Alko

Résumé du document

For the past few years, the profits of ALKO have shrunk because of a more active concurrence. Then, the board of directors of this company, which produces lighting fixtures, decided to hire Gary Fisher to try to find a solution to reduce the delivery costs. After having studied how the company used to work, Gary Fisher concluded that the main problem was to be found in the operating performance. Until then, the company only aimed at a good quality and competitive production and never cared much for enforcing the efficiency of the supply chain. As a consequence, Gary Fisher decided to set up a task force to try to improve it. After having studied the problem, the task force drew the following conclusion. For the moment, lighting fixtures for the whole United States are produced in 3 factories, all of them situated around Cleveland. From Cleveland, the finished products are sent to 5 regional Delivery Centers (DC). Ultimately, the goods are delivered to customers from the DC within one single day. The problem of this system is that it generates important transportation and warehousing costs.

Extraits

[...] Indicative bibliography Inventory Management and Production Planning and Scheduling par Edward Silver, David F. Pyke, et Rein Peterson (Relié - 26 janvier 1998) Inventory Control and Management par C. D. J. [...]

[...] Let's calculate the warehouse costs of the safety stock. We are using the formula given by: With the standard deviation of the demand period I the interval between two orders And Z the normal distribution In our case, Z = 95% that corresponds to 1,645 in the table. The delivery lead time is different for each region, as seen in table 1. The deliveries are done every week, so that means that the interval between two orders is equal to 7. [...]

[...] That gives dollars per day. Table Costs for the first system The transportation costs from the DC to the customer is equal to the total production per day in every regions, times the cost of transportation between the DC and the customer. That gives: 38,44+27,49+24,61+19,91+13,39=123,84 units per day * 12,38 dollars per day. The warehouse costs of the average inventory is equal to the total production per day in every regions, times the cost of inventory seen in table times the average inventory. [...]

[...] In table the comparison between the daily costs is made between the two systems and for each case depending on the correlation coefficient for the second one: Table Cost's comparison between the two systems We can see that the first system is most interesting as soon as there is a correlation between the demands in the five regions. The second system could be interesting if there is no correlation between the regions. But becomes more expensive if not. As a conclusion, and after having analysed those data, we can say that it's not very interesting to set up a new system in building a NDC. Suggestions There is a third solution Gary Fisher did not take into account. He did not mention any sub-contracting solution. [...]

[...] Alko Basic assumptions For a few years, the profits of ALKO Company have shrunk because of a more active concurrence. Then, the board of directors of this company, which produces lighting fixtures, decided to hire Gary Fisher to try to find a solution to reduce the delivery costs. After having studied how the company used to work, Gary Fisher concluded that the main problem was to find in the operating performance. Until then, the company only aimed at a good quality and competitive production and never cared much for enforcing the efficiency of the supply chain. [...]