Excel Logistics

Topics: Kellogg School of Management, Store manager, Retailing Pages: 88 (2304 words) Published: October 12, 2013
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KEL019

SUNIL CHOPRA

Excel Logistics Services

Background

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“The quality of our performance has improved significantly, but stores continue to complain about our deliveries,” said John Margolis, general manager of the Springfield Warehousing and Distribution Center (WDC) run by Excel Logistics Services. Margolis looked at the customer satisfaction survey for the fourth quarter of the previous year. “At this point, it is becoming increasingly difficult for us to make further improvements. We need a detailed plan of action regarding what to do next. Robin, I would like to see an initial plan from you in the next couple of months. Why don’t you begin by looking at the receiving function?” Robin Stalk, quality manager at the WDC, nodded her head.

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Founded in 1989, Excel Logistics Services (ELS) was a wholly owned subsidiary of Excel and Co., a large national retail chain. Prior to 1989, Excel handled its own logistics functions, including warehousing and transportation. In 1989, ELS was spun off as a separate company with the sole objective of providing logistics services. Initially, all of ELS’s business came from Excel. At present, only 85 percent of ELS’s business came from the parent company, and ELS was actively seeking business outside of Excel. Although ELS had plans for growth, it wanted to stay in the business of providing logistics services to retail chains.

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ELS operated a network of seven warehousing and distribution centers for Excel and Co. Each WDC was assigned a region in which it served all Excel stores. Each WDC typically stocked all items needed by stores in the region it served. Company buyers at Excel placed orders for merchandise with suppliers. These orders were based on forecasted demand at retail stores and were delivered to the WDCs where they were received and held in storage. When stores ran out of a product, store managers placed replenishment orders for merchandise at the WDC. If the product was available, the order was picked at the WDC and delivered to the stores. The stores primarily cared about orders being delivered in the right quantity at the right time.

The Springfield WDC

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The Springfield WDC served a total of 194 stores. The 194 stores were divided into three categories (A, B, and C) by decreasing order of size. There were 57 A stores, 75 B stores, and 62 C stores. A total of 12,539 items were stocked at Springfield. The majority of these items were referred to as breakpack items (9,944 in total), with the rest being full-case items. For breakpack items, such as answering machines or telephones, ELS received cases of a certain size from its suppliers. Stores ©2004 by the Kellogg School of Management, Northwestern University. This case was prepared by Professor Sunil Chopra. Cases are developed solely as the basis for class discussion. Cases are not intended to serve as endorsements, sources of primary data, or illustrations of effective or ineffective management. To order copies or request permission to reproduce materials, call 800-545-7685 (or 617-783-7600 outside the United States or Canada) or e-mail custserv@hbsp.harvard.edu. No part of this publication may be reproduced, stored in a retrieval system, used in a spreadsheet, or transmitted in any form or by any means—electronic, mechanical, photocopying, recording, or otherwise—without the permission of the Kellogg School of Management.

This document is authorized for use only by Rameshwar Dubey until June 2013. Copying or posting is an infringement of copyright. Permissions@hbsp.harvard.edu or 617.783.7860.

KEL019

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EXCEL LOGISTICS SERVICES

were allowed to place orders for quantities less than a full case because ELS broke open the cases and shipped the items to the stores in smaller quantities. Thus, it was not unusual to have partial cases of breakpack items in storage. For full-case items, stores were required to order at least a case. For these items,...
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