Central Pa Distribution and Warehouse

CPDW– Chapter 5 Case

Andrea Moniz

Supply Chain Management 2– TRA 3155

Professor Jumper

Broward College

July 6, 2015

Abstract

Central PA Distribution and Warehouse (CPDW) was founded roughly five years ago in Milroy, Pennsylvania by a group of individuals who owned a business or had management positions with local businesses. Following the leadership of the CEO, Harry Groves, the partners purchased a building and land from Sanyo Corporation. CPDW bought the building in hopes of utilizing it as a distribution facility and providing logistics services for companies within central Pennsylvania.  Even though the building was not perfect for storage, the partners believed it could be used for repackaging, order fulfillment, and reverse logistics. Harry Groves starts a monthly meeting by telling board members that the company had another depressing month which was portrayed in the monthly financial statements, and his description of the monthly activities. During the meeting, Jay Lenard asks for more information on the current situation. Jay thought things were going well due to the fact that the company was utilizing square footage and the square footage utilization metric was the company’s best performance metric. Harry tells Jay that the square footage utilization metric is not an accurate metric for gaging profitability and even though they are utilizing space well, the company is not making a profit because they are not moving products in or out.

CPDW’s biggest problem is that they have chosen the wrong metrics to gage their performance on. They are using a metric which measures the utilization of square footage, but this metric is no good for a distribution center and warehouse. The company’s profit should be coming from shipping items in and out but instead they have been acting more like a storage facility.  When the building is full of items that are not moving in or out there is no room for additional items to come in. Also, they did not figure pricing correctly and are undercharging the customers. The company’s costs are exceeding the money they are receiving from customers due to the inaccurate pricing which is causing the company to lose money.

Developing distribution and transportation metrics and key performance indicators is a challenge for any organization. CPDW’s distribution and logistics management has to realize that the unit of measure for each metric may differ across various departments and operations. Distribution and transportation metrics may be classified in the following major categories: Quality Metrics (Frequency of damage, Number of back orders or stock-outs), Process management (Orders picked per hour, Units processed per hour, etc.), Asset management (Equipment downtime, Inventory turns), Warehouse Utilization (Storage utilization, Fill rate, Rate of stock-outs) as well as Financial perspective measurements (Cost per order, Return on investment, Distribution cost efficiency, etc.) and Customer perspective measurements (Rate of customer returns, Rate of on-time delivery) (Mohamed,2009).