Distribution Network Reengineering at Bis Corporation: A Case Study in Supply Chain Optimization
Overview
This case study examines the Bis Corporation, a paint manufacturer facing inefficiencies in its 20-year-old single-tier distribution network. The analysis identifies low truck utilization, inventory turns, and service levels as critical problems and proposes a two-tier distribution network restructure involving primary and secondary warehouses to reduce transportation costs and improve overall distribution efficiency.
What this case study covers
- Company background and current distribution challenges
- Problems with existing network and rationale for reengineering
- Proposed two-tier distribution network alternative and expected benefits
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Case Study: The Bis Corporation
The Bis Corporation is a paint-producing firm established in the 1960s. It has eight manufacturing plants that serve an estimated 2,000 retail stores. It relies on a single-tier network for the distribution of its products. Products are shipped from the plants to 17 warehouses country-wide first, then to retail accounts (Simchi-Levi et al.). However, inbound truck utilization, inventory turns, and service levels are low, indicating a need for a more efficient network. What is essential with this question is that distribution networks should evolve based on changes in the external environment.
The current production and distribution network was established 20 years ago. They are no longer efficient today due to the significant changes in the external environment. Further, Bis produces and sells 4000 different stock-keeping units, which implies that an efficient distribution network can be enhanced by reengineering the production, inventory management, and logistics function. Modernizing the distribution network while leaving the three aspects in their current state may impede distribution efficiency. The reengineering is supposed to improve the efficacy of distribution and align the service costs with account profitability (Simchi-Levi et al.). A vital aspect of the current distribution network is low truck utilization and high transportation costs. Therefore, another objective of reengineering the processes is to reduce transport costs.
An alternative to the current distribution network is a two-tier distribution network. The network will include primary and secondary warehouses.