Work Process Improvement Analysis

In order to evaluate the possibility and economic justification for building a new liquid chemical distribution facility near New York City, we must first look at the additional costs vs. transporting good from our Charleston, South Carolina Facility. In order to first perform an analysis on this new facility we first must come to some conclusion of what kind of data we will need. In order for our analysis to be as accurate as possible, we must consider several factors which include; the reduction of volume in our other facilities and transportation costs. Another factor that we must consider is how inventory levels will be affected at our Charleston, South Carolina Facility.

In order to maximize profits, we must determine which products to distribute through the new facility. We also will need to look at construction costs and purchasing of the real estate for the new facility. Overhead of this new facility will also play an important role in determining if it is feasible to increase profits.

METHOD

In order to perform our analysis, we can walk though the analysis by using the problem solving method. Identify the opportunity, analyze the current process, and develop the optimal solution. We then can implement the changes, and study the results to standardize the solution to plan for the future.

Improvement Process Strategies

Improvement process strategies, when looking at the possibility of a new facility, we must consider the four primary improvement strategies. Will this new facility repair, refine, renovate or reinvention. To sum up these strategies we can look at our current operations and see how the new facility will improve our operations.

1. Repair - anything broken must be fixed.

a. Our current distribution system is not broken however without some sort of improvement we will see a decline in market share.

2. Refinement - this is improving a process that is not broken.

a. Without a facility in the Northeast, we can expect our market share in that region to decline by 5% per year for the next five years then stabilize. With the new facility we can see a market share increase by 10 to 15% per year over the next three years. With the new facility we can expect to see an increase in market share that is equivalent to a 15% increase in annualized sales volume. We can consider our current distribution system broken given the fact without the new facility in the Northeast our market share will decrease.

3. Renovation - this is a strategy, which results in major improvements typically directly related to technological advancements.

4. Reinvention - this type if strategy uses the approach that our current system will never satisfy customer needs and wants.

Data Needed

In order to fully perform this analysis, we will need additional data for this analysis to be as accurate as possible. The data needed is as follows:

1. Market Share increase amount

a. Range 10 to 15% over next three years

b. 5 to 8 % for the next two years

2. Increase annualized sales volume 15%

3. Cost to delivery

a. Received by Rail

b. Shipments by Tank Truck

4. Cost of Construction

5. Cost of Real Estate

6. Operating Costs

Once we have the data from the above list, we then can compare it to the reduction of costs (inventory, operating costs and shipping costs from our Charleston, South Carolina Facility) to the costs associated with the new facility.

Another factor we need to take into consideration is the fact that building this facility will have an affect of inventory levels; we need to consider the reduction of these costs in other facilities when determining the company gains from opening this new facility.

Building / Purchasing the New Facility

Looking at one Eastern PA located at the juncture of three interstate highways along with two major railroads to serve the city, I would start by contacting local commercial real estate company to find what is available. One of the features I would look at is the modification that would be needed to make the building work for our production and warehouse needs. I would also look at empty commercial land and compare to building a new facility on empty land vs. modifying an existing building to fit our needs. I would also look into any tax breaks that may be given for companies creating jobs in certain areas. Another key factor will be its location to the three interstate highways in conjunction with the location to the railroads. To estimate the costs of the new facility, I would first make a list of all our requirements needed to operate efficiently, then I would start to get quotes from local contactors plus time frames to complete the tasks.

Which Products to Distribute from this facility?

In order to determine which products to distribute from this facility, we will need to analyze which products are being shipped to what city and from where. Our previous studied determined that liquid chemicals would be best suited. The idea is to achieving a strategic fit. We need to understand the customer needs for each of the targeted segments of the products we offer. Also another consideration is we need to understand the response time needed for delivery and how our new facility will affect the price of the product.

Operating Costs

In considering the operating costs, we need to determine the cost of living index for this city in eastern Pennsylvania. We then need to compare it to our facility in Charleston, South Carolina. A warehouse job in South Carolina may pay more or less in Pennsylvania depending on the cost of living index. There are quite a few free cost of living and salary comparisons available on the web two I recommended is the one provided by CNN and Home Fair job market (See Reference page for URLS). Once we determine the medium wage for the equivalent jobs performed at our South Carolina facility, we can compare operating costs and give a good estimate to how much it will cost to operate in Pennsylvania. Other factors we need to consider that can vary from state to state is taxes both property and city and cost of utilities.

Conceptualized Conclusion

At Canbide, we currently have a push/pull view of the supply chain process. We even have had issues at our Denver Colorado facility with customers showing up to pick up products with no order or paperwork in place. Ultimately, we will need to set up our new facility to have a "Pull" supply chain process so that we can have a smooth operation and not run into the same Denver Colorado issues with transpiration issues. The pull process is an reactive process to the customer demand, with the customer demand acknowledged we can properly scheduling transportation of the goods to the customer and be sure we have product on hand. We can even take it a step further and with our marketing / sales department to get a feel for customer demand on a quarterly and yearly basis so we can maximum production and minimize costs. Our primary goal is to have responsive Supply Chain using a lead-time strategy to be able to better service our customers with a location in the north east part of the United States. We want to accomplish this but not at the expense of the cost of our goods to our customers.

References:

Cost of Living Calculator

http://www.homefair.com/homefair/calc/salcalc.html

http://cgi.money.cnn.com/tools/costofliving/costofliving.html