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Business Case Assignment #1

Compare / Contrast Ocean versus Rail

Introduction

This business case is going to talk about and analyze some problems and changes that the Fat-E
company has. The company produces electrically powered bicycles made for off-road trail
riding and it’s a successful three-year-old firm. We have a unique model that includes an
electric motor and heavy-duty transmission that automatically changes gears while in use,
helping to save precious battery life power. We have a loyal customer base and market
ourselves to off-road cycling enthusiasts and clubs.
Fat-E started on its university campus and quickly grew its space and moved to a small
industrial unit just outside Ottawa, and after some years, our company expanded into two
adjacent units in the same complex and managed the entire business from this location. But
now we exceed and need to find a new location to continue its growth.
As the Director of Transportation of Fat-E, my mission is to solve our current problem which is
about our supplier from the Chinese that is taking too much time to deliver the steel frame we
are considering changing the supplier to a new one in Edmonton, Alberta. And this report will
focus on the logistical impacts of this change and provide a detailed response to the two main
challenges involved in this transition. These challenges include comparing the operational
elements of the two modes of transportation and detailing the potential impacts on Fat-E's
transportation and logistical needs during the transition to a new location.

The differences between the modal change from LCL to TL.

The first analysis that I will need to do is about the change that we are considering about the
supplier from China that is taking too much time to deliver the steel frame, we are considering
changing the supplier to a new one in Edmonton, Alberta. In general, when we going to talk
about what is one of the crucial keys to the success of a supply chain company is how fast, they
can deliver the products for this to happen, is important to have a supplier that will allow you
to be efficient. Transportation nowadays plays a crucial role in ensuring that products reach
their destination on time, and this is the case of Fat-E problems nowadays, we need to solve
this to be able to have a more efficient company, where timely delivery can mean the
difference between spoilage and loss of product efficacy. Another crucial aspect that

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transportation affects is product quality, and this is one of the reasons for choosing the right
mode of transportation and ensuring that our products will be properly packaged to be sure
that will be delivered in a good condition. It is crucial for us to decide between two modes
because transportation costs can significantly impact a company's bottom line. By optimizing
transportation routes and modes, we will be able to reduce transportation costs and increase
profit margins. In the end, transportation plays a crucial role in our company, because will be
super important to ensure timely delivery, continue to have product quality, and optimize
costs. Transportation for our company means that Fat-E will be able to develop an efficient
supply chain flow.

Our current supplier is in China, and they are using Less Than Container (LCL), and it takes 45
days for the frames to arrive at their facility in Kanata, which is a bad thing for our company.
But at least, they allow us to order any number of frames at one time, but this will extend the
lead time, which means that we are not able to adjust our production based on fluctuating
demand. And now to try to solve this problem, we found a new supplier in Edmonton, Alberta,
which can reduce the transit time, but they will only sell in full truckload quantity. I’m doing this
report to provide an analysis of the differences between the modal change from LCL to TL and
to evaluate the options for Fat-E and to diced which model will be better for our company, the
right to do is to do an analysis about the differences between both of our options. The
challenge with changing the supplier from China to Edmonton is the difference in
transportation modes. Fat-E is currently using LCL (Less than Container Load) which means that
we are consolidated with other shipments in the same container, and we pay for freight as part
of the suppliers´ cost. the other option that we can have been the new supplier that is in
Edmonton and the model that they use is TL((Truckload) shipping, in which the entire truck is
dedicated to transporting only Fat-E's frames. Our company will need to arrange and pay for
transportation separately in this case. Now I will be comparing both options and try to dice
which one is going to be better, the first item that I will compare is volume and capacity. LCL
shipping is fit for smaller shipments, and the goods are not enough to fill the entire container.
Therefore, the supplier consolidates multiple shipments into a single container, which reduces
transportation costs for each individual shipment. Now the TL shipping is fit for larger
shipments, in which the goods fill up the entire truck. The truck's capacity is not shared with
any other shipments, which means that the transportation cost is higher. The second item that I
will compare is the transit time. LCL shipping has longer transit times, because the container
needs to be filled with multiple shipments before it departs, and this led to delays if the
container does not fill up quickly. But TL shipping has shorter transit times because the truck is
dedicated to the shipment of just one company and departs as soon as it is loaded. The third
item that I will compare is the cost. LCL shipping is cheaper for smaller shipments as the
transportation cost is shared among multiple shipments. But TL shipping is more expensive as
the entire truck is dedicated just for our company to the shipment and the transportation cost
is higher. And the last item that I will compare is flexibility. LCL shipping is more flexible as it

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allows the shipper to send smaller shipments at different times. But TL shipping is less flexible
as the entire truck needs to be filled before it departs.

Now, I will evaluate the options that we have, the first option is, to continue using the current
Chinese supplier with LCL shipping, the pros that have in continuing using LCL, is that allows Fat-
E to order any number of frames at one time, freight cost is included in the supplier's price and
consolidation with other shipments can lead to cost savings. The cons of continue using the
current Chinese supplier with LCL shipping is the long transit time that takes around 45 days
and not being able to adjust production based on fluctuating demand. The second option that
Fat-E has is to switch to the new Edmonton supplier with TL shipping, the pros that have in this
change are shorter transit time, an adjusted production based on fluctuating demand, and
more control over transportation. The cons to switching to the new Edmonton supplier with TL
shipping, are higher transportation costs, the need to arrange transportation separately, and
the required full truckload quantity.

