ACME Case(1) | Logistics

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  Rose BMGT44780 – Business Logistics Spring 2016 Case Study 2 This case study is adapted from Carlton Electronics , written by Professor Martin Christopher of the Cranfield School of Management, U.K., and Professor Philip Schary, Oregon State University. The case srcinally appeared in Strategic Logistics Management  , 3 rd  ed., Douglas M. Lambert and James B. Stock, Richard Irwin, 1993. ACME COMMUNICATIONS EQUIPMENT, INC. The director of logistics at ACME Communications was examining the results of a customer survey concerning the quality of logistics service. He had been asked by the VP of Strategic Development to make recommendations regarding how logistics capabilities may enable the firm to derive a competitive advantage. ACME was a producer of telecommunications equipment and subcomponents, ranging from telephone answering machines and related peripherals sold in consumer channels to highly complex make-to-order components sold to major OEM’s. Their reputation as a quality supplier was well established. Business strategy at ACME had followed a traditional approach, selling telecommunications subcomponents and equipment mainly through Amalgamated Telecom (ATC), the giant ex-telecommunications monopoly. The telecommunications environment, however, had changed over the years. Within the last 20 years, ACME had established a line of consumer goods sold through large chain department stores and mass merchants. Department stores purchased the full consumer product line and maintained established price structures. Mass merchants took only high-volume consumer product lines but moved these in significant volumes. They asked for substantial discounts on cumulative quantity purchases. The volume of  business with ATC had held steady, while that of the department stores had grown slightly. Mass merchants held the key to growth as they were getting a larger share of consumer business. The competition had also changed. Some new competitors were recognized as having equal quality products at a significantly lower price. ACME had responded, not by matching  prices but by engaging in promotional campaigns. There also had been a flood of low-priced imports that were beginning to saturate the consumer market. ACME dealt directly with the retail buyers for department stores and mass merchants. Buyers, particularly for the mass merchants, were extremely conscious of logistics service. Mass merchants operated on weekly order cycles and managed inventory by responding to actual sales rather than maintaining excessive inventory safety stock targets. As a result, they expected very short order cycle replenishment times – often 24 to 48 hours. To further complicate the situation, the customers arranged their own special promotions and seldom communicated the schedules to ACME’s logistics department. This often resulted in out of stock situations for the promoted items. They also sought direct ordering from their computers to ACME’s computers. The department stores were on a two-week order cycle and maintained adequate safety stock levels in their own distribution centers as backup to their stores. Thus, order cycle replenishment time expectations were longer, ranging from 5 to 7 days. ATC was the least aggressive member of the industry. It placed orders using standard order quantities on monthly order cycles. ATC’s service expectations were the least demanding since they held large amounts of safety stock to cover variances in their demand and in supplier lead times. Service standards related to order fill and cycle time for ATC orders were relatively low compared to other customer segments. ACME valued ATC as a customer because it  presented the full product line, which the other customers did not do. ACME had commissioned the logistics service survey as a means of understanding the strategic opportunities resulting from improved logistics service quality. Service complaints usually came through the sales force and referred to a variety of logistics problems including on-time delivery, order accuracy, and invoicing problems. The customer service survey was conducted through interviews with select department store and mass merchant buyers. In addition to general comments, questions were asked seeking comparative ratings of ACME versus major competitors on specific aspects of logistics service.  Rose BMGT44780 – Business Logistics Spring 2016 Case Study 2 This case study is adapted from Carlton Electronics , written by Professor Martin Christopher of the Cranfield School of Management, U.K., and Professor Philip Schary, Oregon State University. The case srcinally appeared in Strategic Logistics Management  , 3 rd  ed., Douglas M. Lambert and James B. Stock, Richard Irwin, 1993. The survey covered several specific aspects of logistics service: delivery time; inventory reliability (fill rate); order status communication and ordering procedures; advertising and  promotion; and packaging and labeling. The results of the survey follow. Delivery Time. The largest suppliers were about equal in terms of delivery performance. However, as a group they were not equal to the performance of smaller competitors. ACME’s average times were considered to be acceptable, but their performance had slipped in terms of reliability. Customers could not be sure when their orders would arrive. On a local basis, this was caused by ACME’s local delivery dispatching. At a national level, it was due to the  performance of the carriers that ACME was using. Inventory Reliability.  ACME was again comparable in inventory reliability performance to its major competitors, fulfilling about 80 percent of item demands form stock on hand. Smaller competitors, with their restricted product lines, tended to do better. ACME’s back-order  performance was better than average. Customers recognized that back-orders from ACME would always be filled, even if it took a couple of months. When orders were picked there would be occasional errors, which meant that items once shipped had to be returned. This seemed to lead to considerable confusion on ACME’s part. Orders. Customers expressed considerable annoyance about ACME’s order system. There were frequent errors in recording/filling orders, and there was no confirmation when the order was received. Orders were normally keyed in to the ordering system from purchase orders that were telephoned or faxed in from customers or from sales representatives. Customers expected confirmation of order receipt and compliance, which often took ACME several days to complete, if it was completed at all. In the case of mass merchants, the confirmation was often received after receipt of the actual order itself. Packaging and Labeling. Packaging was an important area but involved conflict. ACME’s  policy had always been to pack well. Packages were always well labeled. However, the mass merchant buyers had begun to use laser bar code scanners and wanted suppliers to adapt their  packages to the new system of item identification, requiring preprinted bar codes on a non-reflective surface. This was extremely costly, and most competitors had yet to achieve the capability. ACME was currently complying, but was unsure if the cost was justified. The following table summarizes some key sales and cost figures for the 3 major market segments. ! #$ &'( )*$+,+$- ./00&1- ! # $%&'( *'+,%- ./-- .%,01/2' +'/3 .&23# 45 6 78889 :88;888 <88;888 =88;888 7;888;888!>?. 45 6 78889 =88;888 7=8;888 @8;888 A88;888 )''/&2 >1(31# 4678889 7;888 =;:88 788 <;B88C $&2 D E+#$+*# ! #$F>1(31 5777 57:8 5<78    Rose BMGT44780 – Business Logistics Spring 2016 Case Study 2 This case study is adapted from Carlton Electronics , written by Professor Martin Christopher of the Cranfield School of Management, U.K., and Professor Philip Schary, Oregon State University. The case srcinally appeared in Strategic Logistics Management  , 3 rd  ed., Douglas M. Lambert and James B. Stock, Richard Irwin, 1993. Assignment ã   ACME hires you as consultant to analyze their supply chain operation and make general recommendations for improvement o   Describe their biggest  issues o   What are recommendations to address the issues o   What barriers will they face in implementing the recommendation
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