Delivery Strategy at MoonChem
Case Study Project #2
Alina Logounova
Nany Karlina
DS 855
Professor Bollapragada
San Francisco State University
Fall, 2010
Overview Chapter 10 Case Study: Delivery Strategy at MoonChem Annual cost of existing strategy Considering different delivery options Impact of the proposed recommendation on consignment inventory
Chapter 11 Case Study: Managing Inventories at Alko Inc. Annual costs Savings associated with NDC and recommendations Recommendation and evaluation of other distribution systems
Chapter 10 Case Study: Delivery Strategy at MoonChem
MoonChem is a manufacturer of specialty chemicals that decides to examine its delivery options to its customers. The necessary arose from concerns of inventory turnover being very low and discrepancies between 20 percent of its customers carrying consignment inventory, but over half of the inventory of MoonChem being in consignment with its customers. MoonChem has eight manufacturing plants, where base chemicals are made, and forty distribution centers, where chemicals are being mixed to produce various products and then are being shipped to its customers.
In order to examine current distribution operations, John Kresge, Vice President of Supply Chain, decides to focus on the state of Illinois area with zip code 615, Peoria, which customers, who carry consignment inventory, are supplied from Chicago distribution center. MoonChem’s customers’ data is given in the table 1.a.
Customer category Number of customers Demand per month/ year
Small 12 1,000/ 12,000
Medium 6 5,000/ 60,000
Large 2 12,000/ 144,000
Table 1.a
MoonChem ships its products by trucks, which have 40,000 pound capacity. Transportation cost is fixed at $350.00 with additional $50.00 for each drop off. Given that MoonChem ships its products independently to each customer, transportation cost totals to $400.00 per shipment. In addition,
Alina Logounova
Nany Karlina
DS 855
Professor Bollapragada
San Francisco State University
Fall, 2010
Overview Chapter 10 Case Study: Delivery Strategy at MoonChem Annual cost of existing strategy Considering different delivery options Impact of the proposed recommendation on consignment inventory
Chapter 11 Case Study: Managing Inventories at Alko Inc. Annual costs Savings associated with NDC and recommendations Recommendation and evaluation of other distribution systems
Chapter 10 Case Study: Delivery Strategy at MoonChem
MoonChem is a manufacturer of specialty chemicals that decides to examine its delivery options to its customers. The necessary arose from concerns of inventory turnover being very low and discrepancies between 20 percent of its customers carrying consignment inventory, but over half of the inventory of MoonChem being in consignment with its customers. MoonChem has eight manufacturing plants, where base chemicals are made, and forty distribution centers, where chemicals are being mixed to produce various products and then are being shipped to its customers.
In order to examine current distribution operations, John Kresge, Vice President of Supply Chain, decides to focus on the state of Illinois area with zip code 615, Peoria, which customers, who carry consignment inventory, are supplied from Chicago distribution center. MoonChem’s customers’ data is given in the table 1.a.
Customer category Number of customers Demand per month/ year
Small 12 1,000/ 12,000
Medium 6 5,000/ 60,000
Large 2 12,000/ 144,000
Table 1.a
MoonChem ships its products by trucks, which have 40,000 pound capacity. Transportation cost is fixed at $350.00 with additional $50.00 for each drop off. Given that MoonChem ships its products independently to each customer, transportation cost totals to $400.00 per shipment. In addition,