Polaroid Case Analysis

IIM Indore Polaroid stack European Distribution system 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 deregulation of US motor industry consolidation of the havehouses in US took place, which resulted in an ameliorate assistant level and reduced lives.Overwhelmed by the consolidation results, the management treasured to consolidate the subsidiaries wargonhouses in the Europe to a have dissemination. There were near Twelve European subsidiaries each where headed by general manager. Of that France, Germany, Italy and United ground together have accounted 70 80% of the sales. The Polaroid had three primary fruit areas in Vale of Leven, Scotland, Enschede, Netherlands a nd one in Cambridge itself. The site at Enschede as well as served as a central distribution site and export halfway known as International Distribution center (IDSC) that served all the internationalist subsidiaries.Each European subsidiary had their own warehouse to cater as a buffer and for customizing the orders, special packaging and rush orders. As the measures for the economic consolidation of the European Community also made the aim distribution as an impetus option 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 preceding(prenominal) all, they felt that IDSC management team didnt had the management skill. They were also deist about the outcome after implementation.Tom carrol, carryor of International Distribution and customer service had dissimilar options before him. Like total hand over to a triplet party or implement the direct centralized 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 in force(p) implementation of centralised warehouse system in Europe for trim the operational cost in spite of mounting opposition from the normal Managers of European subsidiaries Options hobby are the different distribution system put in to serve the European subsidiaries from Enschede, 1. To upgrade present IDSC warehouse to handle direct distribution to all the European Subsidiaries 2. To have a central ware house in Enschede and two satellite regional warehouse in southern France and a facility in Denmark 3. To allow a ternary party logistic provider to handle the direct distribution and warehouse in addition to the transportation service Reasons for opposition to plan Following are the d ifferent concern raised by the General Managers of all in 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 list level as the subsidiaries are not charged for the inventory they hold 4. Doubt on whether the cost savings quoted could be hitd 5. Loss of warehouse was seen as substantial loss in their source 6. Subsidiaries considered the quality of Enschede as weak 7.Will lose a buffer among central distribution system and the customers 8. ISDC blamed for inbound transportation delays 9. body politic 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 th e fact that they had beautiful sales volume and they were located close to Enschede 10. Opposition from Unions in different subsidiaries against the layoff could cause serious problems like risque severance package and accomplishable strikes Benefits Of Centralized storage warehouse systemBy implementing Centralized warehouse system, Polaroid would achieve a net annual savings of $5. 7 zillion. Savings done reduction of workforce will be $2. 5 Million and store rental savings will be $1 Million Factors backing 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. function liberalization transportation in Europe would reduce by 5-25% Analyzing overhaul Demand patternCountry Photographic Dealers Hypermarkets/Retailers Warehouse Wholesalers Special Markets Direct service Nature of Service Demand (Remarks) France 70% 20% 1 0% - - 1) Shipment of products directly to individual 2) Direct deli very(prenominal) to retail outlets & angstrom unitretail establishments Germany 0% 85% 90% 10%-15% - - 1) Highly demanding compared to other(a) European subsidiary 2) Strongly opposed late or broken orders Italy 45% 10% 40% 5% Characterized most flexible UK - 20% 45% 20% 35% Some of Accounts considered extremely demandingFrom above defer 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 being enforced 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 undefeated implementation in ITALY would act as good reference point. Analyzing Candidates for executingCountry Positive Factors Negative factors Other Remarks UK Extensive support from celestial pole Bishop, Manager UK Servicing customers considered risky as se a transport necessary Stringent service requirement from Bishop Austria Small Account Located further from ISDC Success in Austria will not have great regard as the account served is low Italy Product Theft in musical passage 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 some of the important accounts which calls for greater service 2. Also the customers in Italy are flexible which implies that they will affirm the poor service quality in initial period of direct distribution implementation Analyzing Net inventory level and Order, Line contain rate Country Line carry out rate Order film rate Net scrutinise level ($ in Million) France 97% 91% 6. 1 Ge rmany 92% 69% 4. 53 UK 92% 75% 4. 32 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 strike rate. This shows a poor inventory management system and also improper ordering of SKUs which mightiness not be moving 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 value 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 manner 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 nearly 70% t0 80% European sales 2.Total European sales = $504. 5 Million 3. gross 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. bonny price per unit = $125 3. Average inventory value= $ 7. 12 million ( based on troop 7) Parameters /Country Germany France UK Italy Sales ($) (in Millions) 151. 35 117. 72 117. 72 117. 72 Sales (Units) 1210800 941733 941733 941733Distribution channel 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 consecrate 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 $) 150 300 150 -