Warehousing of Fredericks Company - Case Study Example

Abstract In order to competitively and effectively operate business, companies depend on warehousing. This dependency gathers the informational setup that assists the business in developments that lead to successful business practices. This writing will submerge in the warehousing content of the Frederick’s Company. It will reveal the internal solution of the company to abort expansion methods and focus solely on centralizing operations in Homebush, Sydney, Australia. The understanding of the company’s decision will come from the compilation of regional interdependence, loss prevention, chokepoints, consolidated facilities, and multiple facility usage. These concepts will construct a consideration of Fredericks’ purpose for changing business operations. Fredericks Company has decided to abandon it expansion practices by eliminating 3 of its 4 warehouse locations in metropolitan Sydney Australia. The company wishes to centralize the production and selling of its consumer goods, apparel, footwear, and long-life products. The new operations site will be functioning from Homebush, Sydney, Australia and include an additional 350 staff members and 1 Returns center. In light of this transition, Fredericks is on the path toward utilizing centralization in order to create company longevity. Fredericks has opted to maximize integration of chosen markets and company value by eliminating obsolete practices. The company chooses to recognize a proactive strategy in a competitive market to ensure longevity. By stressing the flexibility of its business and relying on timing and management, longevity can be met (Antunes, 2011). The dramatic change that the company has decided to undergo can be accredited to several ideals. Of these ideals, a business plan would have revealed probable solutions in the company’s issues with current distribution and logistics practices. According to Abrams a successful business plan consists of the following factors (p. 1-9); 1. The Business Concept: With the business concept the company has to elect to create a new product or service, improve an old product or service, transfer to an underserved market, operate under a new delivery system, or increase company integrity. 2. Understanding the Market: In order to adhere to the market the company must determine if the demand for their product is efficient enough to support business functions. 3. Industry Health and Trends: The business should be able to withstand economic downfall and changes in consumer selection. 4. Consistent Business Focus and Clear Strategic Position: The business has to adhere to a plan that will set it apart from the competition and stick to the strategy. 5. Capable Management: The management team has to be capable of effectively operating business practices. 6. Ability to Attract, Motivate, and Retain Employees: In order to attract favorable employees the company has to be able to demonstrate and develop positive relationships with its workers. 7. Financial Control: The plan should promote positive financial flow by utilizing money handling techniques. 8. Anticipating and Adapting to Change: The Company should be able to recognize the need for change and integrate necessary upgrades. 9. Company’s Values and Integrity: The business can develop a long term relationship with buyers, consumers, communities, and employees by centralizing. Under the assumption that Fredericks has opted to go with the increase of integrity solution in business, we can derive to the conclusion that centralizing location was the best option. Although, Fredericks has adapted to the use of new technologies, such as online selling and telephone ordering, these implementations were in place before the geographical transition. With the integrity method the company can virtually expand community awareness and follow a strategy of growth. Focusing first on the company’s retreat from chaining, we will recognize the choice of geographical position. Frederick’s currently hosts the production of apparel, footwear, long-life products, and consumer goods. Indulging in these facts we can register that the company is within overnight shipping proximity of larger, consumer locations; 1. Parks and reserves offer up the opportunity for individuals to interact in sport or leisure. They provide events and entertainment. Fredericks can benefit from the sells capabilities these locations offer. 2. Colleges and Universities are crowded with individuals that are always in need of personal products. Colleges also house yearly sporting teams and large community functions. The typical family household is apt to spend at least $808.71 to purchase back to school apparel, furnishings, electronics and food (St. John & O’Donnell, 2011). Fredericks would be able to capitalize off the sheer need for uniforms, sportswear, and consumer goods. 3. When indulging in golf courses, the users need to adhere to dress codes and accessories. The courses themselves can offer up these products or make them mandatory to have. Fredericks would be considered a plausible solution to need of these objects in the market. 