Logistics Expansion Decisions

Logistics Expansion Decisions

Section I: Introduction

Having more distribution center reduce shipping costs and increase the speed of delivery to customers (Chopra & Sodhi, 2004). The lead times are reduced by this strategy. The customers get a newer lot of the supply of the goods that are manufactured by the company. The risk is diversified as if one of the points is damaged or affected by any problem, it can be covered by the others. The disadvantages of having multiple distributions and shipping points are that distributors will have issue coordinating with the company. The complexity of the supply chain network increases as there is a lot of coordination to be done between the multiple points.

The international distribution centers have a more direct link with the market as they are based there and can provide a better forecast of the demand (Lee, 2002 ,p.105-119). The centers help develop a better understanding of the market conditions in comparison to the company delivering its goods directly. Direct distribution helps in collecting data regarding the preferences of the consumers (Hensher & Figliozzi, 2007, p.921-923). Having a distribution center increase the cost as there is mantainence costs as well as insurance costs that have to be borne for the center. In order for direct distribution the be effective, the demand forecast has to be accurate. Distribution centre allows for more flexibility.

Supplying to an internationally based merchandiser increases the chances of developing more clients as it gives the company a chance to develop its reputation. There can be a chance of getting orders from other potential clients. It increases the diversity of serving geographical markets as one market may not be as lucrative as the other (Mattson, 2003, p.416-426). The challenges lie in the tariffs, changes in currency rates, government regulations and changes in consumer preferences over a period of time. The dynamics of every market are different and adapting to these changes is the key challenge for the supplier.

Section II: Decision-Making Criteria

The company needs to see if the expansion of the distribution has the appropriate design and layout. The distribution centre should be nearer to the shipping points and the area that is required for the expansion is available (Rodrigue & Notteboom 2009). The manufacturing plant should have the capability to fulfill the capacity of the warehouse. The opening up of the distribution centre should consider the location to be such that it is at it is near for maximum retailers. The current cost of reaching out the customers is lesser than the cost of getting it distributed through the distribution center. The firm should focus on getting raw materials that occupy lesser volume to reduce the shipping costs as they are charged by the space and not the weight. The current costs that are being incurred by the company should be more than the costs that are incurred after the changes.

The manufacturing and distribution centre being opened in the West Coast should look at the cost of land and the ...