OPM 4150 Module 5 Final Project: A Logistics Strategy for a Restaurant Supply Distributor Example

Next Morning, Every Kitchen: A Logistics Strategy for a Growing Restaurant Supply Distributor

Student Name

B.S.B.A. in Operations Management, Thomas Edison State University

OPM-4150: Logistics

Mentor Name

Month Day, Year

Next Morning, Every Kitchen: A Logistics Strategy for a Growing Restaurant Supply Distributor

The Firm and Its Objectives

The distributor supplies 2,300 independent restaurants and small chains across southern New Jersey, the Philadelphia area, Delaware, central Pennsylvania and Maryland with kitchen supplies, disposables and small equipment. It operates one 180,000 square foot warehouse in Paulsboro and a fleet of 26 trucks. Its restaurant customers place about 3,800 orders a week, most of them late at night after the evening dinner service. Its owners have set three strategic objectives for the next three years: grow sales 40 percent, mostly in central Pennsylvania and Maryland; deliver 95 percent of orders by the next morning; and hold logistics cost at or below 9 percent of sales.

Gourdin (2006) argues that a logistics strategy must flow from the firm's competitive strategy: logistics creates advantage when it delivers what customers value at a cost the firm can sustain. For restaurants, which have little storage and run out of supplies without warning, reliability and speed are what they value most.

The Current System

Logistics cost is 8.6 percent of sales, within the target, but the network cannot support growth or the service objective.

Strategy Element 1: Network Design

The total cost analysis in Module 1 showed that adding a warehouse in Harrisburg lowers total logistics cost by about $100,000 a year and raises next-day coverage to 94 percent. Combined with route changes, the 95 percent objective is within reach. The Module 3 breakeven analysis showed that public warehousing in Harrisburg is cheaper until volume reaches about 369,000 hundredweight, which growth should bring by year three. Chopra and Meindl (2016) note that network design decisions set the bounds within which all other logistics decisions operate, so this is the strategy's foundation.

Strategy Element 2: Transportation

Inbound shipments should use the cheapest mode on total cost for each lane and season. The Module 2 analysis showed intermodal rail saves about $200 a load on the Chicago lane for ten months of the year, with truckload kept for peak season. The distributor's eight other main inbound lanes deserve the same analysis. Outbound, the Harrisburg site will add six trucks and shorten routes, and route planning software will set daily routes by order volume rather than by fixed territory.

Strategy Element 3: Sourcing

The Module 4 landed cost analysis showed that importing prep tables saves about 7 percent after pipeline and safety stock costs, but with higher risk. The strategy extends that approach to other equipment lines with stable designs, such as shelving and sinks, while keeping domestic sources for at least 30 percent of each line. Christopher and Peck (2004) argue that resilience comes from flexibility and alternative sources; the split preserves both.

Strategy Element 4: Warehousing and Information

Scanning-based warehouse software at Paulsboro, with data shared by the Harrisburg public warehouse, will cut picking errors toward 0.3 percent and give a single view of inventory across both sites. Bowersox et al. (2013) emphasize that information integration is what allows a multi-site network to act as one system, by letting orders be filled from the best location and inventory be balanced between sites.

Strategy Element 5: Measures

The strategy needs measures that match its objectives.

Options Rejected

Two other options were weighed. One was to keep one warehouse and add a cross-dock in Harrisburg, where trucks from Paulsboro would transfer orders to smaller vehicles overnight. A cross-dock costs less than a warehouse, but it would not hold inventory, so orders would still leave Paulsboro the afternoon before and next-morning service to the farthest customers would remain uncertain. The other was to partner with a third-party logistics provider to serve central Pennsylvania entirely. That would avoid capital spending but would hand the distributor's most important customer contact, the delivery, to another firm, at a margin cost the owners estimated at 2 percent of regional sales. The second warehouse, starting as public space, keeps control of service while limiting the fixed commitment, and it can grow into a private site when volume justifies one.

Sequence and Cost

The savings from intermodal, imports and the lower total network cost, about $160,000 a year by year two, offset part of the investment, and the growth in sales the strategy supports keeps logistics cost within 9 percent.

Responsibilities

The operations director will own the network and warehousing elements, the purchasing manager the sourcing and inbound transport elements, and the controller the measures and cost tracking. A monthly review of the five measures will keep the strategy on course, and the owners will see a quarterly summary.

Risks

Three risks could undermine the strategy. Growth in Pennsylvania may come slower than planned, delaying the private warehouse decision; public warehousing protects against this. A global disruption could cut off imports; the 30 percent domestic share protects against this. And the WMS rollout could disrupt Paulsboro during installation; installing it in the slow summer months reduces that risk.

Conclusion

The distributor's objectives, growth, next-morning service and controlled cost, require a logistics system built for two regions rather than one. A second warehouse, total cost transport choices, a balanced global sourcing policy, an integrated warehouse management system and measures tied to the objectives together form a strategy the firm can carry out over three years. Each element rests on an analysis from the course, from the total cost comparison to the landed cost of imports, and together they apply the course's central lesson: logistics decisions must be made as a system.

References

Bowersox, D. J., Closs, D. J., Cooper, M. B., & Bowersox, J. C. (2013). Supply chain logistics management (4th ed.). McGraw-Hill.

Chopra, S., & Meindl, P. (2016). Supply chain management: Strategy, planning, and operation (6th ed.). Pearson.

Christopher, M., & Peck, H. (2004). Building the resilient supply chain. International Journal of Logistics Management, 15(2), 1-14. https://doi.org/10.1108/09574090410700275

Gourdin, K. N. (2006). Global logistics management: A competitive advantage for the 21st century (2nd ed.). Blackwell.