Autoparts Distributors Ltd.: Improvement Strategies

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Introduction

The flow of goods and services of a given organization is a very important process in the running of its operations. Although many organizations recognize the significant role played by the supply and distribution chains in business, not many of them have effectively implemented or executed a well-elaborated and consolidated supply chain that meets the needs and specific preferences of their customers (Rhodes, 2004, 45). While a few of the organizations have shown the sense of having a supply and distribution systems, they have generally implemented very simple ones where they incorporate elements and different ingredients to enhance the organization’s performance and make it rise to the leadership’s position but which at the end of it makes the system fail to meet the standards of a basic supply and distribution system.

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As the organization grows and develops, existing supply and distribution systems might be not the right ones because of the diverse complexities that emerge within the organization’s structure, operations and management. This implies that an organization should cease maintaining a static form of supply and distribution chain. However, they should maintain a dynamic type of system which has the ability to absorb the organization’s expanding needs as it expands its business. In this particular paper, we will focus on the supply and distribution chain of Autoparts Distributors Limited (ADL); especially on how it can improve its distribution strategies to increase its effectiveness, efficiencies to reduce costs while improving its performance and profitability.

Five major improvement strategies for ADL

Based on the information revealed in the case study, several challenges are facing Autoparts Distributors Limited. These problems are well linked with the area of supply and distribution chain of the organization which depicts some deficiencies in its supply chain. To accomplish the mission and goals of the organization, it is certain that the organization has to modernize the current supply chain by changing its structure, or activities of operations. This will allow it to meet the consumers/ clients’ needs and make it possible to serve them satisfactorily.

On looking at the current supply and distribution chain of the ADL Company, it’s overtly stressing and straining the organization as its current nature of structure and operations do not meet the need for maximum profitability of the organization. As the organization endeavors to restore its supply and distribution chain which permits the realization of maximum profitability several improvement strategies should be adopted. These include:

Improvement in inventory management-: this entails the monitoring of the flow of stock held within the organization’s storage systems. The organization appears to experience stock deficits in its operations. This shows that the organization has poor planning on the acquisition of its inventories. The implication of the underestimation of the inventory is the organizations will be forced to purchase their inventories at any price in the current market. In case of rising prices of the goods the company is operating on, the acquisition of such goods would be costly, or expensive as compared to lowly priced ones. Therefore, through the implementation of stringent monitoring measures on the stock flow in the organization’s storage systems, the organization operators are given the opportunity to assess the different quantities and levels of inventories.

The management of inventories of the organization would thus enable the organization to reduce its costs of purchases and transportation. It also ensures that the organization does not incur losses resulting from running out of stock (Weightman, 2004, 29). In this particular situation, the organization is constrained on leaned sales and sales return, hence, there is no full enjoyment of the return on the profitability of the organization. Another important part of inventory management is the delivery of orders, where stocks must be managed to ensure orders are timely delivered to the client’s destination.

The second possible strategy which the organization can employ to improve its delivery of services is through the management of procurement processes. This entails expedited processes of handling order placement as well as invoices in a timely manner. The procurement processes also go hand in hand with some transportation processes. The main transportation processes which would affect the procurement procedures include scheduling of the supplier and coordination of these processes. (Fagan, 2007, 197)

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The third strategic way through which the ADL Company can have its distribution system improved is by focusing on the nature of its distribution network. The organization management should focus on harmonizing the physical distribution of main storage facilities. These comprise the considerations of the spatial arrangement of facilities such as warehousing. It further involves the examination of the geographical distribution of major storage systems to ease the accessibility and transfer of the products or services from one particular place to another. It is therefore imperative to choose prudently the site of the distribution centers to assume a more centralized form than assuming a decentralized form which is costlier to operate and manage.

The organization can alternatively transform its operations and performance by changing the manner of use of its available resources, to retrieve maximum benefits without causing any damage and degradation. In this particular case, the organization would have to see into it that all of its available transportation facilities are utilized to the maximum. In case such facilities are less to adequately serve the organization, the management should consider venturing into a project of acquiring new additional facilities that would meet the organization’s needs. While taking any improvement step based on this specific strategy, the management has to integrate both the physical resources with the non-physical one of human resources. The reason is that any deficit or deficiency on these would automatically lead to low utilization of the other, since both the physical and non-physical resources have maximum production when they are well synchronized, and neither can achieve its purpose without the other.

To achieve efficient and effective supply and distribution processes in the organization, there should be well-coordinated communication systems. What this implies is that the organization should have modern communication systems installed and well-operated to allow timely communications among, and between parties (Cooper, 2009, 166). The ADL hence should employ the use of IT systems to communicate as well as help in collecting data and information from the different departments or offices and individuals engaged in distribution and supply chain systems.

Major beneficial strategies of the ADL Company

Although several alternative methods or strategies can be utilized by the ADL organization to enable it to serve its customers satisfactorily, it is noted that not all of these strategic techniques do bear or have the same benefits to the organization. This is due to their different abilities to generate profits and give maximum satisfying services to the organization’s clients. Depending on such factor considerations, three strategies were selected or were viewed to have greater benefits to the organization than the others. These include improvement in inventory management, Implementations of modern techniques of communication, data and information collection, and Optimization of connectivity/distribution network.

Improvement on the inventory management

As mentioned earlier, managing inventory is very important to any organization which seeks to rise to the leader’s position on the ladder of competition. From the revealed data or information of the ADL Company, it’s clear that the organization has done little to adjust from its stagnated or static distribution system on the monitoring of the flow of its inventories. While maintaining the old versioned system of checking and controlling its inventories, the company finds itself running into many problems.

