Factory Encroachment and Channel Selection

Topic: Logistics
Words: 325 Pages: 1

It is important to note that selling directly to consumers allows a seller to preserve the profit margins but comes with a burden of planning and execution. Pain Away Corporation and its management are faced with a challenge to integrate the given direct-to-consumer framework for its products. Therefore, the company should not outsource its logistics to third-party logistics (3PL) in order to maintain control and profit margins as a part initial strategy.

From the perspective of customer service, option two is the best choice since it will allow having a greater fulfillment network to be able to reach the customers better. In other words, it is easier to serve customers superiorly when there is regional proximity in the region. Option one is prone to be problematic because it will require focusing on not mixing medical and consumer orders. The third option will involve relying on the 3PL for customer service issues. Option three is the most economical solution, whereas other alternatives require a heavy initial investment and some more to acquire efficiency. Sumner will need to analyze the performance of the existing distribution centers for functional elements, whereas the profit margin loss needs to be compared to the investment needed to have the company’s own logistics network (Chen et al., 2019). Option two is the best way forward since it aligns with the initial strategy of preserving profit margins and growing slowly but reliably. PAC should implement automation slowly as well in order to avoid unnecessary heavy investments.

In conclusion, PAC should not outsource its logistics to 3PL in order to maintain control and profit margins as a part initial strategy. The direct-to-consumer framework is about limiting one’s own scale and growth for the purpose of having control over the entire process as well as not losing in profits. PAC should stick to the plan and intent in order to grow slowly, gradually, and reliably without losing control over some important processes, such as logistics.

Reference

Chen, J., Liang, L., & Yao, D. Q. (2019). Factory encroachment and channel selection in an outsourced supply chain. International Journal of Production Economics, 215, 73-83.

Impact of COVID-19 on Global Supply Chain
Supply Chain of British American Tobacco