Reducing Logistic Costs for Ladner Building Products Essay -- Business

Reducing Logistic Costs for Ladner Building ProductsIntroductionLadner is a National building materials distributer with15-distribution centres nation wide. Recently, the company had beenexperiencing a loss due to high costs. This issue has become adangerous problem at Ladner, and top management is at present looking tounderstand the causes of this problem. RecommendationsLadner can take one or a combination of the following options toimprove its situation- Reducing window pane costs by re-organizing the deliveries and encouraging pick-ups.- Changing staff evaluation methods so that they are aware of costs involved in Ladners attend toes.- Changing and re-organizing the customer and product base.Analysis of transportation processIt is easy to see from a first look at exhibit 3 and exhibit 4 (thatare provided in the readings) that the auction pitch process alwaysproduces losses. The total cost is always more than what the customeris charged. This is mainly due to customer rebat es on deliverycharges. Which means this loss in the delivery process is eating upfrom the profit margins of the company. Ladner has a few options here.They can cancel all delivery rebates for all future deliveries (orreduce them), they can subjoin the charge on deliveries, and/or theycan organize their deliveries better to reduce costs. The latteroption is more favourable and is discussed in the following threeparagraphs. victorious the Ontario region as an example that represents all regions,one can analyze the two transportation costs when transporting to alocal customer, and when transporting to a customer in a rural region.(See exhibit D)For local runs, the carriers were paid a high hourly salary ($34), anda relatively low per kilometre rate ($0.37). As a result, for Ladnerto reduce its transportation costs for local runs, it should minimizethe travelling time. In other words, each time the courier should makeone pilgrimage to serve all customers who are located in the same ar ea andmake as many drops as possible. Moreover, it would be useful here to beget out what?s the longest segment in the process of delivering tocustomers? Is it the trip to a certain area, or the drop-off time? Ifit was the drop-off time, then by chance the deliveries should beorganized to minimize drop-offs. Maybe Ladner should... ...afely assume that it can increase its marketshare in any product if enough effort and forwarding is put into it).It will be useful here to find out what are the actual numbers forthis trade off? Then Ladner can nominate a strategy to increase overallprofit margins by changing the customer base. For example, if thecosts of storage and handling are relatively higher, then Ladner could savor to increase gross sales of industrial products, which have a relativelyhigh profit margin and medium SKU space requirements. On the otherhand, it could reduce sales of allied products, which have high SKUspace requirements.This product base management can be done in an indirect way as well.It is mentioned in the case that Ladner?s sales staff are evaluated onthe basis of product gross margins. This ignores the costs ofhandling, storage and transportation. Ladner?s management can put down a new evaluation method that would include these costs. Theend result would be that sales representatives would try to sell the approximately profitable product to the most profitable customer after takinginto consideration all the costs. In other words, better customer andproduct base selection.