Essay, Logistics

Project description
requirements:
All strategies must change. Prepare for this. Utilize your Category Strategy list of factors/uncertainties to review how your strategy can be adapted should these change. This is where RISK MANAGEMENT sections. Whatever monitoring of internal/external changes or other data gathering is crucial to future decisions, make note of it.

Material:

Looking at the current state for American Airlines beverage spend category (non-alcoholic) in Europe, the airline is spending approximately $1,704,368 in total costs for beverages. These beverages fall into four categories: waters, sodas, juices, and mixers. These 4 categories of items make up a total of 12 different products including Crystal Geyser water, Canada Dry Ginger Ale, Canada Dry Tonic Water, Canada Dry Club Soda, Minute Maid Orange Juice, Minute Maid Cranberry Apple Juice, Kulana Apple Juice, Coca Cola, Diet Coke, Coke Zero, Motts Tomato Juice, and Motts Bloody Mary Mix.

Referring back to American Airlines current state, 7 of the 12 products are currently arriving in Europe via ocean freight containers. This arises many complications due to extensive lead times, damaged/stolen products, and high costs. The cost structure for shipping these 7 products from the United States over to Europe breaks into four different drivers. Altogether, these 7 products that are being shipped to Europe accumulate roughly $1,005,301 out of $1,704,368 in total spend. The remaining 5 products that make up the remaining $699,067 are currently sourced in Europe through an approved supplier list.

The first cost is broken down in product costs where American Airlines is spending roughly $655k on the products alone. The second is ocean freight fees and all included costs to ship product overseas which add up to $223,798 roughly 22% ($223,798 $1,005,301) of costs come from solely logistics. The next cost is distribution fees which come out to $87,234. These distribution fees refer to the cost of domestically packaging and transferring product to the East coast ports before they are boarded on ocean freights. Lastly, all taxes and fees of transferring products to European waters add up to $38,867.

Reaching from a different perspective, out of the 7 European bound products, the 8 oz. Crystal Geyser square water bottle accounts for 78,864 cases (of 24) annually which is roughly 15 times more cases purchased annually than the other 6 products (see chart below). This probes a large opportunity for American Airlines to cut costs if they can source the 8 oz. Crystal Geyser square water bottle in Europe.

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