Supply Chain Management Case 11.1

Supply Chain

Case 11.1

Summary

The case provides information about the current situation of a bathroom accessory manufacturer that produces items such as vanities, mirrors, lighting fixtures and shelving. The company’s products are made of rust and mold resistant plastic that comes in different designs and colors. This type of construction allows them to produce high quality products for an affordable price.

The case begins with Chip Norek, president of BathKing Industries, reading the latest financial statement. Chip is recalling the early days of the company when they were struggling to sell product. Today however, the company is actually failing to produce enough product to meet demand. Much of the company’s sales growth can be attributed to the strategy implemented by Norek in the 1990’s. This strategy focused on marketing their products to large home center chain stores such as Home Depot, Lowes, and their competitors. Today, these stores account for 80% of sales and 95% of growth.

Currently, the company is not only struggling to meet product demand, but it is faced with increased customer requirements such as complying with customer’s RFID initiatives, giving advanced shipping notifications, and improving inventory visibility. Also, one of BathKing’s smaller customers just asked the company to deliver their products within five working days. BathKing’s current setup processes and ships orders weekly. Therefore, meeting this request would result in increased order and freight costs as well as increased costs due to smaller orders and less-than-truckload service. Norek wants to develop a plan that will satisfy customers, but maintain margins.

The case concludes with a suggestion from the director of logistics, Joe Rutner, to establish a six facility RDC. The DC’s would be located in high demand areas and be able to handle case picking, cross-docking, and some value-added services. Rutner also said that the company can decrease inventory costs this way by maintaining only the minimal level of safety stock.

1. Analyze the logistics service costs and constraints imposed on BKI by the chain store’s request.

The chain store requests that BKI reduce its cycle time to five days instead of its current process of weekly shipments. This would lead to an increase in the costs of order processing and costs of freight. The company also requested that each store orders separately. This would force the BKI logistics team to process smaller case quantity orders instead of pallet-quantity orders from regional distribution centers. Instead of each store ordering truckload quantities, orders would result in less-than-truckload shipments, thus further increasing costs. It is expensive to deliver smaller quantities to buyers.