OPSM 3000 INDIVIDUAL
REPORT
(TOILET PAPER)
By Lucas Nunes (3214485)
Contents
EXECUTIVE SUMMARY........................................................................................2
INTRODUCTION .....................................................................................................2
PRODUCT..................................................................................................................3
MARKET CHARACTERISTICS ..............................................................................3
SUPPLY CHAIN ........................................................................................................4
MATERIAL HANDLING & STORAGE ................................................................5
TRANSPORTATION ...............................................................................................6
WAREHOUSE ...........................................................................................................8
CONCLUSION ..........................................................................................................9
RECOMMENDATIONS...........................................................................................
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EXECUTIVE SUMMARY
This report was commissioned to conduct a Supply Chain Management
situation analysis on a toilet paper warehouse in the Hunter Region of NSW,
Australia.
The research draws attention to the Product, Market Characteristics, Supply
Chain, Transportation, and Warehouse. Supply chain logistics has been
extremely important in all of history. The Supply chain allows for trade,
allowing supply and demand to be satisfied through a professional and
accurate delivery of customer satisfaction. With satisfied customers and
reduced costs, competitive advantage is achieved. These parts of the supply
chain lead to the success of future competitive advantage.
Supply chain management was first coined by Keith Oliver in 1982 and has
since been a major part of today’s industry (Heckmann). The report evaluates
the feasibility of a new warehouse for toilet paper in the Hunter Region of New
South Wales.
It is recommended:
That the CEO opens the new dual role warehouse strategically located
within the Hunter region
The CEO organizes a transport route with maximum cost reduction.
Set up a U-turn in and out dock for the truckloads in order for faster
warehousing and disbursement.
Focus on collaborative relationships with the supplier in order to retain the
best value and costs.
INTRODUCTION
An Australian Chief Executive Officer is investing in a new warehouse in the
Hunter Region to help the expansion of its toilet paper industry. Because it is a
fast consuming good, the CEO is in need of a feasibility report on his new dual
role facility. In this report we will break down the necessary considerations for
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the CEO to purchase their new warehousing facility here in the Hunter
Region. Some of the fundamental sections required for considerations would be
the following: Product, Market Characteristics, Supply Chain, Materials
Handling & Storage, and finally Transportation & Warehousing. With all these
fields covered we can determine the feasibility of the toilet paper warehouse in
the Hunter Region and help the decision for the CEO. We can expect that any
information provided will be beneficial to the warehouse opening decision
including things like packaging and its physical characteristics for example. A
lot of what will be introduced in this report effect each part of the warehousing
stage of the supply chain logistics.
Product
With Toilet paper being firstly mention in China in 1391, but only being
officially invented by Joseph C. Gayetty in the United States by 1857, there are
plenty of different types of brands and products that have evolved since then.
(Who Invented Toilet Paper?). Toilet paper is one of the fastest consumed goods
today. Toilet paper is also less expensive to manufacture then things like
toothpaste and shampoo because of its recyclable materials. It is used on a
daily basis and could have different functions. Some may use it in the toilet,
but it can also be used to clean makeup, or as a general napkin, as well as
tissue paper for when you run out. There are obvious benefits to using toilet
paper, like hygiene. Opening a warehouse in the Hunter Region would allow
even faster movement for the toilet paper company.
Market Characteristics
Because toilet paper is constantly consumed daily, there will always be a high
demand for the product. This high demand would provide the new warehouse a
great load especially in the Hunter Region with a population of 620,530 (Fit
For the Future). There are some sorts of consumers for toilet paper. It depends
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if the consumer is willing to pay for a more expensive brand or if they were
willing to purchase a cheaper brand. Otherwise, everyone would fall under the
same category in purchasing toilet paper. On the other hand, there are plenty
of different types of toilet papers. There are thin types of Toilet paper brands,
the padded soft types, as well as toilet papers with lotions such as aloe, and
even those with scented paper (Who Invented Toilet Paper?). Of course like all
products, there are competitors. Some of the leading brands for the toilet paper
industry include: Quilton, Kleenex, Sorbent & ABC tissues. Achieving
competitor advantage involves working with the appropriate manufacturers
and suppliers.
Supply Chain
With all of the competition today, and organisation must be able to produce
quality products at reasonable prices. Product quality is a direct result of the
production workforce and the suppliers (Oloruntoba, Lec. 4). A lot of todays
buying firms look into suppliers who have plenty of capabilities, as well as
providing reduced supplier base (Oloruntoba, Lec. 4). Before making any
decisions the CEO would have to carefully analyse and evaluate each of the
suppliers to confirm their continuous outperformance of their competition.
