supply chain

Critical Thinking Writing Problem

Problem: A Tennessee automobile manufacturer has a container ship (13,000 TEU capacity or 6,500 40’ containers) of parts from suppliers approaching the western coast of Canada, inbound from China. Canadian National Railway workers are threatening a strike. If the workers strike while the load is inbound from Vancouver, the shipments of car parts could be delayed, potentially shutting down the manufacturing line. What do you recommend to management?

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Alternative 1: Continue to Prince Rupert, BC, hoping that the strike will be settled before you shut the plant down. The cost of a shutdown is $12,000,000 per day.

Alternative 2: Divert to Vancouver, BC, for an additional cost of $150,000. If there is a strike, truck the parts to Seattle and on to Nashville via BNSF, with an additional cost of $300 per container. There is still a possibility of getting caught by the strike and shutting the plant down, but it is no more than 25% of the risk of alternative 1.

Alternative 3: Divert to Long Beach, CA. The additional cost amounts to $500 per container.

1. Analyze each option. At what level of strike likelihood would you recommend each option?

2. Graph the costs for each option (for the entire load of 6,500 40’ containers) as a function of the likelihood of a CNRR strike. (Hint: Alternative 3 is a flat line. There is no change in the cost of Alternative 3 because it ships the entire route on BNSF, not CNRR.)

3. Write a memo no longer than 2 pages, reviewing the problem, showing the cost of alternatives, and making a recommendation. Justify your recommendation.

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