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Designing the distribution network for michael s hardware

  • Each Illinois store sold, on average, 50,000 units a year of product from each supplier for annual sales of 400,000 units per store;
  • Ellen wondered how best to structure the distribution network and whether the savings would be worth the effort;
  • Use direct shipping with small trucks capacity of 10,000 units as was currently being done in Illinois;
  • Nidec acquires drivexpert gmbh and announces outline of new subsidiary specialized in design and development of hardware and newswire distribution network;
  • Run milk runs from each supplier to multiple stores in Illinois to lower inventory cost even if the cost of transportation increased;
  • Nidec acquires drivexpert gmbh and announces outline of new subsidiary specialized in design and development of hardware and newswire distribution network.

Transportation costs had been very high, and Ellen believed that moving away from LTL shipping to Arizona would help lower transportation costs without significantly raising inventories.

The company began in Illinois and its stores in the state enjoyed strong sales.

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Each Illinois store sold, on average, 50,000 units a year of product from each supplier for annual sales of 400,000 units per store. The Arizona operation was started about five years ago and still had plenty of room to grow.

Each Arizona store sold 10,000 units a year from each supplier for annual sales of 80,000 units per store. Ellen asked her staff to propose different distribution alternatives for both Illinois and Arizona.

  • The main goal of Toyota production system is to eliminate waste, they think it;;;
  • Transportation costs had been very high, and Ellen believed that moving away from LTL shipping to Arizona would help lower transportation costs without significantly raising inventories.

Use direct shipping with even larger trucks that had a capacity of 40,000 units. Using larger trucks would lower transportation costs but increase inventories because of the larger batch sizes.

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Run milk runs from each supplier to multiple stores in Illinois to lower inventory cost even if the cost of transportation increased. Use direct shipping with small trucks capacity of 10,000 units as was currently being done in Illinois.

This was a significantly lower transportation cost than was currently being charged by the LTL carrier. This alternative, however, would increase inventory costs in Arizona given the larger batch sizes. Run milk runs using small trucks capacity of 10,000 units from each supplier to multiple stores in Arizona.

  1. Study Questions What is the annual distribution cost of the current distribution network?
  2. A consumer can be defined as an individual who purchases the product or services offered by the seller for personal use.
  3. How should Ellen structure distribution from suppliers to the stores in Illinois?
  4. The main goal of Toyota production system is to eliminate waste, they think it... If she used milk runs in either region, she also had to decide on how many stores to include in each milk run.

Milk runs would incur higher transportation costs than direct shipping but would keep inventory costs lower. This would allow all suppliers to ship product destined for all 32 Arizona stores using a large truck to the cross-dock facility, where it would be cross-docked and sent to stores in smaller trucks each smaller truck would now contain product from all eight suppliers. Ellen wondered how best to structure the distribution network and whether the savings would be worth the effort.

If she used milk runs in either region, she also had to decide on how many stores to include in each milk run.

Designing the distribution network for michael s hardware

Study Questions What is the annual distribution cost of the current distribution network? Include transportation and inventory costs. How should Ellen structure distribution from suppliers to the stores in Illinois? What annual savings can she expect?

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How should Ellen structure distribution from suppliers to the stores in Arizona? What changes in the distribution network if any would you suggest as both markets grow? Browse hundreds of Operations Management tutors.