Ocean Spray Logistics Ocean Spray

Ocean Spray Logistics

Ocean Spray Cranberries, Inc., Logistics Case Study

What rationale is offered by Ocean Spray in support of the idea of using a 3PL? Do you agree with the reasons cited for the interest in a 3PL?

The rationale Ocean Spray is using to initial the evaluation and eventual contractual process with a 3PL is the expansion of their logistics network. The need for a 3PL that can integrate with Ocean Spray warehouse management, enterprise management, and SAP Enterprise Resource Planning (ERP) system is critical (Trunick, 35). Key processes are critical for Ocean Spray to expand its market through the strategy of expanding its logistics network. These processes include inventory allocation, vendor managed inventory (VMI), production planning, demand planning, supply planning and inventory management (Trunick, 35). A 3PL would also be able to expand its logistics network more effectively by keeping its distribution centers and warehouses more efficient from an inventory management standpoint, alleviating excess costs through the use of VMI (Trunick, 36). From (Hannon, 49) it is also learned that the logistics network was critical for gaining Nestle' as a key account, in effect doubling Ocean Spray's volume. Based on all these factors and the need for more finely tuned processes across its supply chain to support increased sales into new accounts including Nestle' and greater expansion into existing markets, I agree with the reasons cited for partnering with a 3PL. It was fortuitous timing that Ocean Spray made this decision as it provided the necessary scalable supply chain processes and system integration to support the addition of a customer that in effect doubled their volume, Nestle' (Hannon, 49).

Based on your understanding of Ocean Spray and its business needs, what type of 3PL firm do you feel might be of greatest potential value in terms of a relationship?

Ocean Spray would best be served by partnering with a 3PL provider that is transport-based, as their supply chain faces the majority of challenges within the transportation and logistics areas of their supply chain. In addition, the critical processes of managing VMI, a complex set of processes used throughout supply chains for minimizing risk and improving inventory management, requires a highly specific skill set that transport-based 3 PLs can provide. Added to these factors is the evolution of transport-based 3 PLs to integrate information technologies (it) into these more complex supply chain processes, making their measurement and visibility more achievable, which is a critical factor to Ocean Spray (Hannon, 51). In addition to measurement, investments in it are also making it possible to streamline and re-engineer critical supply chain processes and make them more efficient and profitable as well.

What steps would you suggest be considered by Ocean Spray as it begins to analyze the feasibility of forming a relations with individual 3PL providers?

I'd rely on the process model for forming logistics relations (Sink & Langley, 175) which begins with the task of performing a strategic assessment, followed by decision to form a partnership or not. In completing the strategic assessment it would be critical to perform a logistics audit (Sink & Langley, 172) to the process and systems level, followed by an assessment of the visibility and supply chain planning, management and optimization achieved with comparable clients to the potential 3PL partner. The ability to accomplish shared business goals and objectives, complete a shared needs assessment including defining integration points to the system and process levels across companies would also need to be completed. Logistics network integration, expertise with suppliers from the same industry and knowledge of information systems coordination from VMI through paperless invoicing (Hannon, 52) are also critical. After these steps are completed, there would need to be an assessment of the logistics costs and fees including a break-even and Return on Investment (ROI) analysis across the Ocean Spray supply chain, in addition to an Internal Rate of Return (IRR) analysis specifically within Ocean Spray. Compounding all these factors is also the assessment of external factors including seasonality inherent in their business model, and the initiative to create more effective packaging that maximizes Ocean Spray's shelf space in stores, specifically focusing on square containers to accomplish this (Hannon, 51). After this first phase of completing a strategic assessment was complete, the next step would be to define timeframes to form a strategic relationship. An evaluation of the various forms of strategic relationships, from partnerships, traditional outsourcing relationships to strategic alliances would be considered. The potential partner capabilities and core competencies would be evaluate din the context of Ocean Spray's unmet needs and priorities. Based on this assessment, a partner would be chosen and an agreement structure defined. At this point, many companies opt for a pilot program to define the structural operating model of the relationship (Sink & Langley, 169), also using this time to specifically focus on the key performance indicators (KPIs) and measures of performance critical for ensuring supply chain visibility over the long-term. Pilots are often used to minimize risk (Sink & Langley, 169) and also fine-tune the KPIs and measures of performance to evaluate 3PL relationships over the long-term. Only after a successful pilot is completed can the launch of the project be planned and executed. Of all factors that Ocean Spray must plan for, change management, or educating the many people whose jobs will change significantly when the 3PL relationship in place is the most critical (Hannon, 52). By taking these steps and thoroughly planning the launch of the 3PL relationship, Ocean Spray will have a successful launch of their 3PL relationship.