Transportation economics: concepts and applications

¶ … Transportation Economics class

Transportation Economics Case Study

Major Facts

The case study is about the relationship between DuPont Engineering Polymers (DEP), the supplier, and Gard Automotive Manufacturing (GARD), the customer. DEP has been supplying polymers to GARD for 15 years. The acquisition process is usually represented by an auction with only DEP being invited, followed by a several years contract. GARD was satisfied with the quality of DEOP's products and saw no reason to negotiate with other suppliers.

This situation changed because GARD assigned a new purchasing agent to negotiate the polymers acquisition. The new purchasing agent is not entirely satisfied with the duration and performance of the delivery process offered by DEP. He only agreed to a one year contract with DEP and intends to evaluate samples from other suppliers also.

Major Problem

How can DEP improve its manufacturing and delivery processes so that it is in line with GARDS's inventory management objectives?

Basically, DEP has to improve the time required from order until products are delivered. In addition to this, the company must improve its minimum service threshold. A product differentiator must be identified, as the polymer produced by DEP are similar in quality and functionality with those of other competitors. GARD wants to introduce an auction winning criteria for assigning polymer acquisition contracts.

Possible Solutions

One of the solutions to reducing the time from when an order is placed until it is delivered is to ship the merchandize through common carriers (Kappauf et. al., p. 6). DEP can only send merchandize with its own fleet twice a week, a strategy that cannot be applied in serving a customer like GARD under its new terms and conditions. Sending the products through common carriers would allow DEP to send merchandise every day.

Another solution is to optimize production planning. Products are manufactured only after orders are placed. This situation significantly increases the time between order placement and the reception of products. Production can be scheduled in advance for old customers that probably have the same product needs each month as they had during the same period of the previous year. Therefore, products can be manufactured in advance of receiving the order.

Another solution is to increase the efficiency the warehouse employees' work. This is because the products stay for 6 days in the warehouse before being delivered, which can be considered a very long period of time by customers waiting for the products they ordered. Some of the manual work can be performed electronically, by scanning product codes.

Choice and Rationale

In this case, the selected solution is represented by sending all products through common carriers. This is because this action could significantly reduce the duration of the delivery process. If the time between order placement and the reception of products would be reduced, DEP's performance levels could significantly increase.

The solution represented by advance production before orders are placed will not be applied for the moment, as it can determine certain costs and risks (Whish et. al. p. 240). Increasing the efficiency of warehouse workers will also not be implemented for the moment, as it can produce certain delays.

Implementation