The meat producers of the western world needs to develop their export organizations and to streamline their physical distribution in order to take new market shares on the fast growing overseas markets. HKScan is one of those meat producing companies, the group has businesses in Finland, Sweden, Denmark and the Baltic countries. A part of their sales goes frozen on overseas export by container sea freight. Lately the logistics management of HKScan has been interested in investigating the effects of centralizing the physical distribution for the overseas export from Sweden and Denmark. This leads to the purpose of this study, which is:
“For HKScan, develop and apply a model that evaluates distribution structures for overseas export of frozen food regarding total cost, delivery service, environmental impact and regulations.”
The case study included comparison between the current distribution structure for HKScan and three pre-determined scenarios. The current setup consists of multiple warehouses in both countries. In the first scenario the distribution structure is centralized to include one warehouse per country. In the second scenario, the total export flow of products from both Sweden and Denmark is redirected and centralized to one warehouse in Denmark. In the third scenario, the total export flow of products from both Sweden and Denmark is instead redirected and centralized to one warehouse in Sweden.
To evaluate and compare the different distribution structures a general model was first created by combining different theoretical models and adapting them to the context of overseas distribution for frozen food. The study then included the three phases of developing the model to fit the case company, applying the model on the case company and then to finally evaluating the model.
The resulting model, which was the outcome of the development process, can be seen below. The model illustrates the different included elements.
By then applying the model onto the case company, HKScan, it was found that a centralization to a joint warehouse in Denmark would make total cost savings of several percents. In addition, this scenario would increase the total service level. However, the environmental impact would be increased due to long cross-border road transport distances and longer land and sea transports from the warehouse. In addition, it was not possible to fully investigate whether such a distribution would be possible from a regulatory point of view. A centralization in each country would have minor regulatory issues, it would lead to the smallest environmental impact and have a slight increase in service levels as well as a reduction for the total cost of one percent.
The evaluation of the model showed that it produces reasonable results with the regulatory elements being the hardest to evaluate for the different scenarios. Regarding the detail level, the veterinary element could be accounted for by the warehousing element and the sea freight element split into transport from warehouse to domestic port and sea freight from domestic port to the destination port. The box-model, containing twelve elements, can be seen as generalizable for evaluating distribution structures in similar contexts, Overseas export of frozen food. However, the calculation performed within the model do probably only apply to the specific scenarios in the study.