TSC Stores: Supply Chain Management for Profitable Growth Harvard Case Solution & Analysis

Question 1

What does your analysis of the data in Exhibit 3 suggest that Brad Twiddy might want to consider with respect to options for TSC’s supply chain?

            If we look at the SKU segmentation as shown in exhibit 3, then it could be seen that the SKU segmentation analysis has been performed by Brad Twiddy to focus on the impact of seasonality on the future volumes of the company. It has been stated by Brad that around two-third of the sales of the company last year were about in the year-round category whereas, one-fifth of the total sales of the company were in highly seasonal category.

            Based on this, it could be said that around 67% SKUs were in year-round sales category whereas 20% SKUs were in the highly seasonal category. Therefore, it means all the remaining SKUs have been in the seasonal category and would impact upon the future volumes of the company. The seasonal SKUs were 9417 that were 41% of the total SKUs for the last year. This is a significant figure which shows that management needs to incorporate a plan for the seasonal SKUs in the project 275 to cope up with the increasing volumes in future. The calculations are shown in the excel spreadsheet as follows.

Question 2

What criteria would you use to evaluate the options?

            There are a number of factors, which would be evaluated and the impact of the options would be considered in order to evaluate them. For instance, the management of the company will have to identify that which operations of the company would be easy for the company to operate and which will need to be outsourced. Such as all those current internal activities that are non-core to the production of the goods will have to be outsourced in the future to a third party logistics company.

            Secondly, the growth rate for the increase in the volumes will also have to be forecasted in order to determine the relevant size of the distribution center to accommodate the required capacity. Thirdly, the SKU segmentation and the analysis of all the SKUs in the seasonal category as highlighted above will also have to be considered as they would have a significant impact upon the future growth in the volumes. These are the range of factors that need to be considered for evaluating the four options.

Question 3

As Brad Twiddy, what options would you recommend to Greg and what would be your schedule to evaluate these options and implement your plan?

            There are several options that are being considered currently such as establishing another distribution center, expanding the current distribution center, and setting up a hybrid distribution center or contract out with one of the leading third party logistics company in order to handle the overflow faced by the London distribution center. There are many pros and cons for each of the option mentioned above however, the most recommended option currently for Greg is to focus on the expansion of the current distribution center. This is because this is going to be less costly that setting up a completely new structure. Secondly, the expansion would be tailored to the specific future needs of the company and the increased space, which would be created, is going to help in the accomplishment of the goals of 275.

            Along with this, contracting with a third party logistics company would not prove to be a suitable long term strategy, establishment of a new distribution center would be very costly and there is no infrastructure and proper setup, which is required for it. Lastly, the creation of a hybrid distribution center might solve the problem through focused distribution but the makeup of the company does not allow for such specialization. Therefore, the recommended option for the company is to expand the current distribution center. Furthermore, the schedule for the new space that would be created with the expansion would be implemented as follows:

Question 4

Based on $72 million in sales last year (2006), what is the breakdown of year round, seasonal and highly seasonal SKUs?

            The breakdown for the year round, seasonal and highly seasonal SKUs is given below...............

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