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Innovative Distribution Case

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Grace Aldridge

on 10 July 2015

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Transcript of Innovative Distribution Case

Miranda Palazzolo, Micah McDonald,
Matt Kyker, Grace Aldridge
Innovative Distribution Case
Case Introduction
Hard to establish supplier relationship
Higher inventory carrying costs
Language barrier
Increased transactional cost
Increased transportation costs
Damaged inventory from increased transport
Decreased flexibility
On time delivery suffers

Costs of Distance
Dung-Hai looks like the better option if you only consider one aspect of cost.
However, you must do a total cost analysis to determine the overall supply chain costs.
Initial Cost Comparison
Purchase price is just the tip of the iceberg.
Total Cost Approach
Trend toward Onshoring
Costs to Consider

Longer Lead Times
Intangible Costs
New Product
: Schachtel Schmuggel Bannware
2 Suppliers
- located in Wahoo, Nebraska, with a large unionized workforce
Dung-Hai Supply:
in Chengdu, Sichuan, China

Dung-Hai Supply Co.
Unit Price: $80
Labor Cost per hr: $1.25
Unit Price: $85
Labor Cost per hr: $25
Longer Lead Times
Average Lead Time
CousinsAg VS Dung-Hai Supply
15 days 43 days

We want 97.7% in stock probability for customers
New product with uncertain demand
Stock outs
Port Strikes

Costs of Quality
Risks Incurred from Dung-Hai Supply
Currency Fluctuations
Piracy (Increased insurance premiums)
Trade Relations
Loss of Product
Increasing Labor Rates

Their workers are primarily union workers; however, data reveals that worker strikes are occurring at a decreasing rate.

Capacity: Given that this is a new product, the annual demand of 21,500 units could be inaccurate and we would need to verify that CousinsAG has the capacity to meet the demand.
Potential Risks for CousinAg
A company can lose their reputation or brand equity if associated with a shady supplier
Operating in some countries can lead to a loss in intellectual property

Intangible Costs
Based on Total Cost Analysis, we recommend to use CousinsAg, the domestic company, as our supplier for Schachtel Schmuggel Bannware
There has shown a recent trend from
moving international production back to domestic production

A total cost analysis will show a larger picture and a more thorough comparison of the supplier’s costs of production

Full transcript