1- What impact would the three new alternatives have on transfer and customer freight costs? Why?
The way I see it there are a number of constraints placed on the company. System consolidation makes it easier for transportation economies to be gained. Truckload volumes would be more easily gathered to and from distribution centers, lowering transfer and customer freight costs. However, the effect of using third party warehousing and transportation on transfer and customer freight costs is less obvious.
2- What impact would warehouse consolidation have on inventory carrying costs, customer service levels and order fill rate?
Costs would be reduced with better utilization of facilities and less duplication of effort. The company operates two warehouses in Newark, NJ and Los Angeles, CA. Theses are clear candidates for consolidation. Regardless of any changes in product volume, the reduction in facilities alone represents significant savings.
Customer service levels
The effect on service levels is less clear. If all products’ have to go through a distribution center prior to final delivery to customers the effect may be minimal. Customers generally feel more comfortable when product is stored nearby.
Order fill rates
Can improve with inventory dispersed across fewer storage locations. Fewer transfers will be required to meet customer demand. Pending on the distance from warehouse locations to customer locations, delivery time may be an issue.
3- How are warehousing costs affected by the decision to use 3rd party or private warehouse facilities? What effect would this have on handling, storage and fixed facility costs?
Fixed facility costs are definitely more of a concern with private warehousing. Public warehousing generally involves higher variable costs than private warehousing. Storage and handling costs are usually greater for high volume products distributed through