Each supply-chain risk to forecasts, information systems, intellectual property, procurement, inventory, and capacity has its own drivers and effective mitigation strategies. To avoid lost sales, increased costs or both, managers need to tailor proven risk-reduction strategies to their organizations. (Sodhi)
Distribution systems play an important role in the overall functioning of the supply chain management system of an organization. Any good distribution system requires that all the associated activities are coordinated in such a way that they facilitate the whole flow of organizational resources from one point to another. This is important because of the fact that a swift and smooth flow of organizational resources not only ensure the rapid service and delivery efforts of the firms but also its ability and willingness to serve its customers to its best ability. However, having a distribution system also requires that organizations run some risks and costs in order to take benefits out of them.
We will begin our analysis of the issue with the plant warehouse of the company. The company works on the philosophy that only one product line will be manufactured by the single plant and there was an effort behind putting the plants at locations where they existed in harmony with the existing environment of the area. Further, the plant area was designed in such a way to facilitate the employees of the organizations to work properly. A close analysis of the situation would suggest that the plants manufacture just one product line at a time which may create costs for the company which may not be quantifiable in nature but important and significant. It must also be noted that the plant locations and their distance from the central warehouse and the regional warehouse incur heavier costs for the company and it was because of this reason that the new transit point system was developed in order to avoid those costs.