Compare and contrast the three options from the perspective of cost. Which one do you believe will provide the most economical solution for PFC

The comparison and contrast of the three options based on cost are as follows:

Option 1 - Upgrading the existing PFC distribution center:  This will incur more fixed expenses as upgrading facilities to meet demands is costly in financing interests and depreciation expenses. PFC will also incur additional costs for warehouse automation. These infrastructure and equipment costs may run into thousands of dollars. However, this option means that all the supply processes will be owned in-house by PFC. This strategy does not seem to play in the strengths of the company.

Option 2 - Expand the PFC fulfillment network: According to the scenario, PFC's strength lies in producing quality products and not distribution. Overhauling its distribution may be very costly for the company at this stage. The company does not have the resources for such massive infrastructural expansions.

Option 3 - Outsource fulfillment to a capable third-party logistics company: This third option sounds more promising than the first two. Every company must review its strategies, considering its strengths and weaknesses and the opportunities and threats the market presents it.

Thus, it may be more economical for PFC to go with Option 3 by outsourcing customer fulfillment service to a third-party logistics company, which can ensure that the products of PFC reach retailers and customers on time.

Learn more about customer fulfillment strategies here: link

Incomplete question. The full question read:

Power Force Corporation Kip Himmer, executive vice president of operations of Power Force Corporation (PFC), is feeling stressed out. The producer of power tools for the do-it-yourself market is experiencing higher fulfillment costs as retailers change their buying patterns. They all seem to want smaller, more frequent shipments to a larger number of locations. And, the retailers' service expectations are on the rise. They are demanding advanced shipping notification, RFID tags on all products, and improved inventory visibility. Gone are the days when the retailers bought power tools by the truckload for delivery to a few regionally dispersed distribution centers. Instead, they are asking for smaller shipments to multiple distribution centers and direct delivery to stores. Some retailers are also inquiring about PFC's ability to deliver orders for individual customers direct to their homes. This drop-shipping strategy is completely new to PFC and Himmer worries that it could create major bottlenecks at the company's centralized delivery center that sits next to the factory in Louiseville Kentucky. And, all of these new requirements are accompanied by shorter order cycle time goals. Himmer feels that he is stuck between a rock and a hard place as the major home improvement chain stores (Home Depot, Lowe's, and True Value) account for more than 80 percent of PFC's sales. Although compliance is proving to be very expensive, PFC cannot afford to deny the requests. Doing so would have an unwelcome effect on revenues. After consulting with his fulfillment team, Himmer has come to the conclusion that he has three reasonable options to address the emerging marketplace requirements.

Option 1 - Upgrade the existing PFC distribution center in Kentucky to handle multiple order types and smaller shipments. Deploy warehouse automation to improve order fulfillment speed and efficiency.

Options 2 - Expand the PFC fulfillment network. Add regional distribution centers in Nevada and New Jersey to the existing Kentucky distribution center. Modify operational processes and flows so that orders for delivery centers, stores, and individual consumers can be fulfilled.

Options 3 - Outsource fulfillment to a capable third party logistics company so that PFC can focus its efforts on quality production, accurate demand planning, and lean inventory management.

Himmer's next step is to fully evaluate the three options and choose a path forward before his upcoming meeting with Marcia Avis, the owner of PFC. Avis will ask tough questions and Himmer must be confident in his recommendations.

Compare and contrast the three options from the perspective of customer service. Which one do you believe will provide the most economical solution for PFC?

Options 3 - Outsource fulfillment to a capable third party logistics company so that PFC can focus its efforts on quality production, accurate demand planning, and lean inventory management.

Explanation:

In terms of cost, it will be preferable if Himmer outsourced the fulfillment objectives to another company that is capable because if for example, they decide to go with:

option 1: they will need to set aside large funds investing in physical infrastructure; such as upgrading the existing PFC distribution center in Kentucky, buying warehouse automation tools, etc. Or they chose;

option 2: It also requires even more funds to be able to expand and add new regional distribution centers in Nevada and New Jersey, etc.

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