Introduction The Meats division of Grand Sud Distribution, S.A., a food products company in southern France, was created in 1989. Until recently, this division accounted for a stable 40% of the company sales. However, severe turmoil in the European meat industry, driven by consumers safety concerns, is dramatically affecting this contribution. Recurrent media coverage of the Mad Cow Disease had taken a toll on consumer sales of meat products; and although public fears would eventually subside; sales recoveries seem neither consistent or predictable. The Meats division of Grand Sud Distribution (GSD) comprises three production centers in Avignon, Marseille and Perpignan, and four distribution centers located in Nmes, Nice, Marseille and Lyon. GSDs profit margins have been shrinking in recent years due to both intensified competition, and a lack of ability to react to turbulent market conditions. The company has become very concerned about this situation and is struggling to more tightly control its costs. Until now, management had paid little attention to the influence of logistics on their costs: distribution was organized according to a routine dating back to the inception of the divisions operations. Indeed, logistical decisions tended to follow a logic of geographical proximity of the production and distribution centers, with occasional reliance on outsourcing to fill the gaps. This decisional pattern was heavily anchored on a practice that may have made sense in the early days of the Meat division operations, but which had continued more or less unquestioned since then. Supply and Distribution Procedures The GSD production centers receive supplies of unprocessed meat from local cattle farms and abattoirs six days a week. The meat carcasses are processed and the products packaged at the production centers. The packaged meat products are then shipped to the regional distribution centers. The distribution centers, responsible for the distribution of other fresh food product varieties as well, will then sell their products to local supermarkets. Meat from any GSD production center must be on the supermarket shelves the next day. Each morning, the manager of each distribution center calls GSD headquarters to order the quantity of meat to be delivered to his/her center the next day. Transportation by refrigerated trucks has been contracted to an independent company, on a tariff basis of 2.50 (Euro) per ton1 per kilometer. The total packaging, including boxes, wrappings, and wooden pallets, amounts to about 5% of the weight of the goods. The production centers negotiate three-month contracts with local cattle farms for the daily supply of fixed quantities. Meat carcasses must be processed and delivered on to the distribution centers on the same day they are received. Any meat product not shipped to a GSD distribution center can subsequently be sold off to local independent distributors, which have tacitly agreed not to compete with Grand Sud Distribution. The independent distributors pick up the meat directly from the production center at a price of 4.00 per kilogram. GSD is responsible for the Cold Chain from the moment meat carcasses enter its production facilities until the packaged products are delivered to supermarkets or picked up by the independent wholesalers. If necessary, distribution centers can also turn to external suppliers for all or part of their needs. The costs of using suppliers external to the GSD group are shown in Exhibit 2. The average wholesale selling price to client supermarkets is the same at the four distribution centers: currently 4.83 per kilo of packaged meat. Grand Sud Distribution management would like to take a fresh look at their production and shipping decision processes in the Meats division. As a first step, summary data pertaining to production centers and distribution centers have been gathered. These are shown in Exhibits 1 to 4.

GRAND SUD DISTRIBUTION, S.A. Case data Exhibit 1. Production Center Data Production Center Tons of meat processed daily Production and packaging cos ( per kilogram of meat) Avignon Marseille Perpignan 50 30 25 3.92 4.20 3.90 Exhibit 2. Cost of Outside Suppliers Distribution Center Cost per kilo of meat delivere (/kilogram) Nmes 4.57 Nice 4.65 Marseille 4.73 Lyon 4.72 Exhibit 3. Distances from Production to Distribution Centers Distance (kilometers) Nmes Nice Marseille Lyon Avignon Marseille Perpignan 50 120 200 265 200 500 100 30 325 190 325 450 Exhibit 4. Daily Demand at Distribution Centers (a typical example) Distribution Center Tons of meat needed Nmes 15 Nice 50 Marseille 20 Lyon 23 GRAND SUD DISTRIBUTION, S.A. Case data Exhibit 1. Production Center Data Production Center Tons of meat processed daily Production and packaging cos ( per kilogram of meat) Avignon Marseille Perpignan 50 30 25 3.92 4.20 3.90 Exhibit 2. Cost of Outside Suppliers Distribution Center Cost per kilo of meat delivere (/kilogram) Nmes 4.57 Nice 4.65 Marseille 4.73 Lyon 4.72 Exhibit 3. Distances from Production to Distribution Centers Distance (kilometers) Nmes Nice Marseille Lyon Avignon Marseille Perpignan 50 120 200 265 200 500 100 30 325 190 325 450 Exhibit 4. Daily Demand at Distribution Centers (a typical example) Distribution Center Tons of meat needed Nmes 15 Nice 50 Marseille 20 Lyon 23