Improving the distribution logistics for House of Åsa

Abstract: This thesis is a result of a study performed as an assignment of House of Åsa. House of Åsa is a newly established company on the Swedish market. The company sells furniture produced in India in an Internet shop. The purpose of this study is to map the distribution logistics from the producing company in India to the end customers in Sweden and to develop a cost efficient solution. Outlines for House of Åsa’s pricing have been made based on the logistic costs. House of Åsa has difficulties in pricing the products since the imported furniture is preassembled and of varying volume. Another factor that complicates the pricing is the unique set of products every month. The long distance to the customers complicates it further. Therefore the company is interested in an investigation on how to reduce the cubic metre cost with respect to the most suitable freight considering the product’s volume. Today the annual demand is relatively low and the products are produced to order. This represents scenario 1. Scenario 1 results in high costs per cubic metre because of several shipments of general mixed cargo instead of full container load. House of Åsa wants to reduce the transport costs and thereby reduce the cost per cubic metre. With prospects to reduce the transportation costs the company also would like an analysis of the total costs with respect to a mixed solution hncluding a combination of warehouse and production to order. The mixed solution is represented by scenario 2. The first part of the study was to investigate which means of transport should be used for shipment from India to customers in Sweden. The most suitable means of transport is by ship between India and Gothenburg and by truck for distribution in Sweden. Suitable companies for transport by sea are company A, company B, company C and company D. Posten, UPS and DHL can fulfil House of Åsa’s demands for domestic transport and are therefore possible to use. At low volumes of demand company C will generate the most cost efficient solution for transport by boat. This is accurate for the existing as well as the mixed distribution strategy (both scenario 1 and 2). For higher volumes there will be a larger amount of full container loads. During these circumstances company B will generate the best solution for House of Åsa. The domestic transports are best performed by DHL considering low costs independently of shipment volume. Scenario 2 is more expensive compared to scenario 1, therefore it also generates a higher cost per cubic metre. Considering the total cost, scenario 1 is the most msuitable solution for House of Åsa. Finally, for an annual demand of 120 cubic metres House of Åsa should add a cost of 1693 SEK per cubic metre. This cost should be added to the cost price of each product.