Supply Chain Management
Tutorial - 8
OceanFresh Beverages Pvt. Ltd. is a mid-sized company in the Maldives that produces bottled
fruit juices for both domestic consumption and limited exports. Recently, the company has
been facing challenges in maintaining a smooth supply chain.
• Inventory Issues: The company maintains high levels of raw material stock (fruits,
sugar, bottles) to avoid shortages, but this leads to higher holding costs and spoilage.
At the same time, finished goods inventory often runs out in peak tourist seasons,
leading to missed sales opportunities.
• Transportation Issues: OceanFresh relies on both sea and road transport. However,
limited shipping schedules between islands, unpredictable weather, and rising fuel costs
have created delays and increased distribution costs. Customers in some islands
complain of late deliveries, while urban supermarkets demand frequent and smaller
deliveries.
The management is reviewing their supply chain strategy and wants to strike a balance between
cost efficiency and customer satisfaction.
Case Study Questions
1. Impellers of Supply Chain
a) Identify and explain the key supply chain drivers affecting OceanFresh in this
case.
In The main supply chain drivers influencing OceanFresh are inventory and
transportation. Inventory decisions impact both costs and customer service, as
holding excessive raw materials leads to higher storage costs and spoilage, while
insufficient finished goods during peak tourist seasons results in lost sales.
Transportation, on the other hand, determines the company’s ability to reach
customers across the scattered islands of the Maldives. Challenges such as limited
shipping schedules, weather disruptions, and high fuel prices reduce efficiency and
responsiveness. Together, these two drivers play the most critical role in
OceanFresh’s current performance, while other drivers like facilities, information,
sourcing, and pricing also indirectly influence outcomes.
b) How do inventory and transportation decisions act as impellers of supply chain
performance for the company?
Inventory decisions directly affect OceanFresh’s responsiveness to seasonal
demand fluctuations. Maintaining large raw material stocks protects against
shortages but locks up capital and increases the risk of spoilage. Conversely,
inadequate finished goods inventory leads to missed sales, which weakens customer
trust. Transportation decisions also serve as performance drivers, as delays caused
by shipping schedules and unpredictable weather disrupt the flow of goods to
customers. Efficient, reliable transportation is essential for delivering fresh juices
on time, especially to supermarkets and tourist markets that expect frequent
replenishment. Both drivers therefore act as impellers by either enhancing or
constraining OceanFresh’s balance between cost efficiency and customer
satisfaction.
2. Framework for Structuring Drivers
a) Using the supply chain driver framework, analyze OceanFresh’s current practices
in inventory and transportation.
Under the supply chain driver framework, OceanFresh’s inventory practices are
leaning towards efficiency in raw materials (by stockpiling to avoid shortages) but
failing in responsiveness for finished goods. While raw material excess provides
security, it creates high carrying costs and wastage. Finished goods shortages during
tourist seasons highlight poor demand forecasting and limited flexibility. For
transportation, the reliance on limited sea routes and rising fuel costs creates
inefficiencies, while unpredictable weather reduces responsiveness. Current
transportation practices are reactive rather than strategically designed, which makes
it difficult to serve both rural islands and urban supermarkets effectively.
b) Suggest how OceanFresh could restructure these drivers to improve
responsiveness and cost efficiency.
OceanFresh should restructure inventory by adopting a leaner system with better
demand forecasting and dynamic safety stock policies tailored to seasonal patterns.
This would reduce holding costs while ensuring adequate finished goods during
peak seasons. For transportation, the company could restructure its network by
forming partnerships with reliable logistics providers, using multi-modal transport
(combining sea and road), and introducing regional distribution hubs closer to high-
demand markets. This restructuring would shorten lead times, improve delivery
reliability, and help balance both efficiency and responsiveness.
3. Inventory Decisions
a) What inventory management strategies can OceanFresh adopt to reduce holding
costs while meeting seasonal demand fluctuations?
OceanFresh can adopt several strategies to manage inventory more effectively. A
just-in-time (JIT) approach for raw materials, supported by strong supplier
relationships, would reduce the need for large stockpiles. Seasonal demand can be
managed through safety inventory policies, where stock levels are adjusted based
on historical tourist season data. The company could also build seasonal inventory
during off-peak times when production capacity exceeds demand, ensuring
products are ready for peak seasons. Finally, adopting first-expiry-first-out (FEFO)
policies will minimize spoilage of raw materials like fruits and sugar.
b) How can technology (e.g., demand forecasting, inventory tracking systems)
support better inventory management?
Technology can play a vital role in reducing inefficiencies. Advanced demand
forecasting systems that use sales history, seasonal patterns, and real-time market
trends can help OceanFresh predict requirements more accurately. Inventory
tracking systems using barcodes or RFID can provide real-time visibility into stock
levels, reducing both overstocking and stockouts. Integration of these systems with
supplier platforms can also improve coordination, ensuring timely replenishment
and reducing waste. In essence, technology helps balance cost control with the
responsiveness needed in a seasonal and geographically dispersed market.
4. Transportation Decisions
a) Evaluate the transportation challenges faced by OceanFresh.
OceanFresh faces significant transportation challenges due to the geography of the
Maldives. Limited shipping schedules mean delays are common, while
unpredictable weather disrupts sea routes and makes delivery times unreliable.
Rising fuel prices have increased distribution costs, straining profitability.
Customers on remote islands often face late deliveries, while urban supermarkets
demand frequent, smaller deliveries that add to transportation expenses. These
challenges highlight the difficulty of achieving both efficiency and responsiveness
with the current transport system.
b) Propose alternative transportation and distribution strategies that could improve
reliability and reduce costs.
OceanFresh could adopt a hub-and-spoke distribution model, where regional
warehouses or hubs are set up closer to high-demand tourist islands and urban
centers. This would reduce reliance on long, costly shipments from a single
location. Collaborating with third-party logistics providers could also bring
economies of scale and more reliable shipping options. To reduce dependency on
weather-sensitive sea routes, OceanFresh might explore limited air freight for high-
value or urgent deliveries during peak demand periods. Additionally, using route
optimization technology can lower fuel consumption and ensure efficient
scheduling. These strategies would make the transportation network more reliable
and cost-effective, supporting both customer satisfaction and long-term growth.
MOHAMED HUSSAIN
