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2012 Student Case Competition Story

Carl, the operations manager for Cargo Trailer Manufacturing, was busy working just
another Tuesday morning at the plant when his phone rang. Jack, the warehouse manager,
rarely called unless there was a problem brewing. Jack reported that one of the warehouse
kanbans had just gone into the red zone. It appeared that the military tactical trailer (MTT)
brake assemblies were late from the vendor. Not immediately concerned, Carl decided to go
and see the purchasing agent responsible for the brake assemblies.
Jan was reviewing her email when Carl arrived in purchasing. She reported to Carl that
the brake assembly vendor was in Taiwan and had not responded to her email request for
information the previous day. Unable to contact the supplier directly, Carl waited while Jan
called the import broker. They were astonished to find out that the cargo ship had arrived the
previous week, right on schedule. The broker assured them that all of the product shipped from
Taiwan Brake Company had already been delivered to Cargo Trailer Manufacturing. Confused,
Jan indicated that she would email Taiwan Brake again and would even stay late that evening to
call them after 6pm Seattle time (10am in Taiwan).
Unable to do more in purchasing, Carl went to the warehouse to check the stock levels.
Jack reported that the line had just started using the first batch of parts out of the four day
safety stock. It was the entering of that kanban red zone that had triggered Jack to report the
shortage. The previous Friday, receiving had gotten a call from Jan in purchasing asking about
the brake assembly delivery that had not been received yet, so when Jack found out from his
material handlers that the safety stock had been breached on those same brake assemblies, he
decided to raise the alarm right away.
Carl was concerned. He only had four days of inventory and a vendor half way around
the world. Unfortunately there were no other authorized brake assembly vendors for this
product; Taiwan Brake Company was the last current source on the Military drawings. It had
taken almost two months to get Taiwan Brake Company authorized to be added to those
drawings. Shipping late to the military is not a minor issue. It can trigger late shipping penalty
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payments, and worse, negative reporting under past practices that could create problems
long into the future for new contract bidding. Being late was not an option to be taken lightly.
Carl waited around that evening for Jan to call Taiwan Brake Company. A full shift and a
half of his four day safety stock had been used and he was still waiting to talk with the
manufacturer. There were now only ten and a half shifts of material left before the line shut
down. Carl was getting anxious. At 6:30pm, Jan transferred the call from the vendor
representative to Carl. After a few minutes of talking with the gentleman, Carl began to feel ill.
No matter how many times the vendor apologized, Carl just couldnt seem to fully comprehend
what had gone wrong. He learned that the vendor had filed bankruptcy last week and did not
have any product on the way to Cargo Trailer Manufacturing. Not only that, but they had no
raw material left on hand in which to make the brake assemblies since their vendors had
withheld the material while waiting for payments. It seemed that the Taiwan Brake Company
representatives had been so embarrassed by the bankruptcy that they had not told their
customers and had just stamped incoming purchase orders and production release requests
with a confirmed stamp.
Every day our world seems to get smaller. Vendors and customers are becoming so
interconnected today that they are able to run synchronized operations and complex supply
chains from opposite sides of the globe. But when a problem does occur, it quickly becomes
obvious how large the world really is and how far away help can be.

What do you recommend Carl and his operations team do?

Notes to the student teams: you will be responding to this case as Jan, the purchasing
agent. This means that when you orally present your case analysis, each and every member of
your team will be addressing Carl and the rest of his operations team as if you are Jan. You
know Carl on a first name basis because you have worked for him for several months. Not only
do you want to impress him with your detailed analysis of the problem and with your cogent
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answer(s), but you also understand that this problem is crucial to the work lives of 250 of your
fellow workers. Please make sure you speak to him and his team when you present.

Company Background
Cargo Trailer Manufacturing
Annual revenue $60 million
o 75% of revenue from military trailer sales
Privately held company
Over 75 years in business
One of 2 authorized military tactical trailer (MTT) manufacturers
Primary customers: US Military and trucking industry
MTT shipments are handled through Defense Contract Management
Agency (DCMA)
Single manufacturing plant in Seattle, WA
o 250 employees, 180 direct of which 80% are dedicated to MTT
production
o 65% of 77,000 sq foot production facility dedicated to MTT
production
Company has been pursuing Lean Manufacturing processes for over 5 years
now
Factory works 3 eight hour shifts per day, Monday - Friday in trailer
assembly and machining areas

Brake assembly product information

Brake shoes are spec controlled and source controlled by customer drawings to Japan
Brake Shoe Company
Taiwan Brake Company buys brake shoes from Japan Brake Shoes to make brake assemblies
Cargo Trailer Manufacturing worked with Taiwan Brake Company to get authorized by US
military to supply this assembly
Old brake assembly suppliers have been terminated or are no longer authorized for production
4 brake shoes required per trailer as part of brake assembly
2 brake shoes are assembled into each LH and RH brake assembly
A pair of brake assemblies (1 LH & 1 RH) used on each trailer
1200 brake assemblies fit in one shipping container (600 LH & 600 RH), each weighing 33 lbs
Lead time from Taiwan Brake Company for orders is 13 weeks
Standard shipping time via ship from Taiwan to Seattle is 6 weeks
Shipments scheduled to arrive 1 week prior to production requirement
Safety stock is set at 4 days production
Trailer production level is set at 48 trailers per day or about 1000 per month
Production runs 3 shifts per day, Monday through Friday
Production runs at 98.7% on time month to month
Import broker purchases the materials from Taiwan Brake Company and then handles the
customs and duties for importing, passing along the costs and a markup to Cargo Trailer
Manufacturing Company
Purchase contract set up at beginning of year for full years estimated production volume
Purchase order releases placed at 13 weeks out to arrive 1 week prior to production need
Order of 1200 brake assemblies was due to arrive last week and is now late