_Case study 3.4: The aim of the Glup SA case study is to try and identify a clear input-output relationship, so enabling the conversion of discretionary costs into engineering costs. Glup SA is planning to spend 0.5m on improved material handling equipment on their main distribution centre, with the aim of making the facility more flexible. A number of perceived benefits have been identified but at present the company lacks the information to quantify an input-output relationship to substantiate the business case for the upgrade, and so the cost at present is 100% discretionary. The following benefits have been anticipated: Improved in-store availability Glup SA intends to commission a market research agency to determine the average in-store availability for products. There is a feeling within the company that the figure is low and that sales are being lost to competitors so reducing contribution. The data will be used to build a simulation that will model and highlight the benefits of the new material handling equipment in terms of improving the average in-store availability for 12 products the contribution derived additional sales would then be directly related to the upgrade and so a relationship would exist. Reduced transport costs It is anticipated that the proposed new equipment will increase the utilisation of the pallets by accommodating trays of different SKU's. This will result in higher utilisation of the assets employed in the outbound logistic activity. The aim is to quantify the cost savings by comparing the existing operation with the proposed new solution using simulation modelling. The proposed benefits such as reduced transport costs can be calculated and attributed to the new equipment so establishing a cost/benefit relationship. Promotions and new product launches The proposed new equipment is expected to increase the accuracy and speed of promotions and new products to selected stores. The aim is to reduce the length of time the product spends in the pipeline from factory to supermarket. Glup SA intends to simulate the new operation to determine the time saved and or the value of obsolete stock, which is superseded by the new product or a promotion of the existing product. The savings generated in terms of stock write- offs, reverse logistics and lost sales will be directly related to the equipment upgrade so attributing a causal relationship.

Consider the facts of the Glup SA case study below. Comment on the following: 1. What are the challenges faced? 2. Discuss the opportunities and the accompanying advantages that the company should be exploring 3. What other benefits are not included in the write up below?