Posted: May 24th, 2022

Fireside Tire Organization Case Study

Fireside Tire Organization Case Study

Evaluating Logistics Strategies: Fireside Tire Case Study

“As firms continue their searches for new ways to lower costs and improve service to their customers, the issue of where to locate logistics and manufacturing facilities has never been more complex or critical,” this opens up a need for statistically evaluating the logistics strategy and business operations (Gibson & Novack, 2013, p 521). It is important to know how much logistics cost an organization, and if there are potentially other ways of distribution that could open up funding for other areas of operations. This current research is technically a logistics/supply chain network audit that evaluates the current distribution center’s performance in Atlanta compared to the potential alternative locations elsewhere in the region. What was uncovered was that Atlanta was one of the best distribution locations, but not the best — Colombia, South Carolina proves a more efficient alternative.

In order to best postulate effective recommendations and solutions for current problems for the organization, a brief background of Fireside Tire Organization is necessary. The company manufactures radial tires for SUVs and has a nationwide business operation, selling aftermarket parts in regions around the country. The company’s main distribution plants are in and around the East Coast Its primary tire production locations are found in Pennsylvania, Ohio, and Illinois. Once the tires manufactured at one of these three locations, it is sent to plants and distribution centers which are later distributed out to retail and customer locations. Currently, the southeastern region is provided product by the distribution center in Atlanta. This has been the case for a while. Still, “Fireside management is concerned about the most economical location for distribution center to serve its southeastern region, consisting of North Carolina, South Carolina, Georgia, Florida, Mississippi, Alabama, in southeastern Tennessee” (Gibson & Novack, 2013, p 547). Essentially, management within the organization is worried that the Atlanta location is actually not the most practical location to logistically serve the southeastern locations surrounding it. Other options have been brought up by members of the organization, prompting the need to do further research and analysis into the environment in order to provide the best solution that is the “most logistically sound alternative” (Gibson & Novack, 2013, p 547).

Thus, the company reviewed shipment data in order to statistically evaluate the effectiveness of the Atlanta location vs. other possible alternatives. The Atlanta facility needed to be analyzed in order to understand its effectiveness in meeting logistic needs, but also to serve as a point of comparison for the other potential alternative locations. Atlanta proves a prime location for many distribution avenues of a variety of business industries. In terms of environment, it is relatively humid, but it lacks the harsh winters of locations further north, allowing travel during winter easier and less costly than other areas that have to deal with snow and ice to a greater extent. Additionally, due to shifts in the U.S. population increase in the power of the southeastern demographic, Atlanta has become a powerhouse and a “popular distribution center location for companies serving these increasing population centers” (Gibson & Novack, 2013, p 524). This is part of the reason that Fireside initially chose Atlanta for its primary distribution hub. The research suggests that “the total freight expenditures from the Atlanta distribution center during 2012 were $217,000 and that the average shipment distance was 330 miles” (Gibson & Novack, 2013, p 548). This puts Atlanta with the grid coordinate of 1,400 / 600.

Yet recent developments in the automobile industry have created a situation which questions the effectiveness of Atlanta as the primary distribution for the southeastern region. This is essentially what prompts the need for examining all other potential alternatives available to increase productivity and efficiency of the supply chain network. It is important to understand that “optimization approaches search for best solutions, simulation models replicate the functioning of logistics / supply chain networks, and heuristic techniques are able to accommodate broad problem definitions” (Gibson & Novack, 2013, p 528). From this perspective, examining potential alternatives can provide general answers to pleading questions and broad models for logistics adjustments. According to the research, “the service and cost requirements of the automobile industries move into JIT-based manufacturing have forced companies to examine the locations of logistics facilities” (Gibson & Novack, 2013, p 524). JIT, or Just in Time manufacturing is a system where backup inventory stores are reduced, and only purchased when they are immediately needed (O’Reilly, 2008). This reduces the stockpile of inventory goods, and frees up capital based on getting money out of good that are just sitting around is backup. Toyota spear-headed the implementation of JIT manufacturing within the automobile industry. To keep up with this manufacturing strategy, Toyota and other meter automotive companies like Ford, have turned to operation strategies using less of a stockpile of inventory. They then require smaller shipments of parts shipped out more often than the bulk shipments of the past. Following their lead, many automotive manufacturers have adopted the system.

