Alko Case Study
TABLE OF CONTENTS
EXECUTIVE SUMMARY 1 INTRODUCTION 1 BUSINESS SITUATION 1 External Environment 2 Internal Environment 2 SUPPLY CHAIN DESIGN 4 Supply Chain Drivers 4 Assumptions, Factors and Uncertainties 6 SUPPLY CHAIN ASSESSMENT / ANALYSIS 6 Figure 6: Costs Savings from centralization 9 SUPPLY CHAIN STRATEGY 10 CONTINGENCIES 10 KEY PERFORMANCE INDICATORS 10 CONCLUSION 11 WORKS CITED 12
EXECUTIVE SUMMARY
Our objective is to analyze the distribution network in order to minimize annual system wide costs that subject to a 95% customer service level for ALKO. Integrated Minds considered a scenario approach and looked at net present values to factor inventory costs and quality over the planning horizon. Striving to increase margins and expose various network characteristics and uncertainties, Integrated Minds analyzed many factors.
ALKO was founded on the basis of quality. This principle is indirectly leading to more buffer inventory throughout the supply chain to account for high rejects in shipping. With inventory hiding the real issue, ALKO is not able to achieve the margins desired for their 100 products they offer to the market. In order to remain competitive within their industry, reactive measures must be taken.
Integrated Minds analyzed holding costs, NPV options, and looked at external and internal factors to manage the uncertainty in the supply chain. Replenishment time, product availability, cycle service levels and fill rates were taken into consideration. A key driver was the uncertainty of safety inventory under the periodic review that ALKO performed every 6 days.
Integrated Minds recommends that ALKO combine parts1, 3 and 7 into a NDC in year one, while closing regions 5 RDC. Year two and three will see Alko close all regional DC’s moving the entire operation into a NDC in Chicago.
INTRODUCTION
In 1943 John Williams created Alko Inventories. After a patent in 1948 for a lighting fixture, John
EXECUTIVE SUMMARY 1 INTRODUCTION 1 BUSINESS SITUATION 1 External Environment 2 Internal Environment 2 SUPPLY CHAIN DESIGN 4 Supply Chain Drivers 4 Assumptions, Factors and Uncertainties 6 SUPPLY CHAIN ASSESSMENT / ANALYSIS 6 Figure 6: Costs Savings from centralization 9 SUPPLY CHAIN STRATEGY 10 CONTINGENCIES 10 KEY PERFORMANCE INDICATORS 10 CONCLUSION 11 WORKS CITED 12
EXECUTIVE SUMMARY
Our objective is to analyze the distribution network in order to minimize annual system wide costs that subject to a 95% customer service level for ALKO. Integrated Minds considered a scenario approach and looked at net present values to factor inventory costs and quality over the planning horizon. Striving to increase margins and expose various network characteristics and uncertainties, Integrated Minds analyzed many factors.
ALKO was founded on the basis of quality. This principle is indirectly leading to more buffer inventory throughout the supply chain to account for high rejects in shipping. With inventory hiding the real issue, ALKO is not able to achieve the margins desired for their 100 products they offer to the market. In order to remain competitive within their industry, reactive measures must be taken.
Integrated Minds analyzed holding costs, NPV options, and looked at external and internal factors to manage the uncertainty in the supply chain. Replenishment time, product availability, cycle service levels and fill rates were taken into consideration. A key driver was the uncertainty of safety inventory under the periodic review that ALKO performed every 6 days.
Integrated Minds recommends that ALKO combine parts1, 3 and 7 into a NDC in year one, while closing regions 5 RDC. Year two and three will see Alko close all regional DC’s moving the entire operation into a NDC in Chicago.
INTRODUCTION
In 1943 John Williams created Alko Inventories. After a patent in 1948 for a lighting fixture, John