4. Shopping centers are crowded with individuals in need of something. The location of Fredericks can supply the ongoing need of these marketplaces. Dependent on its standing in the community the company may have a good chance of being the mass supplier for these businesses. Observing the map presented above we will see several contributing factors in the location selection. Dependent on these locations it is evident that a mass market of consumers will be readily available to the company. It is also conceivable that Frederick’s will be dependent on its position to promote consumer services. “Arguably, the most important factor of entrepreneurship and small business development is the strategic allocation of the business which could include the nearness to raw material, accessibility to business premises, good rod network, busyness of the area of the business etc.” (Minai & Lucky, 2011).The reality of chokepoints interference with distribution of products is very real. Costs and security issues increase because of risk capabilities. “Risks of disruption at transportation chokepoints, including ports and inland intermodal hubs such as Chicago, are magnified by the increasing scale and globalization of supply chains, and by emphasis on lean inventories and just-in-time delivery,” (Bonney, 2011). Identifying further with the objective of the central unit Fredericks can determine proper allocation of products. Based on the mapping location provided above there are few obstacles that can cause chokepoints. The unit will be within a few miles of the nearest highways and fast paced traffic roads. This will indulge in a lesser probability of traveling congestion. Also, the lack of interference by bodies of water can enable the company to rely solely on trucking for distribution. Consolidating the company practices to a central location appears to be a benefactor in its strategy. A plethora of businesses maintain operation costs by focusing operations on one unit. Should Fredericks have the mindset to optimize costs, consolidating can appease the motion. According to Teo, Ou, and Goh (cited in IIE Transactions, 2001) the foundation for this strategy can be accredited to the following methods; “1. Reduced facility investment costs. A large CDC is more cost efficient to build and operate compared to having many smaller regional centers. 2. Increased service quality. Centralized inventory ensures better quality control and visibility of stocks within the system. Also at a modern CDC, more value-added services can be provided at lower cost. 3. Lower total inventory costs. By pooling demands together, the required amount of inventory to serve them is reduced, and benefits from increased economies of scale in purchasing and transportation operations can be achieved” (p. 99). Fredericks’ decision to deplete distribution locations holds them dependent to a lesser market size. The company does supply innovative techniques of telephone marketing and online sales. For the current region this tactic will enable Fredericks to readily supply its community. However, the likelihood that only one centralized location will be efficient enough to provide large global supply is out of the question. In recognizing this prompt the assumption can be made that until the company is self-sustaining it will depend solely on its current regional area to maintain. However, Hammel and Denhart (2007) argue that by sufficing the needs of the customers and the community alone, the company can expect to become most profitable and increase value of it individual community (p. vii). Of course this would be the notion if the local community is accepting of Fredericks’ practices. Dependent on this factor it is said that the community and the business have to reach this point (Big Business Quotes, 2012); The simple opposition between the people and big business has disappeared because the people themselves have become so deeply involved in big business. -Walter Lippmann Coupling with consolidating Fredericks operations is the general use of its facility. With the use of one facility producing the company’s multiple products, there is the likely effect of mass quality control and maximizing production based on supply and demand schemes. Fredericks can produce goods and supply services while concentrating on the elimination of overstock. Employees mostly work toward a common goal of fulfilling contracts. At some point the product surpasses demand. When this happens the company is still obligated to continue operating shifts or begin layoffs. If the company does not consider layoffs, regardless of lowering production quotas, a significant amount of overstock will be placed in stock. Considering that Fredericks distribution center will be able to develop all company goods, the unit can stall production when the supply has overlapped with demand. When a contract has been met, the company can refocus workers attention to other outstanding projects. Should the position arise when all contractual obligations are complete, Fredericks can establish a