Assistance to Group Assistance _ SCM

1.  What are the characteristics of the market served by the Horizon Foods

      Corporation? 

The market served by Horizon Foods Corporation is characterized by:

• concern for high quality products.
• intense competition for retail shelf space.
• pressure from the trade for higher levels of service.
• weakening of national brands.
• small orders placed frequently reduce inventories for the trade but increase costs for the manufacturer.

2.  What problems exist at the Horizon Foods Corporation? 

The problems faced by the Horizon Foods Corporation include:

• failure to meet promised delivery dates.
• special production runs.
• large cost for public warehouses (20 of them).
• large inventory investment but still cannot ship (this is why they need special production runs).
• lack of integration between production and marketing.
• high transportation costs.
• purchasing does not appear to consider total Logistics costs.
• low advertising Levels. Horizon Foods is contributing to the weakening of its brand names by advertising at a low level and placing emphasis on promotions (which encourage brand switching and further brand erosion).
  
  

3.    Why do you think that these problems exist?

These problems exist for a number of reasons.

·       First, the company is not focused on the customer and what is required for success in the marketplace. Without a customer service study to determine what lead times are necessary, most companies make the mistake of offering lead times that are too short. Marketing people generally believe that more warehouse locations are better. However, the more warehouse locations, the more likely Murphy’s Law will rule. The more locations that the inventory is in, the less likely a customer order can be filled from any one location. The inventory will be in the system somewhere, but invariably in the wrong location. This no doubt explains the high number of special production runs as well as a significant portion of the high transportation costs. It may even account for a significant number of the small orders (actually small shipments) because customer orders are being split because of lack of inventory availability at the ship location. By putting the inventory in a reduced number of locations, orders will have a greater chance of being filled completely.

·       Second, there is not a logistics function. Responsibility for logistics activities is split between production and marketing and no one is looking at the least cost method of achieving the customer service objectives.

·       Third, the long production run mentality which leads to manufacturing efficiency may be needlessly increasing inventories.

4.  What would you suggest that the task force recommend in order to gain “control over this product movement process?” 

The major recommendations should be:

• Conduct a customer service study so that it can be determined with precision what service levels are required and how many warehouse locations are necessary.
• Create a logistics department and bring all of the materials flow activities together under a logistics executive.
• Rethink the company’s policy of producing in large production runs.