Totalline Transport Case Study

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2/ Stickers to be applied at consolidation doors: The second option is that Electronics International sends packing stickers to Totalline at their consolidation plant and Totalline could apply the stickers. While this would not directly solve the problem of traffic congestion at the DC, however it would save Electronics International approximately 2 hours, if they were to do it after the products reaches distribution centres. Moreover, with the expansion plans of the distribution Centres the inventory will increase and pre assigning the packages by putting stickers before it reaches the warehouse would help in handling and processing of the goods.

The problem with this system is that neither does it solve Totalline’s problems nor does it proposes to reduce any costs instead the proposal would shift the cost from Electronics International to Totalline. This is a value added service that Totalline could propose and hope to negotiate better terms in the current arrangement specifically, late appointment fees.

3/ Delivering directly to Electronic International Stores: This offer proposes that Totalline delivers directly to Electronic International Stores and eliminate the distribution centres completely. This idea is VICE- Virtual Copy exact, from Dell Computers, where the customer received the product straight from the manufacturing plant, but here instead the store will receive the product directly. It is estimated to reduce 2 days from the inventory cycle and another source of savings would be from bypassing distribution centre all together like no storage costs, no administration costs, no late appointment fees etc. Totalline estimates additional costs of $35,000 pa salary for an administrator and $50 to $250 increase per truck load depending on the destination of the store to be delivered to.

The problem with this scenario is that currently, Electronics International is incurring fixed costs of maintaining DC warehouse and in-fact planning to expand. They will still have to consolidate and deliver 80% of the electronics directly to the stores. Therefore, transportation costs and warehousing costs might not have any effect if Totalline delivers directly. Instead, Electronics International might have to bear the extra costs of Totalline too for offering value added services. Therefore, unless Electronic International designs it supply chain such as all other products are delivered direct to the store from the manufacturer there might not be potential savings in just having 20% of the deliveries arranged in such manner.

Recommendation and Implementation

It is recommended that Totalline propose the first option of two dedicated doors for Totalline to Electronics International. Currently, Electronic International has 20 receiving gates and 20 percent of the incoming traffic is from Totalline. Therefore, on average 4 gates are used to receive Totalline’s products, so assigning 2 dedicated doors would actually free up space to receive other deliveries. Additionally, there will be savings on administration costs that are presently involved in assigning those doors and timings. Furthermore, Electronics International will save the costs of detention fees if they cannot offload a truck on time. Totalline can further propose, to offer value added services that are mentioned in the option 2 i.e. offer to put stickers at Totalline Consolidation plant, but only if the first option were to be accepted. Totalline would save more than enough hours by not standing in long queues in front of Electronics International that it can afford to dedicate one hour to put stickers. Further, the expansion plans of Electronics International distribution centre would make it more viable to dedicate 2 doors for Totalline, since they will decongest their already packed parking lot, which has no plans to be expanded. This proposal has no disadvantage to Electronics International whatsoever but instead ties in with their current practices and future plans and the mutual benefits will be realised by all three companies.

The implementation should begin with one month test run starting on September 2, 2014 where Totalline would deliver directly to two assigned doors dedicated to them. Totalline would schedule the appointment and deliver the next day and essentially reducing the cycle time by 5 days. Concurrently, Totalline would also put stickers at its consolidation plant which will save electronics International at-least two hours of labour time.

Monitor and Control

During the first month of trial run, Totalline would monitor each truckload destined for Electronics International Distribution Centre. A log of the total time in transition and time spent on putting stickers at consolidation plant should be created so that the true savings can be understood. The direct cost savings in comparison to last 6 months average would help us understand the true savings from eliminating late appointment fees, detention fees, fuel cost and driver hours due to waiting in line. Maintaining good communication with Electronics International is essential to improve on any shortcomings and maintain customer success.