Case Study

Conestoga College

OPER8070 - Global Logistics Management II

FINAL

GROUP CASE STUDY

"The Challenge: Deliver On-Time"

Case Study... BACKGROUND INFORMATION

The New Logistics Manager

James is the new logistics manager at Parker Hannifin, a U.S. manufacturing company based in the state of Colorado (U.S.A). It provides abrasive surface preparation and spray-painting equipment. The company recently started selling equipment in Kuwait.

An International Customer Complains

To date, Parker Hannifin's only customer in Kuwait is Al Ahleia Switchgear Co.. Al Ahleia Switchgear Co.'s president, Ahmed Al Azmi, complained that products have not been delivered on time. Ahmed was told in January that it would take four weeks to have all the ordered products delivered to Kuwait, but it is now March and he has only received some of the equipment. He also noted that he had ordered electric motors that were urgently needed for a client, but they have not yet arrived, despite his flagging the order to the previous logistics manager. Ahmed has also been waiting on Parker Hannifin to send a signed statement certifying the country of origin of the products and that the products were in accordance with the invoice. Ahmed advised James that if Parker Hannifin did not fix its problems immediately, Al Ahleia Switchgear Co. would begin using a Miami-based company that had recently approached him.

James (the manager) Investigates

James began investigating what type of equipment was being shipped and where the bottleneck was. He reviewed the purchase order and saw that Al Ahleia Switchgear Co. had ordered storage and blast cabinets, vacuum equipment and a few smaller items including the electric motors. With this information, he would determine how the products were sent from the warehouse and then try to track the exact location of the products on their way to Kuwait.

Status of Loading and Transport from Parker Hannifin

In March, Parker Hannifin started to use the budget U.S. carrier Good Luck Logistics to transport larger products from the warehouse to the shipping port in Charleston, South Carolina. The owners of Good Luck and Parker Hannifin were good friends. The companies had negotiated a new two-year agreement in early March. James searched through emails and files, but couldn't find the contract from Good Luck Logistics. He had no idea what the carrier was supposed to do.

He contacted Good Luck to get further details about the services it offered Parker Hannifin, but was unable to reach anyone there. James then went to the warehouse to speak with John, the shipping manager, about the products shipped to Al Ahleia Switchgear Co. - particularly the electric motors. He was surprised when John told him, "We thought that the electric motors could go with the rest of the equipment, so we packed them in the ocean container, too. You know, it might save us some money. We ran out of filling material, but don't worrywe packed it in a way that nothing will happen to them." James knew that some of the larger equipment had protruding parts, so he became concerned the smaller items would be damaged en route.

James also realised that the blasting cabinet that Al Ahleia Switchgear Co. had ordered was still in the warehouse. John said the light box component had to be removed from the top of the blast cabinet in order to meet the ocean container height regulations, and his staff needed the company's engineer to help make the modification before the shipment could proceed. Al Ahleia Switchgear Co. was also waiting on the vacuum equipment, which was found next to the blasting

cabinet in the warehouse. John and his staff had never sent vacuum equipment by sea, and they needed a forty-foot container with an open top. Someone had ordered a hard top container instead. If the open-top container was not used, the container could not be loaded by crane onto the cargo ship. James thought to himself, "How did we not know this before?"

After James finished speaking with John, he went back to the office and received a call from Bryan at Good Luck Logistics. Bryan advised that there was a verbal contract between Good Luck and Parker Hannifin; a written contract was still being prepared. He also said Good Luck was experiencing a shortage of truck drivers and could not come for another four to five days to take containers to the port. Bryan added that James would be very fortunate to find a company able to assist in trucking, as finding new truck drivers to replace those retiring had become a nationwide problem. James had to find a solution to this, as he needed to get equipment moved not only internationally, but in the U.S. as well.

... CORRECTIVE ACTION

James called the freight forwarders that Parker Hannifin used, "FLUKE Global Express", which offered a full range of services, such as export packing and containerization. To save costs, Parker Hannifin did not use FLUKE's U.S. pickup service or any other packaged services. It used FLUKE as shipping agents and customs brokers to arrange the export customs clearance and to pay the export duties. James was used to working with freight forwarders who offered door-todoor service, so this would be an adjustment. However, FLUKE did offer satellite tracking, so James used his smartphone to track Parker Hannifin's latest shipment to Al Ahleia Switchgear Co. through the mobile application. To James's disappointment, the latest shipment was in Kuwait, but delayed due to customs clearance issues.

