Polaroid Case Analysis

IIM Indore Polaroid Corporation European statistical dispersion system Logistics Management system Submitted to Prof. S. Venkatramanaiah Group 2 AludaiyaarasuAsvin VMohan M S Prabu PRajasekar VijayaraghavanSrinivasan DK. M. Venkatraj Synopsis Polaroid Corporation, headquartered in Cambridge, Massachusetts, was a company marketed a wide potpourri of instant photographic products for consumers and industries. After the deregulation of US motor pains consolidation of the stores in US took place, which resulted in an improved inspection and repair aim and reduced make ups.Overwhelmed by the consolidation results, the caution wanted to consolidate the subsidiaries warehouses in the Europe to a direct distribution. There were around Twelve European subsidiaries each where headed by general manager. Of that France, Germany, Italy and United Kingdom together get take on of identifyed 70 80% of the gross sales. The Polaroid had three primary production areas in v alley of Lev en, Scotland, Enschede, moolahherlands and one in Cambridge itself. The site at Enschede in like manner served as a central distribution site and export center known as International Distribution center (IDSC) that served all the international subsidiaries.Each European underling had their own warehouse to cater as a buffer and for customizing the orders, finicky packaging and rush orders. As the measures for the economic integration of the European familiarity also do the direct distribution as an impetus choice which could be used to save the conveyance cost by 25%. But there was a resistance by the general managers of the European subsidiaries because of various problems like layoff, Buffer reduction, depriving the responsibility and above all, they felt that IDSC management team didnt had the management skill. They were also skeptic about the yield after implementation.Tom carrol, Director of International Distribution and customer service had diametrical options before him. Like come up handover to a third fellowship or implement the direct centralized distribution. For Direct distribution, in the first of all place, he was contemplating in picking the first subsidiary to be centralized among the distinguishable options of Austria, UK, Italy and Germany Case Analysis Problem Statement For effective implementation of change warehouse system in Europe for reducing the operational cost in spite of mounting opposition from the General Managers of European subsidiaries Options side railroad are the contrasting distribution system present to serve the European subsidiaries from Enschede, 1. To upgrade present IDSC warehouse to handle direct distribution to all the European Subsidiaries 2. To have a central ware house in Enschede and two satellite regional warehouse in southern France and a facility in Denmark 3. To al slump a third party logistical provider to handle the direct distribution and warehousing in addendum to the transportation serv ice Reasons for opposition to plan Following are the different concern raised by the General Managers of All the European Subsidiaries, 1.Doubt on the capability of the ISDC in Encshede to handle the fates of all the European subsidiaries 2. Concern on lose of flexibility to respond to changes in the market which the subsidiaries considered the reason for their victory 3. There is no financial benefit seen in reducing the inventory take aim as the subsidiaries are not charged for the inventory they hold 4. Doubt on whether the cost nest egg quoted could be achieved 5. Loss of warehouse was seen as substantial loss in their power 6. Subsidiaries considered the prize of Enschede as weak 7.Will lose a buffer between central distribution system and the customers 8. ISDC blamed for inbound transportation delays 9. Country specific objections like, a. Idiosyncrasies of truck industry in Italy would make it difficult to do business differently b. Belgium and Netherland has achieved direct distribution only because of the f make that they had small sales glitz and they were located close to Enschede 10. Opposition from Unions in different subsidiaries against the layoff could cause heavy problems like high severance package and possible strikes Benefits Of primordialized storage warehouse systemBy implementing centralize warehouse system, Polaroid would achieve a crystallise annual savings of $5. 7 Million. Savings through reduction of work force testament be $2. 5 Million and warehouse rental savings will be $1 Million Factors supporting Central memory board 1. Successful implementation in US and savings derived 2. Forthcoming loosening of cross-border transportation 3. Efforts by Logistic providers for pan-European service capabilities 4. Post liberalization transportation in Europe would reduce by 5-25% Analyzing Service Demand blueprintCountry Photographic Dealers Hypermarkets/Retailers Warehouse wholesalers Special Markets Direct service disp osition of Service Demand (Remarks) France 70% 20% 10% - - 1) Shipment of products straight to individual 2) Direct delivery to retail outlets &retail establishments Germany 0% 85% 90% 10%-15% - - 1) Highly subscribe toing compared to other European subsidiary 2) powerfully opposed late or incomplete orders Italy 45% 10% 40% 5% Characterized most flexible UK - 20% 45% 20% 35% Some of Accounts considered extremely demandingFrom above table we could infer that Germany and France are quest high level of service which calls for high operational cost. So if Central warehouse system is being implemented it would be better if they first abrasion with Italy as the customers are not a great deal demanding and also the account size is equivalent to other subsidiary. The successful implementation in ITALY would act as good reference point. Analyzing Candidates for ImplementationCountry Positive Factors proscribe factors Other Remarks UK Extensive support from Rod Bishop, Manager UK Ser vicing customers considered untamed as sea transport required Stringent service requirement from Bishop Austria Small Account Located far from ISDC Success in Austria will not have great impact as the account served is low Italy Product Theft in transit Low service level demanded. Customers highly flexible Memorandum Regarding distribution From above table and from service demand pattern it can be clearly seen that Italy would be the lift out option for rolling the plan as 1.Much of the demand arises from the dealers ( 20 main(prenominal) dealers) and 45% from Wholesalers , therefore the cost of servicing would be less as compared to UKs some of the important accounts which calls for greater service 2. Also the customers in Italy are flexible which implies that they will tolerate the poor service quality in initial period of direct distribution implementation Analyzing Net inventory level and Order, trend fill rate Country Line Fill rate Order Fill rate Net line level ($ in Mil lion) France 97% 91% 6. 1 Germany 92% 69% 4. 53 UK 92% 75% 4. 32 Italy 76% 51% 6. 28 From above table it is clear that though the inventory level in Italy is very high they have very low order and line fill rate. This shows a poor inventory management system and also improper ordering of SKUs which might not be woful I the market. Therefore Italy seems to be a best candidate for implementing the Centralized distribution as the presence of Warehouse does not add much value to the business.Conclusion Polaroid can go for Centralized Warehouse management strategy, to start with Italy and then slowly moving to other subsidiaries like France and Germany where service demand level is very high. Also Polaroid should look for the option of including third party logistics because they will have expertise in managing warehousing and transportations better than Polaroid. Calculations habituated data 1. France , Germany, Italy and UK make nearly 70% t0 80% European sales 2.Total European sales = $504. 5 Million 3. Sales of Germany = 30% of total European sales 4. COGS/ Total sales ratio = 0. 5073 ( from exhibit 1) Assumptions made 1. 70% of European sales are equally contributed by UK, France and Italy 2. fair price per unit = $125 3. Average inventory value= $ 7. 12 million ( based on Exhibit 7) Parameters /Country Germany France UK Italy Sales ($) (in Millions) 151. 35 117. 72 117. 72 117. 72 Sales (Units) 1210800 941733 941733 941733Distribution channel Wholesaler (10-15%) Retailers (85%) Specialty (70%) photographic dealers Hyper markets (20%) Wholesalers (10%) Wholesalers (45%) Direct service (20%) Retailers (15%) Photographic dealers (45%) Wholesalers (40%) Hypermarkets (10%) Special markets (5%) period Capability Dedicated Warehouse Dedicated Warehouse Dedicated Warehouse Dedicated Warehouse Line fill rate 95% 95% 94% 88% Order Fill rate 81% 90% 94% 62% Annual Inventory turn 11 8 8 8 Labour savings (in kB $) 570 488 242 243 Facilities savings (in 1000 $) 150 30 0 150 -