The paper 'Dream Beauty Company - Why the Supply Chain Costs Seem Skewed" is a good example of a business case study. Supply chain management is one of the most important aspects of an organization. Proper knowledge of supply chain theories and practices could determine to some extent the success of an organization. For that reason, the paper analyses the case study of the supply chain attributed to Dream Beauty Company. The main aim of the analysis is to identify some of the flaws in the distribution channels and make a recommendation in order to maximize the profits for the firm.
The analysis shows that the company has several branches, which increases its delivery costs. The inventory holding period is also high. In addition, the packaging of orders has got an immense problem. The paper has made several recommendations some of which includes the introduction of a standard package, instituting a depot at the manufacturing headquarter, and automation of order processing among other measures. Keywords: Supply chain management, distribution channels, branches, standard package Introduction Dream Beauty is a manufacturing firm located in Money City, Nevada and it specializes in the production of beauty supplies and cosmetics products.
The company has seen a considerable increase in its sales hitting up to $130M, which has also reflected on its annual costs. The increase in cost has impacted negatively on its profits and the management has suspected that the problem could be lying within its supply chain. Shah (2009, p. 10) describes the supply chain as the transformation of raw material and components into finished products and efficient delivery to the clients. On the other hand, the management of supply chain is the design and all the management processes across the boundaries of an organization with the main objective of matching the demand and supply in the most cost-effective manner (Hugos, 2011, p.
56). Therefore, the aim of this paper is to analyze the case study of Dream Beauty and make an appropriate recommendation in line with the findings. Why the Supply Chain Costs Seem Skewed Dream Beauty has a very simple distribution channel. The manufacture of all the products takes place in the companies’ headquarters. The products are then shipped to its distribution centers across the United States.
The company services its orders from these centers to its three distinct clients; retail stores, convenience stores located in 13 different stations, and the mass merchants. These customers contribute 50%, 30%, and 20% of the sales revenue respectively. The supply chain had an order fulfillment cycle cost of $50M, which is incurred in order processing, packaging, labeling, and delivering the products. The retail, convenience stores, and mass merchants placed 1,000, 2,500, and 100 orders that were shipped in 800, 1,100 and 100 packages correspondingly at the same cost.
The company has also maintained a fulfilment cycle of 3 days, with inventories of 90 days for retail, 60 days for convenience stores, and 40 days for mass merchants with the total carrying cost of 15% of total average annual inventory. Convenience stores pay within 45 days, while retail and mass merchants pay within the recommended period of 30 days. The main strength of the company is the treatment of its customers without any preferential. All the clients are equal. The company also has its branches all over the county to allow for quick delivery of the products to their clients (Coyle et al.
2012, p. 60). Specifically, Dream Beauty has a total order fulfillment period of three days. However, the transportation of these goods has a considerable cost attached to it. In fact, the delivery has the highest chuck of $30M out of the $50M of total supply chain cost. Basically, this is the transportation cost that the company incurs in shipping the products from its manufacturing headquarters to the distribution centers and transporting them again to its clients.
This is because all the products have to be produced from a central point before being dispatched to the distribution centers. The company shoulders all the delivery costs to their clients’ destinations.
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