Case Study - EAP Laurence Sun, Managing Director of Elite Advanced Publishing (EAP) scanned the 'Executive Summary' of the consulting report he had...
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Case Study - EAP

Laurence Sun, Managing Director of Elite Advanced Publishing (EAP) scanned the "Executive Summary" of the consulting report he had just received. Sun saw the report was filled with the latest buzzwords and hot concepts: "Establish cross-docking facilities for high-volume deliveries to large customers ... centralize storage operations to decrease safety stock levels ... leverage point-of-sale data to move toward a pull distribution strategy..."

Sun was familiar with all of these phrases and concepts at a superficial level, of course — anybody who occasionally picked up The Wall Street Journal or Business Week would be. He was less sure, however, if the consultants were trying to dazzle him with fads or if the kind of radical operating changes that were being proposed in the report would help to position EAP for the future.

Founded 60 years ago, EAP had been for many years one of the largest book distributors in the country. From its seven regional warehouses, EAP services major bookstore chains and smaller independent booksellers throughout the country. The company had continuously strived to improve its service levels and operating efficiency, and it was considered the most efficient book distributor in industry. Using advanced forecasting techniques to control inventory levels and technologically advanced warehouses to control operating expenses, EAP shipped virtually all of the orders it received within two days from its stock of nearly 500,000 books, the largest in the industry.


The bookselling industry, however, had been changing dramatically, and Sun realized that EAP would have to make changes to remain a book distributing powerhouse. In particular, two relatively new types of retailers were becoming more and more dominant in the industry: the large superstores and the online booksellers. Both of these categories of retailers presented new and unique challenges to their distributors.


In the past EAP had interacted primarily with the superstores through large regional distribution centers (DCs) that the superstores maintained. In general, EAP had shipped to the DCs consolidated orders of many different titles bound ultimately for many different stores. As these superstores learned from the experiences of large retailers in other industries, they started to demand new kinds of services from their distributors. For example, some retailers had started to strongly encourage EAP to ship directly to stores, bypassing the DCs. In addition, as the industry consolidated, these huge superstores were developing more leverage with their distributors. They used this leverage to force the distributors to accept lower and lower margins.


Online booksellers presented an entirely different set of challenges to Sun and the managers at EAP. These retailers had very little inventory at hand. Instead, they took orders and relayed them to distributors like EAP, who delivered the books to the retailers for repackaging and shipment. Recently, these retailers had started moving toward a new business model—one in which the distributors handled packaging and shipment of books directly to the end customers.


Sun realized that these industry changes could provide opportunities for his company if he could figure out how to take advantage of them. Clearly, if EAP was to maintain



SUPPLY CHAIN & E-LOGISTICS MANAGEMENT

its reputation as one of the nation's leading book distributors, it would have to start doing things differently.

Furthermore, he had the consultant's report, filled with recommendations and designs for new distribution systems. Sun knew that he and his management team would have to develop an understanding of these issues in order to properly assess the consultant's suggestions. As he prepared for the next day's meeting, Sun made a list of many questions:


  1. Should EAP implement a push strategy? A pull strategy? A push-pull strategy? Why? What would it require?
  2. What distribution strategies are appropriate for EAP's businesses? Why?
  3. What are the advantages to EAP in having fewer warehouses and a more
  4. centralized operation? More warehouses and a more decentralized operation? 

 

Answered by Expert Tutors
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