According to Jocelyn Harrison, closing the distribution center would eliminate approximately in costs. Multiple Choice $650.000 513 million 52 milion 59 mition 51 miltion This case is important because the supply function is frequently given responsibility for logistics and transportation. As a leader in the supply organization, you need to understand the potential costs and benefits of maintaining a central distribution center. Read the following case on Huntington School District and then answer the questions that follow. Huntington School District On Tuesday May 7, Derek Chan, supply manager for Huntington School District (HSD), in Arizona, met with Jocelyn Harrison, finance supervisor. The district's forecasted operating budget for the following year would be in a deficit and Jocelyn had been asked to make recommendations that would address the problem. During their meeting. Jocelyn proposed eliminating the central distribution center and giving the schools responsibility for managing their own supplies. Derek had to respond to Jocelyn's proposal by the end of the week. THE SCHOOL DISTRICT The HSD was created four years earlier with the amalgamation of four regional school districts into one centralized administrative body. Despite a growing population in the area, the amalgamation was deemed necessary to cut costs through operating synergles. The amalgamated HSD operated approximately 200 schools employing more than 8.500 full-and part-time staff, in a geographic area covering about 3,000 square miles. Prior to amalgamation, the Huntington City School District had been the largest of the four, with approximately 100 schools, while the three others were smaller rural school districts. The current operating budget for the HSD was $690 million. SUPPLY MANAGEMENT The supply departments for the three rural districts were eliminated at the time of amalgamation, and the purchasing department at the Huntington City School District was given responsibility for the new HSD. Staffing levels were maintained at the pre-amalgamation levels of 12 people. For a number of years, the supply department had been utilizing its SupplyNot e-procurement system to make it easier for staff to order supplies and to help manage its inventury at the distribution center. At the time of the amaigamation, the three other districts also adopted the same system, which had been upgraded recently. Purchases for the HSD, excluding major construction projocts, specialized consulting services, legal and financial charges, were opproximately $100 million per year. When a staff member at a school needed to make a purchase, they placed an order on HSD's e-procurement system. Orders were cross-checked by finance for approvals and to ensure adequate budget resources were available to acquire the requested goods or services. The system consolidated orders and issued SUPPLY MANAGEMENT The supply departments for the three rural districts were eliminated at the time of amaigamation, and the purchasing department at the Huntington City School District was given responsibility for the new HSD. Statfing levels were maintained at the pre-amalgamation levels of 12 people. For a number of years, the supply department had been utilizing its SupplyNet e-procurement system to make it easier for staff to order supplies and to help manage its inventory at the distribution center. At the time of the amalgamation, the three other districts also adopted the same system, which had been upgraded recently. Purchases for the HSD, excluding major construction projects, specialized consulting services, legal and financial charges, were approximately $100 milion per year. When a staff member at a school needed to make a purchase, they placed an order on HSO's e-procurement system. Orders were cross-checked by finance for approvals and to ensure adequate budget resources were available to acquire the requested goods or services. The system consolidated orders and issued purchase orders to suppliers daily. The district also used purchasing cards for some small value purchases. THE DISTRIBUTION CENTER The supply management department maintained a 30,000-square-foot distribution center in the City of Huntington, which served two primary purposes. Inventories were maintained ot the warehouse for general supplies, such as poper, office supplies, and janitorial products. These inventories were maintained either because quantity discounts justified bulk purchases, minimum order quantities set by suppliers, or substantial delivery lead times warranted holding safety stock. Inventory levels at the distribution center averaged $1.3 million, although it fluctuated considerably during the year. Also housed at the distribution center was the district's inventory of educational resource supplies - equipment such as audiovisual moteriat and special teaching supplies - that schools used occasionally and could loan on a short-or mediumterm basis. The distribution center aiso operated the district's delivery system, including inter-department mail, supplies, educational resources, computer equipment, and audiovisual equipment for repair or loan. In addition, the delivery service handied the removal of surplus equipment and furniture for disposal, Deliveries were made to schools and district offices twice per week, and sometimes more frequently if required. The district owned four delivery vans and one large moving truck. The distribution center had one supervisor, one clerk, five warehouse staff, and five delivery drivers. Overall, school and odministrative staff were satisfied with the current arrangement and the services provided by the distribution center. JOCELYN HARRISON'S PLAN When Jocelyn Harrison met with Derek, she explained that the HSD was forecasting a deficit of $9 million for the coming Purchases at the Huntington School District accounted for approximately percent of the district's total budget. Multiple Choice 14.5 20.5 11.5 8.5 255 The distribution center also operated the district's delivery system, including inter-department mail, supplies, educational resources, computer equipment, and audiovisual equipment for repair or loan. In addition, the delivery service handled the removal of surplus equipment and furniture for disposal. Deliveries were made to schools and district offices twice per week, and sometmes more frequently if required. The district owned four delivery vans and one large moving truck. The distribution center had one supervisor, one clerk, five warehouse staff, and five delivery drivers. Overall, school and administrative staff were satisfied with the current arrangement and the services provided by the distribution center. JOCELYN HARRISON'S PLAN When Jocelyn Harrison met with Derek, she explained that the HSD was forecasting a deficit of $9 million for the coming year and that adjustments to the budget would have to be made in order to address this problem. While early retirement of a number of staff and cuts to various programs would eliminate some of the shortfall, additional reductions were still required. She believed costs could be reduced by allowing schools to handle their own supplies, and proposed that the entire distribution center staff could be laid off, the vehicles and equipment could be sold and the distribution center permanently closed. Jocelyn argued that closing the distribution center was a more attractive option to making further cuts to the educational programs. She estimated that annual salary costs alone were in the $650,000 range, and that reductions in other associated overhead costs, such as rent and utilities, could easily double this number. Jocelyn asked Derek to consider her idea and get back to her by the end of the week. Derek recognized that he would need to evaluate the implications of this proposal on the HSD, before responding. Specifically, he wanted to evaluate the potential costs and benefits of maintaining the distribution center. Furthermore, implementing such a change in operations would have a substantial impact on various stakeholders, such as teachers and school administrative and maintenance staff. Derek needed to understand what accommodations could be made to support the needs of these groups if the distribution center was eliminated, Derek also recognized that if he disagreed with Jocelyn's proposal to shut down the distribution center, he would be expected to offer alternative suggestions to help address the budget shortfall. According to Jocelyn Harrison, closing the distribution center would eliminate approximately in costs. Closing the distribution center would likely Mutiple choce reduce opportunities fer discounts from bulk purchoses decrease total invemones at the district eliminate the districts deficit teduce inventory haiding costs reouce devivery conth