February 19, 2012
The results of this paper center on the supply chain and logistical functions of an elite pharmaceutical organization in the United States. Westminster Company retains three separate companies, which produce and distribute individualized or differentiated commodities independently. This paper will discuss the changes being considered within their supply chain structure, which are, the establishing of a solidified warehousing structure, possessing combined shipments to conserve on costs, the incorporation of information technology (IT) to keep up the companies’ inventory using software like enterprise resource planning (ERP), and …show more content…
The cost of these value added service systems while expensive can be charged back to the customer with little resistance. When value added services are charged back to a company they understand that they are getting what they pay for. This is true because with customary pricing a single flat rate is charged, which means even if a customer does not need certain parts of the service they are still charged for it (Bowersox, Closs, & Cooper, 2010).
Warehouse consolidations impact on inventory carrying costs, customer service levels, and order fill rate are:
Taking multiple warehouses and consolidating them allows for a single warehouse for storing of all the individual plants’ products. The storage of these goods joined with a demand based inventory replenishment strategy, will ultimately lead to the costs of inventory, storage and handling to be reduced. Because of these replenishment strategies inventory levels will never reach overflow to the point of expiration, so overall waste will be reduced. Inventory risk and service costs, cost of storage, and capital cost are comprised to make up carrying cost of inventory, with capital cost being the largest. Consolidation aids in the reduction of costs associated with operations, handling and transportation, it also establishes economies of scales when the overall cost of inventory is reduced. Labor is a key cost