Transport and Distribution Management at Palmer and Harvey Limited - Case Study Example

Transport and Distribution Management at Palmer & Harvey Limited Contents Contents 2 Introduction 3 The rationale for selection of the chosen issue 3The major tasks that is needed to be carried out to tackle the issues 5 Major practical issues that is needed to be addressed 6 Conclusion 7 Introduction 8 Effective management of the transport function can play a significant role in the creation of the company profit through its ability in balancing service levels and costs across a wide range of activities. Discuss the statement with particular reference to the company’s experience 9 Conclusion 11 References 12 Introduction Palmer & Harvey Ltd was the biggest wholesaler of delivered confectionary and tobacco products in UK in the year 1993. The company was facing a decline in the customers which was resulted due to the change in the retail structure. The company was facing a small order problem which was mainly due to large demand from small order customers who wanted to spend small amounts of money. In order to fulfil these small orders the transportation cost of the company increased. The company even had to maintain exceptional customer service level in terms of costs and even reduce their operating cost. The product ranges of P&H widened in 1992 which included snack products, confectionary items, motor accessories, carbonated drinks, health products, and a range of grocery items. P&H operated on a cash and carry technique, which indicates that it is a wholesale warehouse to which small traders and retailers drive in purchase and collect stock items of their choice. The supply chain of the company was very complex as it operated over 3500 trading outlets with around 500 products. P&H even offered free delivery services to its retail customers to maintain competitive marketplace. The rationale for selection of the chosen issue The company can enhance its current position by the application of IT in the distribution. There were three major issues that the company faced was high transportation costs, increase number of delivery restrictions in UK, and even the growing number of customers demand for the delivery to be done on time. There was sufficient reduction seen in the consumer base as the company was not being able to deliver the products on time to the customers. The company had to manage a large base of customers over 3500 trading outlets all of which demanded small orders at the least delivery lead time. In order to so the aspect that should be considered by the management is introduction of IT in the distribution operations so as to keep a track of the inventory flow, delivery lead times, ease of order placements, and response to the problems. A fully integrated IT system would help the company to keep a track of the inventory turnover. It would help to record the demand and supply of the products without any manual hard work. The RFID technology if incorporated would help P&H to track the volumes of delivery and even replenish the stock as and when required. The incorporated IT technology would even ease the problem of order placement. As the retailers can effectively place the order through the software that is used by P&H and it would even have help the company to deliver the placed order on time. As stated one of the major issues of P&H is its complexity in the supply chain networks. The implementation of IT would help the company to ease the problem that occurs due to a congested supply chain network (Rushton, Croucher and Baker, 2014, pp.132-133). The company needs to focus on the small order customers because they form the major part of their sales. It is not just about delivering the orders of the small customers but also delivering the products on time. The information technology provides a transparency in terms of accessing information about the order placements, shipping details, invoice etc. It is very essential for the company like P&H who has a wide supply chain operation because of the wide product range to use IT in their distribution operation. The new technology would make the distribution operations faster and hence increase the customer service level. If the small order customers are highly satisfied with on time delivery of products they would in turn facilitate the sales growth of P&H. Such technology even helps to track the inventory level so that the stock is replenished on time and there is no delay in the delivery because of unavailability of the products. The implementation of IT would reduce the hard work of preparing invoices as depending on the shipping conditions the invoices would be generated automatically and hence the company could pay full attention on how improving the quality of service rather than focusing on the delayed deliveries. The major tasks that is needed to be carried out to tackle the issues One of the major issues of P&H was to manage its small order customers. It had tried various way of forming partnerships with other suppliers, even competitors on a contractual basis to deliver the products to the customers, but this kind of approach by the company led to sharp decline on the customer base. The main reason behind this was that the customers trusted more the company than any such third parties. The effective way of enhancing a faster delivery was to implement a software integrated system into the distribution process. The implementation can only be successful when a same kind of platform is shared by its suppliers, and even the retail consumers. The first step towards implementation of the IT facilities would be outsourcing the appropriate software from an IT company which should be flexible enough to adapt to the changes in future. If the software is outsourced then it would reduce the investment of the company and can even be changed as and when required. The software should have a common platform for the suppliers, P&H and the retail consumers to interact. The suppliers with the help of this new technology can record the delivery volumes and date. The track record by the suppliers would help them to maintain their operation efficiency and at the same time would prove advantageous for P&H to keep a track on the