The paper explores the history of management changes and developments in the operational system of Westminster Company. The main aspects that were altered by the company’s leader are the customer service requirements and the customer composition. The changes were directed at the improvements of the delivery practices in order to provide transportation of better quality for the growing number of customers. The paper is focused on such issues as the costs of inventory carrying, consolidation of the warehouse, customer service, and the impacts of the alternatives introduced to the company’s business.
Westminster Company is a large corporation that is involved into the production and distribution of consumer health care products. The company has three main domestic branches that are specialized on the manufacturing and distribution of the products. Each of the branches has a wide and growing range of customers. The challenges Westminster Company faced were related to the growth of competition on global and domestic levels. The company leaders had to re-think their approaches to delivery and customer service in order to be able to keep, attract and satisfy their key clients, who are mainly mass consumers.
The changes had to be introduced to the spheres of storage and warehouse locations, the way the supply system works and its main activities. The managers discussed three different strategies designed to make the operational process more flexible and suitable for more customers. First of all, it was decided to emphasize the responsiveness of the distribution system, before that the company’s main strategy was aimed at anticipation and predicting, which caused a lot of confusion at the inventory sector. Second suggestion was directed at the improvements in the warehouse department and creation of a consolidated warehouse for the three branches. The third alternative was designed to make corrections within the customer service.
Three New Alternatives
The company started to moderate and reduce the beforehand buying of the inventory as the forecasting method was cancelled. This alternative leads to the minimization of inventory replenishment and confusion. Besides, this will allow the company to avoid big quantity and size of truckloads because the organization will start ordering a narrower range of products from the manufacturer.
Beforehand buying will be easier to control because the manufacturing branches will be always aware of the amount of product remaining at the retailing departments. Movement up the supply chain will be easier because the company will start operating smaller range of products and this is why the relationship between the demand and order will not be hard to control. Truckloads will be easier to transfer this is why the cost of the customer freight will grow, but at the same time this growth will be balanced by the utilization of economies and shipments of the full volume truckloads. As a result, final customer freight costs will remain unchanged.
The increasing number of the company’s customers and a growing amount of smaller orders will lead to more effective shipment. A big truck will be loaded fully with a large amount of products. This is how the company will be able to cover bigger districts and more orders with one delivery. This strategy will help the leaders of Westminster save the costs. Besides, consolidated type of shipping will definitely lead to the decrease of customer freight costs.
At the same time, the deliveries covering bigger number of customers will also have to travel longer distances. Obviously, the distance of shipment affects its cost. The appearance of consolidated warehouses will help to solve the problem with longer distances. Branches of the company were distributing specific products, and the company was using regional warehouses for that. Consolidated warehouses will be filled with bigger variety of products, which will make them suitable for any regional delivery.
Westminster Company also will introduce more technologies to their shipping process. The codes on the products will serve to improve the registration and organization of storage and distribution and help to avoid tons of paper work, which causes a lot of confusion, errors and the customers’ dissatisfaction. The departments will be united under one system of registration of the products. This will make it much easier to find a required load or party and watch its way though different facilities of the company. Customer service improvement also requires modifications of the package of the products and following the needs of the customers. This measure may affect the cost of the product and make it grow, although this should not become a problem because the shipment costs will decrease. This is why the general price of the purchase will remain the same and the clients will not be lost.
Westminster Company owns three domestic branches, each of which is involved into the distribution of unique products. Each of these branches owns a regional warehouse for their production. Consolidated warehouse is going to store a wide range of products from all the three manufacturing branches. The big warehouse can also be called central warehouse as it will be located in the central region between the three branches. The purpose of the warehouse is to sort the products from the three plants, divide them into three large portions for each region according to the orders of the customers there and ship the products. Inventory carrying costs are the value of the amount of time the products spend being stored in the warehouse. This value includes such parameters as insurance, the space occupied by the goods and taxation (Murray 2014).
Consolidation of warehouse will lead to the decrease of these costs. Besides, it will lower the risk of losing costs (Consolidation Warehousing 2010). Order fill rate depends on the time and effort spent to satisfy one customer. Consolidated warehouse will improve this parameter because of wider range of goods organized in one place, which makes them more available.
Third Party and Private Warehouse
Private warehouse is the one that belongs to the company, this warehouse is easier to control and it offers more stability, besides it is cheaper and more affordable. At the same time, hiring a third party warehouse will allow the company to eliminate the costs spent to the administration process of the warehouse. All the handling will be done by the third party. Such system will lead to the decrease of the general costs of warehousing for the company. Moreover, the consolidated warehouse is an advantage in the process of shipment and tracking (Warehouse Management for 3PL 2014).
After the consolidation of the warehouse the process of shipment will go through some changes. First of all the unbound shipment will become more expensive due to the longer distances of the transportations. The outbound distribution will become cheaper because of the opportunity to form consolidated truckloads and cover more orders by one vehicle. Mixed shipment is tricky because of the system of the warehouses. Different facilities may have different inventory taxes due to their location, sizes or status (Bowersox, Closs & Cooper 2002). The opportunities of working out the best suitable strategies and arrangement of the most optimal warehouses can be found by means of a research and data collection with the following analysis.
Eight Supply Chain Processes
Eight supply processes of the company will undergo the restructuring after the consolidation of the warehouse and distribution. These processes will be centralized and decentralized due to the alternatives suggested by the company’s managers.
In order to improve the company’s performance and costs Westminster is recommended to pay more attention to the structure of their warehousing. The company’s shipment will become more profitable after the consolidation. It is also possible that the company will have to shut down some of its warehouses that are currently working. Logistics will become easier and more organized and less costly after the restructuring of the system of warehouses. Centralization of logistics operations brings benefits for the company (Lim, Ou &Teo 2003).
Bowersox, Closs & Cooper (2002). Supply Chain Logistics Management. Ney York, New York: McGraw Hill. Web.
Consolidation Warehousing. (2010). WSSA. Web.
Lim, W., Ou, J. & Teo C. Inventory Cost Effect of Consolidating Several One- Warehouse Multiretailer Systems. Operations Research, 51(4), 668-762. Web.
Murray, M. (2014). Inventory Carrying Costs. Web.
Warehouse Management for 3PL (2014). Accellos. Web.