Hew; Lett Packard Case Study

Hewlett Packard Case

KLF Electronics distributes its products through five regional warehouses located in Atlanta, Boston, Chicago, Dallas, and Los Angeles. In the current distribution system, the United States is partitioned into five major markets, each of which is served by a single regional warehouse. Customers, typically retail outlets, receive items directly from the regional warehouses in their market area. That is, in the current distribution system, each customer is assigned to a single market and receives deliveries from one regional warehouse.

The warehouses receive items from the manufacturing facility; typically, it takes about two weeks to satisfy an order placed by any of the regional warehouses. In recent years, KLF has seen a significant increase in competition and huge pressure from their customers to improve service levels and reduce costs. To improve service level and reduce costs, KLF would like to consider an alternative distribution strategy in which the five regional warehouses are replaced with a single, central warehouse that will be in charge of all customer orders.

How can design for logistic concepts be used to control logistic costs and make the supply chain more efficient?

The three components for design for logistics are:

1. Economic packaging and transportation

2. Concurrent and parallel processing

3. Postponement/delayed differentiation

By packaging the product so that more products can be shipped and stored more efficiently will lower transportation costs and storage costs. Concurrent and parallel processing focuses on modification of the manufacturing process with the desired outcome of shorter lead times, improved forecasting, and reduction of safety stock requirements. Design for delayed differentiation can be used to address the uncertainty in final demand, even if forecasts cannot be improved.

Delayed differentiation

The Institute of Supply Management’s glossary of key supply management terms defines...