Conestoga College

OPER8070 - Global Logistics Management II

FINAL

GROUP CASE STUDY

"The Challenge: Deliver On-Time"

... BACKGROUND INFORMATION

The New Logistics Manager

Carlos is the new logistics manager at Associated LLC, 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 Greece.

An International Customer Complains

To date, Associated's only customer in Greece is Koulouris. Koulouris's president, Avangelos Papadopoulos, complained that products have not been delivered on time. Avangelos was told in January that it would take four weeks to have all the ordered products delivered to Greece, 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. Avangelos has also been waiting on Associated to send a signed statement certifying the country of origin of the products and that the products were in accordance with the invoice. Avangelos advised Carlos that if Associated did not fix its problems immediately, Koulouris would begin using a California-based company that had recently approached him.

Carlos (the manager) Investigates

Carlos began investigating what type of equipment was being shipped and where the bottleneck was. He reviewed the purchase order and saw that Koulouris 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 Greece.

Status of Loading and Transport from Associated

In March, Associated started to use the budget U.S. carrier 13 Point Logistics to transport larger products from the warehouse to the shipping port in Galveston, Texas. The owners of 13 Point and Associated were good friends. The companies had negotiated a new two-year agreement in early March. Carlos searched through emails and files, but couldn't find the contract from 13 Point Logistics. He had no idea what the carrier was supposed to do. He contacted 13 Point to get further details about the services it offered Associated, but was unable to reach anyone there.

Carlos then went to the warehouse to speak with Bill, the shipping manager, about the products shipped to Koulouris - particularly the electric motors. He was surprised when Bill 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." Carlos knew that some of the larger equipment had protruding parts, so he became concerned the smaller items would be damaged en route.

Carlos also realised that the blasting cabinet that Koulouris had ordered was still in the warehouse. Bill 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. Koulouris was also waiting on the vacuum equipment, which was found next to the blasting cabinet in the warehouse. Bill 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. Carlos thought to himself, "How did we not know this before?"

After Carlos finished speaking with Bill, he went back to the office and received a call from Todd at 13 Point Logistics. Todd advised that there was a verbal contract between 13 Point and Associated; a written contract was still being prepared. He also said 13 Point was experiencing a shortage of truck drivers and could not come for another four to five days to take containers to the port. Todd added that Carlos 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. Carlos 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

Carlos called the freight forwarders that Associated used, "El Cheapo Express", which offered a full range of services, such as export packing and containerization. To save costs, Associated did not use EL CHEAPO 's U.S. pick-up service or any other packaged services. It used EL CHEAPO as shipping agents and customs brokers to arrange the export customs clearance and to pay the export duties. Carlos was used to working with freight forwarders who offered door-to-door service, so this would be an adjustment. However, EL CHEAPO did offer satellite tracking, so Carlos used his smartphone to track Associated's latest shipment to Koulouris through the mobile application. To Carlos's disappointment, the latest shipment was in Greece, but delayed due to customs clearance issues.

At the seaport in Piraues, Greece, 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. Avangelos has been waiting for a missing document from Associated to be able to provide the complete set of documents to Greece customs. The demurrage charges have been accumulating for the past two weeks.

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

Carlos called Avangelos 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 Avangelos, hoping the Greek customs authorities would accept it while waiting for the original document to arrive by courier in three days. Carlos also offered to pay for the extra demurrage incurred. Avangelos was still not happy with the service offered by Associated. So Avangelos told Carlos he would not be purchasing equipment from Associated again.

1. STRATEGIC ISSUES: Considering your analysis of what has been happening at Associated, what does your group think are the strategic issues of this case. [10 marks]
2. IMMEDIATE ISSUES: What steps should Carlos take now to deal with the immediate issues he faces? [10 marks]