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
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.