Yuji Kojima

Expurma

Case Analysis
(Dep Gard)

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

Areas which fail to add value and have the potential to erode DEP`s ability to remain a
valued supplier for GARD include the following:

1. Failure to utilize LEAN manufacturing principles causing DEP to carry excess inventory.
2. Manual order receipt and handling process
3. Inconsistent timeline to complete pick, pack and ship process at the distribution
warehouse.

2.) 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?

Upon reviewing the primary suppliers of polymer feedstock for DEP, specifically the
suppliers awarded with 60% of the volume, I am able to calculate a maximum performance
cycle of 25 days to deliver product to GARD. Assuming inventory is NOT available for some
reason requiring an order from polymer suppliers, the longest lead time to receive polymer is 9
days from the 60% suppliers. To receive, process, and produce the material for the customer
order, you then add 8 days, as this is the longest production cycle time. Orders are sent to the
warehouse, prepared for shipping, and another 6 days may elapse before the order is actually
shipped. Using the assumption that GARD is within the 200 mile radius, the longest time that
delivery may take place based on twice a week deliveries is 2 days. This gives us a total of 25
days. Vice versa, when looking at the minimum performance cycle for this total supply chain, I
calculated a 10 day cycle. DEP has abandoned LEAN principles and stores 7 days' worth of
inventory on hand at all times. Based on this, my assumption is that inventory is immediately
available to begin production of the customer order. DEP has a minimum production time of 6
days from receipt and processing of the order to completed production. Material is immediately
moved to the warehouse and prepared for shipment. This process takes a minimum of 3 days to
complete and ship the order. Similar to my assumption used in calculation of the maximum
performance cycle, I assume GARD is within the 200 mile radius. I'm also using the assumption
that DEP can make deliveries on the day an order is processed and ready for shipment,
provided the order is prepared in sufficient time, thus giving a 1 day shipping time in a best case
scenario.
3.) 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?

It is possible to improve the consistency of the performance cycle; however, due to the
fact that the production process from order receipt to finished product takes 3-6 days, the
minimum performance cycle could not be improved. By simply switching to primary use of the
25% and 15% polymer suppliers, there would be opportunity to receive several of the raw
materials in as low as 2 days, however if DEP were to shift back to a JIT process, this would
simply add two days to the overall current minimum performance cycle (currently, inventory is
already on hand), instead of improving the cycle time. For products E and F, the minimum lead
time is 4 days, still negating opportunity for improvement. Automated ordering systems (online,
vendor managed inventory, etc) would allow for a more consistent process and reduce
opportunities for manual failure on the part of DEP, to theoretically narrow the gap from the
current 3-6 days to produce finished product from the time of order placement.

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?

Change the bidding system in a way that DEP is able to purchase more compounds
from suppliers with a higher fill rate and lower performance cycle uncertainty, in order to reduce
the days of inventory storage. (People challenge: Employee’s reluctance and unwillingness to
change in the manufacturing department.)
Communicate with compound suppliers before the next bid and inform them the changes that
are going on. Tell them the importance to reduce their performance cycle uncertainty and
increase their fill rate. And that these two criteria are also going to be considered as well on the
next bid. (Challenge: a) Disturbed relationship between buyer and supplier. b) Ethics issues.

5.) 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?

In order to "sell" Richard Binish on DEP's capabilities to deliver consistently within the
service level criteria now required by GARD, I would highlight critical improvements being
implemented by DEP to better align capabilities with Richards service requirements from key
suppliers. Obviously, price is a common qualifying criteria component, and I would need to
ensure that these improvements made within DEP's supply design did not raise costs to the
point of eroding margin or requiring a price increase to the level of pricing ourselves out of the
GARD business.
Product quality is also critical, but we already know that DEP product is in line with competitors
in terms of quality, thus making it somewhat of a "commodity" product. Price and service will be
the critical components. I will need to visually show demonstrated improvement in delivery
service since these improvements were implemented as compared to historical service to
GARD. Assuming that these improvements were successful, there theoretically should be a
much higher demonstrated performance level within a tighter service window. In closing, Supply
Chain management plays a critical role in the overall commercial success of a business. Setting
proper service expectations and maintaining levels within that range is critical to maintaining
share with key customers. Analyzing gaps in those performance expectations from a customer
against actual capabilities, and actively working to close the gaps should be an ongoing
process.