Aluminsa Company current business situation description essay
Aluminsa is a Mexican manufacturer of aluminum profiles with headquarters located in Monterrey, Mexico. Company business strategy realization requires supply chain performance improvement. Traditionally, each segment of a supply chain is managed as a stand-alone entity focused on the local objectives achievement. Such approach originated inter-functional and inter-company conflicts, and has prevented improvement that could be gradually achieved at the supply chain level.
Aluminsa Company is included into larger conglomerate. The headquarters is located in Monterrey, Mexico. The company is engaged in fabricating and distributing aluminum profiles to the Mexican market. The organization incorporates two manufacturing plants and three distribution centers. The approximate total sales of the company make 50 tons of the products per year. It is worth paying attention to the fact that both plants work as independent enterprises with their own organizational structures. So, all the current operational decisions are taken with a high degree of independence and a lack of cooperation and economies of financial recourses.
The company analysis reveals their two main competitive factors. These are response time and price. The observation of the current situation in company business shows that the intensive pressure from the competitors requires continuous price reductions. This situation led to several cost cutting measures in all the activities of the company. Logistics costs which contribute 24% of total operating cost, has been acknowledged to be an important point for reduction. Having analyzed the structure of total logistics cost, we can conclude that it is necessary to search for potential areas for improvement initiating with the targeted transportation cost contributing about 43%. The next priorities of improvement are warehousing and inventory carrying costs making 25.8% and 22.6% respectively.
As we know, the structure of the market size and its location are very important in the distribution of the logistics costs. Current total annual sales volume is about 50 tons of products which makes about 134 million of U.S. Dollars. Export involves about 6.2% of total sales. Sales which are intended for the Mexican market are distributed as follows. The plant located in Monterrey contributes with 53.7% of total sales and the one located in Mexico city with 40.1%. It is important to note that 29.1% of total domestic sales operations are inter-company sales. In these conditions due to capacity, unbalances and technology limitations, the plants mentioned above have to process part of each other’s sales volume, initiating an important transportation cost between them to make it possible. Having observed the list of the company most important clients, we should note that the enterprise in Monterrey has a better opportunity of using FTL transportation as for about 12 of the clients which cooperate with them represent 65% of its sales. It has been also found that 83.8% of the products are sold to order. Mexico’s plant customer distribution is more disperse and requires transportation routing alternatives. At this plant 58.9% of the products are sold to stock.
The structure of the Mexican supply chain involves two production facilities which are located in Monterrey and in Mexico city, and three warehousing facilities: Monterrey, Guadalajara and Mexico city ones. Since both manufacturing plants work as independent companies, they have to compete for the same market. Thus, the resulting distribution pattern will not correspond with the optimal pattern in case a concentrated integrated strategy is taken. Two possibilities for decreasing transportation costs should be observed. They include the elimination of inter-plant flows and the reconsidering of market to distribution center or manufacturing plant.
The products distribution is fulfilled by the trucks with capacities of 3.5, 11 and 20 tons. The approximate amount of trips is 500 per month. They are carried out by about 32 transportation suppliers. We should mention that it is normally to have up to 7 suppliers for each route.
The freight rates are different for each trip and set up by each supplier in accord with its particular cost structure and conditions of market. This leads to a high variability of the rates during a year. Having made an additional analysis concerning the level of utilization of truck capacity we have got the result of 83% of utilization which yields a low probability for improvement.