Integrated Logistics for DEP/GARD Case Study
Integrated Logistics for DEP/GARD Case Study
-Tin Yeung Ma
-2/27/2014
Tom Lippet, sales representative for DEP, feels the challenge when the successor of Mike O’Leary, Richard Binish, becomes the new purchasing agent at GARD who plans to trim the product line in the next three years. His plan to narrow the service window for suppliers from the original 5 days to 3 days in the next three years to the eventually 1 day window forces Tom to consider ways that can increase the performance and service of their company to win the contracts in the future.
Solutions for DEP
1) Diagram on the Left shows the DEP/GARD supply chain.
Value adding stages are:
- The inbound transportation from compound suppliers
- The manufacturing and packaging process
- The outbound transportation to GARD
Non-value adding stages are:
- The compound inventory sitting in DEP (7-day supply)
- The order transmission time wasted by receiving and handling orders manually
- The finished product staying in the warehouse
2)
Order Transmission, Processing, Selection
Order Transportation
Customer Delivery
Total
Unit
Min Performance Cycle
6
3
0
9 days Max Performance Cycle
8
6
6
20 days The minimum performance cycle for the supply chain is 9 days, whereas the maximum performance cycle is 20 days.
3) The performance cycle can be improved through the use of the 25 percent and 15 percent suppliers. But because DEP used a bidding system that emphasized on price, by giving out more proportions of the raw materials to the 25% and 15% suppliers, the average variable cost per unit will be higher for each compound. However, choosing 25% and 15% suppliers who has a relatively higher fill rate can increase the reliability of inventory availability and reduce the possibility of shortages. Which in turn means that DEP can lower the 7-day supply of each compound to a 6-day or even 5-day supply depending on the reliability of the supplier. By doing so, the inventory
-Tin Yeung Ma
-2/27/2014
Tom Lippet, sales representative for DEP, feels the challenge when the successor of Mike O’Leary, Richard Binish, becomes the new purchasing agent at GARD who plans to trim the product line in the next three years. His plan to narrow the service window for suppliers from the original 5 days to 3 days in the next three years to the eventually 1 day window forces Tom to consider ways that can increase the performance and service of their company to win the contracts in the future.
Solutions for DEP
1) Diagram on the Left shows the DEP/GARD supply chain.
Value adding stages are:
- The inbound transportation from compound suppliers
- The manufacturing and packaging process
- The outbound transportation to GARD
Non-value adding stages are:
- The compound inventory sitting in DEP (7-day supply)
- The order transmission time wasted by receiving and handling orders manually
- The finished product staying in the warehouse
2)
Order Transmission, Processing, Selection
Order Transportation
Customer Delivery
Total
Unit
Min Performance Cycle
6
3
0
9 days Max Performance Cycle
8
6
6
20 days The minimum performance cycle for the supply chain is 9 days, whereas the maximum performance cycle is 20 days.
3) The performance cycle can be improved through the use of the 25 percent and 15 percent suppliers. But because DEP used a bidding system that emphasized on price, by giving out more proportions of the raw materials to the 25% and 15% suppliers, the average variable cost per unit will be higher for each compound. However, choosing 25% and 15% suppliers who has a relatively higher fill rate can increase the reliability of inventory availability and reduce the possibility of shortages. Which in turn means that DEP can lower the 7-day supply of each compound to a 6-day or even 5-day supply depending on the reliability of the supplier. By doing so, the inventory