You are on page 1of 4

ASE STUDY: DELIVERY STRATEGY AT MOONCHEM Consignment Inventory allows you to ship products to your customers transferring ownership

at the time of MoonChem is a manufacturer of specialty chemicals used in a variety of industrial applications. The vicepresident of MoonChem would like to conduct a study on the policy of providing consignment inventory to its customers in the Midwest region. The objective of this study is to analyze different options for distribution available in the Peoria region to decide on the optimal distribution policy. Results from this study would allow the company to introduce the consignment inventory strategy nationally. The current strategy of MoonChem is to send full truckloads to each customer to replenish their consignment inventory. The current annual cost of MoonChems strategy of sending full truckloads to each customer in the Peoria region to replenish consignment inventory is $156, 383.33. Alternatives options were tested to identify what is the best alternative for MoonChem. The first option is that MoonChem delivers its product to his customers separately. The second option is that MoonChem jointly delivers its product to his customers. The third option is that MoonChem delivers its products jointly for a selected subset of products (Tailored Aggregation). The total annual cost for Option 1 is $21,441.31. The total annual cost for Option 2 is $19,395.88. Tailored Aggregation Option shows that the total annual cost is $24,877.34. Therefore, our team recommends that Option 2 (Combined Orders) is the best option for MoonChem since it incurred the lowest annual cost. Its main disadvantage is that it is not selective enough in deciding what should be ordered together. Therefore, it is possible that some of MoonChem's customers will not have enough chemicals in stock or will have too much in stock. The impact of our recommendation on consignment inventory for MoonChem is an improveme ... consumption. Some previous notions: BENEFITS:

Ship products to your customer and retain ownership until the product has been consumed. Maintain accurate financial physical inventory records from shipment through consumption.

Receive consumption notices electronically. Features: New fields in Warehouse Master allow you to flag a warehouse for use as a consignment warehouse. Create inventory transactions for receipts and adjustments in the consignment warehouse. Utilize new inquiries and reports for tracking consignment inventory balances and customer orders. Create the consignment relationship between a product, customer, and warehouse in one master

file. Study case solution will be uploaded shortly.

Strengths

IT has 8manufacturing plants and 40 distribution channels. They produce quality goods and services according to customers satisfaction. The company gave main priority to its customers. Weakness The firms achieved only 2 inventory turns in a year. Only 20% customers carried consignment inventory. Different distribution strategys werent implemented. Extra charges of $50 was charged from customers during each delivery process. Opportunity Can increase their customers by analysing the inventory strategy properly. The proposed recommendation adopting joint shipping for all 3 customers besides dropping order and holding annual cost will reduce consignment inventory. Threats If the company continues to use the same delivery strategy they could loose their customers.
In 2011, Germany's economy as measured by GDP produced $3.085 trillion. This makes it the sixth largest economy, after theEuropean Union (EU), the U.S., China, Japan, and India. Its GDP growth rate was 2.7%, slightly less than the 3.5% rate in 2010, but better than the 4.7% decline in 2009. Germany's GDP per capitawas $37,900 -- lower than in the U.S. Prior to the 2008 financial crisis, Germany's growth was usually less than 1% per year, for three reasons: 1. Modernization of Eastern Germany, which initially cost $70 billion per year, and still ran $12 billion in 2008. 2. 3. High unemployment(9.5%) and an aging population (20% age 65+) means Germany depletes Social Security faster than can be added via payroll taxes. Germany managed to get its budget deficit below 3% of GDP, as mandated by the EU. It lowered fiscal spending, which it what it advocates to solve theGreece debt crisis.

Germany's Economy Benefits From Its Eurozone Membership: Germany benefited from its membership in the EU, and its adoption of the euro. Like many other eurozone members, the power of the euro meantinterest rates stayed low, which spurred investment. In fact, many say Germany profited the most from its membership. Its strong manufacturing base meant it had plenty to export to other members of the eurozone, and could do so more cheaply. This gave German companies a competitive advantage, which only improved over time. The resultant prosperity meant that German consumers had more money to buy more locally. As a result, the domestic market has recently become a more significant driver ofeconomic growth. German Chancellor Angela Merkel: Current Chancellor Angela Merkel was a low-key physicist and economic reformer from East Germany. She won the 2005 election by promising reform to lower the unemployment rate, high even before the recession. In fact, her efforts lowered it from 11.5% to 9.5%. She had to move cautiously to keep the other members of her coalition on board. The recession allowed Merkel to successfully push through stimulus efforts and tax cuts, but this increased Germany's budget deficit to 3.3% -- a violation of the EU's 3% debt-to-GDP ratio. Austerity measures put in place should lower the deficit to 2.5% in 2011. This includes a sales tax increase and higher taxes on the wealthy. This was necessary to raise the revenue needed to decrease Germany's budget deficit to within the EU's budget guidelines. This success means that Merkel pushed for austerity measures to resolve the Greece debt crisis. Opposition to her leadership delayed resolution, which resulted in its expansion to a eurozone debt crisis Why Was German Unemployment High?: Unemployment in 2010 was 7.1%, better than during the recession when it was 7.7%. However, Germany struggles with unemployment because of historical and even cultural reasons. First, Germany has laws which make it difficult to lay off workers and lower wages. Second, the reunification of East and West Germany after the fall of the Berlin Wall also heightened unemployment, as the economy had to absorb workers for the former Communist bloc. Third, the uncertainty caused by high unemployment means that export growth does not translate into domestic spending. Both businesses and people tend to save for the rainy day rather than boost the economy by spending.

Unemployment would have been worse in Germany were it not for reforms launched in 1998-2005. In addition, the government subsidized reduced working hours, which kept people employed during the recession although only part-time. German-Russian Relations Are Unique: While President of the EU in 2007, Merkel met with Russias President Vladimir Putin at his personal country retreat, Bocharov Ruchei in Sochi. Merkel and Putin enjoyed a fairly cordial relationship. That was thanks to Putins fluency in German and Merkels schooling in then-Communist Eastern Germany, which gives her a good command of Russian. Merkel arrived just one week after Russia cut off gas supplies to Belarus, which carried the main pipeline to Europe. Merkel got assurances that Putins pipeline politics would not affect the EU's or Germany's energy supply. Russia does not want to jeopardize German foreign direct investment in Russia or bilateral trade.Putin also agreed to:

A new EU-Russia Partnership and Cooperation Agreement. Acceleration of a gas pipeline construction to Germany under the Baltic Sea. Construction of an oil pipeline leading to Russia's Pacific Coast, to avoid going through transit countries Ukraine, Belarus and Poland. Establishment of a gas reservoir in Germany, adding a new distribution center for Russian gas.