The Brother International Case deals with a logistic problem. One newly hired professional
logistician should reorganize the supply of spares and parts in Europe for a Japanese Firm. In
all there are some 65000 different items from small ones like needles to big ones like motors
for industrial sewing machines. The majority of the parts come from Japan either by air or by
sea freight. There are 20 local sales offices (LSO:S) in 13 different European countries and
one headquarter in Manchester, through which all the orders to Japan were delivered till now.
The LSO:s act as independent profit centers.
In the following text I will describe how the logistician could reorganize the distribution
system, how the stock should be controlled, which information are needed to realize the
reorganization and what problems could occur when trying to implement it. At the moment the LSO:s send their orders daily to the BIE headquarter (hereafter called BIE)
which bundles the orders and send them to the factory in Japan. The factory will than send the
goods directly to the LSO:s. The average lead time by sea freight is 50 days and 20 by air.
The air transport was originally provided for emergency cases. Because of the bad
organization or forecasts many emergency orders were duplicates of earlier routine orders
which didn’t arrived in time. The emergency orders are produced and send with highest
priority leading to a bigger backlog of the normal orders. Therefore the share of air transports
climbed up to some 70-90% .
This is obviously a sub optimal solution through air transports are much more costly than sea
freight. In addition the ordered sizes are smaller than they may need to be, because each LSO orders their products independently. Even the time advantage of air freight is not fully used
since in average the orders need still 20 days! [...]
Table of Contents
1 Which items should be stored and where in the distribution system should they be stored?
2 To what extent should the inventory control continue to be decentralized to the LSO:s?
3 What information will be needed to support your proposals to the previous questions?
4 What problems may Martin Crossley meet when trying to implement your suggested solutions?
Objectives and Topics
The primary objective of this case study is to evaluate and optimize the European distribution strategy for spare parts and components of a Japanese manufacturing firm. The analysis focuses on re-engineering the logistics network to improve operational efficiency, reduce high transport costs caused by over-reliance on emergency air freight, and centralize inventory control to achieve better demand forecasting and stock management across local sales offices.
- Pareto-based inventory classification (ABC analysis) to optimize stock allocation.
- Evaluation of logistics trade-offs between sea freight and air transport.
- Transition from decentralized inventory management to a centralized control model.
- Identification of information requirements and implementation challenges regarding organizational resistance.
Excerpt from the Book
1 Which items should be stored and where in the distribution system should they be stored?
At the moment the LSO:s send their orders daily to the BIE headquarter (hereafter called BIE) which bundles the orders and send them to the factory in Japan. The factory will than send the goods directly to the LSO:s. The average lead time by sea freight is 50 days and 20 by air. The air transport was originally provided for emergency cases. Because of the bad organization or forecasts many emergency orders were duplicates of earlier routine orders which didn’t arrived in time. The emergency orders are produced and send with highest priority leading to a bigger backlog of the normal orders. Therefore the share of air transports climbed up to some 70-90% .
This is obviously a sub optimal solution through air transports are much more costly than sea freight. In addition the ordered sizes are smaller than they may need to be, because each LSO orders their products independently. Even the time advantage of air freight is not fully used since in average the orders need still 20 days!
Summary of Chapters
1 Which items should be stored and where in the distribution system should they be stored?: This chapter applies Pareto analysis to classify spare parts based on demand and value, proposing a strategic split between local and central inventory to reduce logistics costs.
2 To what extent should the inventory control continue to be decentralized to the LSO:s?: This section argues for the complete centralization of inventory control, utilizing a computer network to synchronize sales data and optimize order points from a central hub.
3 What information will be needed to support your proposals to the previous questions?: This chapter outlines the technical and statistical requirements, including data on transport costs, regression models for demand forecasting, and opportunity costs necessary to implement the proposed system.
4 What problems may Martin Crossley meet when trying to implement your suggested solutions?: The final chapter addresses human and organizational challenges, such as managerial resistance, loss of local influence, and potential opposition from unions regarding staff reductions.
Keywords
Supply Chain Management, Distribution Strategy, Pareto Law, Inventory Control, Logistics Optimization, Centralized Stock, Air Freight, Sea Freight, Demand Forecasting, Spare Parts, LSO, Lead Time, Cost Reduction, Process Reorganization.
Frequently Asked Questions
What is the primary focus of this case study?
The work addresses a logistical challenge for a Japanese firm's European spare parts distribution, aiming to reorganize supply chains to increase efficiency and profitability.
What are the central thematic areas of the analysis?
The core themes include inventory classification, distribution channel selection, transition from decentralized to centralized logistics, and the management of change in an organizational context.
What is the main research goal?
The goal is to determine an optimal strategy for stocking spare parts to minimize transport and holding costs while maintaining high service levels for European customers.
Which scientific or analytical method is applied?
The author primarily utilizes a Pareto-based inventory classification (ABC analysis) to categorize products based on stock value and demand, along with statistical ratio analysis to evaluate inventory turnover.
What topics are discussed in the main body?
The text covers current logistical inefficiencies, the rationale for centralizing inventory, the data requirements for a new IT-driven replenishment system, and the expected resistance from local stakeholders.
Which keywords best characterize this work?
Key terms include Supply Chain Management, Inventory Control, Pareto Analysis, Logistics Optimization, and Centralized Warehousing.
Why is the current reliance on air transport considered sub-optimal?
Air transport is significantly more expensive than sea freight. Currently, its overuse is driven by poor forecasting and emergency orders, which fail to utilize the inherent speed advantage effectively due to production delays.
What are the primary concerns of the Local Sales Offices (LSO) managers regarding the proposed changes?
Managers fear a loss of authority and influence, dependency on a central entity, and the potential negative impact on their ability to maximize local profit centers, alongside concerns about data transparency.
- Quote paper
- Tom Kuehner (Author), 2003, Brother International Case European Distribution Strategy, Munich, GRIN Verlag, https://www.grin.com/document/18075
