Rainbow Manufacturing Company (Logistics Issue)
Evaluation
Strengths
- Tai Po facilities is more convenient and efficient because it is owned and managed by the firm
Weaknesses
- The separation of Tai Po (depot) and Yuen Long (Central warehouse) warehouses
- Yuen Long facilities is located in a multi-story building and logistic facilities within the building are shared by tenants
- Engineering department will not be as quick as Tai Po troubleshooting compared to Yuen Long
- Communication between the two warehouses is done manually with messenger assistance
- Raw materials, finished goods and packaging materials are stock in the central warehouse for the use of the depot in manufacturing
- Warehouses are being fully occupied
- Slow moving products that lasts in the central warehouse for 3-4 months
- Records updating (inventory status and purchase data) is manual
- Stocks are kept in random location
- FIFO inventory system
Opportunities
- Operations and facilities in the two warehouses are the same in the areas of staking, racking and retrieval
- Centralization is applied in logistics functions
- The bulk order of supplies from China can be straightly deployed in the depot since different departments have tasks on this transaction. The central warehouse is merely a storage venue which makes communication and transportation redundant
- Staffs in the central and depot warehouses can be housed in the same location to avoid comments of heavy workload from the latter.
Threats
· The full capacity practices in the two warehouses may serve as bottleneck for depot to store finished products to central warehouse (the same is true from central warehouse to depot when regards to supplies and packaging materials). This can delay exportation from different countries as well as manufacturing operations.
· Sub-contractors and central warehouse may have conflicts because shipping department is the one responsible for documentation and coordination in outbound shipments. In effect, local deliveries could be delayed.
Recommendation
As observed in the evaluation, the merging of two warehouses in one location is the ultimate answer to resolve the lack of integration, communication difficulties, inflexibility, absence of real-time data and other inefficient practices in the value chain of the firm. Due to this, there is a need to review the business and financial strength of relocating either the two warehouses as long as all activities in the value chain are done in one location. One option is to integrate central warehouse to the Tai Po office or Tai Po office to Yuen Long. Tax considerations and export capabilities would be the most crucial measurement of integrating to Tai Po within the industrial estate. In the contrary, when Tai Po will be integrated to central warehouse, the Yuen Long location will be disregarded due to disadvantages of the multi-story building design. There is a need to find larger land space and probably to build new facilities for integrated operations.
Appendix
Attach 1: Some facts about Logistics System
- Research suggests that logistics creates more value when cost leadership strategy is applied (2003 ).
- Best performers have highly integrated system across internal and external supply chains ( 2000 )
- IT can help integrate logistic systems but having the fundamentals of IT does not mean that competitive advantages would follow
- Emphasized vehicle management through prescheduled and dynamic dock scheduling including automatic picking or retrieval of goods from the warehouse
- Efficient shippers use electronic data interchanges to place order and on-line booking
- There is transparency, automatic capacity checking, monitoring of orders and maintenance of quality control
- Logistics service providers offer lower labor costs although when logistics serve as core competency for the prospective clients or it is very integrated in the business, they are reluctant to outsource such service.
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