Orion Foods, Inc

Butte

Phoenix

Orion Foods, Inc

Portland

Salt Lake City

Los Angeles

Katherine Geckler, John Halliburton, Kiah Johnson, Kyle Majerowski

Fresno

Seattle

San Francisco

Financial Impact of Anita's Decisions

Benefit's of Anita's Decisions:

Anita's Decision Summary

1. Improved distribution $22,216

2. Burns Expansion $-300,000

3. Reno Consolidation $3,373,875

• Predetermined optimal transportation routes
• Increased capacity to meet demand
• Reduced transportation costs
• Reduced carrying costs
• 40% reduction in inventory

Current Distribution:

• 2 Regional Distribution Centers

1. Improved distribution after implementing shorter routes

2. Expanded the Burns, OR warehouse to meet capacity

3. Determined that consolidation would be the best long term decision

Total Savings $3,096,091

Burns, OR

Fresno, CA

15,000 cwt

50,000 cwt

Inventory Carrying Costs- 5 Years

• 7 Field Warehouses

Burns

Los Angeles

Phoenix

Seattle

Option 1:

Send excess capacity to Fresno warehouse

Portland

Salt Lake City

San Francisco

Butte

$554,400 Savings

5 year inventory carrying costs without consolidation

5 year inventory carrying costs with consolidation

Fresno Capacity: 50,000 (cwt)

Projected Capacity: 47,125 (cwt)

Available Capacity: 2,875 (cwt)

Logistics Issues:

Total Costs

Burn's Warehouse Projected Capacity

2. Is there any benefit to expanding the Burns, OR warehouse?

3. Is the any merit to consolidating the regional warehousing operation at Reno, NV?

• Contracted trucking company does not have specified routes
• Burns distribution warehouse is almost at full capacity
• Expansion is needed
• 2 Options:
• Expand Burns warehouse
• $300,000 per 10,000 cwt of inventory
• Convert both warehouses into one central distribution center in Reno, NV
• one-time net cost of $2 million
• would reduce inventory by 40%

Total 6 year costs without consolidation: $13,449,039

Total 6 year costs with consolidation: $10,075,164.20

TOTAL SAVINGS WITH CONSOLIDATION:

$3,373,874.80

Burns Capacity: 15,000 (cwt)

Projected Capacity:18,875 (cwt)

Available Capacity: -3,875 (cwt)

Anita must determine how to absorb this excess capacity!!!

Current Situation:

Transportation Costs- 5 Years

Recalculated Distribution Costs Using the shortest routes:

• Cost of distribution has become too high
• Newly appointed traffic manager Anita Bailey
• Her job?
• “clean up the distribution mess in the West.”

5 year transportation cost without consolidation

Total Savings $478,774

5 year transportation cost with consolidation

1. Can the current distribution operations be improved?

After using LOGWARE, and implementing the shortest routes into the distribution operation, Anita can save Orion $22,216

Inventory Carrying Costs

Background: Orion Foods, Inc

Option 2:

$412,650 Savings

• Do not expand
• Assumes the the 5- Year projection is wrong
• Anita would run the risk of not being able to meet capacity

Annual inventory carrying costs without consolidation

Anita's First Tasks

as traffic manager:

Annual inventory carrying costs with consolidation

Orion's Transportation

Option 1 Analysis:

Current Distribution Costs:

Not going to happen!

• Fruit and vegetable distribution company
• Imports products from South America & Canada
• Distributes throughout the United States

Transportation Costs

Excess Capacity at Burns: -3,875 (cwt)

Available Capacity at Fresno: 2,875 (cwt)

Only option left

• Contract with trucking companies
• Pays carriers $1.30 per mile
• Average truckload 30,000lb
• 30,000lb/100= 300cwt

Option 3:

Expand the Burns Warehouse

What does this mean?

1. Determine whether or not current distribution operations can be improved

2. Determine whether or not to expand the Burns, OR regional warehouse

3. Determine whether or not to consolidate operations to Reno, NV

• Cost: $300,000 for every 10,000 cwt of inventory

Fresno does not have enough available capacity to take over the excess capactiy!

Annual transportation cost without consolidation $867,310.60

Question:

Are drivers taking the best routes?

Annual transportation cost with consolidation: $521,843.40

Answer: No!

Savings$345,467.20

Phoenix