Summary:
Bathking Industries is a manufacturer focusing on producing bathroom accessories such as vanities, mirrors, lighting fixtures and shelving. From the past, its biggest customers have been Home Depot, Lowe’s and their smaller competitor which account for the company’s 80% of sales and 95% of growth. Recently the customers’ initiatives were to provide advanced shipping notifications, improve product visibility as well as reduce cycle time by shipping orders directly to the stores. Moreover, shipping order time is required to reduce to only 5 working days. However, the problem is that order processing and freight costs would increase, smaller orders increase national truck service costs and more costly less-than-truckload services. To resolve this problem, Rutner suggests establishing a 6-facility RDC network for BKI as to maintain safety stock and increase overall inventory. Yet it is potential to generate high level of initial and opening cost and the efficiency is not guaranteed.
Case Questions: 1. Analyze the logistics service and cost constraints imposed on BKI by the chain store’s request.
The order processing cost of BKI will be expected to increase very high since it now has to ship in smaller quantities, more frequent order will be placed and will significantly affects its flexibility.
Moreover, further delivery will occur since now it has to ship directly from the manufacturer to the stores, lead time will increase. Then, less than truckload capacity might be stumbled upon which is regarded as inefficient delivery. Hence, transportation costs would largely increase. 2. What is your opinion of Joe Rutner’s proposal for establishing a series of company-owned RDCs?
According to Rutner;s proposal, it is obvious that the solution has its own advantage and disadvantage. On the bright side, establishing
