Brunswick Distribution started as a small distribution company 10 years ago when Alex Brunswick stated using his grandmothers shed. The company further grew and moved into a 20,000 square-feet leased facility. Ten years ago, the company entered into an agreement with Kitchen Helper Corp, as their high-end appliance representative and distributor in Moline Illinois. The operations have expanded from the radius of 35 miles to representing them over a 200 mile radius. Given the company’s rapid growth, Brunswick Distribution Inc purchased the leased facility and made additions to bring its capacity to 30,000 square-feet.
After reviewing the company’s financial performance, CEO Alex Brunswick noticed information within the report that indicated uncertainty for the company. Brunswick Distribution Inc. had experienced a robust growth over the past 4 years and were expecting to further decline the following year. Despite the consistent increase over the past four years, there was still some doubt in the company’s future. Alex Brunswick recognises that this growth had largely to a few competitors going out of business, a situation that was unlikely to continue.
Mr Brunswick enlisted the advice of his Vice President of Operations, Bradley Pulaski and Marianna Jackson, his Vice President of Logistics. Mr Pulaski has given the option of expanding to the Mid West by securing a new warehouse. The cost of the new warehouse was in the region of 15 million dollars, 2 million for the plant, 10 million for property, $955,000 for shipping expenses. Mr Pulaski also reasoned that with the additional infrastructure, Brunswick Distribution would be able to increase its annual sales by $4,426,000. 000.
In addition, delivery times to customers in the region would be reduced from 5 days to 2 days which would be very competitive. Marianna, Head of Logistics, suggested that the company capitalize on the void left by the fallen companies to enhance their operation and make it less costly. This option enlisted a new distribution system that was better handling for inventory and process. It also included a system that depended on information technology and saving the company money. With this option, a 16% saving in annual spending on shipping expenses, an increase in the assets of 5. 8 million and the cost of 7. million total. Alex Brunswick must now review the two options posed by Marianna and Bradley and determine how each option would affect the company’s operational and financial performance and secure the company’s future.
The financial remodeling of Alex Brunswick’ decision will have an impact on its supply chain management. The distribution company’s growth has not translated into solid financial return for the past three years which have seen a decline instead of a realized profit, the suggestions for improvement of the company’s financial position through either investing in a new nfrastructure or streamlining the distribution system can bring the company into a new era of doing business. Brunswick Distribution operations strategy and competitive priorities guide its supply chain choices. Supply chain management is the synchronization of a firm’s processes with those of its suppliers and customers to match the flow of materials, services, and information. Measures of supply chain performance and sound supply chain design can assist the company in making the key decision that will affect their future.
Brunswick Distribution inherited customers based on the closing of similar operations; however their Midwest potential customers are not part of their existing clientele. Even though direct competition has decreased, the tendency of retailers to get their products directly from manufacturers puts the company in a position of relooking its competitive edge as a distributor. The marketplace is shifting from an individuality to supply chain performance – the ability to meet end-customers needs through product availability and responsive and on-time delivery.
Supply chain performance crosses both functional lines and company boundaries. Brunswick must change their way to fill customer orders faster and more efficiently than the competition. The company is hoping to make a decision that can improve the efficiency of its operation with sound a strategy to reduce costs as well as increase performance. They must manage the inputs with the outputs to achieve the appropriate competitive priorities of the firm’s enterprise processes.
With their borrowing ability reduced due to manufacturers offering no credit and retailers demanding payment within the same cycle of 30 – 60 days, Brunswick is placed in a position of exhausting their borrowing ability and another loan would be difficult to obtain, a solution would be to consolidate their debts, engage discussions with a financial institution that would willing to buy the debt from the original loaner and willing to apply less interest rate thus raising the loan limit so the company can borrow more.
The company can consider incentives for retailers who pay direct and in full and for retailers that pay within 30 days or before. Brunswick Distribution must perform an analysis on the impact of two decisions invest in a new infrastructure or streamline their distribution system.
Investing in a new infrastructure will mean constructing a new storage facility to compensate for the present inadequate infrastructure and single warehouse. This can lead to the company having an opportunity to increase penetration in key industrial markets including those they have limited presence.
The company can also expect to see an increase in their annual sales, delivery lead time reduction by three days, an increase in brand placement and appliances and an increase to account change to the inventory, accounts receivable, property, plant and equipment by $7,200,000. The other option presented to Alex Brunswick is to streamline the distribution system and make it more cost efficient. The company is presently holding large amount of stock that is not moving and are considering looking into their present stock levels to retain what is needed and dispose what is not.
This venture is not only costly but will open up space in their warehouse. It will allow BDI to have the versatility and capacity to improve their product offering and services. New technology will bring reliability to product delivery and would include an Automatic Storage and Retrieval System (AS\RS). Brunswick’s operational measures that would be affected by its decision would include inventory, Throughput, Operating Expenses and Utilization. An improved infrastructure as a process management decision will allow the company to obtain new equipment and help the company with their present customers.
They can consider changing the way they presently take orders (fax or phone) and include an internet based ordering system which will provide reports on customer trends, locations, goods movement and inventory control. The capital input would be quite hefty in the initial stages especially in the face of its present financial situation, as they can incur a higher charge than its present debt. Investing in a new infrastructure may not necessarily improve the inventory turnover but can assist to expand the customer base, increase assets and sales increase.
Streamlining appears to be more realistic and more efficient given Brunswick’s present financial position. The potential of having real-time ordering, after sales service and warehousing facilities would add a modernization effect to their business. As the cost would be amortized over a period of time the financial constraints would not be as damaging to their present credit rating. A new infrastructure would be perfect in a stable market and a stable company with the right resources. BDI is presently heading towards its credit limit with the bank and would need additional financing to commence such an undertaking.
The present economy is not stable and orders have not been increasing, the risk would mean trying to lure new customers and markets without having dealt with the issues in the company presently. It would be recommended that Alex Brunswick considers streamlining the operations as it is the least costly to immediately implement but as part of their long term solution to continuing and maintaining a market edge they should consider investing in a new infrastructure especially if economy turns around and stabilize and the company does good with an updated more efficient system.
Courtney from Study Moose
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