CENTRAL TRANSPORT, INC.

Doug Thomas, Managing Director of Central Transport, had just returned from a meeting called by Sue Purdum, President and CEO of SAB Distribution. He immediately sat down and wrote the following E-mail message to all of his senior staff. I need your collective wisdom and input to help me respond to a challenge given to me by Ms. Sue Purdum of SAB Distribution. SAB, as you know has been one of our best customers for many years. Our growth has been tied to its growth since we are one of its core carriers. As it expanded its customer base throughout Pennsylvania and the neighboring states, we have expanded our route network to meet its requirements. Our founder, John Spychalkski, was a personal friend of the three founders of SAB Distribution. While that personal friendship has changed with changes in both of our organizations, Central has maintained a partnership approach with SAB. My belief is that if SAB wins Central wins. SAB, according to Sue Purdum has been faced with a growing level competition both directly and indirectly in the communities where its retail store customers are located. Its profit margins have narrowed, and Sue Purdum is under pressure from his board (most of whom are descendants of the three founders) to improve SABs profitability. To his credit, he initiated a number of changes after he became Vice-President five years ago. According to Sue Purdum, he has to reduce his cost-of-sales and / or improve his level of customer service to add more value to his customers. Transportation from SABs warehouse to its customer stores is a major part of its cost-of-sales. Also, our ability to deliver customers orders in a timely and reliable manner impacts significantly SABs customer service. Sue Purdum would like our senior management team to consider what we could do to help SAB remain competitive and improves its profitability. Obviously, we could reduce our rates by 10 % to offset the problem to us unless we can reduce our operating costs by 10 % to offset the rate reduction. We need to be creative and think of ourselves as a supply chain partner with SAB and its suppliers and customers. Help Mr.Doug Thomas develop a white paper to respond to Sue Purdum by addressing the following: CASE QUESTIONS 1. Why and how has the competitive marketplace changed for SAB Distribution? 2. Provide additional rationale for the collaborative perspective suggested by Mr. Doug Thomas. 3. Using the success factors for supply chain management as a framework, recommend what Central Transport can do to help SAB improve its efficiency

1. The Competition has increased for SAB distribution from the communities of its Retail customers. The following are the channels due to which market place changed for SAB. a. The Customer service, for which the SAB thinks, is not as per the competition and at the level which consumer wants. Wall mart buying advantage from manufacturers had to be offset b. The time constraints / limits in which the customer wants the products to be delivered. As the consumer is too choosy now days, he/she want the right product at right time and right place at the cheapest price. c. The transport expenses, which SAB thinks has to be decreased and are affecting their Profit. 2. Mr. Doug Thomas told his company senior staff. a. The founders of the SAB distribution and Central Transports founder were friends. b. There is partnership approach between both the companies c. The central grows with the growth of SAB, as the SAB expanded in Pennsylvania and other states, Central also expanded along with to provide the service. 3. The SAB can improve its efficiency by: a. The Profit = Price Cost. The price is in the hand of Market, as the market fluctuates the price fluctuate, the cost can be controlled by the company, so as to increase the profit. The expenses have to be controlled. b. As the transport solution/Support is provided by Central Transport the Central transport can reduce the rates by 10 %. By which the cost will come down. c. Manage the route of the supply of the materials in such a way that there is no repetition of transport on the same way for different Deliveries. Means orders should be delivered in one stretch, i.e. load all at once as much as possible and unload as the destination arrives, instead of loading and reloading again and again for orders of same route and almost same date. d. Central also can think of providing the Large Capacity Transport vehicle Facility so that Centrals cost decreases and further they can cut the SABs Transport Cost.