Question

Case Study: Supply Chain Trends

The Do-Green Solar Systems case addresses challenges faced by a Canadian manufacturer as a result of the CUSMA trade agreement. As you read through the case, think abou the challenges, risks and complexities in changing their supply chain from North Americanto Internationalmarkets.

Do-Green Solar Systems

Taylor Douglas, V.P of Do-Green Solar Systems, was evaluating the strategic position of the company. With the new Canada-United States-Mexico (CUSMA) agreement in place and the uncertainty around future trade with the United States Taylor was pondering the future direction of Do-Green.

Do-Green’s History

Taylor grew up in the family business. Established in 2000 Do-Green began as a family run electrical contracting company. Their core business focused on providing residential electrical contracting for new home construction as well as renovations and electrical upgrades to existing homes. As the business grew Taylor began to deal more and more with requests from customers for solar power options for their homes. Taylor realized that the market for residential solar power was growing. Supply agreement/partnership attempts with solar component suppliers proved to be unreliable. It was at that point Taylor decided to purchase a facility to begin manufacturing solar power components for residential use. In 2004 Do-Green Solar Systems was formed.

Do-Green was now involved in both the manufacture and installation of solar power systems for residential use. The business saw steady growth through 2006. Do-Green had established a lucrative business niche for itself.

New Opportunities

At the same time that Do-Green was establishing itself, Canadian’s saw the expansion of big box home improvement retailers and the proliferation of the “do-it-yourself” craze. In 2008 Taylor Douglas approached several home improvement retailers and in 2009 Do-Green signed a supply agreement with a big box home improvement retailer to stock their products in 25 stores across Ontario. People could now purchase and install their own residential solar power systems and Do-Green’s business profile evolved into that of a manufacturer/distributor. To meet the increased production demands Do-Green acquired a local mid-size manufacturing facility. For the next two years Do-Green settled into its new business model as installer, manufacturer and retail distributor of solar power systems for residential use.

Do-Green Becomes Leaner and Looks to New Markets

Not one to rest on past successes, Taylor began to look at ways to grow the business. It was now 2011. The Canadian dollar was at par with the U.S. dollar and Taylor wanted to break into the U.S. market. To do that additional capacity needed to be purchased or Do-Green needed to find ways to run their operation more effectively and efficiently. Taylor decided to look within the company for capacity improvement opportunities. Do-Green increased their capacity through several initiatives. They invested in an ERP system which allowed then to increase productivity and fully integrate the ordering and procurement process. Supply chain visibility increased. Do-Green could now receive replenishment orders from retailers directly into their system. This enabled them to reduce raw material, work in process and finished goods inventories by a combined 20%. Do-Green also implemented lean process integration throughout their operation. This accounted for an additional 15% increase in production capacity. Once fully implemented these initiatives accounted additional capacity of 30%. Delivery times were reduced from three days to one.

With the newly found capacity Taylor approached the U.S. affiliate of the Canadian home improvement retailer. In 2012 Do-Green signed a contract to supply 30 U.S. based stores throughout the North East states. For the next several years Do-Green established themselves as a major stakeholder in the residential solar power industry.

The Canadian Dollar Loses Value

In 2014 the Canadian dollar began to lose value against the U.S. dollar. Taylor and the Do-Green management team looked to further streamline their manufacturing and distribution network. Profits began to shrink as the devalued Canadian dollar began to become a real issue for Do-Green shareholders. However, even with the exchange rate being what it was, the company remained strong and profits were steady.

Do-Green Goes Green

With consistent demand and a reliable and robust supply/distribution system in place in both Canada and the U.S. Taylor began to focus on sustainability issues within the supply chain. Much of the dunnage and packaging Do-Green used to ship their product to retail distributors could be reused. Taylor began to develop a reverse supply chain where packaging and dunnage was returned to the Do-Green manufacturing facility to be used again. This initiative helped to further Do-Greens reputation of being a sustainable and environmentally conscious organization. Cost savings were also realized through the reverse supply chain program which helped offset the ongoing disparity between the Canadian and U.S. dollar.

The New Frontier

As Taylor Douglas pondered the new strategic direction of Do-Green, Taylor knew the exact date that Do-Green’s future was in jeopardy. On November 30, 2018 the (CUSMA) Canada United States Mexico agreement was signed. This new trade agreement took the place of the long standing NAFTA trade agreement. Under the CUSMA agreement Do-Green now faced higher tariffs to export into the U.S. This combined with an even weaker Canadian dollar meant that Do-Green had to change direction. The U.S. market was no longer viable.

