UB SCOM Club Case Competition Team - Spartans VASTA WIRELESS – DISTRIBUTION STRATEGY ABSTRACT VASTA Wireless is a national telecommunication carrier that provides wireless services and handsets to US market. They are faced with high amount of obsolete inventory and high stock level in their Distribution Centers (DC) and Retail stores. Objective is to devise a strategy for reducing the inventory cost but maintaining the same or improve the Stock availability and in turn Customer Service Level. Challenges faced are the short product life cycle for the handsets (26 weeks), high inventory turnover ratio, cost in changing the present retail outlets, and complex distribution network because of demand at both DC and retail stores. Push strategy that is currently used by VASTA results in excessive inventory at the retail stores apart from the high inventories at DC. Our recommendation is to use partial consolidation of inventory wherein the Cold SKUs are pulled back to a centralized warehouse but the Hot SKUs are stored in the retail stores. The safety stock of the hot SKUs are held in the Distribution centers in order to exploit the economics of scales in DC during picking and packing operations. The reorder point for these inventory held in DC are calculated considering the lead time from the factory to DC. In order to reduce the logistic cost consolidated shipment of hot and cold SKU across the smart and feature phone should be made while transporting the inventory
UB SCOM Club Case CompetitionTeam - Spartans VASTA WIRELESS
DISTRIBUTION STRATEGY ABSTRACT VASTA Wireless is a national
telecommunication carrier that provides wireless services and
handsets to US market. They are faced with high amount of obsolete
inventory and high stock level in their Distribution Centers (DC)
and Retail stores. Objective is to devise a strategy for reducing
the inventory cost but maintaining the same or improve the Stock
availability and in turn Customer Service Level. Challenges faced
are the short product life cycle for the handsets (26 weeks), high
inventory turnover ratio, cost in changing the present retail
outlets, and complex distribution network because of demand at both
DC and retail stores. Push strategy that is currently used by VASTA
results in excessive inventory at the retail stores apart from the
high inventories at DC. Our recommendation is to use partial
consolidation of inventory wherein the Cold SKUs are pulled back to
a centralized warehouse but the Hot SKUs are stored in the retail
stores. The safety stock of the hot SKUs are held in the
Distribution centers in order to exploit the economics of scales in
DC during picking and packing operations. The reorder point for
these inventory held in DC are calculated considering the lead time
from the factory to DC. In order to reduce the logistic cost
consolidated shipment of hot and cold SKU across the smart and
feature phone should be made while transporting the inventory from
DC to retail outlets. Also instead of giving a makeover for the
retail stores it should continue to sell the Hot SKUs and promise a
free one day delivery, using FedEx, for Cold SKUs. Demands from
other retailers like Walmart should be met from DC with Full Truck
Load (FTL) shipment to reduce the transportation cost. Though the
safety stock for this demand should be maintained along with the
retail store demand, as all safety stock in centralized, the
reorder point for retailer demand should be based on the demand
during the lead time between the retailer and DC. Therefore is
advised that instead of switching completely to pull strategy to
reduce inventory cost, our team suggest partial consolidation of
inventory at central level as explained above. P.S All Calculations
to support our recommendation will be provided before second
round
