Standard logistics operational characteristics
Transportation, warehousing, inventory management, order processing, product scheduling, purchasing, and customer service are some of the standard logistics operations that characterize a consumer product company. Transportation is an essential characteristic of a consumer product company because it must move products from one location to another to allow customers receive their ordered products at the right time and place.
Warehousing offers storage services to a consumer product company and customers, hence, ensuring safety and accessibility of products when required. Inventory management is a database system that allows tracking of orders, purchases, sales, and deliveries that a consumer product company and customers have made overtime. Order processing is a vital operation in a consumer product company because customers order products they require and the company has to schedule ordered products in time.
Consequently, customers make purchases and expect delivery of the product at the right time, right place, right condition, and right price. Customer service is a critical operation of a consumer product company for it allows customers to interact with the company (Liu, 2011). In case there are issues in the delivery of products, customers can inquire from the customer care and resolve their complaints amicably.
The problem areas and specific area of logistics
The case study considered high total logistics cost, overlapping distribution network, inaccessible inventory, delayed delivery, and inflexible services as the problem areas of the consumer product company. As the first problem area considered in the case study, the consumer product company incurred high total logistics cost. Evidently, LeanCor in collaboration with the consumer product company managed to optimize logistic operations and reduced the total logistics cost by about 44% ($0.8 million/$1.8 million*100).
The second problem area is that of the overlapping distribution network, which means that some distribution centers and supply networks were redundant. In this view, optimization of network reduced the distribution centers by approximately 20% from 64 to 51 distribution centers. Inaccessible inventory is a third problem area since the distribution network overlapped and the distribution centers were more than the optimal number. Moreover, the customers requested for the improvement of inventory by making it available and accessible.
Delayed delivery of products is the fourth problem area that customers highlighted in the case study. Customers indicated that they prefer same day or next day delivery of products as a way of improving logistic services. As the fifth problem area, inflexible services hindered customers from accessing services of the consumer product company. In this perspective, the customers requested for 24/7 availability and accessibility of services. Analysis of these problem areas indicates that outbound logistics is the specific area of logistics that the case study considered.
Links to Areas in Logistics
Decreased inventory and its costs, reduction of fleets, enhanced availability of inventory, an optimal number of distribution centers, and improved inventory replenishment techniques are the target areas of improvement suggested by LeanCor. These target areas of improvement link respective areas in logistics. In logistics, decreased inventory and its costs is a target area of improvement that links to inventory management.
Fundamentally, inventory management entails balancing and controlling the flow of products using logistics operations such as ordering, supply, storage, and distribution to diverse customers (Liu, 2011). Reduction of fleets is a target area of improvement that link to the transportation area in logistics. Essentially, transportation is an area in logistics that involves the movement of products from one location to the desired destination.
Transportation comprises the selection of transport mode, appropriate carrier, and the safest transport route. Given that transportation is very expensive, the choice of transport mode, carrier, and route determines the cost. Hence, in the case study, LeanCor reduced transportation cost by redesigning the distribution network. Improved availability of inventory is a target area of improvement that links to customer service. Since customers require to access and use inventory, inventory availability ensures that they order the right products and receive them through the right means at the right time and place.
The optimal number of distribution centers links to the warehousing in logistics. Since products take long to reach customers, warehousing provides storage services so that customers can collect their products at desired times and distribution centers. Improved inventory replenishment techniques comprise a target area of improvement that links to supply management. Fundamentally, supply management entails logistics operations that ensure there is a constant flow of products from producers to consumers under minimum costs.
Lean and Agile Techniques
Analysis of the logistics operations of the consumer product company shows that the lean technique is an appropriate logistics technique. According to Ustyugova and Noskievicova (2013), the lean technique aims at improving the quality of logistics services while reducing wastage and costs involved in the provision of these services. From the case study, it is apparent that the lean technique significantly reduced wastage and costs. Specifically, the lean strategy employed by LeanCor reduced logistics costs by $0.8 million (about 44%) from $1.8 million to $1million and the wastage of distribution centers by 13 (about 20%) from to 51 centers. Moreover, the average cost per unit decreased by 10.6%, hence, proving that lean technique is an appropriate logistic strategy for the consumer product company.
Adoption of the agile technique is not appropriate because it increases logistics costs and encourages wastage. Wang and Koh (2010) describe agile strategy as ‘market sensitive’ because it is responsive to the volatile dynamics of supply and demand in erratic markets driven by the variety of products. Hence, to meet the demand and supply of erratic market, the consumer product company would need to expand its distribution network and centers leading to increased logistics costs.
Implications and risks
The consultant reduced the number of warehouses to mitigate the risks of logistics costs and wastage of redundant warehouses. The case study illustrates that the consumer product company has been incurring high total logistics costs due to the overlapping distribution network and redundant distribution centers. Richards (2011) explains that the number of warehouses determine operations and costs because an extra warehouse implies additional logistics operations, which translates into extra logistics costs.
In this view, reduction of the warehouses is a lean strategy that minimized the costs and optimized logistics operations. As the implications, reduced number of warehouses resulted in reduced logistics costs by about 44% and reduced operations in warehousing by 20%. Moreover, elimination of wastage due to the reduction of the number of warehouses implies optimization of warehouses and distribution network. Christopher (2011) asserts that creation of value-adding networks requires optimization of available networks to ensure that there is no redundancy and wastage of resources. Therefore, reduction of the number of warehouses comprised value-addition and optimization of distribution centers.
Other risks associated with the reduction of the number of warehouses are warehouse shortage, low variety of products, and delayed delivery of products. Reduction of the number of housing has a huge risk for it implies that the consumer product company would not be able to meet the needs of customers when the demand is high. Ismail (2008) states that lean logistics is unresponsive to the unpredictable markets because its operations are optimal and constant. Moreover, lean logistics allows the company to deal with a low variety of products. Due to the risks of delay in delivery, lean logistics also permits the company to deal with products with long life only.
Christopher, M. (2011). Logistics & Supply Chain Management: Creating Value-Adding Networks (4th edition). New York: FT Prentice Hall.
Ismail, R. (2008). Logistics Management. New Delhi: Excel Books.
Liu, J. (2011). Supply Chain Management and Transport Logistics. New York: Routledge
Richards, G. (2011). Warehouse management: A complete guide to improving efficiency and minimizing costs in the modern warehouse. London: Kogan Page.
Ustyugova, T., & Noskievicova, D. (2013). Integration of lean and agile manufacturing based on principles from wikinomics. Quality Innovation Prosperity, 17(1), 46-48.
Wang, L., & Koh, S. C. L. (2010). Enterprise networks and logistics for agile manufacturing. London: Springer.