DEP/GARD supply chain

Posted: January 4th, 2023

Individual Case #1

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Individual Case #1

1. Diagram the DEP/GARD supply chain. What stages are adding value? What stages are not?

A supply chain diagram illustrated graphically, the supply chain processes undertake by an organisation. The DEP/GARD supply chain begins with DuPont Engineering Polymers (DEP) receiving orders from Gard Automotive Manufacturing (GARD) and terminates with the delivery of the finished plastic parts to GARD.

Figure 1. Supply chain diagram

The supply chain processes that add value are those that either directly create a product/service and those that deliver the merchandise to the customer. With speed and quality being of the essence, processes that take up unnecessary or avoidable time in the supply chain add no value (Bowersox, Closs, Cooper, & Bowersox, 2013). This is because their removal of such processes would not affect the quality of the supply chain, and in many cases, many improve the supply chain efficiency. 

The supply of principle chemical, manufacturing and distributing to clients add most value to the supply chain.  However, warehousing and shipping to warehouses add no value because they consume unnecessary time in the supply chain.

• Using the primary DEP suppliers (60 percent of business), what is the minimum performance cycle for the supply chain diagrammed above? What is the maximum?

Performance cycle of a value chain is the speed with which a customer’s order takes to be delivered. It is the time taken from the moment an order is placed by the customer to the time when the product is received by the customer (Boxersox, et al., 2013; Maestrini, Luzzini, D., Maccarrone, P., & Caniato, 2017). Principle suppliers are those who supply vital items to a business; in this regard, primary DEP suppliers are those who provide the company with the 6 principal compounds that are needed for the manufacture of vehicular parts. Although all the six DEP’s suppliers are able to deliver some of the principal products, not of them have 60% of the business, and thus are able to supply the whole spectrum of the chemical compounds required by DEP. Nonetheless, these suppliers are able to fulfil DEPs orders within 4-6 days, with a supply window of 2 more or less days.

From the statistics on the performance of the compound suppliers given in table 1 of the case, the primary suppliers that handle 60% of business include company 2 for the supply of chemicals A and B, company 4 for supplying chemicals C and D, and company 5 for supplying compounds E and F. For the supply of the chemicals from these companies alone, the minimum supply performance cycle is given by the sum of the fewest delivery days or the shortest delivery time by company 1, 4 and 5. That is:

Minimum supply cycle _{(compound supply)} = company 1_(min) + company 1_(min) + company 1_(min)

                                                            = A_(min)  + B_(min)  + C_(min)  + D_(min)  + E_(min)  + G_(min)

                                                            = 3 + 2 + 4 + 2 + 4 + 4

                                                            = 19 days

Other supply chain processes that consume time include area summarised in the 10 day delivery schedule provided by GARD, which DEP interprets and ±2 days. In this regard, DEP can deliver the parts to GARD in a minimum of 8 days after ordering. However, DEP claims to be able to fulfil most customer orders between 6 and 8 days, lowering the minimum delivery time to GARD from 8 to 6 days. From this consideration, the minimum performance cycle of given by:

Minimum performance cycle = principal supplier cycle_(min) + DEP delivery cycle (warehousing + distributing) _(min)

                                                = 19 + 6 + 3

                                                = 28 days

Note: the delivery time would be 0 of the products arrive at the warehouse in the days the deliveries are made by the DEP trucks

However, it may be noted that if DEP has the principal chemicals in its inventory, as it claims to hold an inventory of these compounds for 7 days, then the principle supplier cycle would be inapplicable when calculating the performance cycles. 

Using the same approach, the maximum performance cycle of the supply chain is given by the total of the maximum supply time by the principal chemical suppliers and the minimum DEP delivery time.

Maximum performance cycle             = principal supplier cycle_(max) + DEP delivery cycle (warehousing + distributing) _(max)

 Maximum performance cycle            = (8+9+9+9+7+6) + 8 + 6 + 4

                                                            = 66 days

• Can the performance cycle be improved through the use of the 25 percent and 15 percent suppliers? What trade-offs must be made to use these suppliers?

