DETERMING THE MOST COST EFFICIENT DISTRIBUTION STRUCTURE : A CASE STUDY INVESTIGATING IF A CHANGE OF INBOUND DELIVERY POINT WOULD REDUCE THE TOTAL COST

University essay from Linköpings universitet/Logistik- och kvalitetsutveckling; Linköpings universitet/Logistik- och kvalitetsutveckling

Abstract: Toyota Material Handling Europe, TMHE, is one of the worlds leading forklift manufacturers, who produces both warehouse and counterbalanced forklifts at three production sites across Europe. At each of the three production sites, there are three central warehouses, CWs, which stores spare parts to the forklifts. These CWs are managed by Toyota Material Handling Europe Logistics, TMHEL. TMHEL are responsible for all CWs and regional warehouses, RWs of spare parts, so that spare parts is available to service technicians in Europe within 24 hours. The current distribution structure of the spare parts is that the items from the suppliers are first transported to one of the three CWs before they are distributed further to the RWs. The identified problem with this distribution structure is the few CWs, which sometimes leads to longer transportation routes. For example, a RW in Germany can not order items directly from a supplier in Germany. It means that the goods first needs to be transported to a CW, before it can be transported to the RW in Germany. TMHEL thereby wants to investigate if the total cost could be reduced, if the supplier could deliver directly to either a CW or a RW. This means that the possible inbound delivery points from the supplier increases from three warehouses to six. The purpose of the thesis was thereby formulated as: ”The purpose of the thesis is to investigate if a change in inbound delivery point from three suppliers of spare parts can reduce the total cost.” The current total cost and the total cost for the five alternative inbound delivery points were thereby calculated and compared. The total cost were calculated based on a general total cost model by Oskarsson et al. (2013), which includes transportation cost, inventory carrying costs, warehousing costs, administration costs and other costs. After the total costs were calculated, a sensitivity analysis was made regarding changes in the input data, to see how changes would affect the total cost and which warehouse that would be the most cost efficient inbound delivery point. The results in this thesis showed that all three investigated suppliers should keep the existing inbound delivery point in Mjölby, since it gives the lowest total cost. The results also showed that the transportation cost was the largest cost parameter, which also affected the results the most. The current inbound delivery point gave the lowest total cost mainly due to the low transportation cost when transporting together with the production site, and the large demand at the current inbound delivery point. However, the sensitivity analysis showed that the most cost efficient inbound delivery point would change, for all investigated suppliers, if the input parameters changed. For one supplier, only small changes in the input data was required until another warehouse was more cost efficient to use as the inbound delivery point. For the two other investigated suppliers, large changes in the input data were required until another inbound delivery point was more cost efficient.

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