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Instructions (ONLY PART 1)
Sample paper
Revise and complete the assingment. Use different type charts than the sample. DO NOT PLAGIARIZE. Each answers is a small paragraph to with 5 to 7 sentences
MEMO
Question 1
In making comparison for the five months of 2016 and 2017, it is clear that Melbourne registered the highest performance among all the other warehouses. This is because the units that were shipped within the two periods is constantly high. Melbourne results shows that the warehouse does a lot of shipping. According to the results given by the VP who oversees warehouse operations, Melbourne warehouse is located just next to its manufacturing company. Melbourne is said to be company operated because it has readily available personnel’s from the Lift up My Light who have the skills in carrying out warehousing activities. This is an advantage to it as it can do more shipping.
Question 2
The warehouse that had the poorest performance Cleveland across the five months period in both years. The reason behind this is because it registers the least amount of unit produced and least amount of expenditure. This results were repeated in the year 2017 hence rendering its performance as the poorest. The distance between this warehouse and the nearby manufacturing company is quite long hence it cannot utilize the services of warehousing as compared to those that are located near the manufacturing companies. Perhaps the managers of the warehouse must be deficient in labor and presence of readily available warehouse facility.
Question 3
In order to identify the best performing warehouse, a decrease in the warehouse expense would serve best as a tool for this kind of analysis. According to the table illustrating the warehouses, the best performing warehouse is the St, Louis and Los Sanna. This is because of a decrease in the warehouse expenditures that they project. In such a scenario, a warehouse may thus be said to be functional because it does not operate under losses. (Warehouse, 2018). Cost reduction should be practiced in all warehouses.
Question 4
New contractor has with itself new strategies .These strategies are considered viable because they come after a failure of a previous contract which act a lesson to the new contract. The strategies involved herein are carefully chosen and thoroughly discussed with a panel of board members hence the foundation of the new contract is strengthened
Question 5
Warehouse expense (2017)
Location
Budgeted
Jan-Dec
Actual
Jan-May
Total Per
Warehouse
Akron
$178,000
$40,228
$218,228.00
Buffalo
$73,000
$29,416
$102,416.00
Melbourne
$305,000
$141,222
$446,222.00
Detroit z
$31,000
$14,900
$45,900.00
Cleveland
$17,000
$9,605
$26,605.00
Los Sanna
$176,000
$93,280
$269,280.00
Portland
$85,000
$42,616
$127,616.00
St. Louis
$56,000
$19,191
$75,191.00
GRAND TOTAL
$921,000.00
$390,458.00
$940,191.00
Light Up My Light, Inc
Memorandum
To: Elise Ennis, CEO
From: Student Name
CC: Tom Perkins
Date: 25 June 2017
The purpose of this memorandum is to answer your specific questions from this week’s meeting referencing warehouse operations and financials with the goal of improving the logistical functionality of the company. Each bullet corresponds directly to the questions you posed. This memo will also briefly talk about profits, ROA, and overall analysis of how the company’s warehouses are performing.
1. Greatest improvement over first five months of 2017. The Detroit warehouse showed the overall best improvement in performance. Figure A, below the third point, is a chart I developed to show the completion percentage of projections by May. Detroit showed an overall improvement of over 12 percentage points (33% to 46%) and was one of only two warehouses to show improvement over last year. The other warehouse was Portland (2.77 percentage points). The method I used to determine the performance measure for all warehouses was the percentage of shipments complete in the first five months over 2016 and 2017. The reason for using this data is twofold; it is the only information currently available for performance for this review, but also because it is a good measure of how well a warehouse is currently performing against its projections compared to the same point last year.
2. Poorest change over first five months of 2017. Using the same criteria as above, the Los Anna warehouse is by far the worst performer, with a reduction in almost 36 percentage points (92% to 56%) from this point last year. As seen in Figure A, although all but two warehouses have shown a reduction in performance since this point last year, the average loss is just over 6 percentage points.
3. Best overall performance. The warehouse that I determined is doing the best job is the St. Louis warehouse. The criteria I used was the cost per shipment by dollar that a warehouse spends. St. Louis spends $9.07 per shipment. The average spent is $9.91 per shipment, and the most was Cleveland with $11.95 per shipment. I used this criteria because the warehouses use shipments as their metric of performance, so I determined the best logical factor was the bottom line cost per shipment sent out. Figure B, below, shows a graph I developed showing the difference in cost per shipment from 2016 to 2017, which also shows that Cleveland also showed the highest spike in cost per shipment.
