Distribution Strategy Paper
For this assignment, the company of choice is Suzhou Boacheng Industrial Co Ltd, a China-based industry that specializes in the manufacturing and distribution of kitchen electronics such as cookers and microwaves. It has its headquarters in Wuzhong, China. Suzhou Boacheng has a central-positioned warehouse that serves both domestic and global markets. However, its distribution strategy is causing the company to incur unwarranted costs, including reduced customer satisfaction. Therefore, there is a need to devise another distribution strategy—as a solution– that will be cost-efficient and customer-oriented.
Possible Reasons Why the Company is Incurring Unwarranted Costs
Farooq Umar defines distribution strategy as “A comprehensive process of making products and services available to business and target customers for their use” (Farooq). In other words, it is the past-production function of the supply chain. The high costs incurred by Suzhou Boacheng Industrial Co Ltd–through its distribution strategy–arise from having a centralized warehouse. Centralized warehouse management is usually recommended because it facilitates the flow of information and enables easy handling of goods. However, having centralized management is disadvantageous because it is the sole cause of rush deliveries, which is costly to any company operating a central-positioned warehouse (Farooq). The cost of rush deliveries, together with the costs of lack of preparedness in times of emergencies and management problems that are core to centralized warehouses, are the reasons why Suzhou Boacheng Industrial Co Ltd is having distribution problems. Apart from having a central-positioned warehouse, the other possible reason that is causing this company to incur unwarranted costs is the problem of cross-docking. The chances are that the cross-docking process of Suzhou Boacheng Industrial Co Ltd is poorly handled, costing it too many financial resources in between boarders.
Solution and Recommendation
After factoring in the possible reasons why the company’s distribution strategy is flawed, the warehousing manager should go ahead and evaluate distribution strategy factors such as lead time, distribution expenses, shipment modes, and the nature of the product. After evaluating these factors, he should seal the loopholes is causing their centralized warehouse management system flawed. Of all warehouse management systems, a centralized warehouse management system proves to be the most outstanding because it is cost considerate; it attracts lower operation and inbound costs while ensuring better customer service (Marzec). A centralized warehouse only becomes costly when it is mismanaged.
He could implement this recommendation by solving the problem of mismanagement, an equivalent of sealing the existing loopholes (Marzec). He will need to open communication channels to ensure there is a free flow of communication among the involved parties. This way, other warehouses will have a chance to focus on their activities, ultimately increasing customer satisfaction while reducing operating costs. Note that this is the best recommendation to implement. Other options are complex and are communication-inhabitants (Farooq). A flawless distribution strategy is dependent on flawless communication networks, which can easily be achieved when operating a central-positioned warehouse.
The main challenge I found while completing this case was to prove why a centralized warehouse management strategy is better than other strategies. All strategies seemed to fit in this case, so selecting the best was quite challenging.
Assuming that the additional information for this assignment was the company operating a decentralized warehousing system, it would have disoriented my recommendation because my thoughts on an effective distribution strategy are tied to a centralized warehouse management strategy.
Farooq, Umar. Distribution Strategies; Marketing Tutor, 2019. Retrieved from https://www.marketingtutor.net/distribution-strategies/
Marzec, Ernest. Benefits of Centralized Companies, 2016. Retrieved from com/benefits-centralized-companies-11925.html”>http://smallbusiness.chron.com/benefits-centralized-companies-11925.html
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