1. What is the total distribution cost for W-G-P Chemical Company? What is the cost per pound, cubic foot, case, line, and order? How can these measures contribute to the distribution review process? In order to calculate the total distribution cost, carrying cost must be calculated. Inventory carrying cost rate was given as 18%. The formula is Annual carrying cost=average inventory level * carrying cost rate Average inventory was given in table 4 as $90 million. Therefore Annual carrying cost=$90 million*0. 18=$16. 2 million Thus Total distribution cost equals all costs in table 4 excluding average inventory level.
Cost per order=Total distribution cost/orders =33. 2m/19,139=$1,7346. 678 per order With these measures W-G-P chemical company will identify where to cut costs. Also, by benchmarking these measures against their competitors’ measures, they will pinpoint areas that need improvement and areas they have a competitive advantage. 2) On a map, plot the distribution facilities and network for W-G-P Chemical Company. What product and market characteristics can help explain this distribution structure? Most of these agricultural regions are situated close to the distribution centers with easy access to
the modes of transportation such as freight railroads, canals and inland waterways and interstate highways. Farmers purchase prevention and support products 1 to 2 weeks before field application and it also mostly depend on the intensity of the rainfall. WGP Company would have the ability to deliver quickly to these farmers since distribution centers are situated close to agricultural areas. By adapting this strategy, lead-time would be shortened. The dry and liquid agricultural chemicals are usually stored in bulky containers and dealers also purchase them in bulk to distribute to the farmers.
Thus, the best modes of transportation are by water, railroads and highways. 3) What alternative methods of distribution should W-G-P consider for Prevention and Support? 4) Discuss the rationale for a)Early order Program b) Customer pickup policies c) Use of public versus private warehouse facilities. a)Early Order Program- WGP Company will be equipped to meet the demands for all their dealers. This program will also allow WGP to plan shipments at their convenience. This will enable WGP to consolidate shipments when possible to avoid less-than-truckload situations, which will help in reducing transportation cost significantly.
b)Customer Pickup Policies- This policy will help decrease transportation costs because WGP will not be responsible for shipping and delivering products to dealers. c)Use of public versus private warehouse facilities- since preventive and support are seasonal products, it is best for WGP Company to use public warehouses instead of private warehouses. With public warehouses, WGP will avoid the payment of fixed costs on the warehouses and also avoid the payment of labor employed in private warehouses.