Figure A: Shows the percentage of shipments completed by the end of May each year,
with the difference in the far right column. (-) denotes a negative trend.
Figure B: Shows the cost per shipment by dollar by warehouse over 2016 and 2017
4. Contract termination possibility. As you know, terminating a contract is extremely serious and requires a plethora of information gathering and analysis. For this project I performed several points of data analysis based on the information provided to me (2016 balance sheet, 2016 income statement, and warehouse operations performance data for 2016 and 2017). Through this data, I determined the percentage of projection each warehouse completed, the percent of budget used so far in 2017 and the cost per shipment for each warehouse, all provided in
Appendix
. Through this analysis, and only this analysis, I would recommend the termination of the Cleveland contract. Through my analysis I determined that the Cleveland warehouse, although, relatively small (1.85% of warehouse budget for 2017) has shown a negative performance trend (over 8 percentage points), coupled with an increase in overall cost per shipment (from $8.14 to $11.95), and using the overall highest percentage of their yearly budget so far (56%). The data suggests that the Cleveland warehouse is not only spending more per shipment than any other warehouse, it also shows one of the highest negative trends in performance over the eight warehouses. Cleveland is also the smallest warehouse in terms of shipments sent out both in 2016 and 2017. To put this into perspective, the Detroit warehouse was on a strike for 15 days in March 2016, but still produced more than Cleveland in the first five months of 2016 in both raw numbers and percentage (45% to 40%) and also a dollar less than Cleveland per shipment in 2017.
5. Warehouse costs for 2017. The company will spend around $530,542 granted that all warehouses stay at their budget. With that stated, I believe that the Cleveland warehouse, given its performance and cost increases as detailed above will spend over its budget, and the figure remaining would be closer to $540,000. The company will probably spend close to $930,000 for warehouse operations for the year, including approximately $10,000 that may be over budget with the Cleveland warehouse. Figure C below is a compilation chart I created for 2017 budget information that details each warehouse.
Figure C: Shows the warehouse costs for 2017 by warehouse
6. Strategic Profit Model (SPM). The SPM is the Return on Assets (ROA) which is found by multiplying the net profit margin and the asset turnover. (Murphy & Knemeyer, 2015, p.46) As seen in appendix (third tab), the net profit margin is 14.49% and the asset turnover is $1.47 which makes the Return on Assets 21.24%. I believe the two key items that relate to logistics for the company is the costs of goods sold and total expenses. The costs of goods sold is nearly a quarter of our total sales at nearly a million dollars ($937,000). Logistics can influence this most through our procurement of raw materials, which is cheaper in bulk. This may result in in an overall higher upfront cost, but would cost the company less in the long term. The other important aspect is total expenses, which include the heaviest logistics functions for the company in transportation costs, warehousing costs, and inventory carrying costs. Right now, LUML is spending over $2 Million dollars in total costs. The biggest of those are the warehousing costs at $735,982. I believe significant savings are possible especially if we consider changing a contract. As you mentioned, this could spur other contractors to reduce their overall costs, which would reduce the company’s overall costs.
7. ROA with 10% reduction in warehousing and shipping costs. A ten percent reduction in these costs would result in ROA increasing to 29.63%. Transportation Costs would reduce to $501,590 and Warehousing Costs to $662,384, bringing total operating costs from $2,307,167 to $2,077,837, nearly $300,000 less. This also increases net profit nearly $230,000 from $580,283 to $809,613. Therefore, overall, a 10% reduction in warehouse and transportation costs would result in a nearly 10% increase in the ROA.
8.
Range of costs in warehouse operations. Levine, Stephan & Szabat (2017) define the range in statistics as the minimum value subtracted from the maximum value. This definition also provides us a benchmark to assess the range in warehouse costs. For 2016 the range was $229,904 and the range in 2017 for projected budgets is $288,000. For both the maximum is Melbourne and the minimum is Cleveland. With these numbers, our range is not only very high, but also increased in the last year. Even if we were to remove Cleveland the ranges would only drop to $194,496 and $274,000 respectively. This shows that we may very well have too great a range in warehousing costs.
