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Distribution Centers

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Which is more important to a distribution center, a good transportation system or a plentiful workforce?
Is there a trade-off between the level of workforce and transportation technology? Are they mutually exclusive? Why...why not?
On a related subject, as you will soon see, multimode distribution is rapidly becoming the thing in SCM. How many modes for distribution can you name? What are the challenges for a multimode depot or warehouse, for examples?

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A distribution center is an automated warehouse built to receive products from manufacturers and suppliers, take orders, complete orders efficiently, and distribute products to customers quickly. Distribution centers are devised to move goods to their destinations rather than just as a location for storing inventory. The transportation system and workforce both affect the company's pricing of products, delivery performance and the condition of the products the customers receive.

Transportation systems rely on the flow of information to function effectively. Information such as customer transactions, billing, shipment and current inventory levels are related to the performance of the transportation system. A plentiful workforce is not necessarily a good workforce. Employees typically only work 40 hours a week, they demand benefits, health insurance, require training, and might be disruptive at work. Too large of a workforce can cause overcrowding at a distribution center, leading to accidents. Without the information required for a good transportation system, a plentiful workforce will not be able to function efficiently. As a result, a good transportation system is more important than a plentiful workforce to a distribution center.

A good transportation system that is well-implemented will reduce the necessity for a large inventory, and hence reduce the workforce required; however, simply having a large workforce is not likely to reduce the need for transportation. This is the trade-off between the level of workforce and transportation technology. A plentiful workforce and transportation technology are not mutually exclusive. Even when technology abounds, workers will still be needed to work in the transportation industry. The company will still need to hire workers to provide customer service. A balance in both the level of workforce and transportation technology are ...

Solution Summary

Answered in 1,089 words. Supporting arguments are provided. Five sources are cited. Two companies that offer related services are provided.

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See Also This Related BrainMass Solution

You work in the shipping and logistics department for Beast Buy, an American mail order company that specializes in pet food for very exotic pets. Beast Buy has four warehouses/distribution centers that provide product to each of four different regions in the US; Atlanta services the southeast, Boston services the northeast, Cleveland services the midwest, and Denver services the west. Your manager has recently asked you to analyze the efficiency of these distribution centers.

Introduction

You work in the shipping and logistics department for Beast Buy, an American mail order company that specializes in pet food for very exotic pets. Beast Buy has four warehouses/distribution centers that provide product to each of four different regions in the US; Atlanta services the southeast, Boston services the northeast, Cleveland services the midwest, and Denver services the west. Your manager has recently asked you to analyze the efficiency of these distribution centers.
The attached file contains data from each of the last 26 weeks for each of the four distribution centers. The first column simply denotes the week in which the data were collected. The second column indicates which warehouse the data are from (1=Atlanta, 2=Boston, 3=Cleveland, 4=Denver). The third column contains the distribution cost (in thousands of US dollars) associated with the particular warehouse in each week, and the final column contains data on the number of orders routed through each warehouse each week.

Problem 4.1

The first issue your boss has asked you to address is whether or not there are differences in distribution cost between each of the four warehouses. Use the 0.05 level of significance to:
a) Perform a one-way ANOVA to look for differences in distribution costs between warehouses.
b) If the results in (a) indicate that it is appropriate, use the Tukey-Kramer procedure to determine which distribution centers differ in mean distribution costs.
c) Briefly summarize (in plain English) your procedures and the results of (a) and (b) for your manager.
Excel Tips: When using the Data Analysis ToolPak, Excel requires that your data be formatted differently for ANOVA than for regression. The data as downloaded is formatted correctly for regression analysis, so you will have to transform your data prior to estimating the ANOVA.

Problem 4.2

In addition to looking at differences between distribution centers, your manager also wants to know the relationship between the number of orders routed through each center and the distribution cost. Thus, the number of orders is your independent variable and the cost is your dependent variable.
a) Construct a scatter plot of the two variables.
b) Estimate a simple linear regression between these two variables.
c) Interpret the meaning of &beta 0 and &beta 1.
d) Predict the mean distribution costs of 500 orders, 1000 orders, and 1500 orders. Are these appropriate predictions?
e) Comment briefly on the predictive power/statistical significance of your estimates.

Problem 4.3

Here, your task is to combine 4.1 and 4.2 into a single multiple regression model using dummy variables. To put the data in an Excel-friendly format, you will first need to create dummy variables for each of the different processing centers. a) Estimate a multiple regression model, again using cost as the dependent variable, however for your independent variables you will want to use orders AND your set of dummy variables (see technical note below).
b) Comment on the results from (a) in light of your results in 4.1 and 4.2. Does the coefficient on orders here match your results from 4.2? Do the coefficients on your dummy variables, and differences between the coefficients on your dummy variables, match up with your results from 4.1?
Technical note: For technical reasons owing to matrix calculus, you cannot estimate a regression with an exhaustive set of dummy variables. One of your dummies will have to be omitted from the model. For ease of interpretation when answering the question, I would suggest that you look at your results from the Tukey-Kramer test in 4.1: if your results there are such that one of the centers was significantly different from most/all of the rest, choose that one to omit in your regression. For example, if you find that 2 of the differences were significant, Boston/Atlanta and Boston/Cleveland, do not include the Boston dummy in your regression.

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