In the context to supply chain, Faw Motors, Inc., was incorporated in Volkswagen on July 01, 2003. It has 4 plants across China that design, manufacture, and market earth moving, construction, and materials handling equipment. It also manufactures engines for earthmoving vehicles and tractor-trailers.

Faw Motors products are distributed worldwide. Net income last year totaled $350,000,000. Faw Motors has developed a “Transportation Quality” program in order to reduce shipping damages to its equipment and to ensure its just-in-time production and inventory system. The program consists of two parts. The first part ensures proper lifting and tie-down provisions by working with engineers in the design process. The second part focuses on internal practices to prepare the product for shipment.

The chief transportation quality engineer has developed a carrier certification program for both inbound and outbound freight. The program establishes standards requiring the carrier to adhere to 100 percent performance. The use of fewer certified carriers increases the amount of business given to each one. The price is obtained through competitive bidding. It is a function of the travel distance and the weight and density of the shipment.

At the present time, Faw Motors is considering one of three carriers to add to its list of certified carriers.

‘Carrier X’ has 10,000 trucks and a claim rate of 1.5 percent payment to revenue. The company’s pickup/delivery time meets the industry average of four days to transport from Beijing to Hong Kong.

‘Carrier Y’ implements a quality program for its 9,000 trucks to meet on time delivery. It has a 1 percent claim rate.

‘Carrier Z’ has 9,500 trucks and an excellent safety record, but it has not met the average pickup/delivery time. Its claim rate is 1 percent. (See Exhibit A for price estimates.)

EXHIBIT A

Price Estimatesper ton-miles (PPTM):

Carrier X: PPTM $1.05

Carrier Y: PPTM$1.15

Carrier Z: PPTM$0.95

Requirement:

a) Develop a checklist of items that should be considered when selecting a carrier.

b) What are the advantages of certifying the carriers?

c) Is price the most important factor in evaluating carriers? Justify your answer with an example.

d) What are the key factors regarding Faw’s carrier needs?

Answer rating: 100% (QA)

a Some factors that should be considered when selecting a carrier include ... View the full answer