Real World Decisions Pioneer Hi-Bred International, Inc.

PrOACT 1) Problem Identification: What is the problem (root cause) and the consequences of no decision (no action)? From the perspective of Anita Wilson Distribution Manager: How do I reduce distribution costs? 2) Objectives: A Inventory management (meet target inventory levels set by top management) B Minimize transportation costs increases from previous year (ie. within +/- 15%) C Improve customer service levels by 10% (exceed the goals set by top management) 3) Alternative Courses of Action and 4) Consequences: Alternatives Reduce carryover rate from 33% to 20% Consequences A easier to achieve target inventory levels but there may be a shortage of seed corn supply B lower transportation costs C N/A A easier to track inventory levels (eg. safety stock) B monitor payments to trucking companies C product warranty and post-sales assistance will be more efficient A easier to achieve the right inventory level B better manage the transportation costs C able to deliver at the right place, right time and at the right cost A able to buffer against weather variations, customer demand and competition B demand and access to inventory may be in different countries C quicker turnaround to customers orders

Computerize distribution system (long-term solution) estimated cost $1 million

Work with customers to predict demand levels

Build more warehouses and drying capacity (long-term solution)

5) Trade-Offs: a. If more production shifts overseas, there will be higher transportation costs if inventory is shipped by air in case of urgencies. However, the cost of transportation will be lower if shipment is made by sea or rail. If more production shift overseas, Pioneers patents and proprietary assets will be difficult to protect. Investing in a computerized system to track inventory levels, transportation costs and customer service levels instead of training employees to carry out their responsibilities better.

b. c.

Report by: Vishal Kumra (216687)

Real World Decisions Implementation of the Decision Decision: The only way to reduce distribution costs is to reduce the carryover rate from 33% to 20%. At the same time, I would invest in the computerized system to improve the inventory management for the future. As for the production, I would maintain the production to be in the USA as it will be more cost effective to have domestic production. Investing in the computerized system is a long-term investment. Estimated cost for the computerized system is $1 million and estimated time from planning phase to design and testing to rollout is estimated to be 1 year. In the short-term, this will not help in the inventory management. Work will be carried out as usual.

Report by: Vishal Kumra (216687)