9. Overall analysis and recommendations. After comparing the limited amount of data I received I was able to do quite a bit of analysis. As a disclaimer, these recommendations are based solely on the limited information and data I had available to me. I believe that the company may be spending too much on costs of goods sold and operating costs (transportation, warehousing and inventory). I have also determined that all but two warehouses have shown a negative performance trend in the first five months of the year with an average trend of negative six percentage points. The warehouses are spending on average, nearly $10 dollars per shipment, which may or may not be too high, since the lowest price over the last two years was $8.14 by Cleveland in 2016. The attached appendix shows all analysis in detail. I would recommend a detailed look into our operating costs and costs of goods sold with the intention of reducing those costs. I would also recommend considering eliminating the Cleveland contract as a way of encouraging the other warehouse contracts to reduce their costs and improve their efficiency. I would also recommend that the company has each warehouse manager provide a full report on their productivity that includes their inputs (e.g. human capital) compared to their outputs. These reports would also better assist you and the management team in making a decision to cut a contract
10. Warehouse operations as logistics. Warehouse operations are absolutely a logistics activity. Warehousing activities include receiving, storing, picking, and shipping (Murphy & Knemeyer, 2015, p. 49). All of these things have to do with either the movement or storage of supplies from various locations which fits right into the definition of logistics, given in my previous memorandum dated 28 May 2017. Through my past experience as an Army Logistics Officer, I can attest that the United States Army considers warehouse operations or Supply Support Activity (SSA) as one of the cornerstones of Army Logistics. Central to the SSA is the provision of material to the Soldier on the battlefield (ATP 4-42.2) The SSA in the Army is central to the success of the Army’s ability to feed and clothe its forces, fuel its vehicles, arm its combat vehicles and soldiers, fortify its positions and replace major end items, and information systems (ATP 4-42.22)
11. How can Information Systems (IS) be applied in warehouse operations. Murphy & Knemeyer (2015) describe the several types of IS, which includes Office automation system, Communication system, Transaction processing system (TPS), Management information system (MIS) and Executive information system (EIS), Decision support system (DSS) and Enterprise system. The categories that could be applies to warehousing are Communication system, TPS, and DSS. Communication systems could specifically help the management with communicating with each warehouse, but more importantly in the aspect of Global Positioning Systems (GPS). If we install GPS systems on our company trucks, we could track exactly where each shipment is in real time, but could also help drivers with shortening their routes and help with reducing transportation costs by saving on gas. The TPS, or more specifically Radio-frequency identification (RFID) has a robust capability in the warehouse. RFID installations in the warehouses would allow the warehouse to simply scan an item or barcode and could give accurate data of inventory as well as where to find it in the warehouse. This could result in quicker turn-around times and reduced inventory carrying costs. In fact, the Defense Department has recently implemented RFID to its warehousing activities that has generally been well received and resulted in quicker order fills at their SSAs. With DSS, and more specifically Transportation management systems (TMS) and warehouse management systems (WMS) within DSS, has the ability to help our warehousing functions. Murphy & Knemeyer (2015) specifically mention TMS and WMS. They describe that TMS can help with getting freight to its destination in a more environmentally efficient manner and that WMS helps provide oversight of the storage and flow of materials within a company’s operations (p.31). The WMS specifically could result in reduced operating expenses, increased inventory accuracy and improved customer service. Improved customer service would inspire loyalty and perhaps increase sales. Any and all of these specific systems could help in your goal of reducing warehousing and transportation costs as well as save money in the warehouses which would reduce the range of costs that we currently have.
Individual Resources:
Headquarters, Department of the Army. (2014). ATP 4-42.2: Supply support activity operations. Washington, DC: Army Techniques Publication
Levine, David M.; Stephan, David F.; Szabat, Kathryn A. (2017). Statistics for managers using Microsoft excel eighth edition. Boston, MA: Pearson
Murphy, Jr., Paul R.; Knemeyer, A. Michael (2015). Contemporary logistics eleventh edition. Saddle River, New Jersey: Pearson
List of Figures:
Figure A: Percentage of Shipments in First 5 Months of Year
Figure B: Warehouse Costs (Per Shipment)
Figure C: 2017 Budget Information by Warehouse
Appendix
1MGT5052-IU-SP2018 case3 overview & supply chain – BETA
Florida Institute of Technology
Department of Extended Studies
Virtual Site
Dr. Paul Battaglia
MGT5062-IU-SP2018 Logistics Policy
Case number 3 WORKING (BETA)
Overview of Logistics and Supply Chain
35 percent of the course grade
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Individual work.
