Problems: Polaroid planned to centralize inventories and distribution in Europe because it would save substantial costs and improve service quality. However, it lacked support from many European managers who objected to the plan due to following reasons: The central warehouse in Enschede, Netherlands: its capacity and service quality may not meet requirements from subsidiaries. In the past, some subsidiaires experienced poor services from this warehouse. Subsidiaries would lose flexibility to respond to local market changes.
The financial benefits from the move (e. g. costs savings) were uncertain and unreliable. EU managers got used to having their own warehouses to control inventory outflows. Diminution in EU managers’ power and responsibilities. Warehouse staff layoff problems: union activities and expensive severance pay. Large customers want local warehouses to meet their rush orders/needs. In addition, Polaroid was considering which option below is the best to implement the plan: Implement the plan for all subisidiaries at once; or
Implement the plan for one subsidiary first, then expand to others; or Outsource both warehousing and distribition to independant third parties. In either plan, Polaroid needs to gain support from European managers, improve capacity & quality at the central warehouse, and ensure the successful implementation of the centralization. Recommendations and Analysis: Do not implement the plan at once for all subsidiaries. The plan still lacked support and trust from EU managers. Furthermore, the current capacity and service quality at the central warehouse failed to meet new requirements.
It needed time to grow and improve. Choose UK to run the plan first. First, UK manager gave strong support to the plan and was willing to join the program. Second, UK was a major market hence huge costs could be saved and if successful, it would set an example that persuade other subsidiaries to follow. Third, the new service to customer (after centralization) was superior to current service (according to Exhibit 12). Forth, customer mix is advantageous: 15% is retailers, 85% is wholesalers and large customers. Finally, although it required ocean transportation, carrier could handle it well.
After running the direct distribution with UK for 1-2 years and seeing its success, expanding the plan to all remaining subsidiaries. At this time, after seeing obvious results, EU managers would be persuaded and motivated to support the plan. At the central warehouse: upgrade the facilities, tailor computer software, train warehouse staff so that the new capacity and service quality can meet requirements from all subsidiaries. In other words, Polaroid should implement the aggressvie expansion at the central warehouse.
Tools and techniques used for analysis: Capacity planning: use expansionist strategy, not wait-and-see strategy. Polaroid could enjoy economies of scale and higher efficiency. Constraint management: idenfity the bottlecks in the processes and maximize its throughput to increase the efficiency. Design supply-chain appropriately: outsourcing the distribution; consider efficient supply chain, i. e. build to stock, for highly demanded/standardized products; focus competitive priorities on low cost, consistent quality, and on-time delivery.