23:15 310 < 88 Q lo... 23 470 TABLE 4 Forecast Demand by Region ~ Untitled Bottle $0.60 Shea Butter $0.80 Ocean Mist $0.25 Fresh Sky $0.20 Mountain Air $0.30 Labor $0.40 Packaging $0.50 T Avg. Units per Carton Volume per Carton (cub. M) WFC MFC BB 2222 27 0.05 12 20 0.034 0.05 Cases 99% TABLE 2 Manufacturing Cost Data TABLE 3 Case Pack Data North East 30% Midwest 20% South 30% Northwest 5% Southwest 15% TABLE 5 Plants to SW New Jersey Kentucky California Transportation Cost per Truckload New Jersey $ 100 $ 600 $2000 California $2,000 $1,700 $2000 SW-DC North East Midwest South Northwest Southwest New Jersey $ 100 $ 800 $1,000 $5,000 Kentucky $ 700 $ 200 $1,500 $3,000 $5,500 $3,500 California $5,000 $3750 $3,250 $ 600 $ 300 482/496 (DCs). Each plant ships its production to the staging warehouses which, in turn, ship to the five regional distribution centers. Any staging warehouse can ship to any distribution center. The forecasted demand by region is provided in Table 4. Transportation lanes from the plant to staging warehouses and from staging warehouses to the regional distribution centers will consist of full truck loads. A full truck contains of 100 cubic meters. Johnson Skin Care products typically weigh-out a truck before cub- ing out a truck. The products will only fill 70 percent of a truck's cubic capacity before it weighs out. Bob spent considerable time researching transportation cost data and devel- oped Table 5 regarding transportation cost. The distribution centers will deliver to stores throughout the United States. Bob felt that he could omit that cost for the moment as he pondered what the total cost of distribution. There are several alternative networks, particularly related to the assignment of staging warehouses to distribution centers. To complete his analysis, he assumed that the overall inventory turnover rate would be five per year. He also knew that Johnson Skin Care histor- ically had an inventory carrying cost of 18 percent based on average inventory for the year. Questions 1. Develop a flow diagram depicting all of the possible supply chain flows, 2. What supply chain network would you recommend to Bob Bassett based on the current four echelon structure (plant SW DC Store)? 3. If you could modify the current supply chain strategy, what would you change and why? 23:15 310 < 88 Q 99% ~ lo... 23 Untitled T The manufacturing cost of each product can be determined from the data in Table 2. These costs include the contract manufacturer's profit margins. Bob visited each facility in Johnson's current supply chain. The company uses two contract manufacturers to actually mix the ingredients, bottle and package the finished products. The two contract manufacturers are located in New Jersey and California. The California plant produces WFC. The New Jersey plant produces MFC and BB. All prod- ucts are single sourced, so neither of the plants produces the same product within a cat- egory. Table 3 provides case pack information from the plants. The company has three staging warehouses (SWS) located in New Jersey, Kentucky and California. Regional demand has been aggregated into five regional distribution centers Bottle $0.60 Shea Butter $0.80 Ocean Mist $0.25 Fresh Sky $0.20 Mountain Air $0.30 Labor $0.40 Packaging $0.50 TABLE 2 Manufacturing Cost Data 470 TABLE 4 Forecast Demand by Region Avg. Units per Carton Volume per Carton (cub. M) WFC MFC BB 2222 27 12 20 0.05 0.034 0.05 Cases TABLE 3 Case Pack Data North East 30% Midwest 20% South Northwest 30% 5% Southwest 15% TABLE 5 Plants to SW New Jersey Kentucky California Transportation Cost per Truckload New Jersey California $ 100 $2,000 $ 600 $2000 $1,700 $2000 SW-DC North East Midwest South Northwest Southwest New Jersey $ 100 $ 800 $1,000 $5,000 Kentucky $ 700 $ 200 $1,500 $3,000 $5,500 $3,500 California $5,000 $3750 $3,250 $ 600 $ 300 (DCs). Each plant ships its production to the staging warehouses which, in turn, ship to the five regional distribution centers. Any staging warehouse can ship to any distribution center. The forecasted demand by region is provided in Table 4. Transportation lanes from the plant to staging warehouses and from staging warehouses to the regional distribution centers will consist of full truck loads. A full truck contains of 100 cubic meters. Johnson Skin Care products typically weigh-out a truck before cub- ing out a truck. The products will only fill 70 percent of a truck's cubic capacity before it weighs out. Bob spent considerable time researching transportation cost data and devel- oped Table 5 regarding transportation cost. The distribution centers will deliver to stores throughout the United States. Bob felt that he could omit that cost for the moment as he pondered what the total cost of distribution. There are several alternative networks particularly related to the assignment of staging 23:15 310 < 88 Q lo... 23 ~ Untitled 99% CASE 12 To 12 J MY ANES Johnson Skin Care Products Johnson Skin Care Products is a manufacturer of men's and women's organically based skincare products. The company is based in Kentucky and has developed several new and exciting products for sales through retail stores in the U.S. market. Historically, the com- pany has distributed its products to the institutional market. Its direct customers included spas, hair salons which provide services such as facial treatments, and other such busi- nesses. These customers had been enthusiastic in their reception of Johnson products and sales have grown rapidly. The most recent year sales were slightly over $36 million and operating profit was over $4.8 million. The company's Return on Assets, measured as Operating Profit divided by Invested Capital, was an admirable 28 percent. After considerable market research, the company decided to enter a more traditional market by selling and distributing its products through a network of retail stores for sale to consumers. Being new to this type of channel, the company president, Jim Johnson, hired Bob Bassett into a new position at the firm, Director of Logistics. Bob is a relatively young man, age 34, who received an MBA with a concentration in supply chain management from a major Midwestern university. Following college he worked for six years in several different positions at a large health and beauty aid manufacturer. Bob had progressed rap- idly in his short career and Jim felt confident in his choice despite Bob's youth. Bob settled into his new position, spending the first few weeks familiarizing himself with the company's and current operations. He learned that Johnson Skin Care's product line consisted of slightly over 100 SKU's but the vast majority of sales were accounted for by three Annual sales Avg. unit price WFC $15,000,000 $5.00 MFC BB $4,500,000 $4.50 $2,000,000 $6.25 Cases product categories: women's foot care (WFC), men's foot care (MFC), body butter (BB). It was expected that the same sales pattern would be true in the new distribution channel. The market research team had developed an initial year forecast for the new channel (Table 1) based on expected average unit selling price to the retailer for these three categories. Having worked in a large manufacturer before joining Johnson Skin Care, Bob was not surprised to learn that the primary components of each of these products were quite similar to each other. While there are other minor ingredients costing only a few cents each, the five major components consist of: Bottle Shea Butter Ocean Mist Scent Fresh Sky Scent Mountain Air Scent Each product is made of three or more of these components: WFC is comprised of Bottle, Shea Butter, and Ocean Mist Scent. MFC is comprised of Bottle, Shea Butter, and Fresh Sky Scent. BB is comprised of Bottle, Shea Butter, and a combination of both Fresh Sky and Mountain Air. TABLE 1 Forecast Sales and Selling Prices 469