The company Dream Beauty sells all of its cosmetics and beauty goods throughout the country. The business has for the first time recorded the highest selling. The business distributes its goods through three channels: mass merchants, convenience stores, and retail outlets. The overwhelming majority of sales during that time period came from retail shops. The business processes all of its orders in one location, but it distributes its goods through centers situated in its retail and convenience stores all over the United States. The business offers 30-day discounts on all of its services. The company has a good customer base in convenience stores located in 13 points within U.S. Throughout history; the company has always offered their customers with high standard services.
Major problem
The costs of supply in DB company have been increasing over time, and the management cannot identify where the problem.
Possible solutions
When it comes to costs of supply, manufacturer companies look for the possible ways to mitigate the rising costs that are unplanned. Several alternatives would be considered to reduce the cost of supply within the organization. Alternative A would be to pursuing a new supply strategy. Through the plan, the company will establish highly mature commodity, the company has a stable life cycle of the product, and the company team will be able to ready for any challenge and put in place additional resources in the change management. The opportunity will also cut internal process costs through adoption of six sigma and other strategies (Mentzer et al., 2001). Some of the advantages include accommodating changes, demonstrating to other suppliers about cutting costs, finding the ideal location for the supplier and increasing the innovation ability. Some of the disadvantages of this strategy include decreasing stability, rising risk of production stoppage, and the need for more resources to solve this problem.
Alternative B would be to reduce costs with the current supplier as it will cut costs by implementing lean initiatives throughout the company and its supply chain (Larson & Halldorsson, 2004). Through the strategy, the supplier will be willing to work with the company. However, the alternative doesn’t allow change as it is too risky for the business. The strategy puts the company in mid-production and the organization, therefore, cannot afford any setbacks or delays. Some of the advantages include low risk, no surprises, established a partnership, and available resources for the future improvement of the company. The disadvantages involve suppliers in the chain, who are unwilling to cut costs,
Alternatively, the company manager can spend his time finding the best carrier who offers their services at the best price (Murray, 2017). The strategy may make the company use a large number of carriers since they are cheap. Through reducing the number of carriers, the amount of work offered to other carriers tends to increase. The advantage is rated the routes are lower and can be negotiated.
Choice and rationale
Alternative B would work the best for the company since it aims to reduce the supplies and to cut costs associated with the supply chain. The strategy doesn’t allow several setbacks to be experienced by the company since the company is put in the mid of production.
Implementation
The plan can be implemented through single sourcing. Some companies believe that the best-negotiated prices are only achieved with a single source. The same can also be applied in transportation through placing all transportation requests underbid. The company needs to provide all the suppliers in the chain what is required of them to reduce the supply chain costs.
Question 1
I would recommend that the company invest in less expensive machines with more extended durability than just five years. The supply costs are skewed along the three channels of distribution despite some channels doing better than the others. I suggest low performing channels of distribution be scrapped to cut supply chain costs.
Question 2
Under the current allocations, the company will not make a higher profit margin if all the three channels of distribution are used. However, if mass merchant channel of distribution s done away with, the company is likely to increase profits realized.
References
Larson, P.D. and Halldorsson, A. (2004). Logistics versus supply chain management:
an international survey. International Journal of Logistics: Research & Application, Vol. 7, Issue 1, 17-31.
Mentzer, J.T. et al. (2001): Defining Supply Chain Management, in: Journal of
Business Logistics, Vol. 22, No. 2, 2001, pp. 1–25
Murray Martin. (2017). Reducing Supply Chain Transportation Logistics Costs. Retrieved
on 3rd Nov. 2017 from https://www.thebalance.com/reducing-transportation-costs-2221049
