May 28 Our journey begins in Australia where a farmer is harvesting his spring crop of eucalyptus for eucalyptol, the oil found in its leathery leaves. The farmer sells the crop to an Australian processing company, which spends about four weeks extracting the eucalyptol from the eucalyptus. Morris Plains, NJ-based Warner-Lambert (WL) partners with a distributor in New Jersey to buy the oil from the Australian company and transport it to WL’s Listerine manufacturing and distribution facility in Lititz, Pa. The load will arrive at Lititz about three months after the harvest, says Robert LeRoy, director of material procurement for WL. July 13 Half a world away, an operation owned by the Saudi Arabian government is drilling deep under the desert for the natural gas that will yield the synthetic alcohol that gives Listerine its 43-proof punch. Union Carbide Corp. ships the gas via tanker to a refinery in Texas City, TX, which purifies it and converts it into ethanol. The ethanol is loaded onto another tanker and transported from Texas City through the Gulf of Mexico to New Jersey, where it’s transferred to storage tanks and transported via truck or rail to WL’s plant. A single shipment of ethanol takes about six to eight weeks to get from Saudi Arabia to Lititz. August 25 SPI Polyols, Inc., a manufacturer of ingredients for the confectionery, pharmaceutical, and oral-care industries, buys corn syrup from one of several corn wet millers that purchases corn from farmers in the Midwest. SPI converts the corn syrup into sorbitol solution, which sweetens and adds bulk to the Cool Mint Listerine. The syrup is shipped to SPI’s New Castle, DE, facility for processing and then delivered on a tank wagon to Lititz. The whole process, from the time the corn is harvested to when it’s converted into sorbitol, takes about a month. August 31 By now the solutions of ethanol, eucalyptol, and sorbitol have all arrived at WL’s plant in Lititz, where employees test them—along with the menthol, citric acid, and other ingredients that make up Listerine—for quality assurance before authorizing storage in tanks. To mix the ingredients, flow meters turn on valves at each tank and measure out the right proportion, according to the Cool Mint formula developed by WL research and development in 1990. (The original amber mouthwash was developed in 1879.) This blending process is constant; as ingredients are added to the several- thousand gallon vat, the properly blended liquid is continuously transferred to a separate holding tank. Next the Listerine flows through a pipe to fillers along the packaging line. The fillers dispense the product into bottles delivered continuously from a nearby plas- tics company for just-in-time manufacturing. The bottles are capped, labeled, and fitted with tamper-resistant safety bands, and then placed in corrugated shipping boxes known as shippers that each hold a dozen 500-milliliter bottles. During this process, machines automatically check for skewed labels, missing safety bands and other problems. The entire production cycle, from the delivery via pipe of the Listerine liquid to the point where bottles are boxed and ready to go, takes a matter of minutes. The line can produce about 300 bottles per minute—a far cry from the 80 to 100 bottles that the line produced per minute prior to 1994. In that year, WL switched from glass bottles to sturdy plastic bottles, modernized its production line with high-speed equipment, and went from mixing batches of mouthwash one tank at a time to the continuous mixing process. Each shipper travels on a conveyor belt to the palletizer, which organizes and shrink- wraps shippers into 100-case pallets. Stickers with identifying bar codes are affixed to the pallets. Drivers forklift the pallets to the distribution center located in the same Lititz facility and store them in a designated spot where they will sit for two to four weeks. September 14 WL receives an EDI order from CVS for 20 pallets of 500-milliliter bottles of Cool Mint Listerine to be delivered by September 16 to CVS’s Woonsocket, RI warehouse, which serves all New England CVS stores. The order is automatically screened to make sure the numbers requested are reasonable and that the source for the order is legitimate before it is passed on to WL’s SAP system, an enterprise resource planning tool from SAP AG. SAP prices the order and determines how much of it is already in stock and how much needs to be manufactured. Generally the order is in stock because the SAP Merchandise Transaction System would’ve predicted store demand. That same day, SAP transfers the order to WL’s Strategic Transportation Planner made by Manugistics. The Manugistics system determines how best to consolidate order delivery and which shipping companies to use to minimize costs and meet the required delivery time specified by CVS. An action plan specifying those details is drawn up. WL then sends an electronic alert to the chosen shipping companies via EDI. Meanwhile, the Manugistics action plan is automatically downloaded to SAP, which sends it back to WL’s McHugh Software International, Inc., warehouse system around 1 a.m. for use by the people on the WL warehouse floor. The McHugh system specifies how the warehouse employees should pick and ship the day’s orders.
September 15 Because CVS usually orders products in volume, the pick quantities tend to be full pallets, so forklifts are used to transport the order instead of WL’s network of automatic conveyor belts used for smaller orders. Every morning, the WL forklift operators use computers attached to their forklifts as well as handheld scanners with instruction screens linked to the McHugh system to learn what they need to pick up, where it’s located, and where to transport it. When the lift operators get to the appropriate pallet, they scan the bar code with the handheld device so that the software can confirm it’s the correct product. They next bring the pallet to the designated shipping door and use the onboard computer system and handheld to inform the McHugh system that the job is finished. Workers at the shipping door then load waiting trucks with the Listerine, Sudafed, Rolaids, Certs, Lubriderm, Schick razors, Neosporin, Bubblicious and other WL products ordered by CVS.
QUESTIONS
a. Draw a high-level map of the Listerine supply chain. Use boxes for each node of the supply chain. Connect the boxes with arrows representing transportation. Draw arrows for information flow. Include lead time on each arrow and box.
b. Identify opportunities for improvement in the supply chain. How would your map change after the improvements?
c. Identify points in the supply chain that are vulnerable to disruption. How could you lessen the impact of each risk?