Summarizing the FNS Recomendation Rationale

When appraised according to 19 common criteria, the three solutions show remarkably varying totals. Based on the appraisal results, the following can be asserted:

• Solution C (inaction/compensation) addresses none of the systemic problems identified in the analyis but is easily implemented and may suffice as a short-term measure. Based on the appraisal results, Solution C is the worst option.

• Solution B (3PL) addresses all the systemic problems identified, but comes with high risk and high cost. Based on the appraisal results, Solution B is the second-best option.

• Solution A (GLSU) addresses all the systemic problems identified. Its initial risks and costs are high, but long-term, these are offset by efficiency gains and sales growth. On most appraisal criteria, Solution A (GLSU) significantly outperforms B and C. Solution A (GLSU) is the best option.

Solution A (GLSU) recommended

All five elements of Solution A must be applied for general benefits to be maximised. Mixing high and low performing components generates inefficiencies. Moreover, Solution A is an integrated solution: e.g. RFID is required for automation. Initial costs will be high but the return will follow quickly, in the form of steady energy and labour savings and increases in completed orders. Moreover, the upgraded system will be scalable, facilitating growth and enabling the differentiating logistics capability that is the company’s USP.

A sweeping, full-scale alternative was proposed – and rejected. Outsourcing all logistics operations to a 3PL would result in a 40% reduction in profits. The effort and cost required to manage a 3PL should be channelled into improving in-house logistics instead.

Inaction/compensation was also proposed – and rejected. Its advantages are low-cost and simplicity, but its implementation connotes abdication of vision and resistance to system improvement.