Yes, the performance cycle can be improved when the 15% and 25% suppliers are used by DEP to deliver the principal chemicals. However, the improvements can only be realised from company 2 for chemicals C and D, and company 3 for chemicals A and B. however, no improvement in performance cycle can be realised for chemicals E and F because the principal supplier (company 5) provides the speediest supply times. Specifically, company 3 can lower the minimum supply time for chemical A from 3 to 2 days and the maximum time from 8 to 5 days. The same company can lower the maximum supply time for chemical B from 9 days to 4 days, but will not change the minimum supply time for this chemical. Likewise, company 2 can lower both the minimum and maximum supply times for chemical C from 4 to 2 days and from 9 to 4 days, respectively. In the same vain, company 3 can only reduce the maximum supply time for chemical D from 9 to 4 days.

By opting for the 15% and 25% suppliers, DEP would trade off inventory guarantee and avoiding chemical shortages and unreasonable price hikes for supply performance cycle speed.    

4. If you were Tom Lippet, what changes would you make in DEP’s operations? Why?

What problems do you foresee as you try to implement these changes?

One of the changes I would make to DEP’s operations would be to re-evaluate the amount of business given to the suppliers with high delivery speeds for the principal chemicals. In this regard, I would increase the business percentage given to company 2 and 3 because of their ability to supply chemicals C and D, and A and B respectively, with the speed that is required by the new GARD provisions. This means elevating them to the level of principle suppliers. Moreover, I would invite new suppliers to bid for the supply of chemicals E and F because none of the existing ones are able to supply these chemicals within 3 days, to meet the new GARD requirements. In addition, I would deliver the finished products directly to GARD and avoid the warehousing process to save on 4-6 days.

However, these changes would present foreseeable problems, such as, complaints from the principle suppliers for being denied business. Moreover, the senior management at DEP may resist the changes because they increase the risk of product shortages when untested suppliers are engaged (Bowersox, et al., 2013).       

• Assuming you can make the changes mentioned in question 4, how would you “sell” Richard Binish on DEP’s next bid? What will likely be “qualifying criteria” and “order winning criteria”? Will these change over time? What does this suggest about supply chain management?

After making these changes, I would persuade Richard Binish that DEP has improved its order fulfilment speed and the sufficient supplies are guaranteed in inventory. Moreover, I would inform Binish that DEP has decided to delivers the vehicular parts directly to the GARD to shorten the performance cycle time to GARD’s specifications. These points would indicate that DEP prioritizes GARD’s business, and thus requires special treatment and expedited order fulfilment. Qualifying criteria are those that enable a company to stay in business (Hill, 2017). In this case, the qualifying criteria for suppliers are the minimum requirement for supplier engagement, meaning that these requirements are the baseline qualities that are shared across competing suppliers (Hill, 2017). In the proposed changes, the qualifying criteria for DEP’s business would change from the suppliers with the lowest bid to the swiftest order fulfilment.  For the order winning criteria, a threshold of at least 96% service capability would be added upon the order fulfillment speed requirement to elevate a supplier to a principle one, receiving 60% of the chemical supply business. These criteria would change over time by specifying the minimum qualifying time for order fulfilment to at least 3 days. This means that the supply chain management would tend towards adopting just-in-time strategy to improve supply chain efficiency. Besides, it means that the supply chain management should prioritize logistics because it provides the most potential of increasing the performance cycle speed.   

References

Bowersox, D. J., Closs, D. J., Cooper, M. B., & Bowersox, J. C. (2013). Supply chain logistics management. Michigan State: McGraw Hill.

Hill, T. (2017). Manufacturing strategy: the strategic management of the manufacturing function. London, UK: Macmillan International Higher Education.

Maestrini, V., Luzzini, D., Maccarrone, P., & Caniato, F. (2017). Supply chain performance measurement systems: A systematic review and research agenda. International Journal of Production Economics, 183, 299-315.