At the seaport in Shuwaikh Port, Kuwait, goods are unloaded from the ship and then inspected by customs and stored. The consignee has four days to provide the required documents needed for customs clearance and then remove the goods from the storage area. Ahmed has been waiting for a missing document from Parker Hannifin to be able to provide the complete set of documents to Kuwaitn in customs. The demurrage charges have been accumulating for the past two weeks. Ahmed knew that the sales agreement with Parker Hannifin stated that Al Ahleia

Switchgear Co. was responsible for charges once the shipment arrived in Kuwait, but as he believed the missing documentation was Parker Hannifin's fault, he wanted Parker Hannifin to pay for the demurrage. As a part of the sales contract between Parker Hannifin and Al Ahleia Switchgear Co., they negotiated the following shipping delivery terms: "CFR, Port of Shuwaikh, Kuwait, Incoterms 2020." Al Ahleia Switchgear Co. had a solid relationship with its own freight forwarders, located in Kuwait, and were able to negotiate favourable freight rates. Keeping this in mind, Parker Hannifin had already offered Al Ahleia Switchgear Co. a reduced price for the equipment that it shipped.

James called Ahmed to explain the situation, and that he would be getting all the outstanding equipment shipped, just as soon as possible. He prepared the signed statement - which certified the country of origin - and sent it by email to Ahmed, hoping the Kuwait customs authorities would accept it while waiting for the original document to arrive by courier in three days. James also offered to pay for the extra demurrage incurred. Ahmed was still not happy with the service offered by Parker Hannifin. So Ahmed told James he would not be purchasing equipment from Parker Hannifin again.

FINAL CASE QUESTIONS and DIRECTIONS

Instructions to Students: Respond to each of the questions and directions below in an MS Word document. Ensure that each student group's member's name and Student ID # appear on your submission on a title page. Ensure that it is copied to the Assignments dropbox by the date and time supplied by your professor or instructor. Include a separate page of references for your sources for any research cited by your group. Your submission must reflect global logistics thinking. Equal participation by all group members is assumed.

Questions:

1. CHALLENGES: Identify, evaluate, and describe six challenges faced by James with the shipping of products to Al Ahleia Switchgear Co. in Kuwait. [12 marks]

1. ACTIONS: Describe six actions that should have been taken by the previous logistics manager and the owner, to prevent these challenges. [12 marks]

1. MODE - INTERNATIONAL: Discuss which shipping mode(s) would be most cost-effective for Parker Hannifin in shipping to Kuwait from the USA to Kuwait? [4 marks]

1. MODE - DOMESTIC: Discuss which shipping mode(s) would be most cost-effective for Parker Hannifin in shipping within (inside) the USA. [4 marks]

1. FREIGHT FORWARDERS: Explain how (in what ways) making arrangements with full-service freight forwarders is a good choice for Parker Hannifin? [4 marks]

1. DRIVER SHORTAGE: Explain clearly two ways that the truck driver shortage may affect Parker Hannifin & freight-forwarding companies generally? [4 marks]

1. STRATEGIC ISSUES: Considering your analysis of what has been happening at Parker Hannifin, what does your group think are the strategic issues of this case. [10 marks]

1. IMMEDIATE ISSUES: What steps should James take now to deal with the immediate issues he faces? [10 marks]

1. RECOMMENDATIONS FOR PARKER HANNIFIN: Using an analytical model, develop both short-term and long-term recommendations for Parker Hannifin. [10 marks]

1. JOBS, FEARS, ROBOTS, & YOUR FUTURE: The driver shortage problem noted points to a larger issue - the mismatch between the jobs available, and the people who are available, willing, and capable of filling them. So, should Conestoga graduates fear that there will be no jobs for them after graduation? Should they fear that robots will prevent them from ever being employed? Are there reasons for having confidence in their future? Describe 3 thoughts or points of view that you have about this. [10 marks]

1. THE FUTURE OF LOGISTICS: This case reflects the complex reality of the logistics environment that many organizations face today. But imagine what the world of logistics will be like 10 years from now. Which logistics activities will be different than today; which will be the same? What technologies led to significant changes by 2032, and why? What changes have happened in employment, economic opportunities, and personal freedom as a result?

Now, describe the world of logistics in the year 2032 - 10 years from now - as your group IMAGINES it to be. Provide 3 to 5 imaginative comments about the future of logistics. [10 marks]