Part B On March 27, 2014 Steve Hogg, Director of Supply Chain Services with Fras
ID: 380664 • Letter: P
Question
Part B
On March 27, 2014 Steve Hogg, Director of Supply Chain Services with Fraser Direct, learned that the strike that had crippled the port of Vancouver was resolved and workers were expected to return to work. Mr. Hogg now had to help his key customer deal with the aftermath of the strike and the slow release of the excess inventory.
Fraser Direct Revisited
Fraser Direct Distribution Services Ltd was started by Al and Lois Fraser in Georgetown, Ontario in January 2000 as a third party logistics supplier. Fraser Direct offers a wide range of services including supply chain advice, customs clearance, warehousing, inventory control and project management.
Steve Hogg, as Director of Supply Chain Services in the London office, provides transportation management for third party provider Fraser Direct. This includes international air and ocean transportation as well as US and Canada wide shipping. Fraser has all the information to communicate any variances in the shipments. Mr. Hogg’s responsibilities include providing information to customer on all options available for the shipment of goods from vendors including researching the options, offering the solutions and making recommendations. The customer only has to make decisions on how to proceed. Every month Mr. Hogg looks at the data from the previous months shipments (broken down by mode of transportation) and makes recommendations to reduce costs.
Resolution of the Strike
In February 2014, 1000 non-union truckers and port workers went on strike, leaving millions of dollars of cargo stranded in Vancouver area container terminals. Two hundred and fifty unionized truckers joined the strike on March 10, 2014.
On March 24, 2012 the Huffington Post Business section wrote, “At its peak, the port said the strike was affecting $885 million worth of goods per week…”. It further states “About half of the port's shipping container traffic moves in and out of the port by rail, while the other half moves by truck. Of the truck cargo, the port has said traffic is at about 40 per cent of normal levels. Earlier in the dispute, it was as low as 10 per cent.”
An agreement to return to work was not reached until March 26, 2014 ending the 28 day work disruption. On March 26, 2014, with respect to the agreement reached, the Vancouver Sun reported,
“Truckers who go back to the job will soon get more cash for moving containers. The federal government agreed to boost trip rates by 12 per cent over 2006 rates within 30 days. The rates apply to all moves of containers, whether they're full or empty. The Government of Canada also agreed to regulate a benchmark minimum rate for hourly drivers — anticipated to be $25.13 for new hires and $26.28 for drivers with one year of service. Truckers will also gain from a new escalating fee arrangement for wait times at the port. After 90 minutes of waiting, owner-operators will be paid $50. By two hours that fee increases by another $25. At two-and-a-half hours another $25 will go to the drivers, and every half-hour after that they'll receive $20.”
The Customer’s Concern
Fraser Direct’s customer manufactures auto parts in southwestern Ontario for the top automakers. Most of their sourcing is from overseas, Asia in particular. As with most manufacturing companies they operate with Just In Time inventory, keeping little on hand so inventory is ordered and delivered just in time to use in the manufacturing process.
When the strike hit containers of essential inventory for the manufacturer were stranded in Vancouver along with the thousands of other containers. More shipments continued to arrive. At one point it was so backlogged that ships were stranded off shore unable to unload and unable to return to Asia with empty containers.
It got to the point that the Port could no longer manage first in first out. Containers with critical freight got buried and newer containers passed right over top and on to rail. Fraser Direct had no way of knowing which of several buried shipments would move until after the fact. It was well into May 2014 before the backlog was cleared.
Conclusion
Now that the strike is over how will Fraser Direct and the auto parts manufacturer deal with the excess inventory as it is released from the port of Vancouver? Will the resolution of the stike have any impact on them? What can they learn from this situation that will help them better prepare to meet adversity in the future?
Questions
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You have been asked by Steve Hogg, how you would deal with the excess inventory that had been stranded in Vancouver? What action would you recommend and why? Detail all of your options, identifying the one that you feel would best serve your customers in this situation. Present your response to Steve Hogg in Email format.
Identify and categorize as many risks (hazard, operational, financial and strategic) that you find inherent in this situation. What tools are available to a risk manager to assist in identifying risks? Identify which one of the team approaches to risk identification that you used and why? Present your response to Steve Hogg in Report format.
What are some of the potential controls the parts manufacturer could put in place to mitigate against future losses caused by delays? Present your response to Steve Hogg in Memo format.
Explanation / Answer
.
You have been asked by Steve Hogg, how you would deal with the excess inventory that had been stranded in Vancouver? What action would you recommend and why? Detail all of your options, identifying the one that you feel would best serve your customers in this situation. Present your response to Steve Hogg in Email format.
