Reducing Logistic Costs for Ladner Building Products Essay -- Business

Reducing Logistic Costs for Ladner Building ProductsIntroductionLadner is a National building materials distributor with15-distribution centres nation wide. Recently, the company had beenexperiencing a loss imputable to high costs. This issue has become adangerous problem at Ladner, and top management is now looking tounderstand the causes of this problem. RecommendationsLadner can take integrity or a combination of the following options toimprove its situation- Reducing transportation costs by re-organizing the deliveries and encouraging pick-ups.- Changing staff evaluation methods so that they ar aware of costs involved in Ladners processes.- Changing and re-organizing the customer and growth base.Analysis of transportation processIt is easy to see from a initial look at exhibit 3 and exhibit 4 (thatare provided in the readings) that the delivery process alwaysproduces losses. The total cost is always more(prenominal) than what the customeris charged. This is mainly due to c ustomer rebates on deliverycharges. Which means this loss in the delivery process is eating upfrom the dinero margins of the company. Ladner has a few options hither.They can cancel all delivery rebates for all future deliveries (orreduce them), they can increase the charge on deliveries, and/or theycan mold their deliveries better to reduce costs. The latteroption is more favourable and is discussed in the following threeparagraphs.Taking the Ontario region as an example that represents all regions, whiz can analyze the two transportation costs when transporting to a topical anaesthetic customer, and when transporting to a customer in a rural region.(See exhibit D)For local runs, the carriers were compensable 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 trip to serve all customers who are located in the same area andmake as many drops as possible. Moreover, it would be useful here tofind 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 maybe the deliveries should beorganized to minimize drop-offs. Maybe Ladner should... ...afely go for that it can increase its marketshare in any product if enough effort and promotion is put into it).It will be useful here to find out what are the actual numbers forthis trade off? Then Ladner can form a strategy to increase overallprofit margins by changing the customer base. For example, if thecosts of storage and handling are relatively higher, then Ladner couldtry to increase 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 do ne 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 canintroduce a new evaluation method that would embarrass these costs. Theend result would be that sales representatives would try to sell themost profitable product to the most profitable customer after takinginto circumstance all the costs. In other words, better customer andproduct base selection.