Operations and Supply Chain plans-North America and Europe

Operations and Supply Chain plans-North America and Europe

Numerous distribution logistics alternatives are accessible for regions like North America and Europe. The ideal alternative will be largely chosen based on the firm’s demands and requirements.

Direct shipment from the manufacturing site: In this option, finished products are shipped directly to clients in North America and Europe from the manufacturing facility. This reasonable choice lowers lead times and inventory carrying costs (Ribas, Lusa & Corominas, 2019). However, it might not be appropriate for businesses that don’t have a strong worldwide logistics network or restricted transportation access.

Centralized distribution center: To service clients in North America and Europe, a centralized distribution center might be constructed in a suitable area. This choice enables improved inventory management, quicker delivery times, and cheaper transportation (Diabat, Jabbarzadeh & Khosrojerdi, 2019). However, it can need substantial initial investment and might not be appropriate for businesses with low sales volumes or few resources.

Regional distribution centers: To service clients in each area of North America and Europe, regional distribution centers can be created in a variety of places. This choice lowers transportation costs, enabling quicker delivery times and improved customer service (Butt, 2021). However, operating could be more difficult and need a bigger investment than a centralized distribution center.

Third-party logistics providers: In order to control the delivery of completed goods throughout North America and Europe, third-party logistics companies might be employed. Companies may use this option to outsource logistical operations, which lowers costs and boosts productivity (Yadav, Garg & Luthra, 2020). However, managing the connection with the third-party logistics supplier could necessitate a large investment in technology and resources.

Therefore, cost, speed, dependability, and customer service should all be taken into account when choosing the finest distribution logistics solution for North America and Europe. For businesses with big sales volumes and substantial resources, central or regional distribution centers may be the best alternatives, but third-party logistics providers may better serve smaller businesses with scarcer resources. The ideal choice will ultimately rely on the particular needs and demands of the firm.

Cost Tables For Selected Logistics Based on Annual Quantities of Finished Goods

Per Geographic Area

Assuming we have chosen North America and Europe as our two geographical regions.

Distribution Logistics Options for North America:

Direct Consumer (DTC) Delivery through Online Channels

Collaboration with a 3PL supplier of third-party logistics for storing and shipping

Establishing a warehouse and delivery facility of our own in a strategic North American location

Distribution logistics options for Europe

Direct-to-consumer (DTC) distribution via Internet channels.

Establishing a partnership with a third-party logistics (3PL) service provider situated in Europe for warehousing and shipping

Establishing our own storage facility and distribution hub in a strategic area of Europe

Considering the geographical areas, it is possible to create cost tables based on the yearly quantities of completed items for each choice after identifying the distribution logistics alternatives for each geographical location. Suppose there are 10,000 completed items produced annually in North America and 5,000 in Europe.

Option 1: Direct-to-consumer (DTC) delivery via Internet channels

$10 is the shipping fee per item.

Per-unit handling expense: $5

$15 in total logistical expenses per unit.

For 10,000 units, the total logistical expense was $150,000.

Option 2: Collaboration with a 3PL supplier of third-party logistics for storing and shipping

Cost of warehousing per unit: $2

Cost of shipping per unit: $8

$3 in handling fees per unit

$13 is the total logistics price per unit.

$130,000 is the total logistical expense for 10,000 units.

Option 3: Establishing a warehouse and delivery facility of our own in a strategic North American location

Fixed cost for warehouse construction: $500,000.

Variable price per unit: $1

$6 is the total logistics price per unit.

10,000 units at a total logistical cost of $60,000 + $500,000 = $560,000

Direct-to-consumer (DTC) delivery via Internet channels is the first option in the Europe Cost Table.

$12 for each unit sent

$5 per item for handling

Each unit will cost $18 in total logistics.

5,000 units will cost $90,000 in total for logistics.

Option 2: Cooperation for warehousing and shipment with a third-party logistics (3PL) company situated in Europe.

Cost per unit of warehousing: $3

$9 for each unit sent

Each unit will cost $4 to handle.

Each unit will cost $16 in total logistics.

For 5,000 units, the total logistical expense was $80,000.

Option 3: Establishing a storage and distribution facility of our own in a strategic location in Europe

Warehouse construction will cost a fixed $250,000.

Variable price per unit: $2

$10 is the total logistics price per unit.

Cost of logistics for 5,000 units as a whole: $50,000 + $250,000 = $300,000

The logistics cost data, in summary, reflects the overall logistics expense for each distribution logistics option based on the yearly output of completed goods for each region. The choice of one alternative over another is influenced by a number of variables, including price, effectiveness, scalability, and consumer preferences. Before choosing one course of action over another, it is critical to thoroughly weigh all available options.

Lead Times for Finished Goods

We can calculate the lead times for completed items using the available logistical options as follows:

Delivering directly to consumers (DTC) via internet channels. Lead time for processed and shipped completed goods: 2–5 days

Collaboration with a 3PL supplier of third-party logistics for storing and shipping. Lead time for processing and transportation of final goods: 1-3 days

Establish a warehouse and delivery facility in a strategic North American location. Lead time for processing and transportation of final goods: 1-2 days

Required Average Inventory Levels of Finished Goods

Demand by location: The main criterion in establishing the necessary inventory levels is the demand for finished goods in each location. It would be best if I calculated the average demand for finished goods in each region based on prior sales information, current market trends, and other pertinent variables.

Lead Time: Lead time is the amount of time needed to produce, package, and transport a product in order to fulfill an order. Consider the lead time for each location when determining the necessary inventory levels.

Safety Stock: Safety stock is the additional stock that is kept on hand to handle unforeseen changes in demand or production delays. When determining the necessary inventory levels, you should consider the appropriate level of safety stock for each location.

Production Capacity: The greatest number of finished goods that can be produced in a specific time is called production capacity. The manufacturing capacity should be taken into account while estimating the necessary inventory levels.

After taking into account these variables, I can use the method below to determine the necessary average finished goods inventory levels by region: Area Demand times Lead Time plus Safety Stock equals Required Average Inventory Level. For instance, let’s assume that Area A has a weekly average demand for finished goods of 100 units and that orders typically take two weeks to complete. You have concluded that Area A needs a safety stock of 50 units. The average inventory level needed for Area A would be as follows, using the calculation above. Area A’s necessary average inventory level is 250 units (100 units multiplied by two weeks). In order to satisfy demand, account for lead time, and preserve safety stock, you would need to have an average inventory level of 250 units of finished goods for Area A.

References

Butt, A. S. (2021). Strategies to mitigate the impact of COVID-19 on supply chain disruptions: a multiple case analysis of buyers and distributors. The International Journal of Logistics Management.

Diabat, A., Jabbarzadeh, A., & Khosrojerdi, A. (2019). A perishable product supply chain network design problem with reliability and disruption considerations. International Journal of Production Economics, 212, 125-138.

Ribas, I., Lusa, A., & Corominas, A. (2019). A framework for designing a supply chain distribution network. International Journal of Production Research, 57(7), 2104-2116.

Yadav, S., Garg, D., & Luthra, S. (2020). Selection of third-party logistics services for an Internet of Things-based agriculture supply chain management. International Journal of Logistics Systems and Management, 35(2), 204-230.

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The report will be in business report format with the elements below as section headings, with subheadings as needed, in numbered
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