Another consequence of poor coordination is that some divisions habitually expedite deliveries, which is unnecessary and costly. An east coast workstation manufacturer found that most of its divisions use air freight to ship their products to the merging center, each believing that it is the division holding up the order. These products sit in the merging center for weeks until the last product comes in. It is especially ironic when the latest division uses the slowest mode of transportation.
As the supply chain becomes globalized, coordination is more critical. Cohen and Lee discuss coordinated resource deployment decisions in a global supply chain.3
Pitfall 9: Incomplete Shipment Methods Analysis
Changing the mode of transportation can significantly affect inventory investment and service performance. However, transportation decisions are often based on economic considerations that do not take into account these important operational factors.
A computer manufacturer based in the northeast was surprised to learn that by shipping by air instead of ocean for one of the supply chain links, it could save millions in inventory investment. These savings would come from inventory reduction in the transportation pipeline and shorter delivery lead times to the distribution centers. The distribution centers would need less safety stock to provide the same level of customer service. The benefits far outweighed the costs, even though the air freight cost three times that of the ocean freight. In the course of the analysis, the manufacturer discovered that product packaging could be redesigned to make air shipments even more attractive.
A manufacturer of computer peripherals planned to ship products from a Japanese plant to U.S. and European distribution centers once a month so that the shipment would completely fill one container for each destination. Monthly shipments automatically set the amount of