Supply Chain Management

I. Major Factors The management of Dream Beauty Company, a manufacturer of consumer beauty supplies and cosmetics, is concerned with the increased costs of its supply chain management. The firm’s supply chain costs recently reached an all time high of $130,000, which could be attributable to various factors including additional sales and increased costs for order fulfillment. Currently, the Dream Beauty’s total order fulfillment is averagely three days despite the order size.

Dream Beauty Company has received 3600 orders, provides excellent customer service, and has a discount policy for the channels it services. II. Major Problem Despite its highest standards of customer service and industry benchmark in order fulfillment, Dream Beauty Company is experiencing problems in increased supply chain costs and needs to examine the effectiveness of its three-day order fulfillment cycle. III. Possible Solutions Dream Beauty’s major problem can be addressed through several potential solutions because of the various issues in the firm’s supply chain management framework.

First, the firm should consider decentralizing its order processing and centralizing labeling to reduce costs. This will help in by enabling the company to capitalize on the economies of scale and increase efficiency and delivery speed. However, this will generate complexities on the use of the labeling machine and may not lessen costs. Secondly, Dream Beauty Company should consider cost allocation for convenient stores to cater for higher levels of costs unlike in the current arrangement.

This will help in lessening supply chain costs because these stores will account for over 50% of the company’s total sales and profits. However, the effectiveness of this potential solution requires holding the others constant, which may be a complex process given the changing nature of the firm’s operations. The third potential solution is for Dream Beauty Company to work in collaboration with shipping companies to obtain better prices.

This will help lessen the costs of the delivery process, which account for 60% of the total supply chain related costs. However, this could be difficult to implement given the provisions of the existing contracts between the firm and the shipping companies. The other potential solution is for Dream Beauty Company to move its warehouse to where inventory is kept and fulfilled since this will lessen delivery costs and shipping times (Bowersox et al., 2012). However, the identification of a suitable geographical location for the warehouse could be a difficult process. IV.

Choice and Rationale The most suitable solution for Dream Beauty Company to address the current problem is to decentralize order processing since it has more advantages for the company in comparison to the other potential solutions. Decentralizing order processing will help the company to enhance efficiency in deliveries, which will contribute to decreased supply chain costs. Garrehy (2014) states that decentralizing order processing enables a company to enjoy the benefits of proximity to customers, flexibility, timeliness of information access, increased motivation, and low labor costs.

Through decentralizing order processing, the firm will enhance the efficiency and accuracy of its supply chain system while reducing costs. This solution should be implemented while maintaining the current three-day fulfillment cycle since it enables the company and its customers to have adequate time to plan for the supply chain process. Decentralizing order processing will help.