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O F purchasing

Case Study:  The Lear Seating Plant

Questions:

2. What are the risks associated with direct shipping? What contingency elements are required to overcome these risks?

From this scenario, the Lear Seating Plant ships 10-15 trucks worth of outbound materials to Chrysler per shift – with seven trucks rotating on this schedule. This large shipment requires careful planning and a strict delivery schedule. Fortunately, the plant has not been late for a shipment to the Chrysler plant in over three years, proving the reliability of the Lear Seating Plant. Direct shipment is a method that the company uses to ship its products from its plant to its consumer directly. This delivery scheme bypasses the concept of distribution channels by avoiding intermediaries. For the seller, it will reduce transportation and storage costs. For the buyer, it reduces delivery time and the price of the product. Though the company can save a lot of logistics and warehouse costs there are several risks associated.

· The Lear Seating Company reputation is always at stake as there is no quality guarantee for the products sent to the customer.

· Expanding liability risk: Selling directly to consumers introduces new exposures to the manufacturer that wholesalers or retailers may typically take responsibility for as part of third-party contractual agreements.

· Heightened cyber risk: A Direct shipping operation necessarily requires handling sensitive customer and financial data, making cyber-security a major concern and priority. A security breach can not only disrupt business but may also harm a manufacturer's reputation, particularly if customer information such as credit card data is compromised.

· Supply chain complexity: Selling to consumers makes the supply chain more complex, with additional points of vulnerability where disruption could impact the entire business

Overcoming these risks is not a simple one-step task; instead, it requires strategic planning and sometimes implementing new operating procedures to be effective. Below are some things the Lear Seating Plant should consider addressing these risks:

· Develop a cross-functional team to identify potential challenges and vulnerabilities of direct distribution.

· Consider insurance implications, review risk controls in place, and adjust your coverage as needed.

· Establish a contract with third-party logistics firms to manage inventory and distribution and mitigate potential delivery challenges and risks.

· Use custom distribution Software to guide schedules, custom orders, and inventory.

 

5. What does it really take to become a lean manufacturer with direct shipping capabilities?

When the trailer pulls away from the dock doors, it's over. You've done all that you can do to ship your customers the right product in the right quantity and have it delivered on time. It's also your final opportunity to get it wrong, which is why manufacturing executives need to pay as much attention to creating a lean material flow in their picking, packing, and shipping areas as they do in the factory.

A lean distribution operation is an integral part of a pull-based value chain that begins with the customer order. Such procedures apply lean tools and techniques to simplify packaging, streamline material flow, reduce errors, eliminate extra handling, reduce floor-space requirements, and improve inventory management (Koenemann, 2008).

Setting up a lean distribution operation does not start with equipment. It is not solely on having new conveyors or the latest material handling automation to eliminate labor hours. New equipment and technology may be part of the final solution. Still, lean distribution starts by thinking about applying lean principles of eliminating waste, creating flow, and implementing pull-based processes to develop a value chain driven by customer demand.

 

Reference:

Koenemann, K. (2008, June 8). Lean Distribution: Shaping Up to Ship Out. Retrieved November 02, 2020, from https://www.industryweek.com/operations/continuous-improvement/article/21958304/lean-distribution-shaping-up-to-ship-out