More commonly used, professional purchasing managers can provide the
buying firm with most of the decision making, which help for detect-free parts
and value-added capabilities of suppliers.
One of the major decisions is for the CEO to decide wether or not they would
make or buy the product. For this instance we will say that the product is
already made and that we have been buying it, as for we are only opening a
new warehouse for distribution. As these suppliers continuously provide
service for the toilet paper company their relationships also grow which can
benefit the both of them for many reasons. In some market segments it is
estimated that 80 percent or more of total product revenue, often passes
directly to suppliers for payment for labor, materials, and equipment
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(Oloruntoba, Lec. 4). With a new opening of a warehouse in the Hunter Region it
would be a better choice to have a Collaborative relationship with its supplier
in order to maintain a positive income. A collaborative relationship provides a
win-win type relationship with its supplier but with more strings attached
then cooperative. In these types of supplier relationships the two organisations
truly realize the benefits of working together to optimize outcomes for both
organisations (Oloruntoba, Lec. 4) As well as benefitting each other the two firms
work to come up with a strategy in order to deliver a high-quality product or
service on time and under budget (Oloruntoba, Lec. 4). Wether or not the supplier
is doing well, all suppliers to the company should be evaluated to determine
wether it would be time for a new relationship or for corrections within the
current supplier. After choosing a supplier the CEO can then move forward to
handling and storage. The CEO investing into a toilet paper warehouse can be
less worried about the product being fragile. Because it is soft it can be easily
transported and packaged.
Market Handling/Storage
Even though a lot of todays material handling can risk damage to the product,
toilet paper is very easy to manoeuvre because of it is soft and nothing to worry
about. Of course the CEO wouldn’t want the plastic wrap damaged, but
because when large bundles of product are moved they are most likely to be put
together in a containerization or unitization fashion. As well as decreasing the
risks of damage, packaging also minimizes the cost of handling.
Containerization or unitization allows the filling or creating of a larger
container from the smaller ones. In doing so, this allows workers to easily
transport the product with less damage as well as a faster mode of
transportation. Within the packaging, some products can also be warehoused
or stored with an Automated Storage and Retrieval Storage, which are robots
that get, move and put-away material. Even though it is not often used there is
something called RFID, which provides an electronic tracking of any material.
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Investing into something like the Automated Storage and Retrieval Storage
would help the CEO save costs with packaging (Materials Handling). Slotting,
which determines specific locations for the product based on velocity, weight,
and special characteristics, allows the warehouse to be well organized and
easier to locate specific products (Oloruntoba, Lec. 6). There are also two classes
of storage: active, and extended storage. Active storage is for basic inventory
replenishment that focuses on quick movement and includes flow-through or
cross-dock distribution (w3mentor). Extended storage is for inventory held in
excess of period for normal replenishment, for things like: seasonal, speculative
or even commodities (w3mentor). Since toilet paper is a fast consumed good
Active storage would be the more efficient option for the opening warehouse.
Handling must also optimize movement continuity and efficiency (Oloruntoba,
Lec. 6). There is three key components of material handling that allow things to
continually move efficiently: Receiving, In-Storage, and Shipping. “Receiving”
is the unloading of the arriving vehicles; the “In-storage” is the moving goods
for storage (transfer) or order selection (picking), and “Shipping” which is the
verifications of orders and loading the departing vehicles.
Toilet paper can be unitized in order to help move the product as well as saving
on costs. As mentioned earlier, toilet paper can be easily transported because it
is less fragile then things like electronic components or other products that
may be filled with liquids. The sizes of the trucks would have to be a bit larger
then most trucks because of the sizing of the cartons. Toilet paper is light soft
but still bulky and needs more space in transportation and in the warehouse.
Transportation
Luckily today there are plenty of modes of transportation. These modes
include: Truck, Rail, Water, Pipeline, and Air. Each of these modes has their
pros and cons. For example air is fastest but one of the more expensive modes
of transportation. Because transportation is a cost and consumes time,
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financial, and environmental resources, we need to be considerate to the
strategically approached decision of which product movement would be most
appropriate. With the economy of both scale and distance, we can strategically
develop a cost-friendly transit route for our toilet paper products. Economy of
scale is the cost per unit weight decreases as the size of the shipment
increases. Economy of distance, on the other hand, is the cost per unit weight
decreases as the distance travelled increases, often called “tapering principle”
(Oloruntoba, Lec. 8). With this said, if the supplier were coming from China and
arriving into Perth, then flying the toilet paper product over to the east coast to
Sydney would be cost efficient with economy of distance and scale. From there
truckloads would do the same to the Hunter Region. Because Truck is the
second best frequency mode of transportation, behind pipeline, then it would be
more relevant for the toilet paper products due to the high demand and daily
usage. Air transport would be next, but because of delays it is not as
dependent. After determining the transportation modes, next up would be the
actual costs. There are plenty of different carriers for all transportation modes.
