DHL Supply Chain Management - Case Study Example

1.0. Introduction The group reports begins by giving the background information on DHL Company which they were to design a seven step modeling in order to solve the problem which they were facing and achieve their objectives. The group stated clearly that DHL is a Dutch company which is involved in post services and parcel delivery. The group also stated that the DHL Company is concerned with solving the problem of carbon dioxide emissions in the environment. All these are done with main aim of maximizing the profit. 2.0 Review and Analysis of Project Phases 2.1 Definition of the problem The main aim of the DHL Company is to reduce the amount of carbon dioxide which affects its clients all over the world with a prospect of building a friendlier environment to do business hence maximize profit. The company has decided to reduce the carbon emission through increasing the carbon efficiency of the company operations. Low carbon emission will be achieved through ensuring efficient delivery of goods to its clients. However, the organization is faced with the problem of high production cost in meeting the objectives. This has made the company to raise their charges which translates to low customer base hence low revenues. 2.1.1 Observations The team managed to bring out the problem definition in a more conclusive manner giving a brief background of the DHL Company, its aims and objectives. The team further explained the main objective of the model citing how the objectives will be achieved. From the problem definition, the team has managed to cite high cost of production as the major hindrance in achieving their objectives. 2.1.2 Critical discussion of strengths and weaknesses From the discussion and class presentation, the Company should ensure that they transport high volumes of goods because this will enable their customers be satisfied as they will be able to transport their goods in one trip saving them time and cost. By transporting large volume of goods once, they will ensure low carbon dioxide emissions in the air hence achieving organizational objectives. If the goods take short duration during delivery then it will ensure that the amount of carbon dioxide emitted in the air is low. If the company combined these strategies then it will be able to realize high profits and reduce production cost while at the same time, the supplier will not experience much problem during shipment period which could result to unnecessary losses. 2.2 Data Gathering This stage is very crucial as it involves data collection from various sources within the company. The departments where data was extracted were accounting, marketing, production and some external data which were used in the model. The resource data required for the model preparation include; The product weight Unit to be shipped Carbon emission in Kg per Ton per KIM Unit production cost Distance for shipping Shipping cost per unit These data were extracted from the Company’s records and are assumed to be accurate and real. From the group presentation, it is clear that they managed to extract all these data with a lot of ease and the corporation of the DHL administration helped them in extracting the required data through availing the necessary documents. 2.2.1 Observations In my assessment, the team actually managed to give all detailed information and data required in building the seven step model. Though they did not need external data as indicated in the sources of data (since all this information could be internally generated by the group). The assumption that the data are true and represent the true figures of the DHL operations is valid and with this the team formed a good basis for development of the model. 2.2.2 Critical discussion of strengths and weaknesses In the group presentation on the data to be used and source validation, the work is excellent as group members were able to demonstrate a well detailed knowledge of core concepts by citing detailed sources of information supported with major assumptions and the type of data to be included. The six items which include; product weight, unit of the product to be shipped, the amount of carbon dioxide being emitted, the unit cost of the production, the distance of the shipping and cost per unit of the product shipped all reflect proper and consistent analytical skills by the team during their presentation. 2.3 Model Development The model which is optimal should be in a position to fulfill the order which is within the CNY3 billion---the Company’s budget. The model developed should be in a position to provide capacity for large transportation of parcels with low production cost. It should also ensure that the maintenance costs are reduced. The team started modeling through adding the resource from the data. Most of the data which were collected were inputs. The production + shipping cost per unit = production cost + product weight x shipping cost. Getting the carbon emission cost from product weight, times carbon emission in kg per Ton per KM and times the distance. This was a mathematical model developed by the group. After this, the group added constrains into the model. The data of constrains are sourced from resource information center. The team explained that constrains had production limitations, marketing requirements, budgeting requirements in shipping model minimal requirements. From the presentation, it is clear that every supplier has minimum production and maximum production