2020W SUP 2083

Logistics -Warehousing and Distribution

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Group Assignment 1

(Case Study)

 Total Marks: 100 [Weightage for the final grade: 10%]

 Use this template for submitting your assignment.

 Upload a soft copy of the assignment [MS Word file] on Turnitin by 5:30PM hours on
20-Jan-2020

DATE:
INSTRUCTOR:

# STUDENT FIRST NAME STUDENT LAST NAME STUDENT NUMBER

1

© 2019 LAMBTON COLLEGE IN TORONTO

 2020W SUP 2083
Logistics -Warehousing and Distribution

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Case Study – 15 Marks Sanica Bath Products

John Sanica, president and owner of Sanica Bath Products (SBP), is reading the latest financial
report. As he reviews this information, John recalls the company’s early days and the struggle to
get retailers to stock the company’s line of bathroom vanities, mirrors, and light fixtures. Today,
the problem is quite different. The company is straining to produce enough products to meet
retailer demand.

SBP manufactures a variety of bathroom accessories, including vanities, mirrors, lighting

fixtures, and shelving. The products are made of rust- and chip-resistant molded plastic and come
in a variety of modern designs and colors. The plastic construction permits SBP to produce a
high-quality bathroom accessory at an affordable price.

In the late 1990s, John focused the company’s marketing attention on the large home center
chain stores: Home Depot, Lowe’s, and their smaller competitors. Today, more than 80 percent
of SBP’s sales are to these retail chains, and they account for 95 percent of its growth. Without
these key customers, SBP would still be a small, struggling manufacturer.

John’s pleasant memories quickly fade to the realities of dealing with these large chain retailers.
In the past two years, SBP has been required to comply with the customers’ RFID initiatives,
provide advanced shipping notifications, and improve inventory visibility. The latest request
from one of the smaller chain stores is for SBP to reduce cycle time by shipping orders directly
to the stores.

Currently, SBP’s national Distribution Center (DC) processes and ships a weekly order for each
of the chain store’s three regional DCs (RDCs) via national truckload carriers. Product is then
allocated by the RDCs to individual stores and delivered by their private fleet. Under the
proposed arrangement, each store will be ordering separately, and SBP is to process the order
and deliver it within five working days.

Matt Cook, director of logistics, reviewed the request and delivered some sobering news to John.
He indicated that order processing costs and freight costs would certainly increase. His team
would now have to process smaller, case-quantity orders for each store versus pallet-quantity
orders from the RDCs. Also, SBP would have to use more costly less-than-truckload service and
deliver all the way to the stores.

John didn’t relish the thought of spending more money on order fulfillment as the customer
wasn’t huge and had no interest in paying more for the product. He was also worried that other
© 2019 LAMBTON COLLEGE IN TORONTO
 2020W SUP 2083
Logistics -Warehousing and Distribution

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retailers might make similar requests. So John asked Matt Cook to develop a plan that would
satisfy customers without cutting into SBP’s margins too heavily.

Matt Cook came back with the concept of establishing a six-facility RDC network for SBP. The
DCs would be located in high-demand areas within each region. He touted the net- work’s ability
to process orders faster and deliver product cheaper than the current SBP facility. The facilities
would be able to handle case picking, pallet cross-docking, and some value-added services. Matt
Cook went on to say that each RDC would maintain only a minimal level of safety stock and that
the company’s overall inventory would decrease.

John is skeptical of this plan. He feels that it would increase capital expenses, inventory levels,
and transportation costs. He is not even certain it would meet the five-day delivery time
requirements.

CASE QUESTIONS

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

2. What is your opinion of Matt Cook’s proposal for establishing a series of company- owned
RDCs?

3. If SBP moves forward with the RDC plan, what facility ownership structure do you
recommend? Why?

4. Develop a process map depicting the product and information flows in Matt Cook’s proposal.

5. What could be next requests from the SBP in close future by its customers? Consider new
developments in inventory management, transportation and e-commerce.

© 2019 LAMBTON COLLEGE IN TORONTO