Maxwell Corporation Distribution

The President of Maxwell Corporation was considering whether the company

should set up its own distribution system or to outsource the entire distribution
and logistics functions to a third party service provider. The company had set up
a manufacturing plant in Vizag where a wide range of orthopaedic equipments
viz., crutches, wheel chairs, walkers back braces, heating pads, elastic
bandages, canes, knee braces, shoulder braces and so forth were manufactured.
Presently, the finished goods warehouse was located at Vizag itself and the
product were sent to all major towns in Indian as a point-to-point dispatch. The
company was supplying these equipments directly to retail stores at all these
locations. Marketing activity was headed by a general manager-marketing based
at Vishkapatnam who was supported by a sales team comprising of sales
officers. The company was not resorting to advertisement and publicity though
the products of the company were fairly well known. It was felt that all these
customers wanted quick responses to their orders as the products catered to
emergency patients. But, these retail outlets carried only very limited inventories.
This was due to the fact that most of the products came in a variety of styles,
shapes and sizes and the requirement was more customer driven. Keeping even
a moderate inventory of all types was not economically viable and lead to dead
stocks in long run. The company was looking at various options which included
the following:
Setting up of hub and spoke type of a distribution network wherein it was
proposed to set up a stock point or mother warehouse n each zone viz.,
East, West, North and South and respective retail outlets were to be fed
from the mother warehouse located in that zone.
Setting up of a central warehouse anywhere in Central India and feeding
retail outlets from this location.
Changing the distribution channel from the present numerous retail outlets
system to a more efficient system.
Outsourcing the entire distribution and logistics to a third party wherein the
entire activity of transportation and distribution till the ultimate retail outlet
would be taken care of by this service provider and company could focus
more on activities of marketing and sales.
Questions
1. Evaluate each of the four options independently keeping the distribution
issues being faced by Maxwell in perspective.
2. Develop a recommendation based on your evaluation, above.
3. Should Maxwell go in for the 4 th option, what would be the criteria for
evaluating this option?