limitation, which are 200,000 and 600,000. The different service models have different minimum service requirement, which are 47,000, 92,000, 138,000, 53,000, 79,500, and 79,500. And also we have a constraint for market requirement, which are 920,000 42’’ TV and 530,000 32’’ TV. The budget limitation is $3 million yen. 2.3.1 Observations From the model development by the team, they started well by limiting the model cost according to the client requirements. The mathematical model structure has been well articulated as the group started by factoring inputs from the data source; that is, the production + shipping cost per unit = production cost + product weight x shipping cost. This was followed by carbon emission calculation which formed the basis of the company objectives of maintaining green environment. From the presentation, the model managed to reduce the emission of carbon dioxide as a result of budget reduction. The model further revealed that different service model have different minimum service requirement, which are 47,000, 92,000, 138,000, 53,000, 79,500, 79,500, and also we have a constraint for market requirement, which are 920,000 42’’ TV and 530,000 32’’ TV. The budget limitation is $3 million yen was also well factor in during model construction. After running the solver, the group managed to get the following optimization model which they discovered that the total carbon emissions produced by the optimized supply chain is seven million, four hundred and one thousand, two hundred and forty eight kilograms (7,401,248Kg). Total Cost = ¥ 3,033,851,614 Total Carbon Emissions = 7,401,248 Kg That is, seven point four tones of CO2 created from the production and shipping of your television sets. They also found that the optimization model also could allow them to forecast their potential in reductions of the carbon emissions created by the production and shipping of the companies television sets with the addition of tax incentives and increases to the budget. From the result, the optimization model in form of transport that produced the lowest amount of carbon emission per unit was water. The form of transport that produced the highest amount of carbon dioxide was Air. The optimizations model also gave the group chance to know and understand the amount of carbon production in the supply chain and at the same time gave the benefit of in terms of carbon reduction which resulted from the budget increments of 5%. 2.3.2 Critical discussion of strengths and weaknesses of model development The model which the group developed presents the DHL real problem most accurately as the Company’s main concern was to reduce the carbon emission using a fixed budget while maximizing the profit. The model considered most important data set which included; production cost, product weight, shipping cost, carbon emission in Kg per Ton per KM and distance. One of the characters of a good model is that it must present the inputs which are most important and the group actually did that by factoring the inputs accurately. They further included the model constrains which included; marketing requirements, budgeting requirements and model limitation requirements. In fact, the team managed to reduce the budget cost which enabled them to achieve one of their main of objectives---reducing the carbon reduction. The model actually took into account all important constraints such as; an upper bound on capacity, or its recommendations might not be possible to implement. The model was also simple and easy to construct. This was mostly important for the client who had no previous knowledge of the model as they could easily follow it with no difficulties hence cost effectiveness and efficiency. The model was also able to allow carrying high volume of parcels from one point to the other and the time of transit was also shortened. The green revolution which the model managed to achieve will attract a lot of media attention which could be a good marketing tool for ensuring the sale of the company brand name. It could also act as attraction to the manpower as each and every one would wish to be associated with a green company. It was not so simple neither was it so difficult to understand. At the same time, the budget posses various challenges which include requirements of high level of professionalism which could be costly to the Company. Increased in budget though resulted in carbon reduction, also reduced the profit hence the company could not maximized profit as it was in the objectives. 2.4 Model verification The DHL Company accepted the model since the seven step model allows room for verification. This is due to the easy comparison between the original design of the manufacturing and the new model design. 