BlueStar Office SupplyCompany Study Case

MUHAMAD ALADDAD, CONNOR BROWN, LEE H DANG, NATE MICHAUD, PAUL STEVENSONSCMT 4653, FALL 2015, DR. ANNIBAL C. SODERO

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

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

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

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

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.

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.

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.

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

AirScale 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

SP Minor alteration ● expedited● Less than 500 miles ● Transshipments down with

consolidation

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

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

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

Suggested Solutions

● Consolidation● Shipments● Locations

● Contracted LT Carriers● build relationships● Promote long-term partnerships

● Outsourcing● Provide relief for contracted carriers● Ensure on-time shipments

Consolidation ●Building better/longer relationships● Dedicated Contract Carriage● Lower rates

●Higher volume, easier to fill TL shipments

●Better asset utilization

IdeasRelationshipsDedicated Contract Carriers

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

Tier System Example:

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

Future Collaboration

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