2: RBC Corp: Searching for Delivery Efficiency Purpose: The purpose of this case study is to evaluate the cost and benefits of us- ing its own fleet for deliv- ery or to outsource this function to a third party logistics provider for an organisation. Rubbermaid Corp. Searching for Delivery Efficiency Glen Hodgson, the CEO of Rubbermaid Corporation, a giant Melbourne based clothing retailer that mainly serves B2B as well as B2C customers was reading the economist and an article on 'outsourcing efficiency in retail logistics' drew his attention. Reading the article Glen was surprised to know that 65% of the retail company's CEO favoured the use of 3PL services as the desired delivery mode to their customers. However, the opinion poll also states that a significant number of CEO's voiced against the use of 3PL in the ground of loosing final contact with the ultimate cus- tomers thus not getting the feedback. These CEOs emphasized more on being close to the cus- tomers against the cost incurred to do so. After reading the article Glen was thinking about his company's logistics system because for the Melbourne's largest clothing company- The Rubber- maid Corporation (RBC Corp.), delivering across the Melbourne region was proving increasingly difficult and costly for the fleet of RBC Corporation. Apart from the complexity and cost related problems RBC also ran into series of problems from fleet drivers associations, failure of meeting deadline of fleet maintenance company's delivery work etc. Getting no probable solution from his thought Glen decided to take a decision along with the company board members regarding his company's logistics systems. The Company In 1978 RBC Corporation started as a wholesaler of bulk clothing items to only business customers who further process to those into clothing and ultimately sold to the customer. Running its opera- tion for almost 7 years it started to make clothing by itself and sold those to the retailers along with the wholesale operation. The manufacturing process offered them more per unit profit therefore in 1989 they have transformed RBC as a full line clothing manufacturer. However, as Australia got more open for foreign products Rubbermaid was facing a tough competition from the clothing man- ufacturer of a low cost country. Meanwhile due to the signing of GAAT Australasian continents countries especially China became more open for foreign companies, Rubbermaid quickly realized the opportunity and benefit that it can enjoy from this opportunity. Gradually they started to out- source the manufacturing function to China to realize the cost competitiveness. By 2000 they had outsourced almost 90 percent of their manufacturing work to China, the remain- ing 10 percent mostly highly exclusive items were still manufactured in a plant at Melbourne. RBC has its own logistics fleet that carry out the total logistics function both for the B2B and B2C cus- tomers. Professor Prem Chhetri, RMIT University Case Study 2: RBC Corp: Searching for Delivery Efficiency The Operational Scenario of RBC Logistics from 1980 to 2008 From the day of its wholesaling business RBC delivered the ordered items to the customer's premises. This was one of the added services that RBCs customers received where the customers of most of the other competing companies had to arrange their own transportation. In order to make this differ- entiated service as a sustainable advantage RBC extended its vehicle fleet so that it can meet customers' delivery request as soon as possible. As time goes RBC expanded its business and moved to full line clothing business and to meet the even more demanding and competitive customers demand it kept on adding more vehicle in its fleet. The vehicles of RBC logistics fleet were assigned to six of the big stores designated as Bulldogs, Saints, Magpies, Demons, Swans and Bombers, from which they were serving the customers. The vehicles were also serving the delivery requests of the smallest RBC stores with- in the designated operation area. The vehicles of one regions store were meant to meet the request of only that region even if a nearby customer of other region could be served more easily by the other regions vehicle. In 2008 the total distance travelled by the vehicles of RBC logistics to deliver goods in the specified period exceeds the transport distance computed by transport modeller using opti- mum routing (shortest distance) The difference between the actual distance travelled and the distance to the closest store was found to be substantially large. Customers are also being served by multiple store, which causes inefficiency and confu- sion. When considering responsiveness, RBC logistics is providing a first class service. 90% of the invoices are deliv- ered on the same day. Only a small percentage is delivered the next day and only 0.5% greater than one day later. Irre- spective of the order amount RBC maintains this level of re- sponsiveness to keep its customers happy and loyal. Apart from this utilization issue frequent absenteeism of driv- ers especially in weekends and the resultant replacement driver's needs and their higher payment demands has often been an issue of concern over that time. There were a con- tract vehicle maintenance company that was working for RBC logistics but at times their failures of not delivering the vehicle after maintenance at a scheduled time forced RBC to hire other logistics provider. It appeared a two edged sword where they were paying for the service for the hired logistics provider in one end and at the other end paying for the lost