Taylor and the Do-Green management team knew there were market entry opportunities offshore. With 1.4 billion people and 18% of the world’s population, China was the obvious choice. Do-Green had to develop a new international supply strategy if they wanted to do business in China.

Issues and Concerns

Concerns regarding exporting to China were many. Taylor knew there would be logistical issues. Currently trucks left their facility and delivered directly to retail stores in both Canada and the U.S. International supply chains required multi-tiered distribution systems. There would be currency issues to consider as well as the potential for theft of products, product design and company intelligence. ERP and technology compatibility with Chinese distribution partners was of concern. Do-Green’s operational concept of being a lean organization would be taxed. The longer the supply chain the more inventory investment was required. With a longer more diverse supply chain Taylor knew that risk would increase, supply chain visibility would decrease and overall control reduced. As a green company Do-Green would incur added cost to retain its circular supply chain. Taylor knew that reclaiming packaging from China posed significant logistical and cost considerations. Among other things to consider there was the risk of natural disasters, terrorism and labour disputes potentially disrupting the supply chain.

Where to go From Here

Taylor and the Do-Green management team had some significant strategic planning issues to consider. They understood supply chain trends were heading toward more diverse and complex systems in the delivery of products and services worldwide. They realized that they needed to resolve a significant number of issues if Do-Green wanted to compete in the global supply chain.

Question

From a pure logistics perspective, what unique challenges does Do-Green face while building in Canada and distributing worldwide? Please explain these challenges in detail and how to overcome them.

Warning: Please use your original words and thoughts and only use direct quotes to prove a point in your arguments. References may be required if you are utilizing outside resources. Copying word for word or paraphrasing can lead to Academic Misconduct. Your answers cannot be identical or “very similar” to other group’s answers. This applies to all questions.

Answer 1

Answer 1 :

Supply chain is the backbone for any organization, necessary for effective working. With globalization, various changes have been introduced to a supply chain system. Some macro trends in supply chain are:

Circular Supply Chain, digitization in supply chain, introduction to sustainability in supply chain, omni-channel supply chain, installing AI, big data, cloud system in supply chain, agile supply chain system, combating ERP with supply chain, etc.

Some Macro Supply Chain Trends Identified in case are:

• Do-Green adopted a Sustainable Supply Chain Management System where much of the dunnage & packaging used by Do-Green are shipped to their product retailer, distributors, so that it could be reused.
• Do-Green adopted a reverse supply chain system where packaging & dunnage was returned to the Do-Green manufacturing facility to be used again.
• They invested in the ERP system which allowed them to increase productivity & fully integrate the ordering & procurement process. Supply chain visibility increased & now they receive replenishment orders directly from retailers into their system. This enabled them to reduce raw material, work in process and finished goods inventories by a combined 20%.
• Do-Green also implemented lean process integration throughout their operation. This accounted for an additional 15% increase in production capacity.
• They also opted lean manufacturing & some sights of omni-channel distribution to meet the increased production demands. Do-Green acquired a local mid-size manufacturing facility & established as installer, manufacturer, and retail distributor of solar power systems for residential use.

Answer 4 :

Do-Green Solar Systems

As per the case study it is mentioned that in2018, under the CUSMA agreement, Do-Green had faced higher export tariffs to U.S. This new agreement along with problems of weaker Canadian dollar value, Do-Green had decided to change the direction of doing business. They looked for opportunities internationally. They have identified that there are many logistics challenges they have to tackle in order to expand the business globally. Few such challenges and suggestions to overcome such challenges are listed down below :

1- Currently Do-Green depends on only one model of distribution system, i.e. trucks deliver goods to US and comes back. In order to handle International supply chain process Do-Green has to identify and implement required multi-tiered distribution systems, which is not there in the process now. The suggestion to tackle this challenge could be to have partnership with various transportation or shipping companies who can handle the international distribution system. A long term business agreement with such viable third party distribution companies will reduce the risk of international distribution of products.

2- Another challenge which they have to consider is currency value fluctuation. This will have impact on logistics aspects as well such as payment to distribution companies, freight charges, handling charges etc. Currency hedging can mitigate this risk up to a limit and provide stable exchange rates across business.

3- Another challenge which Do-Green anticipating is theft of goods during goods transportation. This can be handled by having a string insurance policy in place and agreement of safety and security to the third party distribution team.

4- Theft of product design and company intelligence - This risk or challenge can be handles using proper IP policies such as patent of goods or registering the products in international court of IPs. If anyone is misusing Do-Green IPs of try to copy the same, they should be ready to face legal issues.

