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Case Study: Central Transport, Inc

Central Transport's largest customer, SAB Distribution, is facing pressure to improve profitability due to increased competition. SAB's transportation costs from Central are a major expense, and reliable delivery impacts customer service. Central's CEO Doug Thomas asks his staff for ideas on how Central can help SAB remain competitive through cost reductions or added value. Central could cut rates by 10% but that would only shift costs unless they also cut operating costs. Thomas suggests thinking collaboratively as supply chain partners to creatively address SAB's challenges.

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Amish Jha
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94 views1 page

Case Study: Central Transport, Inc

Central Transport's largest customer, SAB Distribution, is facing pressure to improve profitability due to increased competition. SAB's transportation costs from Central are a major expense, and reliable delivery impacts customer service. Central's CEO Doug Thomas asks his staff for ideas on how Central can help SAB remain competitive through cost reductions or added value. Central could cut rates by 10% but that would only shift costs unless they also cut operating costs. Thomas suggests thinking collaboratively as supply chain partners to creatively address SAB's challenges.

Uploaded by

Amish Jha
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
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Case study: Central Transport, Inc.

Doug Thomas, president and CEO of Central Transport, had just returned from a meeting called by
Sue Purdum, president and CEO of SAB Distribution. He immediately sat dwon and wrote the
following E-mail message to all of his senior staff:
I need your collective wisdom and input to help me respond to a challenge given to me by Sue
Purdum of SAB distribution. SAB, as you know, has been one of our best customers for many
years. Our growth has been tied to its growth since we are one of its core carriers. As it
expanded its customer bas throughout Pennsylvania and neighboring states, we have
expanded our route network to meet its requirements. Our founder, John Spychalski, was a
personal friend of the three founders of SAB Distribution. While that personal relationship has
changed with changes in both of our organizations, Central has maintained a partnership
approach with SAB. My belief is that if it wins, we win.
SAB, according to Ms. Purdum, has been faced with a growing level competition both
directly and indirectly in the two small medium-size communities where its retail store
customers are located. Its profit margins have narrowed, and Ms. Purdum is under pressure
from her board (most of whom are descendants of the three founders) to improve SABs
profitability. To her credit, she initiated a number of changes after she became president and
CEO five years ago.
According to Ms. Purdum, she has to reduce her cost-o-sales and/or improve her level of
customer service to add more value to her customers. Transportation from SABs warehouse
to its customer stores is a major part of its cost-of-sales. Also, our ability to deliver her
customers orders in a timely and reliable manner impacts significantly SABs customer
service.
Ms. Purdum would like our senior management team to consider what we could do to help
SAB remain competitive and improve its profitablility. Obviously, we could reduce our rates
by 10 percent, but that only shifts the problem to us unless we can reduce our operating costs
by 10 percent to offset the rate reduction. We need to be creative and think of ourselves as a
supply chain partner with SAB and its suppliers and customers.
Help Mr. Thomas develop a white paper to respond to Ms. Purdum by addressing the following:

Case Questions
1.
2.
3.

Why and how has the competitive marketplace changed for SAB?
Provide additional rationale for the collaborative perspective suggested by Mr. Thmoas.
Recommend what Central Transport can do to help SAB improve its efficiency and
effectiveness. (Hint: use the tactics of SCM as a framework)

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