In this logistics management assignment, scholar has to answer two questions that are as follows.
Q.1 A company is currently making products to stock and is considering switching to a make to order strategy. Discuss the advantages and disadvantages of this new approach?
Ans:- Make to order strategy of manufacturing is a approach which confirms the order first and then manufacturers the product as per the specifications provided by the customer. This type of manufacturing process is a very traditional and conventional approach of order fulfillment and it a good approach in manufacturing product which are either very customized in nature ( for example luxury cars) or have a low volume production ( diamond or platinum jewelry etc). In this question the company mentioned is currently using the strategy of making products in bulk and stocking them in the warehouses from where they are sold to the customers as and when their orders come. One of the biggest advantage of this approach is the cost effectiveness of manufacturing because entire production is done in big batches and company enjoys the scales of volume while producing and biggest disadvantage of bulk production is clogging of supply chain if for any reason sales are low or distribution is improper. For large scale production manufacturers usually keep machinery with huge capacity and without sufficient sales and consumption managing huge machines and large human resources is a very difficult and expensive task (Parry and Graves, 2008).
The new manufacturing strategy which is considered by the company is “Make to order”. This strategy has its benefits as well as disadvantages and before making any final decision a company has to weigh both in context of the need of the company and type of business it is involved in viral marketing. if company’s business is low volume and customized product then built to order is the most suitable strategy for them. Advantages and disadvantages are as follows
- Make to order approach is a demand driven approach which provides more safety to the manufacturer because their orders are confirmed and majority of time they have some payment as well against order.
- This approach requires higher lead time for manufacturing because without confirm order organization doesn’t start manufacturing. This type of approach is beneficial only in manufacturing where customer is aware that lead time would be higher.
- Cost of manufacturing is high in this approach because each manufacturing mght require some assembling of the tools and starting of the process while in build to stock approach manufacturing is a continuous process with low cost per unit of production.
- Customer satisfaction level is higher in make to order approach because products are as per his liking and requirements and they are unique from others (Holweg and Pil, 2004).
Q. 2 As a management trainee for a third party logistics provider you have been tasked with devising the optimal warehouse layout for a new contract. The customer is a large high street clothing retailer with 150 retail outlets in the UK and receives goods from its suppliers in boxes (from overseas) and on hangers (from UK suppliers).
Ans:- key considerations which is to be made while devising the optimal ware house layout are lead time, average units which are manufactured per day/fortnight/month etc, business cycle, payment cycle, order fulfillment time, size of the boxes and hangers in which clothes are transported and number of stores which needs to be covered by the warehouses and what is the replenishment time cycle and time required to transport the material from warehouse to stores.
While approaching this task we will not only consider the key decision making factors mentioned above but there will be some consideration about the availability of the space, time required in manufacturing the warehouse and sustainability of the business cycle. The layout which I would like suggest for the requirement of business is cross dock layout of warehouse. This type of warehouses is suitable for the large quantity storage because this warehouse would be catering the needs of more than 150 stores.
As a warehouse cross dock style is suitable for storing large and huge sizes of boxes and hangers because they are high rise in size and closer to the docks make them ideal for transferring of manufactured goods from ships and trucks to the warehouse. Infrastructure availability in this type of layout is also sufficient for handling and fast movement of goods. It is also suitable for pellet and stretch wrapped pellet which is useful in picking and handling of material directly at the entry area of warehouse and rapid exchange. With 150 stores to serve there would be a heavy movement of products because clothes are exchanged rapidly from one store to another and sometimes some products might be finished in one store and available in another store. In such cases warehouse can only act as a coordinator and make direct movement of products from one store to another. Cost effectiveness of this warehouse is also better because it stores bulk quantity and it is usually established in industrial belts or docks where availability of labor, transportation, infrastructure and power is ensured by the governments (Hansen and Gibson, 2010).REFERENCES
- Parry, G. and Graves, A., Eds. (2008), ‘Build to Order: The Road to the 5-Day Car’, London: Springer Verlag, p.45
- Holweg, M. and Pil, F. (2004), ‘The Second Century: Reconnecting Customer and Value Chain through Build-to-Order’, Cambridge, MA and London, UK: The MIT Press, p.12-98
- Hansen, P. and Gibson, K. (2010) Effectively Slotting a Warehouse or Distribution Center, Cygnus Supply and Demand Chain Executive, P.123-198