Dream Beauty

Case study 11: Dream Beauty Company - Supply Chain Management
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Background
The management of Dream Beauty (DB) Company seeks to understand how different costs affect the efficiency and effectiveness of the supply chain company. DB Company manufactures and supplies cosmetics and beauty products to customers. The company is based in Nevada but its operations are found throughout the U.S. To understand whether the additional costs are associated with increasing sales there is a need to understand how the costs affect operational efficiency.
Current costs allocation, improving efficiency and more accuracy
Based on the current situation the company reported sales totaling $ 130,000,000 with the retail section account for 50% of the sales, the convenience stores accounting for 30% while the mass merchants accounting for 20%. At the same time, the cost of goods sold was 40% of the total sales. Subsequently, the cost category was based on order processing at$ 10,000,000, packaging costs at $ 8,000,000, labeling costs at $ 2,000,000, and delivery costs at 30,000,000 for a total cost category of $ 50,000,000. the retail an convenience stores products are processing without first being labeled, but the there are suggestions for a new labeling machine costing $ 10,000,000 to cater for labeling for the products processed for the mass merchants. Since the labeling machine is deprecated on a straight line basis for a five year, it will decline in value by 2,000,000 for the depreciation period.
Even though, DB company received 3,600 orders for the three distribution channels the convenience stores received the most at 2,500 followed by retail at 1,000 and lastly mass merchants who received only 100 orders. On the other hand, there were 2,000 shipped packages at one time represented as 1,000 orders to the convenience stores, 800 orders to retail and 100 orders to mass merchants. The packaging costs were the same regardless of the order size, and hence more efforts to increases sales from the retail sector are necessary to account for more than 50% of the sales. The rationale for this is that even as the costs increase the packaging costs will remain unchanged. Other than this is lowering the cost of labeling, which stands at $ 2,000,000 with centralization of labeling operations meant to improve efficiency with the aim of improving better coordination.
Recommendation on three-day fulfillment cycle
The three-day fulfillment cycle is effective for the company, since Dream Beauty Company is still able to maintain flexibility and maintain orders within the required time. The system has allowed DB to produce and supply the beauty products without having inadequate stock levels in the company. The supply chain that reduce variability and uncertainty are more likely to improve...