Use of Milk Run Instead of TL Services (Essay Sample)

Executive summary
Companies that deal with a lot of supplies often need a good supply chain management team. This department is usually responsible for overseeing the transportation of the company’s products across the supply chain. This department can be useful to a company by earning it revenues or a liability by incurring a lot of expenses. A good means of transportation is important in ensuring the company earns maximum revenue. Compact Bike Company(CBC) is such a company involved in a lot of shipping and supplying. As such they have had to employ several means in shipping of their products. In an attempt to explore more opportunities in the shipping industry they came across a number of options. This report seeks to explore these options and provide suitable solutions. The company intends to employ use of milk run TL services instead of LTL in shipping their products. Milk run TL services proves to be more profitable to the company and should be employed. It again aims at investing in electronic retailing business and using air courier services as a mode of transportation. This is an initiative that would greatly impact the company’s revenues. Load brokerage is another service that would be of great value to this company in shipping their products and expanding their territory. This reports looks into all this in details exploring the benefits and demerits of each option.
Introduction
Supply chain management is a very important department to any company or oeganisation. It is involved in the strategic planning and implementation of transporting products and services in a supply chain. A supply chain is a set of individuals or organizations involved in the manufacture and distribution of products and services. (Christopher 2016). It involves transportation of raw materials to the manufacturers and final products to the consumers. The supply chain management is responsible for overseeing all the activities involved in the movement of these products across the supply chain. This department can be profitable to the company if the services are efficiently carried out through the most appropriate means or can be detrimental to a company by exerting extra expenses. Proper management of the supply chain is key to increased revenues of a company, a decrease in cost and a good general view of the company businesswise (Mentzer et al., 2014).
In supply chain management a lot of transportation is involved and so there is need to choose an appropriate means of transportation to ensure the company still earns maximum revenue. (Christopher 2016). A number of factors should be considered when choosing the most appropriate mode of transport. Cost of transportation is probably the most essential and obvious option that most companies consider since it directly affects the overall revenue the company intends to make. Other factors to consider include safety, does the mode of transport assure the security of my poduct? Reliability of the means of transport is also key, does it satisfy your need for urgency and speed in supplying the products? If it does then it’s a suitable one. The type and characteristic of product in terms of size, weight and nature of product is also useful in determining the mode of transport to be used. The mode of transport chosen has to ensure the product arrives to its intended destination in one piece and on time too (Mentzer et al., 2014).
Compact Bike Company is a company owned by a Canadian and is involved in manufacture of folded bicycles. The company started by manufacturing frame bodies and hinges while outsourcing the other parts but has since resorted to obtaining the parts from other suppliers and assembling them. They only manufacture one premium model that consists of an aluminium frame, 20 inch wheels, ergonomic seat, a 7 speed twister gearing shaft and a single spring suspension. The company sells its products through small boutique high end shops located across Canada. These shops are mainly found only in the major cities and so most of CBC’s shipping are directed towards these cities. Their headquarter of operations is situated in a 200,000 square foot facility in Gatineau Quebec. From this point the products are shipped to the various boutiques across the country. The operations are managed by 5 senior staff with Juanita as the CEO, a Chief Financial Officer, Director of Operations, Director of Marketing and Director of IT to complete the team. The company has also hired a third party distributor in Regina SK to serve the areas in British Colombia, Alberta, Saskatchewan and Manitoba.
Before shipping, the bicycles are packaged in protective sleeves before being placed in unmarked corrugate cartons each having the following measurements; 85cm in length, 35cm width and 60cm in height. The carton weighs a total of 15kg after being packed with the bicycles. The bicycles are then palletized on 48 x 40 wooded pallets and shrink wrapped before shipping. The units are then stacked three high despite the engineer’s recommendation of not more than two stacks. The company employs the use of single carriers to transport the shipments to Regina Sk. This costs them $4.00 per mile plus a 25% fuel surchage. From Regina SK to the individual boutiques, the shipments are carried using LTL carriers and the cost charged directly on the receiving store. The transit period from Gatineau Quebec to Regina Distribution Centre(DC) is four days. The Regina DC usually requires one day to to unload and pack the products in units for storage from the moment they receive the products. They charge a $31.50 flat rate on handling and storage per unit per month. LTL carriers usually charge an extra 19% on fuel surchage. The current LTL rates are shown in the appendixes.
The demand for bicycles fluctuates with climatic conditions and as a result the Director of Marketing set up a release schedule with the first batch being released in october, November and December and the rest in January and February. This schedule is designed to meet the increase in demand during the spring season. Some cities however, show a consistent level of demand attributed to their relatively favourable climatic conditions.
CBC has in recent times been experiencing stiff competition from other manufacturers. Even though their products are of good quality and enjoy a good reign in the market, Juanita, the CEO feels there is need to explore more opportunities and necessary improvements especially in the supply chain to ensure their reign is maintained in the market. An investigation is launched into this matter and several options are brought to the table. The options are mainly on the shipping strategy. These options include either use multi drop TL service to transport the shipments directly from CBC to the shops, use of an expedited shipping option direct from CBC to customers incase of a stockout at a boutique store or use of a Canadian load broker who promises a 10% savings on TL rates and 15% on LTL rates. Another challenge is the issue of shippng their trademark paint using an outbound truck from Regina DC back to Gatineau QB. This report seeks to critically look into these challenges and analyse them in order to come up with solutions that best fits the company’s interests and objectives.
Use of milk run instead of TL services
Shipping to the Eastern and Central areas have been a concern to Eddie, the Director of Operations. He tends to think a direct transport of goods using a milk run carrier would be more helpful than the LTL carrier services. A milk run is simply a truckload that has several multi drops and pickups. The service is able to carry package and drop them at the specified locations without having to go back to the pick up location (Zolfagharinia 2014). The service charges an extra $150 for every stop they make and $4.00 per mile rate for all distances above 1500 miles. Distances less than 1500 miles are charged at $5.00 per mile rate.
LTL services on the other hand charges $4.00 per mile rate plus an extra 19% fuel surchage. This service however can only be applied to one store at a time and at the same time the store has to order products not less than one pallet. The service involves carrying of several poducts belonging to other organizations with different destinations, dropping the products at the various locations. This cost is relatively expensive considering having to pay for every mileage for each store for each shipment. The quality and safety of goods is also not assured given the multiple stops that the carrier has to make while delivering other products to other individuals or organizations (Jacobs et al., 2014). The products may either be lost or destroyed in the process of loading and offloading of products at the various dropping points. This service is however useful when shipping loads that are less than 15,000 pounds as it would be a waste of space and money to use a truckload service to carry such loads.
The stores on the Eastern and Central areas can collectively order products that are over 15,000 pounds. Use of LTL services to transport the products would mean several trips to these areas and consequently higher and more expensive charges. It would therefore be prudent to employ the use of milk run TL services that would only need one trip to deliver all the products without necessarily having to go back to the pick-up location. The cost for this service looks expensive but relatively cheaper in comparison to the total mileage required to sufficiently service all the shops in the Eastern and Central provinces. This service also ensures quality and safety of products, since the trucks only carry products belonging to one entity. In this case there is only one product hence no need for multiple offloading and onloadings at the various ...