Details of the Tutor
Executive Summary
BathKing Industries (BKI) is a well-established brand in bathroom vanities, mirrors, and light fixtures segment. In 1990’s,the company supplied mainly to the big retailers like Home Depot, Lowe’s and some others. These accounted for over 80 percent of BKI’s business and around 95 percent of its growth. But sincelast two years BKI is facing problems with RFID initiatives, advance shipping notifications and improved visibility of inventory. Today, BKI has a problem with the request of one of its small customers. The customer has imposed a lot of cost constraints and logistics service on BKI. For Chip Norek, president of BKI the opportunity does not seem profitable.The new customer expects BKI to deliver directly to the store within five working days. The order from the store is expected to be small, but for BKI it will be an increase in processing cost as well as freight cost.
SWOT
Strengths
- High-Quality Bathroom Manufacturer
- Affordable price
- Have large retails stores like Home Depot. Lowe’s as customers
Weaknesses
- Complying with RFID, advanced shipping notifications, and inventory visibility
- Large cycle times
- Less number of regional distribution centers
Opportunities
- Get more small chain of stores as customers
- Introduce new RDCs and can get more customers/ store near the RDC for direct delivery
- Faster order processing with new set up of RDCs
Threats
- In case not fulfilled on time, customer may be lost
- Cost of operation and freight may go high
- May not meet the service level agreement and then lose the customer
Analysis of BKI’s Current Position and Suggested Actions
The suggestion of Joe Rutner, director of Logistics is to establish more regional distribution centers (RDCs) in high demand areas. BKI may be able to deliver products from the main company facility to the regional DCs in bulk. This can be repackaged at the RDC and send directly to the store. Mr. Rutner suggests a minimum safety stock in these RDCs. This suggestion may increase operational costs initially, but in the long run this may prove to bebeneficial. The move of establishing regional DCs will assure delivery of the products to the customer within the due date.
If BKI moves forward with the addition of new RDC plan, I recommend the ownership to be a contracted facility. A contracted facility is a type of public facility where the distribution,customer specific storage space, labor and other facilitiesare provided by a third party organization. This move of adding contracted facility vs. privately owned facility is of advantage to BKI in many ways. First of all it will lower the capital investment, compared to the invested in private distribution center.Secondly, the contract facility providers have a well networked structure. Theycontractors have the much needed expertise and can leverage their investments and capacity for multiple customers at a time. This saves a lot of cost for each customer contracted at the facility.The transportation costs also come down significantly. The contractors use specific networks and can club different orders on the same route. Alternatively the contractors selected are near the store location, and thus even private fleet can be cost effective. The thirds biggest advantage is risk management. In case BKI does not retain the small customer they can easily get away with the facility.
According to Mr. Rutner’s proposal, below is the depiction of six facility RDC network in high demand areas that would supply the orders directly to the stores.The process map is the sequence of events that goes from the manufacturing outlet to the store.