5- ERP and technology compatibility with Chinese distribution partners was another major challenge and concern. This will have impact on integrating the business operations in a single platform. This technical challenge can be handled by identifying a suitable integration mechanism which can integrate distribution processes in china and across globe to a common ERP. This may be difficult task, but not impossible with suitable technical resources.

6- Longer the supply chain, inventory handling cost and investments will be more. This is a challenge which all international companies face nowadays. Companies have to swallow this cost and manage the margin based on that, or have contract agreement with wholesale customers based on suitable Inco terms. This can reduce the risk up to a limit.

7- The challenge of supply chain visibility and control can be handled by implementing a world class ERP which can handle international supply chain also using proper integrations which are beneficial to D-Green. Also they have to make sure that they are in alignment with all the latest trends on supply chain management using maximum automation in order to reduce the cost and hence increase in bottom-line.

8- Reclaiming packaging from China or another country posed significant logistical and cost considerations and if they are not able to reclaim the same, it goes against the policy of sustainability and bad for company image. Do-Green has to check for the viability to handle packages locally and reuse there itself, rather than bringing it back to Canada. Local packaging recycling centers which can handle this will have cost associated to it, but it will be definitely less than reclaiming back to Canada.

9- Risk of natural disasters, terrorism and labor disputes potentially disrupting the supply chain should be handled using effective insurance policies and relationship with various stakeholders. Good HR team also needed to handle labor conerns.

____________________________________________________________________________

PLEASE PLEASE UP VOTE THIS ANSWER. YOUR UP VOTE IS SO VALUABLE TO ME. PLEASE. THANK YOU SO MUCH.

Answer 2

Do-Green Solar Systems

As per the case study it is mentioned that in2018, under the CUSMA agreement, Do-Green had faced higher export tariffs to U.S. This new agreement along with problems of weaker Canadian dollar value, Do-Green had decided to change the direction of doing business. They looked for opportunities internationally. They have identified that there are many logistics challenges they have to tackle in order to expand the business globally. Few such challenges and suggestions to overcome such challenges are listed down below;

1- Currently Do-Green depends on only one model of distribution system, i.e. trucks deliver goods to US and comes back. In order to handle International supply chain process Do-Green has to identify and implement required multi-tiered distribution systems, which is not there in the process now. The suggestion to tackle this challenge could be to have partnership with various transportation or shipping companies who can handle the international distribution system. A long term business agreement with such viable third party distribution companies will reduce the risk of international distribution of products.

2- Another challenge which they have to consider is currency value fluctuation. This will have impact on logistics aspects as well such as payment to distribution companies, freight charges, handling charges etc. Currency hedging can mitigate this risk up to a limit and provide stable exchange rates across business.

3- Another challenge which Do-Green anticipating is theft of goods during goods transportation. This can be handled by having a string insurance policy in place and agreement of safety and security to the third party distribution team.

4- Theft of product design and company intelligence - This risk or challenge can be handles using proper IP policies such as patent of goods or registering the products in international court of IPs. If anyone is misusing Do-Green IPs of try to copy the same, they should be ready to face legal issues.

5- ERP and technology compatibility with Chinese distribution partners was another major challenge and concern. This will have impact on integrating the business operations in a single platform. This technical challenge can be handled by identifying a suitable integration mechanism which can integrate distribution processes in china and across globe to a common ERP. This may be difficult task, but not impossible with suitable technical resources.

6- Longer the supply chain, inventory handling cost and investments will be more. This is a challenge which all international companies face nowadays. Companies have to swallow this cost and manage the margin based on that, or have contract agreement with wholesale customers based on suitable Inco terms. This can reduce the risk up to a limit.

7- The challenge of supply chain visibility and control can be handled by implementing a world class ERP which can handle international supply chain also using proper integrations which are beneficial to D-Green. Also they have to make sure that they are in alignment with all the latest trends on supply chain management using maximum automation in order to reduce the cost and hence increase in bottom-line.

8- Reclaiming packaging from China or another country posed significant logistical and cost considerations and if they are not able to reclaim the same, it goes against the policy of sustainability and bad for company image. Do-Green has to check for the viability to handle packages locally and reuse there itself, rather than bringing it back to Canada. Local packaging recycling centers which can handle this will have cost associated to it, but it will be definitely less than reclaiming back to Canada.

9- Risk of natural disasters, terrorism and labor disputes potentially disrupting the supply chain should be handled using effective insurance policies and relationship with various stakeholders. Good HR team also needed to handle labor conerns.