My final recommendation to solve this problem is to switch the China supplier to the new one,
the Edmonton supplier that uses TL shipping. The TL shipping will allow Fat-E to adjust
production based on fluctuating demand, which can lead to increased efficiency and a better
image in the marketplace. Although TL shipping is more expensive and requires a full truckload
quantity, the shorter transit time and more control of transportation make it a better option for
us. Fat-E should negotiate with the Edmonton supplier to lower the transportation cost and
explore different transportation options to reduce the total cost in the end.

The impact to Fat-E if they did make the change in suppliers

The effects of switching suppliers on Fat-E. At the moment, we are having trouble with the
longer transit times for frames coming from China. The cause of this difficulty is that our
business is trying to find a new supplier in Edmonton, Alberta. We have chosen to switch from
the supplier from China to the supplier from Edmonton, which would shorten the transit time
but also present new difficulties. Full truckloads of frames, which is four times more than their
usual volume, must be purchased by Fat-E. The new supplier won't even arrange or pay for any
transportation. For outbound loads, Fat-E must make arrangements for its carrier to schedule a
pickup between 7 am and 3 pm Monday through Friday. The possible consequences of
switching suppliers the effects on people, processes, and costs of on Fat-E can be evaluated.

I must evaluate the choices and select the one that will be best for Fat-E as the Director of
Transportation. Consideration of my options will be the first step in my analysis. The first choice
is to stick with the current Chinese supplier; Fat-E can keep buying frames from this company.

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With this choice, the business can continue using its current procedures without having to
make any adjustments to how it conducts business. The supplier includes the cost of freight in
the price they charge Fat-E, and Fat-E is free to order any quantity of frames at once. The 45-
day transit period, however, may limit the company's ability to modify production if demand
spikes. The second choice is for Fat-E to switch to the Edmonton supplier; Edmonton, Alberta, is
the new supplier. By choosing this option, the company would be able to receive frames faster
and the in-transit time would be decreased. However, the new supplier demands that frames
be purchased in full truckloads, which is four times more than the usual volume for Fat-E.
Additionally, the new supplier will not provide or arrange for any transportation, necessitating
Fat-E to make plans for its carrier to schedule a pickup appointment for outbound loads
between the hours of 7 am and 3 pm, Monday through Friday.

Given that both options have advantages and disadvantages, it will be essential to evaluate the
choices. There is no need for Fat-E to change how its business is run; it can continue to use the
Chinese supplier. However, the prolonged in-transit period might make it more challenging for
the company to change production if demand rises. However, switching to the Edmonton
supplier would necessitate purchasing the images in full truckloads, which is four times the
usual volume for Fat-E. This would reduce the amount of time they spent in transit.
Additionally, the new supplier will not provide or cover any transportation costs, requiring Fat-E
to schedule a pickup time for its carrier between 7 am and 3 pm, Monday through Friday, for
outbound loads. For this, more effort, funds, and resources would be required.

After performing my analysis and evaluating the available options, I have made some
recommendations for the company's necessary corrective changes. It is crucial to take into
account the effects of changing suppliers. People, specifically the Fat-E employees, will be
affected by the company's decision to switch its Chinese supplier to Edmonton in several
different ways. Our staff members will now need to get used to a new supplier, new
procedures, and possibly new quality standards. In order to comply with the demands of the
new supplier, staff members in charge of logistics and transportation may also need to make
significant adjustments to their procedures and work schedules. The processes used by Fat-E
will also be impacted by the change in supplier; new procedures will need to be set up for
ordering, receiving, and storing the new frames. This may take some time and necessitate
significant adjustments to their current inventory and logistics management procedures. The
final effect of this change on the business will be financial. Since we changed suppliers, Fat-E
will need to take into account the increased volume of frames needed, which could increase
storage and inventory carrying costs. Besides, the cost of transportation is not covered by the
new supplier, so Fat-E will have to make new transportation arrangements, which could raise
their transportation costs.

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While there may be some difficulties and adjustments needed, the advantages of reducing
transit time and the ability to order any number of frames at once make the switch useful,
according to my recommendation, which was based on the analysis of the impacts that
switching from the current Chinese supplier to the new Edmonton supplier. We must now
create a thorough implementation strategy that covers additional employee training, ensuring
the new supplier is aware of Fat-E’s unique logistics and transportation needs, working with
their carrier to accommodate the new supplier's scheduled pickup appointment, and modifying
production schedules to match the new delivery timeline and volume.

In conclusion, whenever a company requests a change of that nature, it must carefully consider
the new effects on the organization. In the case of Fat-E, the advantages of cutting transit time
and expanding the pool of suppliers outweigh the difficulties of changing procedures and hiring
new staff. And we'll put our well-thought-out change management strategy into action so that
we can minimize disruptions and ensure a safe transition to the new supplier. This modification
will enable future success and growth for our business.

References

Udemy – Logistic Management - International Transport and Shipping

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https://www.supplychaindive.com/spons/the-transportation-supply-chain/433934/

https://www.purolatorinternational.com/types-of-transportation-in-logistics/

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