This also has an impact on the nature of the logistics strategy Fireside Tire uses based on the fact that they aren’t aftermarket parts manufacturer and distributor for the automotive industry. To deal with this change in trend in manufacturing processes, “many product suppliers to the automotive industry have selected nearby points for manufacturing and/or distribution facilities” (Gibson & Novack, 2013, p 524). Companies requiring fewer inventories often demand smaller shipments much more often. O’Reilly (2008) explains that smaller is better and that “while larger, vertically integrated factories could produce greater quantities, they also held greater inventories. A network of smaller, assimilated manufacturing facilities is better suited to feed and would drop parts and components as demand dictated.” To meet the needs of JIT production, manufacturers and suppliers have to readjust their distribution strategy and focus on how to save money and effort while still conducting shipments on much smaller scales at a faster rate.

Based on the available information and calculations, it is clear that Atlanta is not the most effective distribution hub for Fireside Tire. As previously stated Atlanta has a coordinate grid of 1,400 / 600. Through statistical analysis, this research determined that the Grid Center is at 15,333 / 638. Atlanta is fairly close to this optimal center location; yet, there is another location that actually is closer. In fact, Colombia is actually closest to the Grid Center, with a coordinate of 1600 / 650. As such, it is the recommendation of this research to move distribution center to Columbia, South Carolina. This is the most cost-effective location for Fireside Tire’s logistic strategy. The area shares similar environmental elements that help keep shipping more manageable in terms of cost year-round, based on the fact South Carolina has less harsh winters than regions further north. It is also much closer to port cities along the Atlantic coast, making it easier to transport international shipments. The region is relatively close to the I-95, a major highway dealing with shipping a majority of the truck freight going up and down the east coast (Lowcountry, 2008). South Carolina has put great resources and efforts into building a strong infrastructure for logistic transport (Hitt, Onge, & Newsome, 2012). In fact, just recently in 2008, South Carolina opened new ocean ports (Lowcountry, 2008). Moving the distribution center to Columbia, South Carolina, means that Fireside Tire can take advantage of this strong and continuously growing infrastructure.

Evaluating logistics illustrates that there are a number of benefits of moving the logistics hub for the southeastern region to South Carolina. Organizations in various industries have found great success in adjusting logistics strategy in order to strengthen the underlying foundation of the company as a whole. Here, the research suggests that “in addition to enhancing the efficiency and effectiveness of the logistics/supply chain operation, the redesign of a firm’s overall network can help to differentiate a firm in the marketplace” (Gibson & Novack, 2013, p 521). As such, redesigning the logistics network to incorporate a more efficient strategy would provide Fireside Tire Organization with a greater competitive edge based on reduced cost of operation.

South Carolina authorities are very proactive and progressive in regards to working with companies to strengthen the logistics industry in their state. Working with authorities can increase the competitiveness of Fireside Tires as it situates itself in a new location. Moreover, adjustments in the logistics strategy can help reduce cost of operations for the organization. When any organization uses a logistics strategy that is not the most effective, they are losing out by leaking funds that could be saved using a more efficient logistics strategy. Here, the research suggests that “a reevaluation of logistics network and the functioning of the overall supply chain can frequently help to uncover new sources of such savings” (Gibson & Novack, 2013, p 525). As such, it is clear that readjusting the logistics strategy with a move to Colombia, South Carolina would be Fireside’s best bet.

References

Gibson, Brian J. & Novack, Robert a. (2013). Cengage Learning.

Hitt, Bob, Onge, Bob, & Newsome, Jim. (2012). TDL Council. New Carolina: South Carolina’s Council on Competiveness. Web. http://www.newcarolina.org/clusters/tdlcouncil.aspx

Lowcountry Council of Governments. (2008). Lowcountry Distribution / Logistics Center Cluster Study. Low Country. Web. http://www.lowcountrycog.sc.gov/SiteCollectionDocuments/Planning%20Dept%20Documents/FINAL%20Report-Distribution-Logistics%20Study.pdft

O’Reilly, Joseph. (2008). The evolution of inbound logistics — the Ford and Toyota legacy: Origin of the species. Inbound Logistics. Web. http://www.inboundlogistics.com/cms/article/the-evolution-of-inbound-logistics-the-ford-and-toyota-legacy-origin-of-the-species/

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