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CASE 4.1 Johnson & Johnson 18:1) European opera The company's in The facilities had high elatively low (US. belo meet the species s is always on the it was very interested Healthcare consumer packaged goods giant Johnson & Johnson's (J&J) F. tions were comprised of 12 distribution centers in seven countries. The analysis showed there was little or no consolidation among facilities. The fa operational costs (U.S. $10 million+), but transportation costs were relative million+). The distribution centers were geographically located to help m needs and service expectations of their European customers. Since J&) is a lookout for ways to streamline and improve its supply chain practices, it was y in ways to improve its manufacturing and distribution activities in Europe. An initial result of applying the network optimization software was a reduct number of distribution centers from 12 to 2. Although this scenario was acco increases in the transportation costs to customer locations, overall systems costs by U.S. $7 million. Given the strategic importance of maintaining acceptably his customer service, however, it was important to incorporate the requirement of reasonable customer service levels (i.e., one-day service for some customers, with service for others) into the formulation of the network optimization model. In it also was necessary for the model to consider factors such as the expense of lo leases, etc. Subsequently, a network optimization model that responded to the issues disa earlier was developed and utilized. The end result included a reduction in the numb distribution centers from 12 to 5, which translated into a decrease in facility costs from $10.1 million to U.S. $3.9 million. Although transportation costs increased slightly-from U.S. $6.6 million to U.S. $7.6 million, the overall network experienced a system savings of approximately U.S. $5 million. At the same time, the optimized network was able to customer service objectives such as those outlined earlier. a reduction in the as accompanied by costs decreased otably high levels of ot of retaining is, with two-day del. In addition ense of long-term CASE QUESTIONS 1. What factors help to explain why J&J historically had as many as 12 distribution centers in Europe? 2. What steps in the supply chain network design process discussed in this chapter would have been most relevant to the task faced by J&J in Europe? 3. Are there other factors that the network optimization study should have considered? 4. This case study focuses on the shipments from distribution centers to customer locations. What factors on the supply side, or inbound-to-DC-side, would be relevant to the analysis that was conducted