Guard Automotive Manufacturing Case Study

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No.9 Central Ave. New Era, Quezon City

HRDM 11-14 Logistics Management

Case 1: Integrated Logistics for DEP/GARP

Prepared By:

Henry G. Dollentas

Aubrey P. Catre

Paul Joeman Eran

Jeson Dagongdong

Executive Summary

Currently Guard Automotive Manufacturing (GARD) schedules delivery 10 days from date of order .Considering the previous acceptable standard of on-time delivery occurring with a five-day window, DEP had a minimum service threshold of 96.2 percent which is above GARD’s standard of 95 percent. GARD’s new purchasing manager plans on having a three-day on-time service window within three years and after that he is shooting for exact day delivery with 96.5 percent service capability .Assuming Dupont Engineering Polymers (DEP) continued is current supply chain practices it would only have an 80.0 percent service capability when trying to meet the future requirement of exact day. Currently the minimum order cycle for DEP’s supply chain is eight days .This 11 day cycle assumes the minimum of two days it takes for DEP to receive its chemical compounds from supplier, six days for production, and three days sitting in warehouse before shipment. The maximum order cycle is 24 days. This 24 day cycle assumes nine days to receive its chemical compounds from suppliers, eight days for production, and seven days sitting in inventory before shipment. Major Problem

This case finds Tom Lippert, sales representative for DuPont Engineering Polymers (DEP), in a situation common to today’s competitive sales environment. His company, as a supplier to a major manufacturer (GARD), is faced with changing times. GARD is in the midst of a “changing of the guard” as Mr. Lippert’s long-time contact, Mike O’Leary, retires. O’Leary’s successor, Richard Binish, brings a new set of supplier expectations to the fore of GARD’s purchasing strategy. Over the years, the quality of competitors’ products began to match DEP’s.

Firms now compete based on logistics quality. To keep the GARD business, DEP must improve its logistical performance to meet the customer’s rising expectations.

The textbook illustrates a concept called the “shrinking service window.” The idea behind the shrinking service window is that customers have begun to expect higher levels of service (higher fill rates) in less time (shorter order cycles). In GARD’s case, a change in leadership is responsible for the new, higher expectations. The change, however, is indicative of the realization that logistics has become a strategic weapon. The case illustrates that DEP must either match competitors’ service or face losing a major customer.

The major problem facing DEP is that in order to maintain its business contracts with GARD it has one year to demonstrate to the new purchasing manager substantial progress towards the goal of exact day delivery from 10 days of when the order is placed with a 96.5 percent service capability. Even though this condition is not required for 3 years, the current contract ends in one year. Therefore DEP must do everything in its power to come as close to this goal as possible and sell GARD on the promise that it will continue to improve in supply chain and ultimately meet or exceed GARD’s requirements.

1. Diagram the DEP/GARD supply chain. What stages are adding value? What stages are not?

• A diagram of the DEP-GARD supply chain.[pic 3]
• Stages that are adding value:

∙ Inbound transportation from the suppliers

 ∙ manufacturing

∙ DEP packaging

 ∙ product delivery

• Stages that are not adding value:

∙ “dwell time” at the remote warehouse

∙ materials receiving

∙ matching orders to paperwork

 ∙ materials inventory

1. Using  the primsry DEP suppliers (60 pecent business, what is the minimum performance cycle for the supply chain diagrammed above? What is maximum?

• Minimum order cycle time: 8 days
• Maximum order cycle time: 25 days 3.

1. Can the performance cycle be improve d though the use of the 25 percent and 15 percent  suppliers? What trade-offs must be made to use the suppliers?

• Yes, it appears that the performance cycle can be improved through the use of 25% and 15% suppliers. For example, Company 2 offers better service levels and less variability than Company 1. Using more reliable suppliers may result in higher prices on materials but this can be mitigated by reducing DEP’s material inventories. Greater certainty on the part of suppliers reduces the need to maintain high stocks of inventory.

1. If you were Tom Lippet, what changes would you make in DEP’s operations? Why? What problems do you foresee as you try to implement these changes?

• This is a question of opinion. People’s resistance to change should be considered. In particular, manufacturing personnel will be tough to convince due to past experience.

1. Assuming you can make the changes mentioned in question 4, how would you “sell” Richard Binish on DEP’s next bid? What will likely be “qualifying criteria” and “order winning criteria”? Will these change over time? What does this suggest about supply chain management?

• The means of “selling” the idea to Mr. Binish is matter of opinion -- more of an art than science. Regardless of the specific effort, it should demonstrate why Binish should keep DEP as a core GARD supplier. This will involve conveying clear guidelines for making the desired service improvements while maintaining a competitive price -- providing Binish with the value he demands.

Below are samples of “Qualifying” and “Order winning” criteria.

“Qualifying criteria”

• Good product quality
• Competitive price
• Service capability that exceeds the minimum standards

 “Order winning criteria”

• Consider changes that demonstrate that DEP is practicing the very service expectations that Binish is trying to implement. This would illustrate DEP’s conceptual understanding of Binish’s ideas.
• Position GARD for electronic data interchange (EDI) or other asset- and information- sharing processes. EDI would allow Binish with “real time” information from DEP. These investments also help to solidify relationships.

• These criteria will likely change over time. The shrinking service window illustrates how customers continue to expect more until eventually service approaches 100% fill rates and very short performance cycles. This case suggests that supply chain management increases in sophistication with higher levels of performance. Unless these areas of improvement are addressed, supplying firms will be left behind as competitors strive to meet customers’ ever-changing needs.