Sourcing Case Study
Snedeker Global Cruises
It was August 7th, and Brandt Womack had just been given his first assignment by his purchasing manager at Miami-based Snedeker Global Cruises Inc. It was the “E-Auction Development Program” (EDP). The purpose of EDP was to identify potential products that could be purchased through e-auctions, determine the necessary steps to conduct a successful e-auction, and assess the impact of e-auctions on supplier relationships. As a newly hired supply chain manager, Brandt wondered how to proceed.
Snedeker Global Cruises incorporated in 1986 and is a cruise company with 35 cruise ships and over 70,000 berths. Snedeker Global serves the contemporary and premium segments of the cruise vacation industry and offers a variety of itineraries to destinations worldwide, including Alaska, Asia, Australia, the Caribbean, Europe, Hawaii, Latin America, and New Zealand.
In 2005, Snedeker incurred its highest-ever procurement costs in sourcing the products and services needed for cruise ship operations and wanted to combat this trend. To that end Snedeker had been working on changing its buying practices. In the past, each individual cruise ship made all its own purchases for the upcoming season. Purchasing was decentralized, with each ship making purchasing decisions based on its needs alone. The company began moving away from this practice and put into place a centralized purchasing department in charge of making purchases for the entire cruise line. The centralized purchasing strategy provided many cost-saving opportunities for the company and greatly reduced the overall order costs of the company. The company wanted to continue to pursue ways in which the centralized purchasing practice could reduce costs, and e-auctions became a viable option. However, senior management at Snedeker was concerned about the impact on quality and the effect e-auctions might have on suppliers.
At Snedeker, the purchasing cycle began with a master forecast for the upcoming year with orders being placed 8 to 10 months prior to need. This master forecast included everything from replacement engine parts to chocolate mints placed on pillows in cabins. When the forecast was generated it was given to the Senior Purchasing Manager, Kasey Davis. Kasey scheduled a meeting with Brandt to discuss the E-Auction Development Program, giving Brandt the master list of all the products needing to be purchased for the next year. Kasey instructed Brandt to determine which products would be best to purchase through e-auctions and wanted to know how the e-auction process would work. In addition, Kasey wanted Brandt to determine the effect that e-auctions would have on relationships with current suppliers.
Brandt walked out of Kasey’s office overwhelmed. It was his first assignment, and he did not know where to begin the E-Auction Development Program (EDP).
Source:
Sanders, N. R. (2017). Supply Chain Management (2nd ed.) Wiley, VitalBook file. (p. 118)
Case Questions
Use your textbook and a minimum of three expert resources from the internet to answer the following questions regarding this case study.
Logistics Case Study
Strategic Solutions Inc.
Strategic Solutions (SS) is a small 3PL provider that was started by Scott Crash in 1992. Scott began his career working in the logistics division of a large trucking company. He worked with fleet scheduling, customer support, and route scheduling before he saw the opportunity to start his own business offering similar services. Strategic Solutions provides logistics services to small businesses in Columbus, Ohio, and has recently acquired major accounts with two well-known grocery store chains. Their core competency is specializing in the movement of cold and frozen food products. Refrigerated trailers can be expensive, and if not transported using reliable equipment, it can prove to be very costly for all parties. Scott started his company by strategically combining LTL (less-than-truckload) shipments for small stores such as gas stations, pharmacies, and small grocery stores. He found his niche in climate-controlled trailer movements. Business has been growing since.
The Business
Strategic Solutions operates by arranging customer shipments with the best for-hire transportation service they can find. Two of their main transporters are Frigid Movements and Problem Solved Shipments. Strategic Solutions has long-term contracts with most of its customers, but they also accept one-time shipments and business from random customers on a regular basis. Customers can either call or e-mail Strategic Solutions with the details, such as identifying the products that need to be shipped, the destination, and required time of delivery. Once Strategic Solutions has this information they can then arrange for the outbound shipments from the customer’s distribution centers to the desired location. The customer base has increased substantially as a result of the company’s success in the cold food movement area, and they have acquired new contracts with major grocery store chains.
The Problem
Scott’s company has begun to struggle with the business growth due to information technology constraints. Their current method of telephone and e-mail information exchange has become outdated, and customers have found it hard to communicate with Strategic Solutions. Customer satisfaction has dropped in the recent past, and Scott fears the loss of some of his top business clients. Something must be done so that Strategic Solution’s reputation isn’t damaged, and no customers are lost.
The Need for EDI or TMS
Scott understands that logistics depends on accurate real-time information but isn’t sure what type of system would be best suited for his operation and has decided to take a customer-oriented approach. He personally spoke with each of his customers to find out what would be the best system for them and how the two companies could best work together. He also spoke with his transportation providers to see what type of information exchange and transportation scheduling arrangements would best work for them. It seems that the ideal system would be a single point of contact for customer orders where information is updated in real time. It is inconvenient and time consuming for a customer to call and deal with busy phone lines and unanswered phone calls or wait for an e-mail reply. There could also be clerical errors when transferring the information between different parties.
The EDI versus TMS Expansion
Scott is not sure which system to implement and what would be the best investment. He assumes that electronic data interchange (EDI) can accomplish real-time information sharing with all of their customers as well as potential carriers. For customers, information can be available online with proper access codes so that scheduling arrangements involving shipments, equipment, and time schedules can be made with a single point of contact. The downside of an EDI system is the expense. Also, system failure could halt the business, potentially resulting in significant financial losses.
Another option is a transportation management system (TMS), which is a software system designed to manage transportation operations. TMS would enable Strategic Solutions to directly link to their transporters’ systems to more efficiently identify and find potential routes. They wouldn’t have to arrange shipments through telephone or e-mail but could simply schedule them using the TMS. A downside to TMS is that it would leave out noncontracted carriers. If a certain time or route wasn’t available through Frigid Movements or Problem Solved Shipments, Strategic Solutions would have to find other ways to schedule the transportation of their customers’ goods.
Scott has estimated the following costs for both systems as well as customer preferences:
Systems considered Cost Customer rank (1-3)
EDI (for real-time information and single point of contact) $15,000 3
TMS (to link into transporters system and find routes and lanes) $20,000 2
Both systems $35,000 3
Source:
Sanders, N. R. (2017). Supply Chain Management (2nd ed.) Wiley, VitalBook file. (p. 137)
Sample Solution
