Logistics Processes Case Study

You have been hired as the Director of Transportation for Fat-E. Fat-E is three-year-old firm, founded by three university friends based out of Ottawa, Ontario. The company makes electrically powered bicycles made for off-road trail riding. The Fat-E is unique in that it is based on the "fat tire" bike already on the market. Fat-E's model includes an electric motor and with a heavy-duty transmission that automatically changes gears while moving. There are other bikes in this market, but the Fat-E is unique in that the transmission is electronically controlled, saving precious battery life power when in use. The firm has begun to build a relatively loyal customer base, and markets itself to offroad cycling enthusiasts, and off-road cycling clubs. Fat-E started originally by manufacturing their first models on their university campus in space provided by their entrepreneurial centre. The owners quickly outgrew this space and moved into a small industrial unit just outside Ottawa (Kanata). Since then, the company has grown to expand into the two adjacent units in the industrial complex. From this location they managed the entire business including 24 permanent full-time staff (mixed between administration, production, and warehousing). Business is strong and Fat-E has now outgrown the space they currently occupy and unfortunately there are no more adjacent units in the industrial complex for them to consider expanding into.The Bike: The bicycle is comprised of a heavy duty steel frame, weighing 48 pounds, two oversized rims with oversized "fat" tires, a battery that is integrated into the frame, and the patented transmission that has been integrated into the frame at the rear wheel.

When fully assembled, the finished bike weighs 84 lbs. It is packaged and shipped with front wheel off and occupies a corrugated box: dimensions: 48 inches long x 12 inches wide x 30 inches high. The Fat-E is not palletized, and ships individually via courier. The bike contains a lithium-ion battery and due to dangerous goods regulations cannot be shipped by air.

There are four primary components to the bicycle - the frame, battery, gears and wiring, and the wheels. Each is sourced from an individual supplier outside of Canada :

The gears and wiring are purchased in from a supplier in France using LCL service that is arranged by the seller

Fat-E is under constant pressure to improve their products. In particular, reducing weight allows for better performance. Fat-E's design team has found a potential new supplier of the gear mechanism that can significantly reduce the overall weight of the bicycle. The new gear mechanism is available from a German supplier however they will only work under EXW terms. This will require Fat-E to take on new responsibilities that the previous supplier from France had performed. You have been asked to consider this potential change from a logistical perspective and report back to the senior management team.

Required:

Provide a description of the potential marine insurance clauses that could be purchased and a recommendation on the coverage that Fat-E should purchase for the new German gears.

Note: the gears will be shipped by water under EXW terms.