Over 6,000 companies have established operations within Jebel Ali Free Zone, using it as a base to distribute their products to the GCC countries and beyond. These companies have adopted this strategy with a view to improving their supply chain and gaining a competitive advantage in relation to their competitors. Assume you work for a global company manufacturing electronic products which has factories in Japan (cameras), Malaysia (televisions), USA (music systems) and Spain (DVDs). The Company currently supplies its GCC distributors by shipping directly from factory to distributor in 20ft containers. The Company has witnessed significant growth in the region and is exploring the possibility of establishing a Distribution Centre in Jebel Ali Free Zone.
1 Discuss the following points with regard to the Company selecting Jebel Ali Free Zone as its Middle East base.
(a) How is a company likely to enhance its supply chain by using it is as a distribution base as opposed to supplying the goods direct to distributor from source?
(b) How are the distributors of the Company likely to benefit and how are the retailers and consumers of these products likely to benefit?
2 Discuss the additional cost elements which would be incurred when establishing a Distribution Centre instead of shipping the goods direct.
3. The Company currently sells 3,000,000 units p.a. and once it has established the distribution centre it is planning on achieving growth in volumes over the next 5 years as specified below.
Year 1 2 3 4 5
Growth 8% 10% 12% 8% 7%
The Company would expect to carry 1 month’s inventory and on average, there are 70 units per pallet.
(a) Based on the above data, prepare a table which will illustrate the following:
· Units expected to be sold each year.
· Distribution Centre capacity - in terms of pallets - required each year allowing an additional 10% for seasonal fluctuations in sales.
(b) If you were to build a Distribution Centre which would be able to accommodate the expected growth in sale volumes over the 5 year period, and provide space for a further 50% in growth, specify what the required capacity would be - in terms of pallets.
(a) Specify 10 KPIs you might use to measure the efficiency of the supply chain from the Factory to Distribution Centre to Distributor.
(b) Explain what action you might take to resolve a problem highlighted by each of these KPIs.
The question belongs to Operations Management and it discusses about the principles and techniques that are involved in Operations. Various operations techniques such as activity based management, total quality management, benchmarking, etc have been discussed in the solution.
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