The DEP supply chain process can be described using the diagram below.

Company:

Chemical compound: (A,B,E,F) (A,B,C,D) (A,B,E,F) (C,D) (E,F) (C,D)

% of business: (60,60,15,15) (25,25,15,15) (15,15,25,25) (60,60) (60,60) (25,25)

DeliveryCustomer
of Raw MaterialOrder
to the Manufacturing
Production
Facility
and conversion
Orders Arrive at the Warehouse
Transportation and

When DEP receives the customer order, it is electronically wired from the marketing
and sales departments to the manufacturing department. The order is then
recorded into the information system which allows for the tracking and monitoring
of the shipments as they are delivered to the manufacturing facility as well as
construct optimal production schedules to reduce idle time and waste. The six
companies listed above, supply six different chemical compounds that feed into the
production of various polymers. After receiving the raw material shipments, DEP
commences the manufacturing process, following which the converted and
consolidated chemicals in the form of requested polymers are transported to the
warehouse where the orders are matched to their corresponding documentation,
labeled, finalized and prepared for outbound shipment. Delivery is then scheduled
and carried out, transportation being divided between the DEP truck fleet and
common carriers.
The following is the identification of some of the value producing and value reducing
stages of the DEP supply chain operations some of which should be continued,
improved or reconsidered:
Value Adding Stages:

Rapid

inbound logistics and the inter-departmental electronic communication and

information systems
Production and conversion process
Favorable Facility locations
Packaging labeling and sorting of materials (palletization, shrink wrapping)
delivery of produce from manufacturing to company warehouse

Value Compromising Stages:

Tied up and unused inventory resulting in an incurrence of inventory

management and maintenance costs

Slow preparation of shipping documents as well as verification and matching
of manufacturing documentation to the received orders. It can take anywhere
from 3 to 6 days for the order to leave the warehouse in a ready to ship

condition.
Fluctuating and tentative delivery window (up to 6 days) for customers
outside the 200 mile reach of the DEP truck fleet.

The current procurement protocol of DEP is to source the 6 essential compounds

needed for the polymer production from 3 different companies. The annual bidding
process determines the lowest cost suppliers that will get 60, 25 and 15 percent of
the business respective to the cost of their materials and performance. The
minimum performance cycle time of the chief suppliers is 4 days. Considering DEPs
evaluative performance criteria, Companies 4 and 5 have a minimum delivery time
of 4 days from the date of the order and seem to be the limiting factor in DEPs
supply chain performance cycle. Taking into account the minimal 6 days from the
order date of manufacturing, another 2 days are needed before the order is
produced and is ready to be shipped to the warehouse. An additional 3 days from
the day the order leaves manufacturing until it is shipped from the warehouse and
the calculations show a total of 9 days minimum in DEPs SC performance cycle.
Using the same metrics described above the maximum performance cycle will result

in 21 days (9 days from the start date for the shipment of raw material to arrive, 6
days before the order is shipped from the warehouse and a worst case scenario of 6
days for the common carrier to deliver it to the customer).
Using the 25 and 15 percent vendors, the performance cycle could be improved
favorably. In addition to ensuring a continuous supply of raw material throughout
the year, these vendors also serve as as a protective safety net against any
unexpected or unreasonable price increases by any individual company. Comparing
the primary with the ancillary vendors, the delivery time from order and fill rate is
quite impressive for the ancillary or non-primary vendors. Considering Company 2
and Company 3 particularly, the delivery of 2 days and the high fill rates are
unmatched by the primary suppliers providing the same compounds.
To use ancillary suppliers more effectively, DEP should implement a more malleable
delivery and contractual arrangements, making primary vendors aware of the
conditions and requirements of GARPs service window and delivery thresholds and
not having to oblige itself to any one particular supplier for an extended period of
time. Likewise, the annual bidding process should move away from the myopic
lowest cost procurement strategy and view the process through the integrated TCO
lens considering factors such as service delivery, fulfillment rates and overall
performance. In addition, DEP should develop more rigorous performance criteria,
educate suppliers about the newly implemented changes and work proactively to
develop and enhance their performance capabilities. Although the utilization of
supplementary vendors will increase the procurement costs for the company, DEP
can reconsider its inveterate inventory management procedures and look for ways
to reduce costs associated with inventory storage and maintenance and consider a
new approach.

If I were in Toms shoes, the first thing I would do is consider the attainability of
shrinking the service window without compromising the polymer quality while
maintaining the competitive price and advantage. If all else remains the same, DEP
should review all of the established contracts with their vendors negotiating tighter
delivery deadlines and overall higher delivery performance and thresholds. To
further shorten DEPs performance cycle and leadtime, I would introduce the idea of
reducing the time spent at the warehouses for packaging, labeling and other
activities associated with the preparation of orders for final shipment and delivery to
the operational structure of the company. Activities such as labeling, palletization,
shrink wrapping and verification of manufacturing tickets to orders could be easily
performed at the end of the production line, decreasing the time the warehouse
spends preparing the shipments with some products qualifying for expedient
shipment out of the warehouse immediately after the production process.
Due to DEPs ongoing investment in the most advanced, up-to-date manufacturing
equipment I would strongly emphasize the quality of our product compared with
that of our competitors and our initiative towards continuous improvement and
away from obsolescence. Most importantly, I would sell Binish on the successful
adjustments we have made in response to the new qualifying criteria of GARDs
suppliers. We were able to maintain the competitive price, reduce our service
window and provide higher delivery thresholds while still producing high-grade, top
quality polymer. I would also inform him of the changes in companys strategy
regarding newly implemented supplier performance criteria, benchmarking and
service capabilities measures. These steps serve as a reflection of DEPs business
adaptability and can be considered the touchstone of order winning criteria.

This case is a perfect example of what it takes for businesses to stay

competitive and how crucial and integral supply chain management has become to
the success of any organization. Supply chain managers must be able to adapt a
dynamic approach to the operations of their company, perceiving new trends and
market changes while timely executing appropriate decisions aimed at the
prosperity of the firm, retention of competitive advantage and maximization of the
bottom line.