Westminster Company Logistics Case Study

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Case Summary

The case study entails a supply chain analysis of Westminster Company, which is one of the largest world’s largest producer of health care consumer products. The pharmaceutical company established in the early 20th century currently operates across the United States, Latin America, Europe, and the Pacific Rim. The Company owns three major manufacturing subsidiaries and eight distribution centers with products spanning across drugs (20%), mass merchandise (25%) and grocery products (37%). Westminster Company faces the challenge of maintaining an efficient logistics and supply chain system in face of a competitive market. The decentralized three subsidiaries adopt a decentralized management system which arguably encourages self-ownership, responsibility which motivates entrepreneurial management.

Logistics system is a critical aspect of a business to thrive. Logistics system ensures that inventory is stocked in the retailers’ shelves whose delay yields a constrained relationship between the manufacturer and the retailer. Currently, Westminster Company adopts a decentralized distribution network that entails the three autonomous subsidiaries using their standalone distribution centers to deliver inventory. Leong (2012) cautions inefficiency of decentralized distribution systems as it negatively affects profitability due to excessive fixed operating cost. Hence, Westminster Company doesn’t adopt direct shipments. Consequently, Westminster Company reports mostly less-than-truckload increasing the cost of shipment. Given the evolution of supply chain systems and increasing pressures from both the competitors and customers, it’s essential for Westminster Company to reevaluate its logistical management system to ensure efficiency.

Accordingly, Westminster Company commissioned a study to establish customer overview, and other operational management changes critical to the pharmaceutical firm’s success. The research established that in addition to the largest customers driving the significantly increased domestic sales, a majority of the domestic sales were from 10% of their customers. The research findings identified intensified competition from private-label companies that adopt integrated logistics and are cost-efficient. Additionally, the study identified customers were becoming more specific with logistics requirement. The fundamental customers are increasingly demanding efficient planning, collaboration in the supply chain, adopting information technology systems and order fulfillment. Lastly, the study observed that given the core customers derive higher profit margins from Westminster, adopting advanced integration would be a competitive edge.

Proposed Alternatives

To address the research findings a proposed overhaul of the supply chain structure has been identified inevitable. The overhaul would entail three potential changes; introduction of POS (Point of Sale) driven systems, higher degree customization and reduction in cycle time. The proposed changes respond to the rapidly evolving technology that has enabled inventory tracking that ensures increased delivery rate. The proposed changes will significantly affect the freight cost by reducing fixed, direct and indirect cost.

One of the proposed alternatives entails production based on the data-driven forecast as opposed to the traditional anticipatory production.

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Logistic information including warehousing and transportation play an imperative role in ensuring the flow of inventory along the supply chain. Introducing data-driven POS information system ensures efficient flow of inventory and earnest replenishments as customers could transmit information about product sales (Walters 2010). Subsequently, production and inventory replenishment would be informed by data from…

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…who would prefer the proximity to the store. Moreover, the increased distance between the customer and the distribution centers would imply increase cost of transportation and increased delivery days.

Westminster would consider public or private warehouse. While owning a private warehouse allows flexibility, stability, and control, Westminster would incur a fixed investment to put up a consolidated warehouse that would negatively impact the company’s bottom line. Adopting a public warehouse overcomes the fixed investment challenge presented by the private consolidated warehouse. Moreover, the multiple users in a public warehouse present share scale economies. However, a public warehouse presents additional third-party cost increasing administrative cost (Bowersox et al 2007).

While the redesign of the warehouse network seeks to realize reduced cost and increased efficiency, focusing on customer satisfaction is essential. Reducing the cycle time, and integrating mixed shipment reduces the procurement logistics which with efficient planning enhances customer satisfaction (Walters 2010). Performance consideration would be essential for each of the output from the different manufacturing unit. For the mass merchants, for example, ensuring higher customization in receptiveness in manufacturing, responsiveness and product development launch would be paramount.

Conclusion

It’s evident that integrating the proposed alternatives for the larger customers would yield significant cost savings which would increase Westminster’s competitive in the pharmaceutical industry. A redesigning of the warehouse network to promote shipment consolidation would yield significant effiency in inventory handling and reduced storage cost. Providing a nimble and agile supply system would reposition Westminster as a strong competitor in the industry. Hence, implementing the….....

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