2.4.1 Observations The table below shows the original production design and the quantity of goods shipped using different modes of transport. Table 1. Minimum and maximum number of units to be produced for each original design manufacturer Original Design Manufacturer Min Production Max Production Units to be produced ODM1 200,000 600,000 - ODM2 200,000 600,000 530,002 ODM3 200,000 600,000 - ODM4 200,000 600,000 - ODM5 200,000 600,000 600,000 ODM6 200,000 600,000 - ODM7 200,000 600,000 320,002 LCD TV set Units to be shipped Units to be shipped LCD 42" 920,000 920,002 LCD 32" 530,000 530,002 Client Budget ¥3,000,000,000.00 ¥3,746,770,367.99 The original model if compared with the new design shows that the new model is within the budget of ¥3billion though slightly higher than the budgeted amount. In the group presentation, this is well captured and shows that the team met the client demands and objectives. The clients can easily compare the current and the previous supply design hence the model allows its verification 2.4.2 Critical discussion of strengths and weaknesses The model allows the comparison of the Company’s current value of the inputs used to check the outputs situation. This was apparently evident in team presentation and model design. In the above table, the current input and the total units produced can be seen. The model output is expected hence it meets the clients demands thus good. One of the weaknesses of the model is that it cannot be compared over long period of time hence does not give the management opportunity to improve on the model according to time lapse. 2.5 Optimization and decision making From the calculation, the model budget surpasses the company planned budget by a narrow margin. This can be seen in the table below; OPTIMAL VALUES Total Costs ¥3,746,770,367.99 Total Carbon Emission, in Kg 3,293,331.07 Though the budget has substantially increased, the objective of reduction in carbon emission has been achieved since it has reduced by over 5% from the original Company’s design. The decision which the Company can derive from this calculation is that; increase in budget cost reduces the carbon emission though this one has an effect on the total revenue realized by the Company. 2.5.1 Observation From the decision variables, the road network and express modes of transport does not have estimates, others have and shows an improvement from the previous design. The budget increased by ¥746,770,367.99 which is very high. The carbon emission has reduced and the Company is in track of achieving the objective of carbon emission reduction. 2.5.2 Critical discussion of strengths and weaknesses One of the weaknesses of this model is that it surpasses the planned budget with almost 25% which result into profit reduction. The model has also failed to recommend the profit maximization strategy which forms the core objective of the Company. Meanwhile, one of the benefits for CEC in aiding in the reduction of CO2 could be outstanding among other disadvantages of the model. This has made the DHL Company to be more acceptable among the community and also to attract man power. The team has managed to bring these qualities of the model building in their presentation more distinctly. 2.6 Model communication to management The team managed to communicate the model to DHL management with a lot of ease explaining the inputs and constrains in the model. 2.6.1 Observation The team was clear and more explicit in the discussion, factoring in the needs of the clients and the strength of the model they were to develop. 2.6.2 Critical discussion of strengths and weaknesses The communication of the model was not exhaustive since there are some aspects of the model which the team did not touch in their presentation. There is no indication of the kind and names of the management team which they did involve in making the model. They should have involved the head of departments and the people who will actually use the model in the production process. The project is also user friendlier and the easy to follow yet at the same time the outsiders cannot easily follow it hence meets the criterion of a good model. 2.7 Model implementation After the model acceptability in the Company through top management, the team needs to plan the implementation strategy. This should involve training the users on how to use the model, advantages and model disadvantages. 2.7.1 Observation The team has not indicated the model implementation procedure during their presentation. They did develop a good model compared to the previous one but failed to develop a good implementation model. 2.7.2 Critical discussion of strengths and weaknesses The team failed to develop model implementation plan and if they did so then, it was not captured both in the tem presentation and personal presentation. The team members ought to explain into details methods and ways through which they are going to implement their well designed model. 3.0 Conclusion/lesson learned From the presentation and discussion there are several lessons learnt. Firstly, about the organizational structure of DHL Company where the team explicitly explained the location, organization structure and the core business which DHL company deals in expounding on organization objectives and aims. Secondly, through team presentation one is able to gain the seven step model development of supply and distribution used by mathematicians. Thirdly, analytical skills were also developed as the group analyzes the model into details comparing the initial model design and the current model design. The team was also able to analyze the strength and weaknesses of the model hence valuable analytical skills developed throughout the presentation session. Fourth, the team explained the major objectives of the Company about carbon emission reduction; I was able to learn the global warming and the advantages of why the companies should go green. Lastly, I managed develop the public speaking skills and reporting skills presented during the presentation time. The seven steps in the models include; 1. Problem Definition 2. Data collection 3. Model development 4. Model verification 5. Optimization and decision making 6. Model communication to management 7. Model implementation Read More