inventory being purchased and controlling the inventory holding cost. As the company aims to reduce their operating cost this kind of implementation would help the company to improve efficiency and even reduce the inventory carrying cost (Coyle, Novack, Gibson and Bardi, 2010, pp.171-172). As the technology would keep a track record of the inventory level and an indication would be given when the stock level needs replenishment. The company needs to implement such software for all of its retail trading outlets so that even the retail customers can place an order effectively with this new technology without wastage of time and receives the delivery on time. It can also be termed as an online approach to the distribution operations where the errors in manual work can be effectively be reduced. The reduction in errors ensures that the customer service level would increase which would in turn enhance the sales growth of the company. The orders can be placed using a unique code as generated by the software and the response from the company can be tackled on the basis of the generated unique code. The software that is implemented would even incorporate the various operations that is internal to the company and would even facilitate access of the information throughout the various departments. The technical platform that is to be implemented is the major task of the company that initiates incorporating common software to track the supplier’s operations with P&H, and a similar technology based platform between the company and the retail consumers to lower the delivery lead times and enhance the customer service level for retaining the small order customers as well as acquiring a new market share. Major practical issues that is needed to be addressed The implementation can only be successful if the workers of the organization develop the necessary skills so as to operate on a technology based working system. The implementation of IT would increase the work efficiency but at the same time would require an initial investment. Even there could some compulsory redundancy as the manual work would be lessened by the implementation of IT in the distribution systems. In order to track the records effectively it requires technical skills that the workers should possess and can be obtained by training development programs that needs to be conducted by P&H. The implementation of IT requires a huge initial investment as the software needs to be updated with the supplier and customers. The software implementation can even because unrest amongst the employees as the company can cut down on the overhead cost so as to mitigate the investment costs. Even the skills need to be developed which can only be done by P&H hiring technical experts to train their employees. If the entire operation is based on IT than a small failure in the network can lead to the full stoppage of the entire process flow. This is a major issue that needs to be considered when a company implements IT into its distribution operations. Even there can be a total loss of the track record for the company which would initiate major problems in the distribution channel and ultimately affect the sales of P&H. Thus the implementation of IT has positive as well as negative aspects. The negative aspects needs to be addressed properly by the company so as there is no major process failure because of the system. The transparency towards accessing information may lead to hacking of the software which can be a major threat for the company. The company can overcome such issues by always keeping a back up for all its operations so that it is not depended on the system for its operations. The backup of the track records would facilitate the company to carry on its operations even when there is a major failure in the technology based system. The employees who are resistive towards application of such technology can be motivated through the efficiency that this technology offers and even can be offered some rewards so as to encourage them to learn required skills needed to operate on the systems (Shen, 2006, pp.235-239). Thus having a backup methodology and well trained and skilled would facilitate the company to overcome the major issues associated with the implementation of IT into the distribution system. Conclusion P&H being the largest wholesaler and offering a wide range of products had to encounter major difficulties in the supply chain network. One of the flaws of the company was that they were not very focused on the small order customers. This had even caused a major sales decline of the company as the small order customers constituted the maximum part of the sales of P&H. One of the issues that the company faced was to manage a highly complex supply chain and to ease the order placement and delivery lead times. In order to remove the issue the best way is to implement IT into the distribution network. This would in turn make it very convenient for the retail customers to place orders, the company can keep a track of inventory level, would even lessen the delivery lead times by quicker replenishment of stock levels, faster invoice generation and effective handling of the customers at the least time possible, hence offering the best of customer service in the highly competitive market place. Introduction . Transportation plays a significant role in the logistic activity of an organization. It is the most important economic activity in the logistic chain of any business organization. Approximately one third to two thirds of the entire logistic cost is spent on transportation. It occupies a very important ratio in the logistic activity and the management should be very much focused to comprehend the transportation activity. Transport system makes products and goods movable and provides regional and timely efficacy to promote value addition services at the least cost possible. It is very important element that affects the profit and revenue growth of an organization. Effective management of the transport function can play a significant role in the creation of the company profit through its ability in balancing service levels and costs across a wide range of activities. Discuss the statement with particular reference to the