What are the standard logistics operational characteristics of a consumer product company?
Logistics costs reduction, improvement of inventory, and the availability and maintaining optimal service levels are some of the characteristics in standard logistics operations (Gudehus & Kotzab, 2012). Logistics costs management is an essential element in operations of a standard logistics company. Costs determine company efficiencies and earnings. A reduction in logistics cost increases efficiencies and a company’s profit earnings as well as ensuring customer satisfaction.
Improving availability of inventory ensures that logistics processes are done in a timely and cost-effective manner. On the other hand, the maintenance of optimal service level ensures that the costs of products are reduced through the reduction of warehouses and distribution points. Optimal service levels reduces the risks and improves the efficiencies within the logistical processes
Logistics distribution network is considered in this case. Distribution networks are the key areas in logistics that influence the logistics operations. In this case, the company had sixty-four distribution centers. The increase in distribution centers was caused by the company’s acquisitions across its operation areas. This led to the overlapping of distribution network.
An overlap in distribution network and the increase in distribution centers or warehouses resulted in the increase in fixed costs. This also led to the increase in inventory lying within the warehouses. Therefore, less consolidation of outbound and inbound shipments occurred within the warehouses. This led to delays in the processes involved in shipments and operations.
Costs were too high while increase in availability of inventory was needed. Flexibility and delivery processes needed to be effective to ensure that same day shipments were possible. Another problem was that warehouses were more hours distance away from the clients. The further away the warehouse is from the client meant that more costs are involved while customer deliveries are delayed.
The case delineates: LeanCor ensured that the customer achieved its goal to reduce the number of distribution points by decreasing its number of warehouses by 13.” Why the consultant has reduced the number of warehouses? Analyze the implications of this reduction considering the “risks” in the logistics chain. A number of sources of the risks should be considered during the analysis and these sources should be illustrated with appropriate justification
The reduction of warehouses ensures that costs are minimized (Viardot, 2004). More warehouses require more fixed costs. Warehouses hold more inventories that are not fully utilized. By ensuring that warehouses are reduced, inventory holding costs are reduced. The average cost of a unit was significantly reduced by 10.6 percent. A reduction in any costs within the logistics operations lead to better performance of the company and lead to customer satisfaction through timely and cost effective means.
More risks are associated with the number of warehouses. More warehouses require more staff, machinery and other resources associated with warehouse operations. An increase in any cost is a risk. In addition, warehouses pose different risks of not only holding more inventory but also risks associated with such holding such as theft, fire and natural calamities.
The target areas of improvement (by LeanCor) are elucidated in the case. Link these target areas of improvement to the areas in logistics. Do you recommend adopting lean technique in the demand chain of this consumer products company? What is your opinion for adopting agile technique for the case company? Provide substantial technical reasons behind your opinion.
LeanCor focused on key areas of improvement such as inventory cost reduction, fleet costs reduction, improvement of inventory replenishment methods, improvement of inventory availability and fewer distribution centers. These target areas were critical in the improvement of this customer products company.
In logistics management, reduction of inventory and inventory costs improves the company’s earnings. All costs associated with the management of inventory are directly attached to the overall cost of the product. On the other hand, a reduction of inventory in the warehouses reduces the costs associated with holding such inventory. Therefore, a reduction of these costs reduces the costs of the product. This leads to customer satisfaction. LeanCor ensured that inventory costs were reduced by reducing the number of warehouses from sixty four to fifty one and an annual reduction cost of one million dollars.
Fleet costs determine the overall costs of a product. When fleet costs are high, the product costs more. Fleet costs are increased when the warehouse is located at a far distance from the company. In this case, LeanCor ensured that the warehouse are within a four-hour distance to ensure that fleet costs are reduced. The reduction of warehouses was also determined by the distance from which the warehouse was situated. The company also ensured that there was an optimized network with a reduced annual logistics costs of one million and eight hundred thousand dollars.it also ensured that only fifty-one warehouses were utilized with the same level of service.
The number of distribution centers were reduced significantly to ensure that costs were reduced. This reduction ensured that the company had the right and cost effective number of distribution centers. LeanCor reduced the number of warehouses or distribution centers from sixty-five to fifty-one. The fifty one stores operated at the same level of service ensuring that they all performed optimally.
The adoption of lean technique in the chain of demand by the company will enhance the performance and profitability of the company. The lean technology ensures that the company reduces its overall costs and maintains these costs within a manageable range (Viardot, 2004). A reduction of warehouses, inventories and inventory costs will enhance efficiencies in customer deliveries.
Gudehus, T., & Kotzab, H. (2012). Comprehensive logistics. Heidelberg: Springer.
Viardot, E. (2004). Successful Marketing Strategies for High-Tech Firms. Norwood: Artech