Logistic Management and Distribution

Introduction

Favoured Blend Coffee company is doing coffee business in their nationwide market, they offer ground and grinded coffee in a variety of packages. They have their own manufacture plant and logistic system, once coffee were packed, it will be distribute directly to customers or their own warehouse for storing.

In 1990, their business were expanded, sales increasing 5 percent annually, but somehow profit was not increasing at the same time. At the year 1992 this situation were getting serious, sales were growing but profits starts to drop and loss was experienced the 1st time.

After the analyze all the figures, they found out that the causes was the increasing of the cost of logistics. One of the main problem is because the lack of communicating between the department of distribution service and the department of marketing. Most of the shipments made were LTL quantities and sometimes the routine of shipments had to change due to request of customer and promised by the marketers for getting the business for the company and try to provide a good customer service.

Other than that, the observe of the problem shows that some warehouse do not have enough places for stocking. Overstocked happens and sometimes even out of stock happens too. In that case, demurrage accrues and cost being increased when time goes longer.

Question 1

In this case, Favoured Blend Coffee Company should try to practice the principles of cost-trade off and the total cost concept.

The meaning of cost trade off was, giving a priority on one of your cost, in order to decrease some of the cost, there will be having a risk of increasing other cost or value. The main problem from Favoured Blend Coffee Company is that their marketing team desire to give their customer a high customer service level and this causes the increasing of the cost at logistics. The marketing teams were over letting the customer to unduly dictate the terms and routine of shipments. In that case the distribution service...