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How submitted.
*** Post your answer to the Canvas assignment box. Do NOT send to the rest of the class.
*** Your answers are due according to the class schedule & the policy on self-selected late submissions.
It is usually possible to include ALL your answers in one file. That includes the memo.
*** Be sure to label each answer with the correct question number (or otherwise indicate which question is being answered) so that the CEO (or other reader such as the grader!) can easily find the answer.
*** For essay- or narrative-type questions use MS Word or compatible. There is usually no need to go to a universal format such as PDF. But you can use PDF if you desire with no penalty.
*** Be sure to show your work. For more complex calculations you can use Excel or compatible; or manual and scan the pages into your answer file. Just be sure that the CEO or other reader can find and interpret the answers.
You can use basically any file name that you want EXCEPT please include your last name (a) somewhere in the file name; and (b) at the top of the first page inside each file. That helps me identify whose work I am looking at grading, etc.
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Copyright 2018 as adapted. Dr. Paul Battaglia and Florida Institute of Technology for use ONLY in MGT5062-IU-SP18 for the Virtual Site. Other use requires explicit written permission.
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Note: As noted earlier, the basic LUML scenario is used throughout the course for the cases. Additional information is provided for each case as needed.
There are THREE parts to this case.
Be sure to submit the answers for ALL THREE parts!
Case 3
Light Up My Light, Inc.
The basic scenario for LUML continues.
Case 3, Part 1 (Warehouse/shipping performance)
In working cases, we typically want much more information than is presented in the case. Of course, even in the “real world” we do not always have all the information (and time) that we would like. Basically, stick to the information in the case. If you need to make any assumptions, then be sure to make these clear in your answers.
It is now mid-2017.
During the last weekly review, the CEO (still Elise Ennis) expressed some concerns about the warehousing operations. She has no real feel for the efficiency of the warehouses. The operations “strike her” as being somewhat expensive. And her impression is that “the cost for each warehouse is sort of all over the place.”
The CEO asked if it would be possible to do a quick analysis of the warehousing function. [Of course, that was a rhetorical question. As you might expect, the answer from Tom Perkins the VP/head of logistics was “sure we can do an analysis for you”.]
The CEO said that she would send over some more specific questions after the meeting.
As a logistician for the company you are to play a key role in doing the analysis and reporting the results to the CEO.
In preparation for the analysis you asked the Comptroller for some financial information. The Comptroller provided the financial statements (income statement & balance sheet) for 2017, the most recent complete year. These are attached.
You also asked the VP who oversees warehousing operations for some data. The manager of warehouse operations sent over the most recent data that was available. The VP explained that LUML has been using the number of shipments as a key metric for warehousing. No distinction is made between an incoming shipment or an outgoing shipment. They believe that the work effort for either type of shipment is about the same. The shipment information is also attached.
You ask if there is any other information that you should know — any peculiarities of warehousing operations for LUML? The VP mentions a few things that he says are not so obvious.
#1. The Melbourne warehouse is co-located with the Melbourne manufacturing plant & the company’s headquarters.
#2. All manufacturing is done in-house in Melbourne.
#3. All the warehousing facilities are in leased buildings (including the one in Melbourne). So that aspect is standard for all 8 warehouses.
#4. The Melbourne facility is “company operated”. As the original warehouse, the warehouse staff are all employees of LUML.
#5. As the need arouse for other warehouses/shipping centers, the VP at that time decided to try what was then a relatively new concept. The work at these other sites was contracted out to local operators at each site. The contractors follow basic LUML policies, etc. These operations are what was to become known as 3PL (third party logistics). [Note: If you want to read more on 3PL in our book, then check in the index. However, for this case all that you basically need to realize is that these warehouses are each operated by a separate local operator under contract to LUML.]
