Scenario:

You have been hired by Pirch as a Logistics / Supply Chain Management consultant to help them with their supply chain challenges. After meeting with the team, you have collected the following information.

General Info

Pirch is a retailor of luxury kitchen and bath appliances and fixtures.https://www.pirch.com/ Links to an external site.They are based in Sothern California operating out of seven retail showrooms. They are currently experiencing a period of rapid growth. Since 2019, annual retail sales have doubled. Given the rapid growth the company has also doubled the number of employees to approximately 500. While the company remains profitable, the CFO is worried about the increase in operating costs.

Showrooms

Products are displayed in companies 7 showrooms. The showrooms only contain display items, and no physical inventory is held at the showrooms. The sales team at each location helps the customers select products and places the orders for them. Additionally, the sales team is supposed to find out when the customer needs the items by (the requested delivery date). Since most orders are placed at the beginning of a construction project (new home construction or remodel) most items are not needed for at least 4-12 weeks.

Sourcing

As soon as an order is received from the showroom, the sourcing team immediately places the order with the distributor. During the Covid-19 pandemic, orders were taking up to 6 months to arrive. For the past year, this has not been the case and orders are arriving within 4 weeks. However, to ensure Pirch has the orders ready when the customer wants them, the sourcing team continues to place orders as soon as they can.

Warehousing

Pirch currently owns and operates 3 warehouses. Each warehouse is capable of storing boxed item such as light fixtures and plumbing parts, full pallets, and bulk items such as refrigerators and bathtubs. Over the past 2 years the inventory levels in the warehouse have greatly increased. Due to increased inventory levels, it is often difficult to find empty locations for new items to be stored. Everyday orders are pulled and consolidated for the delivery team to pick up the next day.

Delivery

The delivery schedule is set one week in advance. This is due to the fact that the requested delivery date is rarely accurate. Given there are often delays in the construction projects, the actual delivery date is often pushed back by several weeks and in some cases several months. Deliveries are rarely requested for a date earlier than the initial requested date. Monday through Friday, the delivery team picks up orders from the 3 warehouses and delivers them to the customers that same day.

Questions:

1. Identify how Pirch is currently doing managing their order cycle time.

2. Do you recommend Pirch change their order cycle time? If so, what do you recommend and why?

3. For the past 2 years inventory cost have been on the rise. While many at Pirch believe this is a good thing because 70% of the on-hand inventory is allocated for orders, there are some who are worried about the amount of on-hand inventory. Do you agree that the increase in on-hand inventory is good for the business? Justify your answer.