Some of the economic drivers influence rates would be: distance, weight,
density, storability, handling, liability, and market. Density would most likely
be a considerable rate due to the volume of the toilet paper packages. It is
important because trucks are more constrained to cubic capacity then by
weight loaded, but the cost per unit weight declines as product density
increases (Oloruntoba, Lec. 9). Another factor to consider would be storability. All
of the toilet paper packages will be unitized in rectangular shapes, which is
easier to stow. As well as being in a rectangular shape they will be wrapped
with plastic and put on pallets for easier handling. Carriers must also pay
liability insurance for the products being transported, which would reduce
costs if there were any damage to the toilet paper packages during transport.
Along with the insurance all carriers have their own carrier pricing. For the
toilet paper the CEO should look into either carrier pricing cost-of-service
strategy, or net-rate strategy. Cost-of-service estimates cost of providing
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service then adds on a percent profit margin, and commonly used for low value
goods or in highly competitive situations. The net-rate strategy is a simplified
pricing format made possible by deregulation, establishes discounts,
accessorial charges rolled into one all-inclusive price, and finally having the
price tailored to the individual’s customer’s needs (Oloruntoba, Lec. 9). Finding
the better price between these two strategies would reduce costs of
transportation but still provide the same service. Of course these are only some
of the considerations for transportation and the CEO would need to take in the
consideration of load planning, routing and advance shipment notification, and
transportation management system. When transporting any product you need
to determine how the warehouse is set up in order to load the trucks in their
proper docks.
Warehouse
Warehousing is known for its storage and holding of inventory. There is also a
contemporary view of the warehouse functions as being a mix of inventory
assortments to meet customer needs (Oloruntoba, Lec. 6). There are different
types of warehouses used such as: distribution centers, consolidation
terminals, break-bulk facilities, and cross-docks. There is something today that
warehouses use called “JIT” (Just-in-time), which is a stockless production
strategy that requires strategically located warehouses across the globe. This
would be irrelevant to the toilet paper warehouse because they are consistently
a demand and are not waiting for a special order. Sometimes a warehouse has
to adjust to the demand of products and respond to the changes by stocking
those specific products, but again, just like JIT, toilet paper is constant and
never changing. Warehousing is also beneficial for its economic and service
benefits. Economically all costs are reduced due to consolidation and breakbulk, sorting, seasonal storage, and reverse logistics. Service benefits include:
spot-stocking, full ling stocking, and value-added services. As mentioned
previously, consolidation occurs when a warehouse receives materials from a
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number of sources and combines them into exact quantities for specific
destination (Oloruntoba, Lec. 6). Break-bulk occurs when a warehouse receives a
single large shipment and arranges for delivery to multiple destinations
(Oloruntoba, Lec. 6). There is also cross-docking which combines inventory from
multiple origins into a pre-specified assortment for a specific customer. Crossdocking is different because it is dependent on IT. For the toilet paper
warehouse break-bulk would be the best option due to the single large
shipment and disbursement into the Hunter Region. There are also two
different ownership arrangements, private or public. The CEO purchasing the
warehouse for the Hunter Region would have a private warehouse because the
firm owning the product would operate it. Public are service company owned
warehouses and hire out space and services. Warehouse decisions also
determine handling and storage efficiency. The sizing, layout, design, and site
selection are some to consider. In the Hunter Region there are plenty of
locations and would be more ideal because of the population, and easy
transportation routes. Under the design of the toilet paper warehouse, there
would have to be an in-dock and out-dock on the same side of the building due
to the fast transition of the daily-consumed product. There would only be
storing of back stock, if any, otherwise it’s off one large truckload and into
separate smaller trucks dispersing through out the region.
Conclusion
Toilet paper is a great product for a fast moving good to it’s consumers.
Opening a new warehouse for the Hunter Region would be feasible due to the
high population and other factors. Because both the east and west coasts of
Australia have ports for incoming trade this allows the new warehouse to
intake large amounts from nearby Sydney or quick and affordable shipments
from Perth. Toilet paper also is easily stored and can be transported easily in
bulk but at a high cost of density. Toilet paper can also be stacked on pallets
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making it easier to handle in the warehouses. Having a quick moving
warehouse in a highly populated region also allows for quick revenue.
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