Daniele Francescon Stephane Nicolay

AMERICAN LIGHTING PRODUCTS Case Study

Business Logistics
November 2008

TABLE OF CONTENTS Preface 3

Analysis of the situation 3

Physical flow of goods 3 Organisational structure 3 Information management: order processing and demand forecasting 4 Performance 4 Costs 5

Identification of major issues and problems 6

Incipit 6 Initial consideration: need to redesign the system 6

Generation of alternative solutions 7

First solution: centralization for the west area 7 Second solution: LOC for consumer products 8

Further considerations and conclusions 9

List of references 10

Appendix 1 – Calculations 12

Preface
The lack of criteria through which to make decisions about priority can heavily influence the average service level provided.

Costs

The current carrying cost of an item held in inventory is 18 percent per year of lamp value before taxes. Breaking down this figure could lead to focused intervention in specific areas affecting the cost. Approaches like the total cost management can help balancing the activities through the supply chain in order to minimize the impact on the cost.

Identification of major issues and problems

Incipit

The company presents many different problems at a logistic level, each of them has been stated in the first part of this essay when analysing the logistic system as a whole. We think that more than acting at the inventory level should be done to enhance the company profitability and logistic performance. The following paragraphs therefore focus on inventory management in order to fulfil the requirements of upper management with regard to inventory reduction.

Initial consideration: need to redesign the system

An inventory reduction policy as the one claimed by the company’s vice president of finance makes sense to the extent to which the main logistics goals are achieved: cost reduction or service enhancement. Our analysis started with assessing the customer’s satisfaction drivers.
We matched the inventory