Running head: INTEGRATED LOGISTICS SOLUTION FOR DUPONT ENGINEERING
Integrated Logistics Solution for DuPont Engineering Polymers/Gard Automotive Manufacturing COURSE ID May 12, 2014 NAME INSTRUCTOR
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Introduction DuPont Engineering Polymers (DEP) are one of t he top polymer manufacturers in the country. Through continued investment in the latest manufacturing technology, they have managed to produce the highest quality polymer available on the market for a number of years. This has allowed them to enjoy a great measure of profitability through winning contract bids over their competitors easily, in some cases directly. One of DEP’s biggest customers is Gard Automotive Manufacturing (GARD). GARD are renowned suppliers of plastic parts to makers of automobiles and small trucks as well as aftermarket retailers in the United States. Over the past fifteen years, DEP and GARD have had a successful and productive business relationship where DEP was directly sourced as the sole supplier of polymers. Polymers are a critical component of the GARD manufacturing process. GARD are undergoing transition in the procurement department, with the current head, Mike O’Leary, set to retire in six months. The y have identified Richard Binish, an ambitious and qualified manager, as his replacement. Binish intends to revolutionize the GARD procurement process in order to enhance efficiency. He has a set of measures in the pipeline to be implemented progressively as he takes charge of th e company’s procurement. Some of the benchmarks he intends to implement are currently not being met by DEP, and they currently have only a one year contract to work with. Tom Lippet, the sales representative from DEP, also learns that his competitors have cau ght up with DEP in terms of polymer quality, meaning that DEP will have to seek alternative avenues of differentiating themselves away from the product if they are to remain competitive. Present Situation
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The most fundamental weakness identified that threatens the future of DEP’s dealing with GARD is an inefficient product delivery setup. Presently, DEP is required to deliver the polymer ten days after the order, with an acceptable window of five days and a 95% minimum service threshold. They easily meet this requirement, posting impressive service threshold of 96.2%. However, Binish intends to shrink the delivery window to 3 days, while also increasing the minimum service threshold to 96%. After three years, Binish intends to have achieved sameday delivery (one day acceptable window) with delivery threshold of 96.5%. DEP are faring poorly at the enhanced standards, achieving only 80% service on same-day delivery. The first step in improving DEP’s service delivery is to review their supply ch ain process (Hanfield & Nichols, 1999). The following image represents a supply chain diagram for DEP’s operation. After an order is received from a client, it is communicated electronically to the manufacturing department. They are able to order the six chemical compounds required to manufacture the polymer from their six supplying companies. The actual manufacturing then takes place, followed by warehousing of the produce before it is processed and ready for shipping. The manufacturing and shipping stages add value in the process. This is because in manufacturing, a less useful substance is converted to a more useful substance. The shipping stage bridges the geographical gap between the customer and the product he requires, hence adding value. The other stages do not add value but are a required part of the whole process to facilitate smooth operation.
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DEP enlists the services of three suppliers for each raw material annually. They are assigned delivery quotas of 60%, 25% and 15% depending on their performance during the yearly bidding process. The minimum delivery stage process c ycle for primary producers is 4 days. The limiting factor in this case are Companies 4 and 5, which have a minimum delivery time of 4 days from the order date. When we take into consideration a minimum warehousing period of three days before the product is shipped to the customer, the minimum performance cycle becomes 7 days. On the other hand, when seeking the maximum performance cycle, we take into account worst-case scenarios in terms of delays (Hanfield & Nichols, 1999). The max imum delay in raw material delivery is 9 days, by Company 4. Coupled with a worst-case 6 day warehousing period and a 6 day shipping period for distant customers, the maximum performance cycle for DEP is therefore 21 days. This is a very huge delay for a company seeking to be successful in an increasingly competitive market.
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The 25% and 15% suppliers are a handy asset to DEP. In addition to ensuring that there exists an assured supply of raw materials throughout the year, the company is also able to use them as a shield against price increase by any individual company. The non-primary suppliers actually deliver very impressive performances in terms of the time between order and delivery. For example, it is noted that five non-primary-supplier arrangements provide a minimum delay of 2 days between order and delivery, compared to only one primary-supplier arrangement. To use these supplementary suppliers more effectively, DEP should adapt a flexible delivery arrangement which does not bind it to buy specified amounts from specific suppliers for a long time. For example, if a company shows impressive delivery records, the con tracts should allow for more orders to be given to that supplier. In addition, the bid evaluation during the tendering process should move beyond merely comparing prices, placing stronger emphasis on performance cycles and service delivery thresholds. Admittedly, this will increase the cost of procuring raw materials for DEP. However, the payoff in terms of shorter production cycles will be a handsome reward for such a small price. Recommendations If I was Tom Lippet, the first project I would sug gest a review of all contracts with our suppliers. I would propose new contracts with shorter delivery deadlines a nd higher delivery thresholds to reduce the total performance cycle. Secondly, I would float an idea for tighter integration between the manufacturing and warehousing teams. According to Thomas and Griffin (1996), “Historically, the three fundamental stages of the supply chain, procurement, production and distribution, have been managed independently, buffered by large inventories.” They go further to mention that the need to better meet customer needs has led to companies adopting “coordinated planning between two or more stages of the supply chain.”
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I would suggest increasing the manufacturing area to provide space for some of the processes that take place in the warehouse at present (Hanfield & Nichols, 1999). Some activities such as labelling, palletizing, shrink wrapping and matching manufacturing tickets with purchase orders can easily be done at the tail end of the production line. This would reduce the time spent by products at the warehouse, as some can then be shipped immediately after manufacturing has been completed. This would further contribute to shortening the production cycle. With these proposals implemented, our service record with GARD will improve significantly. We will be able to post better service deliver y thresholds, even with the narrower delivery acceptability window being considered. I would emphasize to Binish the everimproving quality of our polymer due to the continuous investment we make in improving our processes. However, the keynote of the sales pitch will focus on our service delivery benchmarks. I will mention that today’s polymer manufacturers have upped their game, almost commoditizing the product. This makes having a high quality product merely a “qualifying criteria” for the contract. I will point out how our compan y is able to deliver the product within narrow time requirements to very impressive levels. I will sell to him that our efficiency is also beneficial to them as it helps them streamline their internal manufacturing processes without suffering from interruptions (Thomas & Griffin, 1996). I will market this as a key differentiator, and th e cornerstone of an “order winning criteria.” The change in our strategy is a reflection of the highly dynamic nature of supply chain management. Businesses are continually reinventing themselves in pursuit of increased growth and opportunities to attain higher profits. The business landscape means that supply chain management must drive the change to keep businesses ahead of the curve. Supply chain
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managers must have a dynamic mindset that is able to perceive oncoming change and act suitably in good time to the advantage of the company.
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References Hanfield, R. & Nichols, E. (1999). Introduction to supply chain management. Upper Saddle River: Prentice Hall. Stevens, G.C. (1989). Integrating the supply chain. International Journal of Physical Distribution & Logistics Management , 19(8), 3-8. Thomas, D. J. & Griffin, P.M. (1996). Coordinated supply chain management. European Journal of Operational Research, 94(1), 1-15.
