Reference no: EM132183103

Problem: On Time Shipment of Orders

The Rock Solid patio furniture company has a manufacturing plant and distribution center located in Smalltown, USA. The patio furniture is produced using a MTS strategy to ensure that the products are made in advance of the seasonal demand. Once the season begins, historically the shipping volume goes from a couple of truck loads a day to 55 - 60 truckloads a day.

The historical practice has been that as orders come in, they are sorted based on the customer requested ship date. The Traffic department determines the appropriate carriers, based on destinations, and coordinates with all carriers two days in advance to have their trucks on site on the requested ship date.

Historically, during the busy season, the On Time Ship rate drops to an average of 60 percent and the overtime hours and pay for the warehouse workers increase to an average of 14 - 15 hours a day, six or seven days a week. The loading process is further complicated by the fact that Small Town is in a rural area, located approximately 1 to 2 hours from the closest Metropolitian areas in any direction.

Operating Characteristics

- The warehouse has 12 dock doors for outbound loads.

- All product is brought into the warehouse via conveyor from the plant so there are no inbound shipments, but 2 lanes (doors) need to be free to "receive product".

- Historically, the warehouse has operated with one shift that starts at 7:00 am, given that the real busy season only runs 4 - 5 months a year. There is a smaller 2nd shift, that starts at 3:30 pm, and is mainly involved with replenishing product to the shipping lanes to get ready for the next shipping day.

- As most of the shipments are full truck load, a large percent of the trucks scheduled to pick up loads at Rock Solid are delivering loads to the surrounding areas before they come to Small Town to pick up our outbound shipments. They often get delayed during unloading and also often get lost on the way to Small Town. The result is that there are very few trucks available to load in the morning at 7:00 am and then they all start showing up around lunch time, which often results in traffic jams on the yard and on the two lane road leading into the plant facility.

- The warehouse has to maintain a workforce early in the morning as the plant starts running new product into the warehouse at 7:00 am and it has to be stocked.

- To increase the difficulty of on time shipping, it is not uncommon for the trucks to arrive for loading and then it is discovered that the warehouse doesn't have all the required product for the order. This results in trailers being brought to the doors late and/or trucks being partially loaded and then pulled out of the door until the remaining product is available so that other trucks can be loaded. Occasionally, this results in the truck having to stay overnight, which results in Detention charges.

You have recently been hired as the Logistics Manager, just before the start of the busy season. You have to determine what needs to be done to improve On Time Shipment results, reduce the excessive overtime, and transform your operation into a World Class Operation. No Pressure, but your biggest customer, Home Depot, accounts for 60% of your total sales.

They have threatened your VP of Sales saying that if service doesn't improve quickly, they will be looking for a new furniture supplier.

Your Task, whether or not you choose to accept it, is to work with the other members of your team to review your current processes, determine possible root causes for your poor on time shipping performance and tremendous inefficiencies (labor OT), and recommend process improvements to improve your service levels.

On the "Current Shipments" tab you have a list of the currently available orders. Today's date is 12/18/2017. 

As a general rule, a full truck load of your product averages about $40,000 in value. Some of your customers are bad about entering single orders which are actually multiple truckloads.

For planning purposes and distinguishng between LTL & TL shipments, you can use 34% or less of a TL quantity to classify a shipment as an LTL shipment.

As you start the process improvement efforts, you can ask your local subject matter expert (ME) questions to clarify your understanding of Current processes.

You will need to determine root causes for your poor performance and identify specific steps to take to start on the path to improved performance. No Pressure, but Your three largest customers are meeting with your CEO in 4 weeks to determine if they are going to continue to use you as a supplier. Your CEO wants to review the presentation that you will give to these executives in 3 weeks.

Question 1. What are the Root Causes of your Below standard On Time Shipment rate. List them all.