BlueStar supplies products to major retailers, distributors, wholesalers, small business owners, and consumers. BlueStar generates annual revenue of $950m. Their primary market consists of the United States and Canada also supplies a minority of business revenues.
BlueStar company has made some regretful decisions in the last year that is affecting product margins and the sustainability of the entire company. BlueStar has a large market share, but they have experienced numerous problems within their supply chain and more specifically in their transportation group.
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BlueStar Office Supply Company Study Case
1. BlueStar Office Supply
Company Study Case
MUHAMAD ALADDAD, CONNOR BROWN, LEE H DANG, NATE MICHAUD, PAUL STEVENSON
SCMT 4653, FALL 2015, DR. ANNÍBAL C. SODERO
2. Company profile
● Industry: Office Supplies and Stationery.
● Annual revenue: $950M.
● Market: United States and Canada.
● Customers: Mass Retailers and Commercial
Accounts.
●Key Retail Accounts: OfficeMax, Office Depot,
Walmart.
• Who they are, what they do
3. Key Issues
● Decreasing customer service levels
●Weakened relationships
● Increases in transportation cost
● Decreasing profit margins
● Relatively low-value products
● High transportation costs
● LTL and Air freight
● Data analysis capabilities
4. Supply Chain
Status
● Estimated Spending on Transportation from
questionable data:
● Transportation costs = 30% of Product costs
● Customer Service levels are dropping, costs
are increasing.
oNew carriers have had unintended costs.
● Bottom Line: BlueStar is facing numerous
issues with their Supply Chain.
• Customer service levels and
Costs.
• Corporate sales.
• Product margins.
May-Aug $ 56,894,378.83
Annual
(estimated)
$ 170,683,136.50
5. Outlook
● Efforts are being focused on improving
● BlueStar’s production facilities;
● Regional distribution centers.
● Executives at BlueStar want to see both
immediate and long term improvement.
● Key Goal: Reduce Transportation Costs
● Low value and high density nature of most
office products makes shipping complicated.
● Rising fuel prices.
Going Forward
6. BlueStar attempted action, cause and effect
● Moving away from established core
carrier relationships and long term
contracts;
● Placing every load on every lane up for
bid.
● Lost Economies of scale;
● Service requirements;
● Late shipments, extended delivery
times, and dissatisfied customers;
● Relationship with Carriers and Key
Customers;
● Price increases from most of the old
core carriers.
7. Data
Discrepancies
● Some data values for freight paid were off
by one or two decimal places.
● This created substantial changes in some of
the data we were analyzing.
● Perhaps due to the data integration process
as formatting for certain data are different.
● Miles are also affected.
A lot of the data is believed to
potentially be erroneous.
8.
9. TL and LTL
● TL and LTL shipments make up the huge
majority of our shipments.
● TL, LTL shipments account for 84.3% of
the total 50,454 shipments .
● TL freights account for 14,041 compared
to the 28,478 LTL shipments.
● Data was too fragile to justify changes.
10. Intermodal
To keep or not to keep ?
● Short distance / Avg. 341 miles
● High rates/ Avg. $1,259
● SC not dependant on IM / only
1.60%
● Inefficient
● Rail industry issues
11. Air Scale Down our usage
● Rates are too expensive to justify
such a short distance travelled.
● For any reason we never want to
have to be dependent on air.
● Long distance expedited
12. SP Minor alteration
● expedited
● Less than 500 miles
● Transshipments down with
consolidation
13. Average Miles, Weight, and Cost
●LTL
● Avg. miles : 469
● Avg. Weight : 5,328
● Avg. Cost : $ 1,128.10
●TL
● Avg. miles : 413
● Avg. Weight : 4,759
● Avg. Cost : $1,122
14. Top LTL and TL Carriers
Top 5 TL carriers by number of shipments
Carrier Shipments
CROUSE CARTAGE 5,023
USF BESTWAY 2,051
OLD DOMINION FREIGHT LINE INC 1,744
AMERICAN FREIGHTWAYS INC 1,289
A DUIE PYLE INC 841
CRETE CARRIER CORP 451
Top 5 LTL carriers by sum of weight (lbs)
Carrier Total Weight
U S XPRESS ENTERPRISES INC 45,854,050
USF HOLLAND INC 18,274,549
SOUTHEASTERN FREIGHT LINES INC 12,087,708
FOX MIDWEST 8,390,558
RAINBOW TRUCKING SERVICES INC 6,743,564
15. Recommendations
● Invest in new/improved transportation
management system
● Improved LTL routing
● Better utilization of DCs
● Increased employee performance
● Invest in quality employees and training
● Reduced cost
● Increased performance
● Analyze DC locations in relation to LTL
shipments
● Determine if costs justify results
● Revisit Dedicated Carrier Decision
● Regionally or seasonally
● Short term fuel surcharge contracts
17. Consolidation
● Building better/longer relationships
● Dedicated Contract Carriage
● Lower rates
● Higher volume, easier to fill TL shipments
● Better asset utilization
Ideas
Relationships
Dedicated Contract Carriers
18.
19.
20. Contracted
Carriers
● Move away from open bidding process
● Contract top performing carriers
● Issue RFQs
● Volume
● Price
● Performance
● Lanes and projects are awarded based on
Tier qualification
● Drives performance
● Encourages lower rate quotes
Paul
22. Outsourcing
BlueStar concern:
● Price
● Service Level
● Costs
● Efficiency
● Service level
Reasons for Outsourcing
● Resource network
● Rebuilding costs structure and Save time
● Expertise
● Scale and Flexibility
● Continuous Optimization and Support