XL Pharmaceutical - effective operation and logistics Kamal Jaafar and Jawahitha
ID: 384091 • Letter: X
Question
XL Pharmaceutical - effective operation and logistics Kamal Jaafar and Jawahitha Sarabdeen On 19 April 2010, Dr Mazen Safy, Managing Director of XL had to take an important decision about operation of the company warehouse and the managoment of inventory system as it is costing the company in tem of money and reputation. Despite the company having the advantages of more outlets and enjoying overall cost leadership because of local manufactured products. It lacks having a proper warehouse in Dubai to accommodate and supply the demands of 24 pharmacies in Dubai. He had to come up with proper solution soon, so hat the company could organize all their transactions, reduce the number of errors, make speedy decisions to claim its right position in the market Kathal Jaafar and Jawahtha Sarabdeon are Associare Professors at the Dubai, Dubai, Unted Arab Emiratos This case was writen by XL was established in 1995 with a vision to provide health care products of the highest h Saibden itwas uay at the most affordable cost worldwide. It is the largest drug manufacturing company fomaton and rin the Mddle East Region. XL is located in the GCC and also exists in more than forty countries through agencies or distributors to ensure availability of their products in different markets. XL Drug Store (XLS) is the distributor for XL products in the UAE local market. XLS head office warchouse is located in the city of Sharjah, UAE: with one subsidiary warehouse in Abu Dhabil. Sharjah warehouse is currently covering Dubai, Sharjah and Northern Dr Kamal Jasfar and prepared using company its intontion was to proide material for class discussion aeeahrn s The athors do not intend to managerial stuation. The author may have dagubed Emirates pharmacies, while Abu Dhabi warehouse is covering Abu Dhabi pharmacies. pronect conficentality The authors would also like to 1.2. The operational problems thank Araad Moonoar for hel Mazenknew that due to increasing demands especially in Dubai pharmacies and increasing in proparing the Teaching notecost oftransportation of om Sharjah to Dubai, XL distribution network in Dubai is not working efficiently leading to high-operational cost (Figure 1). There is also an issue of an neffective computerized system. The current system is an independent computerized Sarabdeen (2012) This case is System used for day-to-day sales, transaction and stock update information. Thus, the counes Business Ciserdination between branches and knowledge transfer between the individual pharmacies s often limited, with only a direct communication between the head warehouse and goods fr Copyrig Jaafar and Disclaimer. This case is written solely for educational purposes and is notinended to represent pharmacies XLS also has poor communication mechanisms in generating orders between XLS networks. The main cause of this is that there is no direct information flow between the various company warehouses, as well as between the warehouses and the pharmacy networks and suppliers. The current process starts when XLS sales representative take 12-15 orders manually from different pharmacies each day in his area, and he writes them in an order sales book. He submits these orders on the next day for invoicing to the computer departments. Orders then send from computer department to the store for preparation and inspection, after that the order will transfer to the logistic side for delivery, this usually take more than two days from the time of taking the order to the time delivering the order to the pharmacies (Figure 2) This leads to slowing down business, misunderstanding orders and leading to distributing wrong orders, causing out of stock situations and expiration of managerial decision making The authorls may have disguised names financial and other secognizable intomation CHAPTER Midde East & product which at the end leads to the dissatisfaction of oustomers and suppliers O 10110820450621 1 119094 va.nw. 4 201 t se. © GDO Peterg U tet SSN2045-0021|EMERALD tsNING MARKETsas! snoES|PAGE,Explanation / Answer
Ans: The Linear Programming model can be used to solve following problems.
1. Optimizing the size of warehouse taking into account holding costs, value of the SKUs and frequency of their movements.
2. Designing the layout for warehouse to minimize the movement of goods to save space, cost and time.
3. Allocation of warehouse space for different commodities according to the revenue generated per unit of space.
4. Determing the location of warehouse to minimize the cost of movement.
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