Hiram Miller Case Analysis
1. Basic Problem
The basic problem pertaining to Hiram Miller Office Products Division (HMOPD) is 2 outdated, structural unsound warehouses that handle all distributional activities. These facilities are not only outdated, but are not large enough to handle the high level of sales ($33 Million).
2. Support for Basic Problem
The outdated warehouses are operating in a logistically unsound/unorganized manor. The three elevators in the main warehouse are often out of service, and when they are operating correctly, the high volume of floor-to-floor movements bottlenecks at the elevators, forcing stock people to use stairwells. Another disadvantage caused by the inadequate warehouse (Jefferson Street) was the 6 docks’ inability to accommodate 53-foot trailers. This forces trucks to unload quickly, because often 8-10 trucks would pile up in the street, violating traffic laws. Limited dock space forces Shippers to be called once an order was complete to come pick-up/load a shipment. These space constraint issues have the possibility of constraining future sales growth. Also, the 60-year old warehouse must employ a larger work force to operate sufficiently, causing labor rates to operate at a 30% higher level than other Hiram Miller warehouses.
3. Alternate Recommendations
Management has considered different alternatives to solve this warehousing issue. The immediate surrounding area of Chicago does not present any viable options, mainly because of size limitations. The second option considered was to build a facility. Management located 30 acres on the west side of Chicago, with an estimated cost of $60 per square foot. This option of building a new facility on the west side of Chicago poses many pros and cons. The company would lose the proximity to their retail stores, lose the low metropolitan trucking rates, as well as lose the benefit of being located so close to the largest concentration of business offices in the area. The