Delivery Strategy at MoonChem John Kresge was very concemed as he left the meet-

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Delivery Strategy at MoonChem John Kresge was very concemed as he left the meet- has a capacity of 40/XX pounds and Golden charges ng at MoonChem. a manufacturer of specialty a fixed rate given the origin and destination, irre- chemicals. The year-end meeting had evaluated ve of the quantity shipped on the truck. financial performance and discussed the fact that the Currently MoonChem sends full truckloads to each firm was achieving only twoinventory turms a year. A customer to replenish their consignment inventory more careful look revealed that over half the inve tory Moon Chem owned was consignment inventory THE ILLINOIS PILOT STUDY ith its customers. This was very surprising giver that only 20 percent of its customers carried consign- John decided to take a careful look at his distribu nventory John Kresge was Vice President of tion operations. He decided to focus on the state of men Supply Chain and thus responsible for inventory as nois, which was supplied from the Chicago distri- portation. He decided to take a careful bution center. He broke up the state of Illinois into a look at how consignmen inventory was managed llection of zip codes that were contiguous, as and come up with an appropriate plan shown in Figure 10.10. He decided to restrict atten- tion within the Peoria region, which was classified a zip code 615. A careful study of the Peoria region MOONCHEM OPERATIONS revealed two large customers, six medium-sized cus Moon Chem is a manufacturer of specialty chemi tomers and twelve small customers The annualcon- cals used in a variety of industrial applications. sumption at each type of customer is as shown in Moon Chem has eight manufacturing plants and Table 104. Golden currently charges SA00 for each forty distribution centers. The plants manufacture shipment from Chicago to Peoria and MoonChem the base chemicals and the distribution centers mix policy is to send a full truckload to each custome them to produce hundreds of end-products that fit when replenishment of consignment inventory is customer specifications. In the specialty chemicals market. MoonChem has decided to differentiate John checked with Golden to find out what it itself in the Midwest region by providing consign would take to include shipments for multiple cus- ment inventory its customers MoonChem would single load. Golden informed him tha ke to take this strategy national if it proves effec- they would continue to charge S350 per truck and tive, MoonChem keeps the chemicals required by would then add $500 for cach drop-off that Golden each customer in the Midwest region on consign- responsible for Thus, if Golden carried a truck ment at the customers' sites. Customers use the that had to make one delivery, the toual charge chemicals as needed and MoonChem ensures would be $400.However, if a truck had to make four replenishment to ensure that the customers do not deliveries, the total charge would be $550. run out inventory. In most instances consumption of chemicals by customers is ve stable. MoonChen TABLE 10.4 Customer Profile for Moonchem is paid for the chemicals as they are used. Thus all in Peoria Reg consignment inventories belong to MoonChem Customer Namber Customers (Pounds DISTRIBUTION ATMOONCHEM Smail Medium 5000 em currently uses Golden trucking. a full Iruckload carrier for all its shipments. Each truck

Explanation / Answer

1) Providing Consignment inventory to its customers.

2) No Problem of the combination

3) Strength - Four times delivery charges of the truk is $550

Weekness- Individual one delivery charge of the truk is $400 ( $350+$50 )

4) Four times delivery charges of the truk is getting benfit Compare to individual one delivery charge

one individual delivery = $400

Four  individual delivery =$400 * 4 =$1600

Four times delivery charges of the truk = $550

Benfit =$1600- $550 = $1150

  

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