GROUPCASE STUDY

"TheChallenge: DeliverOn-Time"

...BACKGROUNDINFORMATION

TheNewLogisticsManager

James is the new logistics manager at Parker Hannifin, a U.S. manufacturingcompany based in the state of Colorado (U.S.A). It provides abrasive surfacepreparationandspraypaintingequipment.ThecompanyrecentlystartedsellingequipmentinKuwait.

AnInternationalCustomerComplains

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 productshave not been delivered on time. Ahmed was told in January that it would takefour weeks to have all the ordered products delivered to Kuwait, but it is nowMarch and he has only received some of the equipment. He also noted that hehadordered electricmotorsthatwereurgently neededforaclient,buttheyhavenot yet arrived, despite his flagging the order to the previous logistics manager.Ahmed has also been waiting on Parker Hannifin to send a signed statementcertifying the country of origin of the products and that the products were inaccordance with the invoice. Ahmed advised James that if Parker Hannifin didnot fix its problems immediately, Al Ahleia Switchgear Co. would begin using aMiami-basedcompanythathadrecentlyapproachedhim.

James(themanager)Investigates

James began investigating what type of equipment was being shipped and wherethe bottleneck was. He reviewed the purchase order and saw that Al AhleiaSwitchgearCo.hadorderedstorage andblastcabinets,vacuumequipmentandafew smaller items including the electric motors. With this information, he woulddetermine how the products were sent from the warehouse and then try to tracktheexactlocation oftheproductsontheir way toKuwait.

StatusofLoading andTransportfromParkerHannifin

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

James then went to the warehouse to speak with John, the shipping manager,abouttheproductsshipped toAlAhleiaSwitchgearCo.-particularlytheelectricmotors. He was surprised when John told him, "We thought that the electricmotors could go with the rest of the equipment, so we packed them in the oceancontainer,too.Youknow,itmight save us some money.Weranoutoffilling

material, but don't worrywe packed it in a way that nothing will happen tothem." James knew that some of the larger equipment had protruding parts, sohebecame concernedthesmalleritemswouldbedamageden route.

James also realised that the blasting cabinet that Al Ahleia Switchgear Co. hadordered was still in the warehouse. John said the light box component had to beremoved from the top of the blast cabinet in order to meet the ocean containerheight regulations,andhisstaffneeded thecompany'sengineer tohelpmakethemodification before the shipment could proceed. Al Ahleia Switchgear Co. wasalso waiting on the vacuum equipment, which was found next to the blastingcabinet in the warehouse. John and his staff had never sent vacuum equipmentby sea, and they needed a forty-foot container with an open top. Someone hadordered a hard top container instead. If the open-top container was not used, thecontainer could not be loaded by crane onto the cargo ship. James thought tohimself, "How didwenotknowthisbefore?"

AfterJamesfinishedspeaking withJohn,hewentbacktotheofficeandreceiveda call from Bryan at Good Luck Logistics. Bryan advised that there was a verbalcontract between Good Luck and Parker Hannifin; a written contract was stillbeing prepared. He also said Good Luck was experiencing a shortage of truckdrivers and could not come for another four to five days to take containers to theport. Bryan added that James would be very fortunate to find a company able toassistintrucking,as findingnewtruckdrivers toreplacethoseretiringhad

become a nationwide problem. James had to find a solution to this, as he neededtogetequipment movednotonlyinternationally,butintheU.S.aswell.

...CORRECTIVEACTION

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

At the seaport in Shuwaikh Port, Kuwait, goods are unloaded from the ship andtheninspectedbycustomsandstored.Theconsigneehasfourdaystoprovide therequired documents needed for customs clearance and then remove the goodsfrom the storage area. Ahmed has been waiting for a missing document fromParker Hannifin to be able to provide the complete set of documents to Kuwaitnin customs. The demurrage charges have been accumulating for the past twoweeks.

Ahmed knew that the sales agreement with Parker Hannifin stated that Al AhleiaSwitchgear Co. was responsible for charges once the shipment arrived in Kuwait,but as he believed the missing documentation was Parker Hannifin's fault, hewanted Parker Hannifin to pay for the demurrage. As a part of the sales contractbetween Parker Hannifin and Al Ahleia Switchgear Co., they negotiated thefollowing shipping delivery terms: "CFR, Port of Shuwaikh, Kuwait,Incoterms 2020." Al Ahleia Switchgear Co. had a solid relationship with itsown freight forwarders, located in Kuwait, and were able to negotiate favourablefreight rates. Keeping this in mind, Parker Hannifin had already offered Al AhleiaSwitchgearCo.areduced pricefortheequipmentthatitshipped.

James called Ahmed to explain the situation, and that he would be getting all theoutstanding equipment shipped, just as soon as possible. He prepared the signedstatement - which certified the country of origin - and sent it by email to Ahmed,hoping the Kuwait customs authorities would accept it while waiting for theoriginal document to arrive by courier in three days. James also offered to pay fortheextrademurrage incurred.Ahmedwasstillnothappywiththeserviceoffered

byParkerHannifin.SoAhmedtoldJameshewouldnotbepurchasingequipment fromParkerHannifinagain.

FINALCASEQUESTIONS andDIRECTIONS

InstructionstoStudents:Respondtoeachofthequestions anddirectionsbelow in an MS Word document. Ensure that each student group's member'snameandStudentID# appearonyoursubmissiononatitlepage. Ensurethatitiscopied totheAssignmentsdropbox bythedateandtimesuppliedbyyour professor or instructor. Include a separate page of references for yoursources for any research cited by your group. Your submission must reflectgloballogistics thinking.Equalparticipationbyallgroupmembersisassumed.

1. facedby

James with the shipping of products to Al Ahleia Switchgear Co. in Kuwait.[12marks]

1. the

previouslogisticsmanagerandtheowner,topreventthese challenges.[12marks]

1. MODE - INTERNATIONAL: Discuss which shipping mode(s)would bemostcost-effectiveforParkerHannifinin shippingtoKuwaitfromtheUSAtoKuwait?[4marks]
2. MODE-DOMESTIC:Discusswhichshipping mode(s)wouldbemostcost-

effectiveforParkerHannifin inshippingwithin(inside)theUSA.[4marks]

1. FREIGHTFORWARDERS:Explainhow(inwhatways)making arrangementswith full-service freight forwardersis a good choice for Parker Hannifin?[4marks]