Case 13: Supply Chain Management at Dream Beauty Company
Dream Beauty (DB) Company is a manufacturer of consumer beauty supplies and cosmetics.
Based out of Money City, Nevada, the company services its customers across the U.S. Recently, a supply chain expert was elected to the board of directors. With his insight into supply chain operations, heightened attention was turned toward that area. The costs in this area have been increasing, and management became very concerned about the issue. The company annual sales reached $1 30,000,000 for the fust time since inception. Management believed that some of the increase in supply chain costs may be attributed to additional sales, but they were confident that other factors existed that needed to be addressed. The situation had management's full attention, especially since supply chain costs (and savings for that matter), tlow directly to the bottom line.
DB supplies its products through three distinct channels: retail stores (direct), convenience stores, and mass merchants. Each channel is considered an independent profit center with full financial responsibilities for income statement and balance sheet. From DB sales, retail accounted for 50 percent, convenience stores for 30 percent, while mass merchants picked up the remaining sales. Cost of goods sold accounted for 40 percent of sales. All three channels seem to be profitable, and contribute equally to DB, according to the company's cost accountant.
The order fulfillment cycle at DB consists of four areas:
Total Cost
Order Processing $10,000,000
Packaging $8,000,000
Labeling $2,000,000
Delivery $30.000.000
Total Supply Chain-Related Costs $50,000,000
The total order fulfillment averages 3 days. All orders are processed through a central location, and delivered from distribution centers located across the U.S. Usually