VASA Company Rethinking Distribution Logistics

Evaluation

Sanchez Loppacher et al. (2013) report about three possible options available to VASA. First, the glass producer can utilize its fleet to ensure complete control over its delivery operations. Second, the company can “take direct action with” its partners to ensure high-quality delivery to its customers (Sanchez Loppacher et al., 2013, p. 23). Third, VASA can contract another delivery company or several transportation firms to replace Transfer S. A. and CristaLog Hnos. All of these strategies are associated with certain advantages and disadvantages.

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Own Fleet

Due to the increasing competition and certain financial insecurity of the global and local markets, the company will pay considerable attention to costs. It is forecasted that the company’s income will rise in 2008 while transportation costs will decrease (see Appendix A). However, previous years indicate that transportation costs are likely to grow (see Appendix A). The first option to be discussed is characterized by the highest costs, which can make it less attractive and appropriate. The development of a company’s fleet will require substantial investment. On average, during a fortnight, CristaLog Hnos. makes 359 trips and Transfer S. A. conducts 324 trips. This means that the company needs the capacity to meet such high demand which is predicted to increase. VASA will need a fleet of approximately 45 trucks, and the majority of these vehicles should be equipped with modular and trestle technology. The company will also have to hire more employees. Another downside of this option is the lack of flexibility as the company will depend on its fleet only as no other contracts are likely to be retained.

The advantages of this method include the ability to take complete control over the company’s operations, which can help VASA reduce costs in the long run. More importantly, the glass manufacturer will be able to improve the quality of the provided delivery services. VASA will be able to develop closer relationships with its customers. However, Poirier (2016) that organizations that do not have the necessary experience in managing delivery processes, often face the need to allocate additional costs in the short-term perspective.

Closer Control

Another option seems less cost-effective, but it can be more difficult to implement successfully. It has been estimated that only 38% of the trucks arrive on time or with less than a 20-minute delay (see Appendix B). Almost 43% of trucks come with delays ranging from one hour to five hours (Sanchez Loppacher et al., 2013). The services provided by the transportation companies are of low quality. So, it can be beneficial to take control of these firms’ certain operations. The advantage of this option is the improvement of the delivery service and increased customer satisfaction. The relationships with the companies as well as their fees may also become more favorable for VASA as no delays would mean lower costs for the two transportation companies. However, a major disadvantage of this strategy is the fact that it is time-consuming. It will take quite a while to negotiate with transportation companies and improve their operations. Another downside of this option is the stakeholders’ reluctance to share information and change some of its policies that can be regarded as their competitive advantage (as in the case of Transfer S. A.).

Contracting Other Transportation Companies

Finally, VASA can also find more reliable transportation companies that can provide high-quality services with no delays. However, Sanchez Loppacher et al. (2013) state that the region has only a few transportation companies that have the necessary capacity. At the same time, VASA’s competitors managed to contract international delivery services and successfully satisfy their needs. One of the advantages of this strategy is the timely provision of VASA’s products to its customers. The partners will enter the competition and will try to adhere to schedules. The most effective transportation company will have more orders. Another benefit of this option is the possibility to find better fees and cooperate with companies that will offer the lowest price. In this case, VASA will reduce its transportation costs and can win another competitive advantage.

As far as the shortcomings of contracting new transportation companies are concerned, it is necessary to start with a possible increase in costs. The search for new partners may be associated with the risk of low-quality services, which will lead to the need to provide additional benefits to customers or even the loss of clients. Apart from increased costs, as noted by Kamalahmadi and Mellat-Parast (2015), companies looking for new partners should consider numerous risks including the disruption of certain processes, customer dissatisfaction, and reputational losses. In the most severe case, collapses are possible as the existing partners can hardly provide quality services. If they receive additional orders (the ones failed by new transportation firms), they may be simply unable to provide trucks promptly.

