Case 8-2

Ohio Plastics

Ohio Plastics (OP) is an extruder of plastic sheets of varying color and size that are sold to engraving and business promotional firms who make signs, name tags and award trophies from the plastic sheets. OP is well known in the industry for making a high-quality product and for providing quick response times for orders. In 2003 OP had 75 percent of the U.S. market for plastic engraving sheets. During the last half of 2003 OP sales declined. Discussions with OP’s major distributors and engravers revealed a softening of demand for engraved items, and the outlook for 2004 was a further reduction in sales. To counter the U.S. market decline, OP began to sell its products in Mexico in August 2003. OP signed agreements with distributors in Mexico City, Monterrey, and Guadalajara. During the first 6 months distributors in these Mexican cities had double-digit monthly sales increases. However, during the first quarter of 2004, monthly sales increased at a slower rate. Discussions with the Mexican distributors indicated the lead time for shipments had increased to 7 days from the 4-day norm during 2003, and the consistency of the transit time had dropped to 70 percent. This longer, less consistent lead time for shipments resulted in frequent stockouts and lost sales. Because OP did not have brand recognition in Mexico, the Mexican engravers would buy other brands from the distributors. Thus OP incurred the lost sales while the distributors substituted other brands to meet their engraver demands. OP initiated a study of the transportation process to Mexico, and the results are presented below:

➢ The sheets are picked up by CBN Trucking at OP’s Ohio plant and transported to its terminal in Laredo, Texas.

➢ When the shipment arrives at CBN’s terminal, CBN calls BCJ Forwarding and Brokerage and