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Transportation and Logistics Management OSCM455-H1WW-W13 Case Study Westminster Company Diane Irwin May 10, 2013

3 Westminster Company is one of the largest manufacturing companies of consumer health products and was founded in 1923. The company started as a family-operated pharmaceutical supply business; but has expanded, by virtue of aggressive new product development into a global provider. Westminster Company has regional offices in Europe, Latin America and the Pacific Rim to support the overseas manufacturing and distribution. The company also has a domestic operation that consists of three wholly owned companies that manufacture and distribute a unique line of domestic products. Westminster Company operates as a decentralized management; which encourages responsibility, self-ownership, and an incentive for entrepreneurial management. The company markets their products through diverse retailers and wholesalers. The pressure from domestic and international competitors, as well as one of their largest customers; have forced them to reevaluate their supply chain practices in order to keep up with customer service, product demand and the logistics of transportation of raw materials and finished products (Donald J. Bowersox, 2012). In order for Westminster Company to keep running a successful business, they will need to run a more efficient system, increase sales in volumes, consider private label sales, and change their networking in able to communicate more efficiently between warehousing, sales, logistics, customers and corporate personnel. The company will also need to examine how they want to handle their inventory, a better transportation schedule, utilize a SKU system and a plan to meet customers requirements and specifications as their needs change. Westminster Company will need to look at some key issues for logistics: movement of product, movement of information, time/service, cost, and integration. The movement of product can raise the risk of higher cost, so a system consolidation would make transportation a more economical way to transport. Utilization of full truckloads to and from distribution centers

4 would lower the transfer and customer freight cost. However, the cost of using a third party transportation company for transfer and customer freight is less obvious. Distribution and transport are an important aspect for customer satisfaction as it affects quality, response time and financial cost; which with the movement of information this could help curve some cost that would be associated with miscommunication and causing late or wrong shipments. Warehousing is definitely an issue with the Westminster Company; they have distribution centers is six different states with different companies that they own, so if they consolidate the two centers in Newark, NJ and the two centers in Los Angeles, CA they could save money and time by having less travel time between the two and service delivery time with everything under one roof. Warehousing costs is associated with inventory, service and risk, the risk of damage to products and the difference in counts from records to reality. Other cost to consider is retrieval cost, packaging cost, and loading cost. Truckload volumes would be easily gathers and distributed, order fill rates would improve by less travel time which would minimize customer effect for their product and would keep customers happy. There are a lot of factors that would impact the warehousing decisions, like costs will affect the decision to use a third party or private warehouse facilities. Warehousing costs represent a major factor of costs for Westminster Company. According to the case, the total warehousing costs for Westminster during the year was $8.5 billion for company A, $6 billion for company B, and $7.4 billion for company C; which amounts to a total warehousing cost of $21.9 billion, which was roughly 38% of the logistics costs service provider. The company could divert these funds to other areas of the business such as; developing a strong IT infrastructure, which would help them run the ERP solution. Apart from the financial gains, by using a third party logistics provider it could utilize its expertise.

5 A third party service provider would be more efficient than owning their own warehouse; but not being able to maintain it properly. Another point of conflict would be labor; Westminster would not be responsible for the labor cost or the availability of skilled workers. Moreover, by outsourcing logistics activities, Westminster could save on capital investments, and reduce financial risks. They could also expect an excellent level of service, because of the highly competitive market and the advent of numerous service providers. Outsourcing would also enhance its performance and help to achieve good results. Moving of product is not the only change that needs to happen; the company also needs to know that orders are coming in and when they must be delivered for sound decision-making. This information needs to be shared and communicated between the company, suppliers, carriers, warehouses and customers. Internally, it needs to move among purchasing, customer service, logistics, manufacturing, sales, marketing and accounting. The company needs to establish an ERP (Enterprise Resource Planning) system; which would help them manage the important parts of the business. ERP systems provide visibility for key performance indicators (KPIs) required for meeting corporate objectives. ERP software applications can be used to manage product planning, parts purchasing, and inventories, interact with suppliers, provide customer service, and track orders. This system would be a great asset to the company and would require extensive training and considerable business process analysis. The solution for the labeling issue can be found by using RFID labels. RFID labels can be attached to big pallets for large clients. This allows for instant stock taking, just by scanning the RFID label. The label has all the details about the stock within the pallet. Details include number of SKU, number of total units, and details about the SKUs. Also, they can imply RFID for their own stock in their warehouse for good inventory management. Moreover, they can

6 charge the customers for whatever value added services they provide to cover the costs. Companies are happy to pay for value added services, because they are only being charged for what they are getting. Key measurements are also needed for a company in order to be successful. Performance measures or metrics are needed for global supply chain performance improvements. The metrics should show how well the company is providing goods for customers, how well the company is handling its business from speed to asset/inventory and financial metrics. Given the crossfunctional nature of many supply chain improvements, metrics must prevent organizational silo behavior which could hinder supply chain performance. Westminster Company has had many great years, but with the change in times, there are changes in business. Although the company has operated great in the past years, they can operate better in the years to come by establishing a solidified warehousing structure, possessing combined shipments to conserve on cost, the incorporation of information technology (IT), to keep up with the companys inventories with software like ERP, and contain an integrated management supply chain structure. Westminster Company can look at where they can consolidate warehouses and processing plants to run smoother, and keep customer needs in mind to keep customers happy. The company can with a little time become the company of today.

Works Cited
Donald J. Bowersox, D. J. (2012). Transportation and Logistics Management. New York, NY, USA: The McGraw-Hill Companies, Inc.