On focusing on the improvement of inventory, the organization tries to reduce several kinds of costs. One of the majors, in this case, is the purchasing costs. Proper arrangement of stock checks enables the managerial team to make arrangements of goods and services in time. Through this, the organization is able to negotiate for the best prices to be offered, and once again, this aids the organization to avoid the purchase of goods or services through impulse environment which is likely to lead to buying of the wrong products as far as the quality of the product is concerned. The implementation of a standard inventory system is also important as it ensures that the organization stocks the right commodities which are on demand. Under such kinds of operations, the organization prevents having its finances stuck on goods or services which are being held by the organization in its stores. As a result of this, the organization is able to keep its activities running or on operation without having much worry of financial shortage or constraints.

One of the greatest problems that plague organizations are the increase in costs especially those emerging from transportation services. Though the problem might be serious depending on the organization structure of operation, there is a general reduction of the transport costs incurred when offering discounted transport services (Martin, 2011, 117). To offer these services without incurring extra costs which are out of the planned or budget, the organization should implement a distributed cost-sharing strategy. To accomplish this, the company should prudently reduce the price for their products and begin charging a transport fee. This process will enable the company to generate profits in two areas, one being that of the products and another one from the services of transport which they will have to pay due to the heavy nature of the product which is not easy to carry around.

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On the other hand, the organization would need to cut off those transport services and maintain a bit high prices for those light products which the clients can carry around without feeling the pain of heaviness. However, in case the client wants to have transport services to be extended to her/him by the organization, the number of products should be the determining factor, and this should only be extended when the client has purchased products that show the organization is meeting its profits estimated after deduction of transport costs (Fagan, 2007, 241). While the organization is specializing in selling vehicle repair spare parts, for which most of them are light ones, there is no need of offering a transport service discount. Looking at the nature of the goods, it seems that the clients have to purchase them, as they are mandatory for maintaining the vehicle on the roads. So, whether the organization offers transport discounts, clients have to buy the products and make arrangements to their destination place. In this case, avoiding charging high prices on the commodities may not be a good decision, since the organization’s customers offer services to their clients, who are financially stable to purchase luxurious commodities. What this implies is that the clients can easily pass the extra costs of the product and transport services to the third party who are the owner of the vehicles. Alternatively, the clients can carry the products on their own means after buying them expensively and pocket the transport service cash in case the product is light and the destination distances are short.

Implementations of modern techniques of communication, data and information collection

The success of a business depends mostly on the ability to make a sound future decision upon the assessments and evaluation of held available data and information by the organization. The ADL should therefore have systems that make it possible to collect the relevant data and information, and also which permits ease access of it to the relevant departments or individuals. Following this approach, it’s believed that the organization would be able to have better schedules for the supply of its products to its clients in a better way. Often, the supply and distribution of products in short-duration practice are much costlier than one in which there is an adequate time duration to prepare for supply. This is because a lot of errors are likely to occur and there is a high demand on the labor force. Having valid data and information, it would thus make the officers in charge of the distribution plan early and set the best time of supplying the clients with products. Setting on to supply the clients twice or thrice a day is less costly than having to supply products hourly, or after half an hour.

The implementation of modern data and information gathering system within the distribution part would allow the organization to supply its products in advance as it happens with buying on credit, and this permits clients to take products in large quantities (Cooper, 2009, 356). The effect of this practice is that the organization will be able to supply its products at appropriate hours of the day. For instance, the organization will have the freedom and opportunity to supply its product during hours or periods when the roads are less busy having traffic jams, which in turn tends to increase to costs of distribution. Under this particular consideration, the ADL Company may consider the setting of its schedule to distribute the products during the dawn hours or late hours of the day, while avoiding the use of those hours which have heavy traffic jams.

Connectivity/ Distribution network

Well-connected distribution networks enable an organization to considerably reduce costs of operation. Strategically situation facilities allow a supplier to reach his clients with easy and without having to incur great expenses. If the organization decides to concentrate its market, it reduces distances of transport. On the other hand, a decentralized distribution channel increases the costs of operation as well as transportation (Rhodes, 2004, 132).

Discussion on simulation

From the manipulation of the different strategies on the appropriate system, the use of inventory strategy shows that there is a great improvement in the way customers are served. The customers are able to access the product at places where they intend to get it without having to look at the different auto spare stores around that place. While the organization enjoys enormous profits received from the sale of the products and transports services for the heavy parts, this method fails to satisfy the client’s needs as it is limited to time, hence, they cannot access the goods after business hours. On the side of implementing modern data and information methods, there are anticipated benefits of reducing time spent on sorting and procurement. The noticeable change this will bring is easing the process of order placement as the systems are kept running throughout the day. According to the understanding of the revealed experience, one would therefore make the following few comments:

  • Of the three strategies, there are no single methods that can adequately satisfy the needs of the clients and those of the organization.
  • An effective and efficient distribution improvement system is only possible with a combination of several strategies but no one strategy.

References:

Anderson, S. (2009). Strategic cost management in supply chains. New York: McGraw-Hill.

Cooper, B. (2009). Supply Chain Logistics Management. McGraw-Hill.

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Fagan, L. (2007). Raising profits through lower distribution costs. NY: Harvard business Press.

Martin, C. (2011). Logistics and Supply Chain Management. FT Press.

Rhodes, E. (2004). Supply Chains and Total Product Systems. Blackwell Publishing.

Weightman, P. (2004). Food Supply Chain Management. Blackwell Publishing.

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