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Supply chain management -question 1 –what impact would the three new alternatives have on transfer and customer freight costs? Why?

  • Category:
    Management
  • Document type:
    Assignment
  • Level:
    Masters
  • Page:
    1
  • Words:
    628

What imрасt would the thrее new аltеrnаtivеs have on transfer and сustоmеr freight соsts? Why?

What imрасt would the thrее new аltеrnаtivеs have on transfer and сustоmеr freight соsts? Why?

The three products of Westminster Company reduce both the transfer and customer freight costs. The company has ventured in other products as a part of growth strategy. The growth strategy incurs its expenses as it also provides benefits of growth. The three new alternatives tend to expand the customer and hence gaining the advantages of a larger company. The three lines have their set of demand and due to high demand, the amount to be distributed is high. When the demand is high, the company has to distribute a large amount of the products demanded in order to satisfy and meet the expectation of the consumers. The high demand translates to high sales volumes, which is advantageous to the company. The consolidation of the system further enhances the attainment of the transportation economies in the long run (Celli, 2013). The cost of transfer and customer freight is subsequently lowered when the high volumes of the truckload are garnered to and from the distribution centers.

The three alternatives are in high demand hence the supply in large amount, which earns the benefits of economies of scale. The company has gained a high market share depicted by the high demands hence, the company’s products are transported in bulk to the distribution centre and hence the transfer cost is therefore reduced in return. The distribution centre are moreover, situated near the manufacturers and hence the shorter the distance the lesser the transportation expenses. Westminster Company accrues the marketing synergy due to the decrease in changeover time and travel time. The goods has to be further distributed from the distribution centres towards the customers both the retailers and wholesalers. The goods are additionally conveyed in bulk from the distribution centre hence they also acquire the benefits of economies of scale (Celli, 2013). Due to transportation in bulk, the unit average cost is lowered. The firm is able to distribute the transportation cost over a larger unit volume. The company is capital intensive and hence the overall overhead costs are generally distributed in the bulky unit volume.

Experience and continued learning in Westminster Company makes it to be an expatriate in the production and distribution sectors. The new alternatives therefore expands the size of the company which makes it to produce lower costs due to the experiences previously gained. These commodities are transported into the various locations to meet the requirements of the target consumers hence the organization is able to satisfy their customers. Further, the alternative derivatives are situated in areas where they closely access the distributors. Proximity to the market may be a strategy to reduce the transfer cost. The nearness to the consumers is a major factor contributing to the reduction of the transportation cost.

Shipment of the Westminster company new alternative products in bulk would therefore positively impact on the transportation cost where the overall transportation company is reduced due to the high production and bulky distribution. The three alternatives of the company are evidently aimed at the growth of the organization and hence, Westminster acquiring the large size. The huge company hence reduces the expenses in terms of transportation of the goods in bulk. The size of the company is a determiner of the benefits accruing to the economies of scale. The large size of the company hence results to the reduction in terms of costs. Cost reduction contributed by the marketing, distribution as well as the production synergy.

Reference

Celli, M. 2013, Determinants of Economies of Scale in Large Businesses—A Survey on UE Listed Firms. American Journal of Industrial and Business Management, 3, 255-261. Retrieved from: http://file.scirp.org/pdf/AJIBM_2013062411490253.pdf