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?