production schedule that will allow production to cease at desired points. Avoiding unnecessary purging of stock the company can maximize profits. It is not a surprise that companies suffer some loss due to theft. In some cases it is by buyers and consumers. A more disturbing case would be that of suffering loss at the hands of employees. Considering the positives of centralizing business, there is the question of what to do about monitoring extensively larger groups of people and product. Based on the concept of Fredericks doing business as a supplier to other companies it is logical that the source of most thefts will be the cause of employees. The customers will likely be denied access into the inner workings of the warehouse. Therefore, the employees will be the individuals responsible for product loss. Considering this issue it is relevant to acknowledge that; “1. A majority of employee theft goes undetected by supervisors and management. 2. Opportunity remains the leading cause of employee theft. 3. Employee theft is responsible for 33% of all business bankruptcies. 4. Other employees often ignore the theft and don’t do anything about it. Employers should not count on other employees to report employee theft, unless they can put a system in place that keeps the "reporter" anonymous and/or a reward program is set up. 5. Employee theft is prevalent in every type of business. 6. Business owners must be aware of these facts in order to detect employee theft. It is a common fact that most employers do not suspect their employees of theft. Another fact that is important for owners and supervisors to keep in mind is that the majority of the people who are stealing are those who have a close relationship with their boss,” (Walsh, 2000). The effects of Fredericks creating massive warehouse operations will inevitably add an aggressive population to the company. The constraints of which are derived from the internal workings of 4 separate operating units. There will be an increase in operating departments and staff. That means Fredericks will be faced with persons on top of persons handling critical information and the company’s cash cow. At some point this realization will become evident to employees, marked by their ever-growing freedoms and opportunities. The argument can be made for Fredericks to implement finances procured from depleted expansion costs toward securing the central location and its operations. Fredericks will undoubtedly have to reinforce loss prevention by reconstructing policies and creating a structured security platform for the consolidated warehouse. At a minimum warehouses should practice some efforts of isolating and preventing theft by adhering to tighter surveillance. This would include tasks such as prohibiting trucker drivers from entering the warehouse and operating shipping and receiving platforms from different locations. Keeping cargo holds and vital areas should be under lock and key. Also, the use of close circuit television surveillance should be utilized to observe high traffic areas (Lamourearx). In conclusion, the decision of Fredericks to consolidate its business practices is a working part of a larger plan. The business has simply determined a goal that revolves around the increase of community integrity. Fredericks is attempting to solidify its possibilities of longevity in the Australian marketplace. References Abrams, R. (2003). The Successful Business Plan: Secrets and Strategies, 4th edition. Palo Alto, CA: The Planning Shop. Antunes, J 2011, 'Longevity in business? Copy recruiters', Recruiter, p. 23, Business Source Complete, EBSCOhost, viewed 22 April 2012. Big Business Quotes: Showing Search Results for Big Business, 2012, Search Quotes. http://www.searchquotes.com/search/Big_Business/ (2012, April 21). Bonney, J 2011, 'SHIPPING'S CHOKEPOINT RISKS. (cover story)', Journal Of Commerce (15307557), 12, 8, pp. 12-15, Business Source Complete, EBSCOhost, viewed 22 April 2012. Hammel, L. & Denhart, G. (2007). Growing Local Value: How to Build Business Partnerships That Strengthen Your Community. San Francisco, CA: Berrett-Koehler Publishers, INC. Lamoureax, D.J. Business loss prevention techniques. ABD Federal Investigation Agency, INC. http://www.pimall.com/nais/n.loss.prev.html (2012, April 22). Minai, M, & Lucky, E 2011, 'The Moderating Effect of Location on Small Firm Performance: Empirical Evidence', International Journal Of Business & Management, 6, 10, pp. 178-192, Business Source Complete, EBSCOhost, viewed 22 April 2012. St. John, O, & O’Donnell, J, 2011, Off-to-college kids can go overboard on ‘essentials’, USA Today, http://www.usatoday.com/money/industries/retail/2011-08-04-smart-college-shopping_n.htm (2012, April 22) Teo, C.P., Ou, J., & Goh, M. (2001). Impact on inventory costs with consolidation of distribution centers. IIE Transactions. No 33. pp. 99-110. http://www.ie.bilkent.edu.tr/~ie572/Papers/Teoetal.pdf (2012, April 22). Walsh, J.A. (2000). Employee theft. International Foundation for Protection Officers. http://ifpo.org/articlebank/employee_theft.html (2012, April 22). Read More