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ourse: MGT-510 (Operation and Production Management

Polaroid Corporation: European


Distribution System
Background:
Polaroid Corporation, headquartered in Cambridge, Massachusetts, was operating worldwide with multiple and
variety of instant photographic products with approximately over 2300 SKUs for consumer as well as industrial
customers. It had manufacturing sites in the United States, Scotland and the Netherlands. When deregulation of
US motor industry took place the management of Polaroid Corporation consolidated the warehouses in US and
implemented the integrated distribution system from a centralized location across the whole USA, which not only
resulted in an improved service level but also reduced costs. After the successful consolidation of warehouses in
the US the management also took under consideration the plan to consolidate the subsidiaries warehouses in
Europe to centralized distribution system in early 1990s. There were around 12 European subsidiaries each was
headed by General Manager of those France, Germany, Italy and United Kingdom together have accounted 70
80% of the total European sales. The proposed system of centralized distribution would be at Enschede,
Netherlands in which all inventory for European retailers would be held and it would serve as the have only central
distribution for whole Europe eliminating the countrywide subsidiaries warehouses.

Statement of the Problem


The proposal of Centralized distribution system faced significant opposition from majority of subsidiary general
managers of Europe and also from the Polaroid's European marketing organization. The top management including
Tom Carroll, Director of International Distribution and Customer Service at Polaroid Corporation, strongly
advocated the idea of centralized distribution which, according to them will have multiple advantages such as cost
cutting, Raise the order fill rates and improved service quality were the supposed to be the most important ones.
However the opponents of the proposed plans showed various concerns and hold the view the plan will not work in
Europe keeping in view the European market dynamics. Various concerns of the General Managers were as under:

It would diminish the flexibility to respond to the changes in the local Markets.
Financial benefits were highly uncertain.
The benefits are limited to the Top management, no benefits to the subsidiaries.
The future role of the subsidiaries would diminish.

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Enschede may not have capabilities to prove the level of services their customers require across the whole

Europe.
Layoffs of the staff at Subsidies and decreased responsibilities of the managers.

Decision Criteria and Alternative proposals.


The Polaroid considered three distribution alternatives which are:
1. Direct distribution to retailers through Europe from the Dutch distribution center
2. Hiring a third-party logistics organization to take over all of Polaroid's European distribution activities,
3. Establishing regional satellite distribution centers.

Polaroids distribution needs vary According to Subsidiary needs in Europe:


Market dynamics vary in different parts of the Europe. There observed a significant difference in the tastes and
preferences, consumer needs and wants varied substantially which led to variations in the companies marketing
distribution strategies. Similarly, Polaroid distribution needs also needed variation in accordance with the needs
and wants of the customers.
Some of the examples of regional disparities in consumer preferences and mentioned below:
France: Large number of Customer in France needs the delivery of product directly to retailers because
they view various channels in distribution process as a complicated.
Germany: They are highly demanding with respect to both quality of product and service. They need
timely deliveries. They detest late arrivals of deliveries.
Italy: They were more flexible and even not so much concerned about stock delays as other European
customers.
UK: These customers were more demanding particularly for service requirements.

Implications:
This variation in the composition of European customers demands more flexibility and changes in the Polaroids
product. The apprehensions of most of the General Managers were largely based on this very fact that Centralized
distribution system would diminish flexibility of the variations in the European Markets.

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Recommendations:
They should go with the mixing up of different strategies and plans for initial period on trail basis in order to
access the which strategy would be more useful keeping in view the market dynamics of European markets and
after then they should decide what option should be implemented on long term basis.

Action Plan
Should it implement direct distribution strategy or not:
There are the strong arguments in favor the implementation of direct distribution strategy. Various studies have
presented some of the major benefits of the strategy which are given below.
Post integration traveling Cost saving from 5-25%
Reduction in inventory handing cost which is up to 9% of the value of inventory. It will reduce 75 % of the
local inventory.
Improving in cash flows, annual saving would be around $ 5.7 Million. Etc,
Theoretically, Polaroid possesses sufficient experience of working with Integrated Distribution system such as in
US and also the already operational International Distribution Service Center (IDSC) at Enschede are the basic
example in this regard. As IDSC also serves many international subsidiaries as well as distributors in the countries
in which Polaroid did not have subsidiary. Thus, it may be said that Polaroid had the enough experience of
Consolidated Distribution system. And launching the same in the Europe would surely be a success.

Exhibit-1 Includes SWOT analysis of the consolidated distribution system.

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Exhibit-1

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