Woodmere Products' decision to implement time-based logistics

Woodmere Products Case Analysis

Problem Identification

Woodmere is a reputable furniture manufacturer which has been presented with the opportunity of aligning its forces with HomeHelp, an equally reputable and successful retailer, which has been met with increasing levels of sales (even throughout the financial crisis). The factor which conditions the alliance refers to the request forwarded by HomeHelp for Woodmere to change its logistics system. The proposed system, the time-based logistics, is a relatively new concept, but is expected to simultaneously reduce inventory and increase customers' access to products by improving the availability of products to in-store clients. Given this situation, the problem refers to the insecurity of the next step to be made -- should Woodmere implement this new and challenging system and align their forces with HomeHelp or should they pass the opportunity due to the risks associated with it?

Sub-Problems

There are two main sub-problems associated with the overall issue of the alliance with HomeHelp. The first revolves around the increased sensibility of a close and tied relationship between manufacturer and vendor. If Woodmere were to become associated with HomeHelp, it would come to share its risks. The second sub-problem is given by the challenges of implementing a time-based logistics system. Additional questions in this direction refer to the financial costs associated with a move toward time-based logistics, the organizational change that would have to be implemented to respond to the new needs, as well as the impact such a shift would have upon the more traditional customers, especially those who do not see any real benefit in the new logistics system. Furthermore, additional costs could be registered by over-serving the traditional customers. Both of these sub-problems have been pointed out by executive leaders who feel increased levels of reticence to change, are more traditional and need to be presented the benefits of a new alliance with HomeHelp.

4. Alternative Solutions

There are three means in which the managerial team at Woodmere could respond to the challenge raised by a prospective alliance with HomeHelp. The first sees the full adoption of the time-based logistics system, with the concomitant elimination of the current system. The second alternative sees that Woodmere maintains its current system for traditional operations, but also introduces time-based logistics for its relationship with the retailer. Finally, the third solution is that of dismissing the offer made by HomeHelp and continuing operations as they are currently handled. The following lines assess the three alternatives in terms of the benefits and limitations they generate.

4.1. Implementing a time-based logistics system (replacing the current system)

Advantages:

It would secure the deal with HomeHelp, which would in itself generate a series of advantages such as the gaining of a clear competitive advantage over other furniture manufacturers or the increased access to a wider customer palette, which would in the end materialize in increased organizational revenues

It would create and strengthen Woodmere's reputation as an innovator, which would in turn improve its public perception, the attention of the industry and other categories of stakeholders, which would in the end increase the company's popularity and the demand for its products

If Woodmere were to decide in favor of internationally expanding its operations, the time-based logistics system could offer it the necessary support (Hise, 1995)

It generates massive improvements to supply chain operations, such as increased flexibility of the logistics system, increased quality of both products and services, competitive prices or better communications (Andries and Gelders, 1995)

It could also support the transition to a performance-based logistics interface (Bowersox, Closs and Cooper, 2009)

Disadvantages:

The replacement process will only succeed if it is structured on "modern logistics foundations" (Andries and Gelders), which imply additional costs in terms of all capital, technologies as well as human resource

Financial costs pegged to the employees' reticence to change, in the meaning that the time it would take for them to readjust to the new system would translate into lower productivity rates

4.2. Assuring the coexistence of the current and time-based logistics systems

Advantages:

Reveals the benefits of both current and time-based logistics systems

Fosters innovation in a context of maintained traditional safety

Allows for a period of testing of the new logistics system

Allows for a relevant and direct assessment and comparison of the two logistics systems

The combined model would support the creation of a new strategic approach, a relationship with the supply chain and as such an increased competitive position (College, 2009)

Finally, the dual system would create a more mobile and flexible supply chain, which would better allow the entity to respond to the challenges of the modern day market and industry (Supply Chain Management Review)

Disadvantages:

Implies additional costs with the maintenance of both systems, including capital, technologies and human resource costs

The work conducted through the dual logistics system is complex and could even be perceived as tedious

4.3. Disregarding the possibility of an alliance with HomeHelp and continuing with the current logistics system

Advantages:

No additional costs

No additional risks

Disadvantages:

Limited prospective gains

Possibility of losing the competitive position

5. The Selected Solution

The second proposed alternative solution is the most adequate one, at least for the time being, as it combines the advantages of both traditional and time-based logistics, while reducing their limitations. First of all, the adoption of the time-based logistics system allows the company to take the opportunity presented by HomeHelp and strengthen its competitive position, improve its internal supply chain operations, promote itself as an innovator and so on. Secondly, the maintenance of the traditional logistics system creates a safety net in case the deal with HomeHelp falls through or in case the new logistics system does not fully generate the benefits initially estimated. The most probable outcome however is that Woodmere will fully benefit from all advantages offered by the partnership with HomeHelp as well as those implicit to the adoption of the time-based logistics system. In time, it is then expected for the removal of the traditional system and its full replacement with the time-based solution.

6. Implementation Plan

The dual logistics system would be implemented throughout seven successive steps, as follows:

(1) Communicate the decision for the time-based logistics system to Nan Peterson and get insight into their experience with time-based logistics

(2) Contract the specialized services of a company with vast expertise in managerial consultancy, especially a transition from one logistics system to the other as well as the implementation of change in a means that is accepted by the organization

(3) Offer training programs to the Woodmere employees to familiarize them with the time-based logistics system

(4) Launch operations based on the new logistics system

(5) Foster the fruitful relationship with HomeHelp

(6) Conduct internal analyses to reveal the consequences of the newly introduced system; these analyses would occur at all organizational levels including manufacturing, marketing or finance

(7) Formulating conclusions and making recommendations for the future based on the data retrieved through the analyses

References:

Andries, B., Gelders, L., 1995, Time-based manufacturing logistics, Logistics Information Management, Vol. 8, No. 6

Bowersox, D.J., Closs, D.J., Cooper, M.B., 2009, Supply Chain Logistics Management, 3rd Edition, McGraw-Hill / Irwin, New York

College, B., July 2009, Development and analysis of a supply chain strategy taxonomy, Journal of Supply Chain Management, Vol. 45, No. 3

Hise, R.T., September-October 1995, the implications of time-based competition on international logistics strategies, Business Horizons

Synchronizing the Distribution Supply Chain with Mobility, Supply Chain Management Review, http://scmr.resourcecenteronline.com/resource_center/asset/1660-Synchronizing_the_Distribution_Supply_Chain_with_Mobility?q=supply+chain last accessed on October 6, 2009

Case Study: Woodmere Products