1. Address the problems the company faces clearly.
2. Analyze the problems by applying the theories and methods you studied in the Supply Chain Management course. Try to explain the causes of the problems.
3. Give the solutions to the company based on your analysis.

Favored Blend Coffee Company is a reputed coffee manufacturer in the U.S. Its products are sold to final consumers and business customers in the country. The coffee products to the final consumers under Favored Blend brand are sold by stores and chain stores. The coffee products to the business customers are sold directly by the company itself, or by the middle retailers under Best Blend brand. The production lines for the two brands are the same except the packaging size and style. For the two brands of Favored Blend and Best Blend, the company provides instant coffee and ground coffee with different package size. Both brands of coffee are produced by the same factories and delivered by the same logistics systems. Before 2010, Favored Blend Coffee Company had good business and grew rapidly. Annual average sales increasing rate was around 5%. Although the profit increasing rate was not so good as the sales, it still grew. At the yearly management meeting of 2010, the management team was optimistic for the continuous increasing of sales and profits. However, at the middle of 2012, this optimistic attitude encountered setback. Although the sales of two coffee brands is still growing, the profit of 2011 decreased significantly. In the first quarter of 2012, the company had its first deficit since 1929. The business analysis found that the main reason of the profit decreasing is logistics cost. Comparing with the logistics cost in 2010, the transportation cost increased 4% in 2011, inventory cost increased 3%. By the end of the first quarter of 2012, the tendency of cost increasing had not been slowed down. Comparing with 2010, the finished product inventory increased 8% at the end of 2011. At the end of first quarter of 2012, because of production reduction, the inventory had to be adjusted. In April of 2012, CEO Mr. Smith holds a management team meeting. The whole team realizes there are some problems in logistics. When some big business customers decided to remove Favored Coffee from product list, the problem is elevated to a new level. The CEO of one big business customer informed Smith that the Favored Blend Coffee Company is insufficient in supply, and is not stable in delivery, thus they are forced to make the product removal decision. Since the management team cannot reverse the current situation, CEO Mr. Smith accepts the advice from the company board, and decides to invite an independent consulting company for a research and analysis about the company and delivery structure. At the meeting, CEO announced his decision of recruiting the logistics consulting company Able Management Consultants. The vice president of marketing department supports the decision, but the executive director of the delivery service department and the vice president of finance department are opposed to the decision, and they think the problem can be solved if a proper policy of sales and customer service can be implemented in the company. They doubt a so-called professional expert can have sufficient knowledge in the food retailing industry. The both sides have a fierce discussion. The vice president of production department comments: "what we do not need most is the more theories. Last time we had an expert here for 3 weeks, and then he told us something we already knew and something we told him. What we need is action, not analysis." After two hours discussion, CEO concludes the meeting with the following comments: The evaluation about consultants from some of you might be right. Nevertheless, frankly I feel you are defending yourselves. The facts you listed cannot support your viewpoint. However, the situation is worsening. I will call Able headquarter. I know them well. I will tell them the facts happened here and see how they make their plan if they would like to accept this project. The following is the fact description to Able by the CEO: The products of Favored Blend Coffee Company are sold in the country, and the company operates three factories in Philadelphia, New Orleans and Los Angeles. Each factory supplies products to a certain area of the country. The operations in each factory includes oversea raw coffee acceptance, coffee blending, roasting, grinding, processing, packaging and delivery. Once the packaging process is finished, the products are transported directly to the final consumers, or to the warehouses at each market. In the production process, it is always to produce the products with same size and package, until the weekly demand is satisfied, then the factories continue to produce other products with another size by production plan. In the recent years, because of production capacity expansion, more spaces in the factory are used to put the equipment for instant coffee production, thus the capacity of inventory space and transportation in each plant has been weakened. Although our company tried to seek more space in the factory and surrounding places of the factory, the efforts failed with no results. As a temporary measure for insufficient space, the delivery service department has passions to use railway as transportation mode, just because they found the filled train wagons can be used as a warehouse. The cost the company pays for this space is not large, because in the pricing of delivery, there are 48 hours for free. Mr. H.J. Speedy is the director of the delivery service department, he is proud that he makes full use of this policy, and has mentioned this many times at company meetings. Although the coffee consumption can be forecasted, the orders from customers still fluctuate significantly, no matter the products are delivered from the factory directly or from the regional warehouses. The company tries the best to forecast the orders. However, the result is not encouraging. The company has 30 warehouses for product delivery in the country in total. Although there is the planning for supply, on one hand, over-loading in some warehouses is severe; on the other hand, some warehouses are empty with no inventory. At any time, at any warehouse, the inventory of both Favored Blend Coffee and Best Blend Coffee is always not satisfactory. It always can be found there is one or more than one product type with a brand or a package size with insufficient inventory. Thus, in order to satisfy the customer demand, urgent transportation in the warehouses is often used. The physical delivery mode is the conflicting cause between the marketing department and the delivery service department. Generally, the following two delivery modes are applied. 1. Direct delivery from factory to final consumers. FTL (Full-truck-load) mode is often used. LTL (Less-than-truck-load) is seldom used. 2. Delivery from factory to regional warehouses with FTL, then LTL is used for local delivery from the regional warehouse to the final customers. Direct delivery from factory to the customers was very important since it was cost effective and used popularly in delivery service department. However, in the recent years, the principle of inventory reduction is becoming popular in business. Nowadays, customers hesitate to make a large order for full truck transportation, and more and more customers require the delivery service department to deliver in smaller lot size and shorter lead-time. Comparing the delivery quantities of 2000 and 2010, it is easy to see this fast-growing trend. In 2000, in the all delivery quantity, 80% were transported by train, and only 20% by truck. In 2010, the two percentages changed their positions. CEO Mr. Smith spends much time working with delivery service department and marketing department, and tries to solve the problem of constantly climbing cost. Generally speaking, the delivery service department blames that the marketing department does not implement an effective policy to encourage large quantity purchasing, and the sales condone the customers' excessive requirements for delivery condition and path. Conversely, the marketing department points out that the problem cause is the increasing competitors and increasing coffee brands in the market, and "competition makes the customers demand more services, and we do not have any other choices. If we need the business, we need to try best to provide the services