Question

The Hudson Valley Juice Company is a wholly owned subsidiary of National Beverage Corporation, headquartered in Cincinnati, Ohio. At its plant in Poughkeepsie, New York, Hudson Valley manufactures a number of different natural fruit juices, based on the fruits of Local region. It's most popular juice drink products are • Apple • Grape • Cherry

New source

At a Cincinnati meeting sponsored by the parent company, National Beverage Corporation, Debbie Wagner, Hudson Valley's purchasing agent for packaging materials, had met Jeff Smith, a colleague from another National Beverage Corporation subsidiary in Los Angeles, California. Talking shop, they had exchanged information and experiences. When Debbie• had confided in Jeff that she had experienced some difficulties lately in obtaining sufficient quantities of bottle closures at competitive prices, he suggested that she contact the Tight Cap Division of American Packaging Corporation. He reported that he had long bought from this source and was very pleased with their performance and responsiveness. Upon her return to Poughkeepsie, Debbie had called Tight Cap in Chicago, requesting a price quotation and sample caps. The caps were duly tested in the company's laboratory and Tight Cap's prices turned out to be quite attractive. So Debbie had placed an initial order for 500,000 bottle caps, to be delivered on a specified date.

Surprise! It is now:3:00 P.M. on Friday afternoon , and Debbie has just learned that the shipment of 500,000 bottle caps from Tight Cap, scheduled for arrival this morning, has not been received. These caps were to be used immediately in the production process, starting at 7:00 A.M. on Monday. No safety stock of these caps has been kept on hand. To make matters worse, apple juice which is to be produced using these caps is out of stock with a substantial backlog of orders on the books. As Debbie goes about sorting out the situation, people in the purchasing, production, and marketing departments nervously wonder what happened and what will happen. Amid the scurrying to attempt to determine the whereabouts of the missing caps, comments such as "it's not my job" and "why didn't you come to us earlier" are overheard.

A quick review of a copy of the purchase order tells Debbie that the designated routing is "best way." Also, instead of a specific delivery date, the notation reads ASAP (as soon as possible). The terms of delivery are noted as FOB.

Assignment: The four questions below are to be used as guidelines and thinking points for your analysis.

1. What mistakes were committed by Hudson Valley employees in this case? A: How could they have been avoided or at least minimized?

2. What are the pitfalls of routing traffic the "best way"? A: Is the delivery term "FOB" sufficient, and why or why not?

3. How can the correct selection of transportation mode help the overall profitability of the company?

4. How and by whom should decisions regarding transportation arrangements be made and why?

Answer 1

1) "Precaution is better than cure" Sometimes an unfortunate and unforseen things take place wherein we may get helpless so to avoid such time, one should take precaution in advance.

Here this mistake has been done by Hudson Valley Employees that they overlooked the situations that took place.

The following things overlooked by them:

• If you need a certain thing always plan a date few days back rather calling the things on the same day like a specified date should have been the date much before the event of its use so that if they won't get delivered, one would be having the chance to approch another one.
• They forgot to keep a safety inventory which must be kept for such unforseen events.
• They didn't follow up with the vendor. The vendor would have informed of his failure if contacted much before.
• They have to analysis the demand and supply chain must in advance to avoid stock short fall of Apple juice.

To avoid such problem, the following things will work:

• They should approch two dealers at a time and made contract with one but should keep the other one in trust so that if one fails to deliver, other can be contacted.
• Proper Commuincation between the vendor and purchaser
• Ongoing Contract administration
• Detailed Master Agreement mentioning the quality, Quantity and expectations in terms of service and delivery
• Potential Risk to be identified and managed

2) Pitfalls of routing the Traffic the best way:

• Filter out the traffic that should not be forwarded, such as local unicast frame
• Prevent the forwarding of collisions
• Prevent the forwarding of frames with errors
• Virtual Local Area Network
• Simple network management protocol
• Statistics collection

FOB means Free on Board which means that the seller fulfills his obligation when the Goods have passed over the ship rail at the named port of shipment.

This means that the buyer has to bear all cost and risk of loss or demage to the goods from that point.

The FOB term requires the seller to clear the goods for export.

The seller must:

• Provision of Goods in conformity with the Contract.
• Provide the Goods and commercial invoice
• Transfer of risk

FOB alone is not sufficient as when the goods leaves the Seller warehouse, the seller records the shipment as complete. This transfer the risk of loss and demange from the seller to the buyer. The buyer owns the product enroute to its warehouse and must pay the delivery charges.

Whereas, FOB Destination would be the perfect and complete term to be use in buyer best interest. So if the buyer is located in Austria then FOB Austria would be the term and destination. And only when the purchased shipment arrives in perfect condition does the buyer accept it and consider the inventory. The sale is officially complete at that time.

3) Transport is the major contributer to the economy and compititive force in buisness. It is the activity that physically connects the buisness to its supply chain partners such as suppliers and partners. And major influence on Customer satisfaction.

The business environment that is being strangled by volatile oil prices and high cost transportation solution has prompted organisation to rethink on their supply chain strategies. Three transport driven shifts in supply chain strategy in particular have emerged and are gaining ground:

• A shift from offshoring to nearshoring
• A shift from product design for marketability and production to design for shipability
• A shift from lean inventory policies to hybrid lean transport/inventory policies

The Companies who have adopted these strategies has indicated that their benefits has gone beyond ameliorating transporation challenges. These shifts also help to improve supply chain and financial performance due to lower costs and more productive investments.

Transporation and logistics related cost as a percentage of sales range from 9 % to 14% depending on Industry sector for companies who do not adopt a 'Best in Class' managment approach. These percentage ranges include all logictics related expenses such as Warehousing, dedicated personnal and transporation expenses.

Transportation cost alone comprise the vast majority of this expense for most companies.

4) Five factors to consider in choice of transporation arrangement by Management:

1. Potential for Goods Demage

The key factors that influence the potential for demage to Goods include movement and acceleration forces. Frieght Containers experiance the greatest acceleration forces during handling at the terminal or depot and during transfering rail yards.

2. Transit Time

A study conducted transit time between sydney and perth found the average door to door transit time for each of the following transport modes:

Road = 2-4 days

Rail = 7 Days

Maritime =10-14 days

Accordingly one can plan its mode for transporation and plan accordingly.

3. Cost of Transport

Here the cost include Fuel, manforce, accidents, vehicle and equipment maintenence, regulatory complinaces, accidents, profitability targets, and market share.

4. Fuel Efficiency

In a New Zealand study, Maritime Frieght transport was found to be slightly more efficient in fuel consumption and CO emissions when compared to rail. Meanwhile both Maritime and rail transport modes surpoassed the fuel efficiency of road transport by around 50%.

To acheive this efficieny, however, 500 containers would need to be transported per maritime vessel and 40 containers per train.

5. Levels of Safety

According to Safe Work Australia, road freight transport accounts for the majority of serious claims and fatalities in Australia's transport, postal and warehousing industries.

More specifically, Trucks -which make up only 2.5 % Vehicle on road, contributed to around 20% of all road fatalities in Australia.

Having reviewed the Five factors of mode choice, there are some clear benefits and deficiences with each transporation mode:

Least potential for Good Demage	Maritime - Yes	Rail - no
Efficient Transit Time	Road - Yes	Maritime - no
Cost Savings	Maritime - Yes	Rail - no
Efficiency in Fuel consumption	Maritime - Yes	Road - no
Safety	Air and space transport- Yes	Road - no

Thank you.