Answer :
To; stevehogg@fraserdirect.com
Subject : Solutions to clear out excessive inventory from the shipyard.
Hi Steve,
While the port worker's strike has caused significant delays, backlogs and excessive inventory. the damages can be minimised if not eliminated. The supply chain's or the logistic's main bottle neck is the port exit where the cargo is moved using trucks. We have a limited number of trucks and large quantity of inventory due to the delays. The primary cause of this bottleneck is that we don't have additional trucks, The second challenge is the limited storage space due to our Just In Time manufacturing model.
Here are the two solutions that might help us deal with the excess inventory that had been stranded in Vancouver.
Hire Additional third party logistics instead of relying on our own logistics and existing vendors. We could even contact additional vendors in order to get the inventory moving. We could select logistics / trucking vendors with GPS systems so that they can optimise their routes and save time and fuel .
We could lease additional warehouse temporarily in order to meet our warehousing and or storage requirements in order to meet the required space for excessive inventory.
Looking forward to hear from you about my recommendations.
Refards
John Smith
Identify and categorize as many risks (hazard, operational, financial and strategic) that you find inherent in this situation. What tools are available to a risk manager to assist in identifying risks? Identify which one of the team approaches to risk identification that you used and why? Present your response to Steve Hogg in Report format.
Answer :
Report on Risk Classification
Risk Categories and Classification
Hazardous : This is the type of risk under which an incident would fall under if it involved the damage or potential damage of the firm's and or its vendor's personel while they're on duty. It could also involve anyone being in real or potential danger at any stage of the supply chain.
Operational : An event or an incident would qualify as an operational risk if it disrupts the operation in a temporary or a permanent way that holds back business as usual or BAU activities.
Financial : An event or an incident would qualify as a financial risk if it's managed to cause relative or has the potential to cause significant financial damage to the organisation, it would quality asa financial risk
Strategic : An event or an incident would qualify as a strategic risk if it effects the overall operational strategy.
Operational Planning involves laying down the road map for the execution of a project, in order to deliver a product or a service. The core operations management team works with various units of the production like Forecasting, manufacturing. supply chain. vendors, workforce management teams in order to execute a project on time and within budget. It also involves designing , controlling & auditing any business's manufacturing operations of its products or services.
Tools & Approaches that are available to identifying risks :
- Using ERP's and MRP's
MRP (Material Requirements Planning ) and BOR (Bill of resources) are ERP or enterprise resource planning softwares. They're a system of organisation, controlling. modelling a project or a business's operational execution by viewing both its macro as well as micro elements. While MRP or Material Requirements Planning is a way to optimise inventory costs by using the data from forecasting manufacturing requirements from the operational planning and forecasting process. It makes way for proper allocation of resources, funds and the supply chain to support the manufacturing process of an operation. SAP, ORACLE are the two largest ERP and MRP software service providers in the world.
What are some of the potential controls the parts manufacturer could put in place to mitigate against future losses caused by delays? Present your response to Steve Hogg in Memo format.
Answer :
To;
Steve Hogg
Director of Supply Chain Services ay Fraser Direct
From;
John Smith
Subject : Controls, Policies and Procedures to mitigate futures losses and delays
Here are a few controls that we could use in order to mitigate futures losses and delays.
Warehouse Management and Planning
Warehouse Management will prevent the following issues
- Over Supply or Under supply of resources such as time and budget constrains, manpower or access to human resources , talent and technology. due to lack of operational planning.
- Over estimating or under estimating the timeline of a project and the firm's or the teams ability to complete it within the given time frame and resource constraints.
Having a Strong Operational Planning Framework. It involves laying down the road map for the execution of a project, in order to deliver a product or a service. The core operations management team works with various units of the production like Forecasting, manufacturing. supply chain. vendors, workforce management teams in order to execute a project on time and within budget. It also involves designing , controlling & auditing any business's manufacturing operations of its products or services. Operations management plays a major role in manufacturing companies , cost centres , back office operations, business process outsourcing or BPO's.
Establishing Supply Chain Risk Management or Business resiliency ensures the seamless manufacturing of a product without interruption. It plans for back up units to fill the gap in supply of one unit of manufacturing is down. It involves developing contingency plans for the manufacturing process in the issue of an natural calamity, human inefficiencies like workers strikes, technical issues like manufacturing units breaking down etc. If there is a break down in the supplier's outflow our output of supplies for some reason and the supplier does not have a backup in order to meet the supply chain requirement for a given project, this is a huge operational risk and can potentially threaten the operation and bring it to a stand still.