Case

17.1: Excellent Electronics (EE)

You are a consultant hired to look at the integrated logistics system of excellent electronics.
It has a manufacturing plant in Mexico and a distribution center in the united states, since
the vast majority of EE’s business is within the united states. Your task is to complete a
feasibility study on EE’s logistic s system and propose some ways to satisfy its customers.

The following data were gathered from the recent survey:

• Response time is fourteen days: customers want a response time of three days.
• Order cycle time is two months, when customers want a maximum one-month order
cycle.
• Communications and support between sales and the factory are poor.
• Shipment traceability is bad, creating stockouts at the customers’ facilities due to
incorrect shipping information.
• Four percent of the shipments made are damaged due to mishandling.
• Two percent of the shipments have incorrect part numbers.
• Neither the factory nor the warehouse personnel can provide accurate information
on raw material or finished goods status.
• The distribution center computer system is incompatible with the factory’s
information system.
• Sales order processing and acknowledgement is normally fourteen days.
• Expediting capabilities of both the sales and the shipping people are poor.
• No proper training is conducted for new employees.
• Many processes are paper-driven, causing many delays due to misplaced
documents.
• Management lacks the information to make critical decisions on factory production
output.
• Pricing is not competitive.


1. Your job is to develop new strategies to make EE more competitive. Additional
assumptions that could assist you are as follows:
§ Government taxes are 10 percent
§ Goods insurances is .05 percent
§ Storage space cost is 3 percent
§ Salaries at headquarters equal $144,000
§ Salaries at the sales office equal $28,800
§ Obsolescence cost is 4 percent
§ Shrinkage and damage cost is 1 percent
§ Factory location safety stock is 10,000 pieces.
§ Salaries at the distribution center equal $57,600
§ Current safety stock at the distribution center is 18,163 pieces.