company’s experience Transport function is the most important element in the logistic system and even influences the sale and production of a company. The level to which transportation affects the profit of a company depends on the size and volume of the products being manufactured. If the product size is small then the transportation cost would be low compared to when the product size is large in which the cost incurred for transportation would be high. Transportation plays a connective role from the sourcing of the raw materials, production of the products to the delivery of the manufactured products to the end consumer. It is rather an effective planning to coordinate the various functions of the logistic system so as to enable faster movement of goods and maximize the service to the end user and minimize the overall cost. The transport function needs to be managed effectively so as to reduce the overall cost and increase the profit, if not managed properly then it can be an element that constitutes the maximum share in the overall cost for a company. Transportation is the major factor of concern whether it may be movement of goods from the suppliers to the manufacturing unit, or movement of goods from the plant to the warehouses and again movement from the warehouse to the respective distribution centres and then finally to the end consumers (Gubbins, 2003, pp.76-77). Companies always aim at developing the best transport facilities either by contracting a third party for transporting facilities or having their own fleet of drivers for transportation of goods. A structured transport facility initiates better service level by delivering the goods on time. When the delivery is on time than the customers are more satisfied with the service of the firm at that in turn helps the company through an increase in the sales growth. If the cost on transport function can be reduced by effective management than the overall logistic cost can be controlled which in turn initiates more profit level for the firm. In context of the case of Palmer & Harvey, one of the issues that the company faced was their increased transportation costs which in turn even affected the profit levels of the company. They were not being able to meet the service expectation of the small order customers and at the same time their transportation and the entire supply chain cost showed a rapid increase. This was mainly due to a wrong strategy that the company had adopted in the initial years of its business; they tried to satisfy the small order customers in order to gain more of market share by offering them free deliveries. This resulted into extended satisfaction level of the customers but with time increased the total overhead cost of the company. The small order customers wished to pay small amounts which were not enough to cover up the transportation cost. Even the fleet of drivers was self owned and incurred a good amount. The company was operating on 3500 trading outlets and it was not being able to handle such wide operations with a huge product range. This was greatly affected by improper management of the transportation costs. The company then decided to find out ways in order to reduce the overall transportation cost, the first one was to contract out the transport function in which the entire transportation would be carried by an external agency on a contract basis, but this kind of strategy do not assure high quality service to the customers as there can be delays. The second option was to franchise small order deliveries. In this option there would be self employed owner’s drivers who would be given some amount of money for delivery to the small orders (Waters, 2003, pp.105-106). This would ensure quality service to the customers and at the same time would reduce the overall transportation cost. The third option was to carry its own fleet of drivers by reducing the storage capacity of vehicles but this would increase the direct transportation cost. The effective management of the transport function can only be achieved if the company delivers quality service on time and reduce the overall cost. Since this constraint is an important element of the logistic system an increase in its cost increases the overall cost of the supply chain and hence decreases the profit level. If the transportation system is managed effectively than it would result into increased service quality as the delivery lead time would be reduced. It would even enhance reduction of cost, as there would be no delays or excess overhead cost of having self owned transport facilities. The best ways that is adopted by many companies and is even one of the options of P&H is contractual transport or franchise the deliveries. In this way it would reduce the overall cost without compromising on the quality and increased the sales of the company and eventually the profit rate (Wisner, 2011, pp.145-146). Conclusion Transportation function is all about movement of goods from the sourcing to the delivery to the end user. The service quality of the entire supply chain operation depends on how effectively the goods are being delivered on time. Thus indirectly or directly the transportation activities can increase or decrease the profit of the term. A well structured transportation function helps in the minimizing the overall logistic cost and at the same enhance the quality of service by quicker deliveries. It helps in striking a balance between the cost and quality and thereby increasing the profit for the company. References Coyle, J., Novack, R., Gibson, B., and Bardi, E. 2010. Transportation: A Supply Chain Perspective. USA: Cengage Learning. Gubbins, E. J. 2003. Managing Transport Operations. Great Britain: Kogan Page Publishers. Rushton, A., Croucher, P., and Baker, P. 2014. The Handbook of Logistics and Distribution Management: Understanding the Supply Chain. Great Britain: Kogan Page Publishers. Shen, W. 2006. Information Technology for Balanced Manufacturing Systems. USA: Springer. Waters, C. D. J. 2003. Global Logistics and Distribution Planning: Strategies for Management. Great Britain: Kogan Page Publishers. Wisner, J. D. 2011. Principles of Supply Chain Management: A Balanced Approach. USA: Cengage Learning. Read More