#6. Shipments tend to be relatively homogeneous over all the sites. A typical shipment has one to three fixtures. Even the shipments from Melbourne fit this model because of the specialty nature of most of the fixtures.
#7. As might be expected, most shipments form Melbourne are outgoing to customers or to the other warehouses.
You thank the VP and head back to your office.
When you arrive, you find a note on your desk from Tom Perkins. This is forwarding the questions that the CEO had promised to send over.
[Your name]
Here are the questions from the CEO.
Please prepare a written memo to reply. Mrs. Ennis is a “data freak” and so likes to look at the backup numbers and analysis. Be sure to include the basic work that was done. Simple calculations might be in the narrative; more complex might need to be in an attachment.
Thanks,
Tom
Tom Perkins
VP for Logistics
Tom Perkins
Logistics
Tom,
Ref the weekly briefing. Here are the things that jumped into my mind as the topic was being discussed and when I thought about it later in the day. Of course, we are very interested in efficiency and effectiveness. I think that I also mentioned that it seems to me that we have a pretty wide range of warehousing costs over our 8 warehouses.
I’d like the memo per our schedule. Thanks.
Elise
#1. (100 pts) Comparing performance during the first five months of 2017 with 2016, which warehouse shows the best improvement in performance? What criteria did you use? Briefly explain why you used that criteria.
#2. (100 pts) Comparing performance during the first five months of 2017 with 2016, which warehouse shows the poorest change in performance? What criteria did you use? Briefly explain why you used that criteria.
#3. (100 pts) Comparing all eight warehouses, which warehouse is doing the “best job”? What criteria did you use? Briefly explain why you used that criteria.
#4. (50 pts) One possibility might be to terminate one of the current contracts and to engage a new contractor. Some have commented that this might offer the possibility for better performance and/or reduced cost at that location. Also, there may be a “spillover effect” to help “motivate” the other contractors to reduce costs.
If one contractor is to be changed, which one do you recommend? Briefly explain why.
#5. (100 pts) The year 2017 is close to being half over. How much is LUML likely to spend for warehousing for the rest of the year? How much for the full year? Is this better or worse than budgeted? I’d like to see this information for each warehouse; and, the total for all our warehousing operations). Briefly explain your work and answers. [Hint: did you make any assumptions that the CEO should know about?]
#6. (100 pts) Using the 2016 financial statement, what would our Strategic Profit Model (SPM) look like? Briefly interpret the results. Briefly interpret two of the key items that most relate to logistics.
#7. (100 pts) I’d like to reduce shipping costs. Holding all other information constant, what would be the effect on ROA if our warehousing/shipping costs declined 10 percent? Explain. [Hint: It should be obvious that the CEO is not looking for a simple answer — ROA increases/does not change/decreases. Best to compute and explain the actual change?]
#8. (50 pts) I do not expect the costs to be identical for all warehouses. But is there too great a range in costs per unit between the warehouses? Explain.
#9. (100 pts) What is your overall analysis and recommendation (or recommendations) to help us to achieve our objectives? Briefly explain.
#10. (50 pts) I have heard a bit about logistics and a logistics chain. How can warehouse operations be an activity in the logistics channel? Please provide a short explanation.
#11. (50 pts) The Comptroller told me that there is probably a bit of money that could be put into our information systems. How can IS/IT be applied in warehousing operations at LUML? [Hint: recall that we looked at many types of IS/IT. You might include whether each type likely has the potential to help meet the CEO’s goal to reduce warehousing expenses and reduce the range.]
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REMEMBER THAT THERE ARE OTHER GRADED ELEMENTS THAT ARE NOT SEPARATELY LISTED (e.g., on time; format and completeness; purpose).
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Your mission? Prepare a memo to the CEO with the answers to her questions. Remember that you also need to send your supporting analysis. The material should be organized as you would send to a senior official. And you should also be sure to cite any material used that is not your own.
The reason that we do this type of analysis is to help manage better, to solve problems, and the like. Interpreting the information in relation to the business situation is important.
****
Keep in mind
#1 the answer to each question needs to be easily identifiable. The CEO is almost certainly not going to remember the details of each question that she asked. There is at least a week between the question being asked and reply expected. And she is unlikely to “go looking” for the answer somewhere in a document. [On the other side of the coin, for your purposes, you want to make sure that you answered each of the questions.]
