Case Study Of Westminster Company
There are three alternatives which come to view for consideration by the Westminster Company In terms of logistical adjustments.
The first option would be to consolidate Its warehouses. The second option Is to make use of public warehouses and the third option would be to have private warehouses. All the options have advantages and disadvantages which should be considered before a decision Is made on the best type of warehousing that should be adopted by the company. System consolidation for the Westminster Company would result in easy gain of economies of transportation.
This is because it would be easy to gather truckloads to and from the centers of distribution.
This will lower both the customer freight as well as the transfer costs. The effects of warehouse consolidation have some great impacts on the costs of transportation. Firstly, it would reduce the inventory carrying costs. This will be as a result of the reduction of duplication of effort and use of better facilities. There would also be an improvement on order fill rates.
This will be achieved because the Inventory will distributed from fewer locations of storage.
Moreover, the number of freight transfers needed to meet the demands of the customer would be considerably reduced. System consolidation would therefore result In great savings In terms of costs. Another advantage of using the consolidated system Is that It offers greater opportunities for large volumes of shipment using trucks. The consolidated system also makes it possible to practice mixed shipment. The large volumes of shipment would mean that there would be need for fewer shipments, each carrying a large quantity.
This would improve the economies of scale.
There are also some disadvantages of the consolidated system. There are some customers who feel comfortable when the stores are near them. Consolidating the warehouses would increase the distance from some customers. This may pose a challenge on the time taken to deliver the customers. The distance from the distribution centers would be longer and may result in a considerable increase In the cost of transportation.
The other alternative Is public warehousing. In this form of warehousing, the first advantage is that there Is no need for fixed Investment.
The laity of performance Is also considerably high. The first disadvantage of this system is that the variable costs involved are considerably high. Secondly, when handling products of high volume, one must incur high costs in terms of storage and handling.
The third option is private warehousing. It is easy to work with this type of warehousing when handling products which have uncertain nature in terms of their sales. However, this option would not be the best for Westminster products since they are health products which are in demand throughout the year.
Use of third arty warehousing and transfer would result into higher inventory costs. However, in case there are no fixed Investments, the inventory costs would be considerably reduced. One of the advantages of third party warehousing is that since specialists are Involved, the service provided is usually better at a lower cost.
In terms of cost reduction, consolidated public warehousing would be the best alternative to explore. This Is because the overall Initial costs are considerably reduced using this option. This would be achieved since the company would not need to make any fixed Investments o