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Bis Corporation

Bis Corporation produces and distributes paint from eight manufacturing plants to 2,000 retail stores. Their current single-tier distribution network results in low truck utilization and high transportation costs. The CEO wants to reduce costs, increase profits, and improve service levels. The document recommends replacing the current network with a two-tier distribution system including primary warehouses that receive products from plants and secondary warehouses that serve retail outlets. This could potentially allow for higher truck utilization and reduced transportation costs while meeting the CEO's goals. Key challenges include determining the optimal number, location, and size of the primary and secondary warehouses.

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Xinru Chen
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280 views2 pages

Bis Corporation

Bis Corporation produces and distributes paint from eight manufacturing plants to 2,000 retail stores. Their current single-tier distribution network results in low truck utilization and high transportation costs. The CEO wants to reduce costs, increase profits, and improve service levels. The document recommends replacing the current network with a two-tier distribution system including primary warehouses that receive products from plants and secondary warehouses that serve retail outlets. This could potentially allow for higher truck utilization and reduced transportation costs while meeting the CEO's goals. Key challenges include determining the optimal number, location, and size of the primary and secondary warehouses.

Uploaded by

Xinru Chen
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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Bis Corporation

Business Situation:
 Company that produces and distributes paints and has now eight manufacturing plants and sell to 2000 retail stores
 CEO pointed out that inbound truck utilization, inventory turns and service level are too low and their current
production and distribution strategy was designed 20 years ago and was never modified
 Goal: reduce cost/increase profits --> transportation and distribution
 improve service and increase efficiency, increase inventory turns by positioning inventory, aligning service to the
profitability
o Goal: deliver to retail location in one day
 They didn’t want to construct new plants because it's too risky
Their current logistic network -> this single tier network forces low truck utilization and hence high transportation cost
 Produce and Store at the manufacturing plants
 Pick, load and ship to a warehouse center
 Unload and store at the warehouse
 Pick, load and ship to the stores
Analysis and Insight:
 High number of SKUs (Produce and sells about 4000 different SKUs at a similar price and the gross margin in the
paint industry is 20%)
 8 manufacturing plants, 17 warehouses, 2000 retailers
 Single tier strategy and no inventory positioning strategy
Some of the constraints:
o Customer service is concern as there are number of competing products in the market (CEO insists to
remain competitive, delivery time should be no more than one day for most retail outlets
o CEO opposes building a new manufacturing plant because of the costs and risks involved (risk and
uncertainty)--> they are willing to change the focus of different facilities so each M facility produces the
appropriate product
o Non uniform volume growth as the product is varying amongst the product family
Recommendations:
Bis needs to consider replacing the logistics network with two-tier distribution network that includes primary and secondary
warehouses.
 Primary warehouse receive products from plants and transfer inventory to secondary warehouses
 Secondary warehouse will serve the retail outlets
Since the number of primary warehouses is relatively small, it can potentially allow for high truck utilization and hence
reduction in transportation costs
Challenge is to identify number, location and size of primary and secondary

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