April 13th, 2019

Case 9-1: Penner Medical Products

1. (A)

If I was in the position of Neil Bennet, I’ll starter to focus on the main issues with the
delivery problems from Stinson by finding the most effective and rational solutions available to
decrease the company’s costs immediately. In my analysis, I will consider three possible
solutions to the issue. First, I will calculate an estimate total costs generated from delivery issues
with Stinson in order to find more cost convenient solutions. Having numbers to work with can
help make the most appropriate decision in whether hire a clearing agent or find a 3 rd party
logistics company, finding a new supplier or expanding warehouse capacity in order to stock
more Stinson’s goods to avoid delayed deliveries.

2. (E)

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Penner, a medical supplies distributor, and retailer don’t have the experience and resources

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within the company to deal with paperwork for customs officials. This has created a huge
problem with delays and inventory holding costs. The best bet for the company is to consider

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outsourcing transportation. Having an efficient and well-organized transportation system will
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automatically get rid of incomplete paperwork problems, resulting in prompt deliveries and
reduction of inventory levels. Hiring the services of a 3rd party logistics company that knows how
to deal with pharmaceutical and technology shipments is necessary for Penner’s future.
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3. (G)
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The company’s sales were $30 million, and it expects those sales to go up by 10% during the
following 5 years ($600,000 per year, $3 million increase in 5 years). As right now, Penner is
having loses due to Stinson’s rising costs and missed deliveries. The highest costs are generated
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from the lack of proper customs documentation and transportation. Adding only transportation
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costs for the two-ton truck is $52,800 per year (not including the driver’s salary, truck
maintenance, plus additional costs due to delays at the border). This current activity also
requires space to prepare shipments to cross the border in Windsor which cost the company a
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good $12,000 per year. This adds to a total of $64,800 only in truck and warehouse costs. The
estimated cost for this problem goes way beyond this amount if we take into consideration the
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excessive inventory levels, rising costs from Stinson’s goods and lost sales.

4.
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According to the information provided on this Case study, Stinson supplies nearly 10% of the
entire goods for Penner Medical Products, so in effect, Stinson is a major supplier to Penner.
Penner has been in business for more than 50 years and has created a long-term relationship
with this supplier, but it is not the only one they have. The company has effectively captured the
market and increased customer numbers over the years thank their variety of products. Some

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 April 13th, 2019

of these products are from Stinson, which are described as high-quality medical equipment. The
quality of Stinson products does make a difference in sales since the Case also specifies that
Penner travels twice per week and purchase $15,000 worth of goods per trip, which makes it
$30,000 investment cost per week ($1.44 million per year). Stinson is one major supplier to
Penner since the whole study concentrates on the issues generated by it.

5.
- Hire a 3PL company services to handle distribution, warehousing and fulfillment
processes.
- Find a new supplier with the same qualifications (or better) than Stinson.
- Establish a new inventory management system (“Just-in-time”).
- Calculate the most realistic total cost amount generated by Stinson’s rising costs, missed
delivery dates, lost sales, transportation, inventory and employee salaries in order to

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find the most cost-effective decision to make.

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6.

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As discussed in my previous responses, the first step to lower costs would be to hire a 3rd
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party logistics company in order to solve incomplete paperwork problems causing delays at the
border. This will automatically prevent excessive use of the only two-ton truck that Penner has
($52,800 savings) plus using the annual cost of $12,000 on warehousing fees to pay 3PL
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services. Having someone to outsource for elements such as distribution, warehousing, and
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fulfillment services takes off a lot of pressure off Penner’s shoulders, thus it will reduce their
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sale loses making 3PL services a great cost-effective decision to make.

Once the transportation problem is solved, Penner can concentrate on finding another
specialized equipment supplier other than Stinson since they have been raising their costs and
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missing their delivery dates. Penner will have to specify the criteria looked for in a new supplier
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(equal or better-quality equipment). The new supplier can either be close to Rockford or
anywhere in North-America or even Europe or Asia as long as it meets the criteria and the costs
related to transportation aren’t over budget.
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