service of its own vehicle. These issues along with the increased deliv- ery cost forced RBC to outsource its Store A-North and Store B-South logistics operation to a third party logistics provider named Kaiger Logistics. Professor Prem Chhetri, RMIT University Gate- way Intermodal Kaiger Logistics serving RBC from 2009 Kaiger Logistics started working for RBC from January 31, 2009. It was handling the North and South clusters logistics operation especially for Store Bulldogs and Saints. Moreover, the small stores located within the region were also served by Kaiger. At the year end of 2009 RBC discovered that it made a substantial savings in its logistics operation especially from North and South. The per kilometre travel cost was substan- tially less than when these regions was served by its own logistics fleet. In addition savings came from reduced pay- ment to the contract maintenance firm that was looking after the maintenance work of RBC logistics vehicles. Driver ab- senteeism and the resultant complexity and higher payment on on call drivers were also mitigated almost completely for North and South region. Moreover, as a full line 3PL service provider some specialized services was also offered by Kaiger such as vehicle tracking through the specialized soft- ware that has to be installed by the client, more efficient han- dling of fragile and high value items, specialized storage facil- ity when the goods are on move etc. However in order to take advantage of the vehicle tracking system RBC has to invest a substantial amount of money for the system set up across the stores especially at the main stores (i.e. Store A and B). Another issue that is more of a concern for RBC is that in the past 4 months they received at least 10 requests from its high value clients to reduce the delivery lead time. They accordingly requested Kaiger to make the delivery faster however Kaiger could not do much to entertain the requests as in Kaiger they have the policy- 'Start the delivery process as the vehicle is fully loaded or else accumulate several orders to load the vehicle- Do not start with half load; look after our cost' Case Study 2: RBC Corp: Searching for Delivery Efficiency The Decision Scenario On July 4, 2010 RBC had their performance review meeting in the presence of all the directors of the company as well as the CEO and Chairman, Glen Hodgson. Frank Reuter, the managing director was rather in a sad tone announced be- fore the board members that the company's profit plunged by 5% compared to the previous year in spite of achieving cost efficiency in logistics operation. Another announcement that received the attention of most of the board members was that in the last 6 months from the beginning of last quarter of 2009 to April, 2010 the company lost 135 customers out of them 3 were high value customers. They had been with the company for the last 10 years. An exit interview revealed that these customers were not happy with the new form of deliv- ery responsiveness. Glen along with the other board mem- bers became very concerned about this issue. The board members could not ascertain a strategy about this issue which in future may have a further daunting impact on RBC bottom line. Case Study Tasks What are the critical components of RBC's transporta- tion costs? Do you think that the decision to outsource some part of logistics operations to a 3PL provider is logical? With the given scenario, as a consultant, what is your recommendations for the company to overcome the present crisis? read the case and associated questions carefully. Highlight the main points of the case and any issues that you can identify. Read the questions closely and analyse what they are requiring you to do. Read the case again, linking the information that is relevant to each question you have been asked. address the problem based on the learned methods. answer to the case questions based on the output of your analysis. Recommended Length and Structure 1. Setting out the business context of RBC In this section, you should set out the business context of RBC including the logistical challenges and opportunities to outsource to 3PL. The context needs to be grounded on the literature review on 3PL and course materials. Information can be selected from scientific journal articles, books and similar credible sources to support your argument. 2. Critical evaluation and economic rationalisation In this section, you are required to undertake cost-benefit analysis of outsourcing distribution/transportation function to 3PL as a business strategy to reduce operational costs. Your analysis should consider economic rationalisation of the proposed strategy and its implications on business operations, service quality, and staffing. Use of tables and figures are encouraged to present your argument and decision thought process succinctly and effectively. 3. Recommendations You should propose a set of recommendations to the company, along with justification and the potential implications. The relation of recommendations with the previous sections of the report should be clear and understandable for the reader. You should explain how the recommendations can improve the current state. Additionally, the feasibility and applicability of recommendations is crucial as sometimes optimistic recommendations are not feasible in the practice. Referencing Guidelines Use Harvard style referencing style for this assessment. If you are using secondary sources, include these as a reference list in your report. You must acknowledge all the sources of information you have used