Assignment:
Case Part 1
(Warehouse/shipping performance)
In working cases, we typically want much more information than is presented in the case. Of course, even in the "real world" we do not always have all the information (and time) that we would like. Basically, stick to the information in the case. If you need to make any assumptions, then be sure to make these clear in your answers.
It is now mid-2017.
During the last weekly review, the CEO (still Elise Ennis) expressed some concerns about the warehousing operations. She has no real feel for the efficiency of the warehouses. The operations "strike her" as being somewhat expensive. And her impression is that "the cost for each warehouse is sort of all over the place."
The CEO asked if it would be possible to do a quick analysis of the warehousing function. [Of course, that was a rhetorical question. As you might expect, the answer from Tom Perkins the VP/head of logistics was "sure we can do an analysis for you".]
The CEO said that she would send over some more specific questions after the meeting.
As a logistician for the company you are to play a key role in doing the analysis and reporting the results to the CEO.
In preparation for the analysis you asked the Comptroller for some financial information. The Comptroller provided the financial statements (income statement & balance sheet) for 2017, the most recent complete year. These are attached.
You also asked the VP who oversees warehousing operations for some data. The manager of warehouse operations sent over the most recent data that was available. The VP explained that LUML has been using the number of shipments as a key metric for warehousing. No distinction is made between an incoming shipment or an outgoing shipment. They believe that the work effort for either type of shipment is about the same. The shipment information is also attached.
You ask if there is any other information that you should know -- any peculiarities of warehousing operations for LUML? The VP mentions a few things that he says are not so obvious.
1. The Melbourne warehouse is co-located with the Melbourne manufacturing plant & the company's headquarters.
2. All manufacturing is done in-house in Melbourne.
3. All the warehousing facilities are in leased buildings (including the one in Melbourne). So that aspect is standard for all 8 warehouses.
4. The Melbourne facility is "company operated". As the original warehouse, the warehouse staff are all employees of LUML.
5. As the need arouse for other warehouses/shipping centers, the VP at that time decided to try what was then a relatively new concept.
The work at these other sites was contracted out to local operators at each site. The contractors follow basic LUML policies, etc. These operations are what was to become known as 3PL (third party logistics). [Note: If you want to read more on 3PL in our book, then check in the index. However, for this case all that you basically need to realize is that these warehouses are each operated by a separate local operator under contract to LUML.]
6. Shipments tend to be relatively homogeneous over all the sites. A typical shipment has one to three fixtures. Even the shipments from Melbourne fit this model because of the specialty nature of most of the fixtures.
7. As might be expected, most shipments form Melbourne are outgoing to customers or to the other warehouses.
1. Comparing performance during the first five months of 2017 with 2016, which warehouse shows the best improvement in performance? What criteria did you use? Briefly explain why you used that criteria.
2. Comparing performance during the first five months of 2017 with 2016, which warehouse shows the poorest change in performance? What criteria did you use? Briefly explain why you used that criteria.
3. Comparing all eight warehouses, which warehouse is doing the "best job"? What criteria did you use? Briefly explain why you used that criteria.
4. One possibility might be to terminate one of the current contracts and to engage a new contractor. Some have commented that this might offer the possibility for better performance and/or reduced cost at that location. Also, there may be a "spillover effect" to help "motivate" the other contractors to reduce costs.
If one contractor is to be changed, which one do you recommend? Briefly explain why.
5.The year 2017 is close to being half over. How much is LUML likely to spend for warehousing for the rest of the year? How much for the full year? Is this better or worse than budgeted? I'd like to see this information for each warehouse; and, the total for all our warehousing operations). Briefly explain your work and answers. [Hint: did you make any assumptions that the CEO should know about?]
6.Using the 2016 financial statement, what would our Strategic Profit Model (SPM) look like? Briefly interpret the results. Briefly interpret two of the key items that most relate to logistics.
7.I'd like to reduce shipping costs. Holding all other information constant, what would be the effect on ROA if our warehousing/shipping costs declined 10 percent? Explain. [Hint: It should be obvious that the CEO is not looking for a simple answer --- ROA increases/does not change/decreases. Best to compute and explain the actual change?]
8. I do not expect the costs to be identical for all warehouses. But is there too great a range in costs per unit between the warehouses? Explain.
9.What is your overall analysis and recommendation (or recommendations) to help us to achieve our objectives? Briefly explain.
10. I have heard a bit about logistics and a logistics chain. How can warehouse operations be an activity in the logistics channel? Please provide a short explanation.
11. The Comptroller told me that there is probably a bit of money that could be put into our information systems. How can IS/IT be applied in warehousing operations at LUML? [Hint: recall that we looked at many types of IS/IT. You might include whether each type likely has the potential to help meet the CEO's goal to reduce warehousing expenses and reduce the range.]
Case Part 2
Given the analysis and results in part 1, how might the issues raised tie in with the various organizational and managerial issues in logistics?
You should be able to write a great deal about this. But I am targeting for very nice coverage in about 2 single spaced pages. Sometimes tables or figures can help, but they do need some basic explanation.
Case Part 3
Light Up My Life, Inc.
During the weekly meeting, the topic of "Supply Chains" and "Supply Chain Management" came up.
The CEO asked if she could get some information on the following:
1 What, indeed, is a supply chain?
2 How does logistics fit into a supply chain model?
3 In general, should LUML be looking at the possible use of Supply Chain Facilitators?
If yes, then from a general management perspective, what types of facilitators might be considered?
If yes, then from a logistics perspective, what types of facilitators might be considered?
If yes, then what might be some key considerations on how a facilitator could be used?
Tom, our VP, says that he will have a memo sent to the CEO in a few days with the information. After the meeting he asks you to write up the memo.
[You are not restricted on the length, but a very nice answer can be prepared in -- say -- one page -- or even less -- per question. Remember that the CEO is asking this, so she must not be very familiar with these concepts.