Alternatives

The three options mentioned above are not the only possible solutions to the issues VASA is facing. One of the appropriate alternatives is the introduction of regular audits that will imply VASA representatives’ review of trucks’ departure, arrival, road time, and other indices. Richards and Grinsted (2013) state that the use of checklists, reports, and tracking software can be essential. VASA has the necessary technology but has failed to use it effectively so far. This alternative is characterized by low cost and a short period of implementation.

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Another alternative is transportation diversification, which implies the maintenance of the relationships with the existing delivery firms and contracting one or two new ones. This option is also associated with comparatively low costs as the majority of customers will be covered by Transfer S. A. and CristaLog Hnos. VASA will be able to contract new transportation companies to cater to the needs of new customers. The company may gradually increase the number of orders making the most reliable transportation companies their primary partners. Richards and Grinsted (2013) note that flexibility is one of the premises for efficient supply chain management, so it is essential to ensure the development of partnerships with several companies.

Finally, the company can start with a complete revision of its operations as well as the relationships with the two transportation companies. VASA should utilize advanced information systems to ensure the effectiveness of its supply chain management. Poirier (2016) argues that customer-oriented service can help in optimizing companies’ supply chain operations. Therefore, VASA should become more transparent and provide more data to its customers who should have a chance to track their deliveries. Sanchez Loppacher et al. (2013) note that the company’s clients do not always specify their preferred delivery time, but it is unclear whether they receive any information concerning the expected time of their truck arrival. Becoming closer to its customers can help VASA manage its operations more effectively.

Recommendations

To address the most serious challenges, VASA can be recommended to develop an action plan based on a combination of solutions mentioned above.

  1. VASA should make use of the available technology to take control over the two transportation companies. Tracking systems should be regularly reviewed and used for the development of reports (Hugos, 2018).
  2. The company should also use advanced technology to improve its inventory management. It is essential to ensure that all the necessary items are available during the dispatch.
  3. It is also necessary to increase its dispatch capacity. It is expected that the demand is likely to grow, so more cargo will be dispatched and delivered. At present, the company has a certain amount of equipment, but it is already insufficient.
  4. It can be effective to negotiate the introduction of penalties for delays.
  5. Furthermore, VASA can develop certain guidelines for Transfer S. A. and CristaLog Hnos. These policies will cover such areas as the development of routes, customer loyalty programs, and information sharing.
  6. VASA should consider looking for new transportation companies to improve its flexibility. The current approach is not effective, so the glass manufacturer should have at least one or two additional partners. New transportation firms can be assigned to deliver to new clients first.
  7. Finally, VASA should provide extensive training to its employees. The areas to pay specific attention to include technology use and information sharing. VASA’s employees should be able to obtain the information they need and share certain data with transportation firms and customers.

References

Hugos, M. H. (2018). Essentials of supply chain management. Hoboken, NJ: John Wiley & Sons.

Kamalahmadi, M., & Mellat-Parast, M. (2015). Developing a resilient supply chain through supplier flexibility and reliability assessment. International Journal of Production Research, 54(1), 302-321. Web.

Poirier, C. C. (2016). Using models to improve the supply chain. Boca Raton, FL: CRC Press.

Richards, G., & Grinsted, S. (2013). The logistics and supply chain toolkit: Over 90 tools for transport, warehousing, and inventory management. Philadelphia, PA: Kogan Page Publishers.

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Sanchez Loppacher, J., Pancotto, M., & Vera, M. F. (2013). Rethinking distribution logistics at VASA, Pilkington. Harvard Business Review, NA0247, 1-25.

Appendix A

VASA Income Statements, in Thousands of US Dollars, based on data provided by Sanchez Loppacher et al
VASA Income Statements, in Thousands of US Dollars, based on data provided by Sanchez Loppacher et al. (2013).

Appendix B

Delayed Trucks by the Severity of the Delay.
Delayed Trucks by the Severity of the Delay* (Monthly Average). Source: (Sanchez Loppacher et al., 2013).
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