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KLF Electronics is an American manufacturer of electronic equipment. The company has a single manufacturing facility in San Jose, California. KLF Electronics distributes its products through five regional warehouse located in Atlanta, Boston, Chicago, Dallas, and Los Angeles. In the current distribution system, the United States is partitioned into five major markets, each of which is served by a single regional warehouse. Customers typically retail outlets, receive items directly from the regional warehouse in their market area. That is, in the currently distribution system, each customer is assigned to a single market and receives deliveries from one regional warehouse. The warehouses receive items from the manufacturing facility. Typically it takes about two weeks to satisfy an order placed by any of the regional warehouses. In recent years, KLF has seen a significant increase in competition and huge pressure from their customers to improve service level and reduce costs. To improve service level and reduce costs, KLF would like to consider an alternative distribution strategy in which the five regional warehouses are replaced with a single, central warehouse that will be in charge of all customer orders.
Describe how you would design a new logistics network consisting of only a single warehouse. Provide an outline of such an analysis: What are the main steps? Specifically, what data would you need? What are advantages and disadvantages of the newly suggested distribution strategy relative to the existing distribution strategy?
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