Individual Case Study 2

Master of Business Administration, University Canada West

OPMT 620: Operations Management

September 03, 2023

Instructor Kimberly Tholl

By Celine (Dung H. Dinh)

Individual Case Study 2: Warehouse Strategy

Based on the information provided in the case study, Acme Fragrances is one of the

major businesses in the UK. As the company continues to expand their influence across the

globe, it is important to readjust the strategy going forward to make sure that the company will

be able to transition smoothly into bigger operations. This paper will provide an in-depth

analysis on how Acme can accommodate for short-term growth through expanding facility

space, and how the company can overcome lost online sales as a result of transportation delays.

The paper will also touch on some future strategies for the company regarding the lease of

business locations and outsourcing of logistics services moving forward.

According to Stevenson et al. (2021), companies can rely on the lean production system

to help with storage management issues. Through properly applying the core principles of the

lean production system into their operations, Acme Fragrances will be able to resolve their

concerns surrounding their warehouse expansion. First of all, the company can implement a pull

system based directly on customer demand (Stevenson et al., 2021), making sure that inventory

only gets replenished when needed. This system also involves the use of a kanban card, which

allows warehouse employees to signal the need for extra batch of items only when they are

required. The company can put a focus on the JIT/just-in-time inventory management method,

which emphasizes on keeping inventory levels as low as possible without compromising on

customer demand. By minimizing excess stock, Acme can free up valuable warehouse space for

more productive uses. On the other hand, the company can also look into optimizing the layout

of the warehouse to maximize space utilization. This approach involves implementing efficient

storage systems, such as vertical racking, to make the most of available vertical space. In
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addition to that, Acme can start developing VSM, which stands for Value Stream Mapping. The

VSM tool can be used to collect data and point out the less efficient working methods and

common mistakes (Stevenson et al., 2021). Through these information, Acme employers can

figure out what might be bogging down the system and optimize the space to make sure

inventory goes in and out smoothly. It is also essential to remember the 5S principles, which are

sort, set in order, shine, standardize, and sustain. Cleaniness is important in keeping everything

moving smoothly inside the workstation and reduce the amount of unnecessary items bogging

down the area, so housekeeping is something that Acme might want to tackle on a regular

occasion.

To overcome the issues of lost online sales to Europe due to delays at UK and European

ports caused by increased customs checks and additional paperwork, Acme Fragrances can adopt

a multi-faceted approach that focuses on operational agility, process optimization, and customer

communication. Firstly, enhancing supply chain visibility is a crucial step for Acme Fragrances

to address the issues of lost online sales to Europe due to port delays and customs checks. The

use of supply chain visibility would require data sharing to ensure quick access to real time data

(Stevenson et al., 2021). Implementing advanced tracking and visibility tools can greatly

improve customer experience and reduce the chances of unexpected accidents. Following this

approach, Acme Fragranes can integrate a tracking system onto Acme's online platform that

allows customers to track their orders in real-time. Provide them with access to detailed

information about their order's journey, including shipping milestones and estimated delivery

dates. In addition to this, they can set up automated notifications to keep customers informed

about their order's status, making sure that customers are aware should there be any new update

to the shipping process. Send email or SMS alerts at key points in the shipping process, such as
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order confirmation, shipment dispatch, customs clearance, and delivery. It is also essential for

Acme to maintain safety stock levels strategically placed within the EU to ensure product

availability even during port delays. Safety stock, which is stock in excess of average demand

(Stevenson et al., 2021), can help mitigate the risk of stockouts due to delays and cover for

unexpected increases in customer demand. The company can also outsource to external services

to provide guidance and help on paperwork, which would in turn speed up the process.

Regarding the future, I do believe that the sales and marketing director must take certain

factors into account before deciding on the new locations for their manufacturer and warehouse.

First of all, distance is a major aspect to consider during the evaluation process of location.

Acme’s warehouse should be placed in locations that are easily accessible to transportation

vehicles and not too far from areas where the majority of consumers are located. The

manufacturer should also be within a short distance from the main warehouse in order to reduce

time and budget for supply transportation. Cutting down on transport distance should save Acme

a lot of money and improve on shipping time, which would boost customer’s satisfaction. In

addition to that, the director should also look into local suppliers and make sure that the essential

materials are readily available to Acme’s manufacturing location. Having the right people to

support the system is a critical component to success, and this applies to internal departments as

well. Acme has been suffering due to the warehouse manager not having formal training. The

director can setup a training system for warehouse workers at the new location and Acme

employees in general to make sure everyone has a base understanding of the supply chain

process at Acme. Finally, the director should consider expansion plan for future growth, for

example if the company continues receiving such high number of sales that bottlenecking
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becomes a problem, it might be beneficial to start looking for more locations for new

manufacturer and warehouse to expand business.

Regarding the escape clause, as there is a break clause in two years’ time in the contract,

I would recommend triggering the escape clause to give Acme more flexibility to expand their

operations. The current location is in a remote area, which makes it hard for transportation and

cannot accommodate for long term growth. Even though triggering the escape clause can be

expensive, it would open up for new opportunities and end up saving the company money in the

long run.

Finally, in terms of outsourcing logistics services, I would agree with the director that

currently, outsourcing might not be the best option for Acme, as the company is in the growing

phase and having full control of the logistics operations will be beneficial to help the company

establish a proper system and quickly fix up on errors that might occur within the system. In the

near future, once the company has grown and is unable to fully manage all of their operations,

the outsourcing of logistics services will be a solid option to efficiently keep up with the

demands and help Acme allocate resources on areas that require in-house management.
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References:

Stevenson, W. J., Hojati, M., Cao, J., Mottaghi, H., & Bakhtiari, B. (2021, March 11).

Operations Management (7th ed.). McGraw-Hill Education.