Polaroid Case Analysis

IIM Indore Polaroid Corporation European Distribution system of rules 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 market placeed a wide variety of instant photographic products for consumers and industries. After the deregulating of US motor perseverance consolidation of the warehouses in US took place, which resulted in an improved service aim and reduced follows.Overwhelmed by the consolidation results, the management wanted to consolidate the subsidiaries warehouses in the Europe to a prepare distribution. There were around Twelve European subsidiaries each where headed by general manager. Of that France, Germany, Italy and United Kingdom in concert have accounted 70 80% of the gross revenue. The Polaroid had three primary production areas in Vale of Leven, Scotland , Enschede, Netherlands and one in Cambridge itself. The site at Enschede too served as a central distribution site and export center kn protest as International Distribution center (IDSC) that served all the international subsidiaries.Each European subsidiary had their own warehouse to cater as a buffer and for customizing the determines, special packaging and rush orders. As the measures for the economic integration of the European Community also make the direct distribution as an impetus extract which could be used to save the transportation 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 outcome after implementation.Tom carrol, Director of International Distribution and customer service had different options before him. Like total handover to a third gear party or implement the direct change distribution. For Direct distribution, in the first place, he was contemplating in picking the first subsidiary to be centralized among the different options of Austria, UK, Italy and Germany Case Analysis Problem Statement For effective implementation of modify warehouse system in Europe for reducing the operational cost in spite of mounting opposition from the global carriages of European subsidiaries OptionsFollowing are the different distribution system present to serve the European subsidiaries from Enschede, 1. To grow present IDSC warehouse to handle direct distribution to all the European Subsidiaries 2. To have a central ware house in Enschede and two major planet regional warehouse in southern France and a facility in Denmark 3. To allow a third party logistic provider to handle the direct distribution and warehousing in addition to the transportation service Reasons for opposition to plan Following are t he 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 requirements 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 success 3. There is no financial benefit seen in reducing the stock level as the subsidiaries are not charged for the scrutinise 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 quality 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 trucking industry in Italy would make it difficult to do business differently b. Belgium and Netherland has achieved direct distribution only because of the fact tha t they had small sales volume and they were located pen up to Enschede 10. Opposition from Unions in different subsidiaries against the layoff could cause serious problems like high severance package and possible strikes Benefits Of Centralized storage warehouse systemBy implementing Centralized warehouse system, Polaroid would achieve a net annual savings of $5. 7 one million million million. Savings through reduction of workforce will be $2. 5 Million and Warehouse rental savings will be $1 Million Factors supporting Central Warehousing 1. Successful implementation in US and savings derived 2. Forthcoming liberalization 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 pauperization patternCountry Photographic Dealers Hypermarkets/Retailers Warehouse Wholesalers Special Markets Direct service Nature of Service Demand (Remarks) France 70% 20% 10% - - 1) Shipment of products straightaway to individual 2) Direct deli very(prenominal) to retail outlets &retail establishments Germany 0% 85% 90% 10%-15% - - 1) Highly demanding compared to other European subsidiary 2) Strongly 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 seeking high level of service which calls for high operational cost. So if Central warehouse system is beingness implemented it would be better if they first start with Italy as the customers are not much demanding and also the account size is equivalent to other subsidiary. The victorious implementation in ITALY would act as good reference point. Analyzing Candidates for ImplementationCountry Positive Factors Negative factors Other Remarks UK Extensive support from Rod Bishop, Manager UK Servicing customers considered risky as sea tran sport 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 best option for rolling the plan as 1.Much of the demand arises from the dealers ( 20 main dealers) and 45% from Wholesalers , therefore the cost of servicing would be less as compared to UKs nigh 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 limit of direct distribution implementation Analyzing Net inventory level and Order, Line fill rate Country Line fit rate Order Fill rate Net Inventory level ($ in Million) France 97% 91% 6. 1 Germany 92% 69% 4. 53 UK 92% 75% 4. 3 2 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 piteous 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 look upon 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 Given data 1. France , Germany, Italy and UK make nigh 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. Average 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 alley 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%) Current 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 1000 $) 570 488 242 243 Facilities savings (in 1000 $) 150 three hundred 150 -