain customer has recently requested that BKI reduce cycle time by shipping orders directly to their stores. Presently, BKI’s national distribution center processes and ships a weekly order for each of the chain store’s three regional distribution centers via national truckload carriers. From there, the product is transferred to individual stores by the chain’s private fleet. The new system would entail each store ordering separately and BKI processing and delivering each order to the store within five business days.
Joe Rutner, the direct of logistics, has determined that the new system would result in higher order processing and freight costs. Norek wasn’t happy with this news and feared that other retailers might make similar requests in the future, so he asked Rutner to develop a plan to satisfy customers without drastically cutting BKI’s margins. Rutner developed a potential six-facility regional distribution center network for BKI, with the distribution centers being located in high-demand areas within each region. Rutner outlined the positives of this proposal, including faster order processing, lower freight costs, and a decrease in inventory. Norek is skeptical of the plan, but a decision must be made.
1) Analyze the logistics service and cost constraints imposed on BKI by the chain store’s request.
In order to satisfy the request, BKI will be forced to process smaller, case-quantity orders for each store versus pallet-quantity orders from the RDC’s. Because the company only distributes products by the pallet at this time, the new system will require significant changes to the order
Supply Chain Management
Mini Case 11.1
02/17/2015
BathKing Industries (BKI) is a manufacturer of bathroom accessories that sells their products primarily to the large home center chain stores; Home Depot, Lowe’s, and their smaller competitors. Chip Norek, the president of the company, has a decision to make with respect to BKI’s distribution system. A small chain customer has recently requested that BKI reduce cycle time by shipping orders directly to their stores. Presently, BKI’s national distribution center processes and ships a weekly order for each of the chain store’s three regional distribution centers via national truckload carriers. From there, the product is transferred to individual stores by the chain’s private fleet. The new system would entail each store ordering separately and BKI processing and delivering each order to the store within five business days.
Joe Rutner, the direct of logistics, has determined that the new system would result in higher order processing and freight costs. Norek wasn’t happy with this news and feared that other retailers might make similar requests in the future, so he asked Rutner to develop a plan to satisfy customers without drastically cutting BKI’s margins. Rutner developed a potential six-facility regional distribution center network for BKI, with the distribution centers being located in high-demand areas within each region. Rutner outlined the positives of this proposal, including faster order processing, lower freight costs, and a decrease in inventory. Norek is skeptical of the plan, but a decision must be made.
1) Analyze the logistics service and cost constraints imposed on BKI by the chain store’s request.
In order to satisfy the request, BKI will be forced to process smaller, case-quantity orders for each store versus pallet-quantity orders from the RDC’s. Because the company only distributes products by the pallet at this time, the new system will require significant changes to the order