#2 in most cases the CEO has asked you to explain your answers. So, each answer needs to have the answer plus the supporting rationale. However, that does not mean that each answer/explanation needs to be pages long! Some of the backup work might be a bit lengthy, but most of it is very brief. The answer itself and the rationale will usually only be a couple of sentences.
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Light Up My Light, Inc.
Income Statement 2016
Sales
$4,003,450
Cost of goods sold
$937,000
Gross margin
$3,066,450
Transportation cost
$657,322
Warehousing cost
$735,982
Inventory carrying cost
$567,987
Other operating cost
$345,876
Total operating costs
$2,307,167
Earnings before interest and taxes
$759,283
Interest
$110,000
Taxes
$69,000
Net income
$580,283
Light Up My Light, Inc.
Balance Sheet as of December 31, 2016
Assets
Cash
$706,034
Accounts receivable
355,450
Inventory
1,590,435
Total current assets
$2,651,919
Net fixed assets
803,056
Total assets
$3,454,975
Liabilities
Current liabilities
$1,678,589
Long term debt
398,060
Total liabilities
$2,076,649
Shareholders’ equity
1,378,326
Total liabilities and equity
$3,454,975
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Here is the information that you asked for. We have been using the number of shipments as a basic metric. That seems to have served us well over the years. At first blush, given the CEO’s questions and areas of interest, you may need to revise the metric being used.
Light Up My Light, Inc.
Warehouse operations performance data (special run)
2016
2017
Units shipped
Warehouse expense
Units shipped
Warehouse expense
Location
Actual
Jan-Dec
Actual
Jan-May
Actual
Jan-Dec
Actual
Jan-May
Projected
Jan-Dec
Actual
Jan-May
Budgeted
Jan-Dec
Actual
Jan-May
Akron
12,437
4,080
$156,803
$35,890
15,000
4,035
$178,000
$40,228
Buffalo
6,920
3,061
$63,417
$27,915
7,200
3,119
$73,000
$29,416
Melbourne
32,104
14,621
$246,315
$131,618
38,000
15,230
$305,000
$141,222
Detroit z
3,021
1,005z
$28,019
$8,600z
3,100
1,421
$31,000
$14,900
Cleveland
2,016
980
$16,411
$8,883
2,000
804
$17,000
$9,605
Los Sanna
12,491
11,431
$151,975
$109,690
17,000
9,444
$176,000
$93,280
Portland
8,333
4,028
$73,015
$36,021
9,000
4,600
$85,000
$42,616
St. Louis
5,921
2,331
$51,819
$23,232
8,000
2,116
$56,000
$19,191
Note z: In March 2016, the warehouse was closed for two weeks due to a strike.
Case 3, Part 2
(100 points) Given the analysis and results in part 1, how might the issues raised tie in with the various organizational and managerial issues in logistics?
You should be able to write a great deal about this. But I am targeting for very nice coverage in about 2 single spaced pages. Sometimes tables or figures can help, but they do need some basic explanation.
PS. Remember that we are targeting to use 12 pitch type. Not 10 or 8 (or, gulp, even smaller). Going the other way, not 16, 18, 20, 24, etc.!
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Case 3, Part 3
Light Up My Life, Inc.
During the weekly meeting, the topic of “Supply Chains” and “Supply Chain Management” came up.
The CEO asked if she could get some information on the following:
(100 points for each question. Remember that there are also other standard graded elements that are not separately listed.)
#1 What, indeed, is a supply chain?
#2 How does logistics fit into a supply chain model?
#3 In general, should LUML be looking at the possible use of Supply Chain Facilitators?
** If yes, then from a general management perspective, what types of facilitators might be considered?
** If yes, then from a logistics perspective, what types of facilitators might be considered?
** If yes, then what might be some key considerations on how a facilitator could be used?
Tom, our VP, says that he will have a memo sent to the CEO in a few days with the information. After the meeting he asks you to write up the memo.
[You are not restricted on the length, but a very nice answer can be prepared in — say — one page — or even less — per question. Remember that the CEO is asking this, so she must not be very familiar with these concepts.
Sometimes a good figure can help a great deal. But very few figures are “stand alone” in their own right. Most figures also need some explanation.]
