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CASE 4.1 Red Spot Markets Company
The Red Spot Markets Company operates a chain of grocery stores in New England. It has a grocery distribution center in Providence, Rhode Island, from which deliveries are made to stores as far north as Lowell, Massachusetts, as far west as Waterbury, Connecticut, and as far northwest as Springfield, Massachusetts. No stores are located beyond the two northernmost points in Massachusetts. Stores to the west are supplied by a grocery warehouse located in Newburgh, New York. The Providence grocery distribution center supplies 42 Red Spot retail stores.
Robert Easter, Red Spotâ€™s distribution manager, is responsible for operations at the Newburgh and Providence distribution centers. By industry standards, both centers were fairly efficient. However, of the two, the Providence center lagged in two important areas of control: worker productivity and shrinkage. Warehouse equipment and work rules were the same for both the Newburgh and Providence centers, yet the throughput per worker hour was 4 percent higher for the Newburgh facility. Shrinkage, expressed as a percentage of the wholesale value of goods
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handled annually, was 3.6 percent for the Newburgh center and 5.9 percent for the Providence center. Jarvis Jason had been manager of the Providence distribution center for the past three years and, at great effort, managed to narrow the gap between the performance rankings of the two Red Spot facilities. Last week he requested an immediate reassignment, and Easter arranged for him to become the marketing manager for the Boston area, which would involve supervising the operations of 11 Red Spot markets. The transfer involved no increase in pay.
Easter needed a new manager for the Providence distribution center, and he picked Fred Fosdick for the task. Fosdick graduated from a lesser Ivy League college, where he majored in business with a concentration in logistics. He had been with Red Spot for two years and had rearranged the entire delivery route structure so that two fewer trucks were needed. As part of this assignment, he also converted the entire system to one of unit loads, which meant everything loaded on, or unloaded from, a Red Spot truck was on a pallet. Fosdick was familiar with the operations of both the Providence and Newburgh centers. He has been in each facility at least 50 different times. In addition, he spent two weeks at the Providence center when the loading docks were redesigned to accommodate pallet loading. Fosdick was surprised that Jason had requested his reassignment to a slot that did not involve an upward promotion. That was his first question to Easter after Easter asked whether he was interested in the Providence assignment.
â€œIâ€™m sorry you started with that question,â€ said Easter to Fosdick. â€œNow weâ€™ll have to talk about the troublesome aspects of the assignment first, rather than the positive ones. To be frank, Fred, one of the union employees there made so much trouble for Jason, he couldnâ€™t stand it.â€
â€œWhoâ€™s the troublemaker?â€ asked Fosdick.
In the warehouse, Bigelow was a natural leader. He would have been a supervisor except for his inability to count and his spotty attendance record on Monday mornings. On Mondays, the day that the warehouse was the busiest because it had to replenish the storesâ€™ weekend sales, Bigelow was groggy, tired, and irritable. On Mondays, he would sometimes hide by loading a forklift with three pallets, backing into any empty bay, and lowering the pallets in position (which hid the lift truck from view), and he would fall asleep. The rest of the week Bigelow was happy, enthusiastic, and hardworking. Indeed, it was he who set the pace of work in the warehouse. When he felt good, things hummed; when he was not feeling well or was absent, work dragged.
â€œWhat did Bigelow do to Jason?â€ Fosdick asked Easter.
â€œWell, as I understand it,â€ responded Easter, â€œabout two weeks ago Jason decided that he had had it with Bigelow and so he suspended him on a Monday morning after Bigelow showed up late, still badly hung over. It was nearly noon, and he told Bigelow to stay off the premises and to file a grievance with his union shop steward. He also told Bigelow that he had been documenting Bigelowâ€™s Monday performanceâ€”or nonperformanceâ€”for the past six months and that Red Spot had grounds enough to fire Bigelow if it so chose. He told Bigelow to go home, sober up, and come back on Tuesday when they would discuss the length of his suspension. Bigelow walked through the distribution center on his way out, and Iâ€™m sure Jason felt he had control of the matter.â€
â€œTom Bigelow,â€ was Easterâ€™s answer.
â€œHowever,â€ continued Easter, â€œby about one oâ€™clock, Jason realized he had a work slowdown on his hands. Pallet loads of bottled goods were being dropped, two forklifts collided, and one lift truck pulled over the corner of a tubular steel rack. At 4:00 p.m. quitting time, there were still three trucks to be loaded; usually they would have departed by 3:30. Rather than pay overtime, Jason let the workforce go home, and he and the supervisor loaded the last three trucks.â€
Fosdick remembered Bigelow from the times he had been at the Providence center. Thomas D. Bigelow was nicknamed T. D. since his days as a local Providence high school football star. Fosdick recalled that during work breaks on the loading dock, Bigelow and some of the other workers would toss around melons as though they were footballs. Only once did they drop a melon. Fosdick recalled hearing the story that Bigelow had received several offers of athletic scholarships when he graduated from high school. His best offer was from a southern school, and he accepted it. Despite the fact that the college provided a special tutor for each class, Bigelow flunked out at the end of his first semester and came back to Providence, where he got a job in the Red Spot warehouse.
â€œOn Tuesday, Bigelow did not show up, and the slowdown got worse. In addition, retail stores were phoning with complaints about all the errors in their orders. To top it off, at the Roxbury store, when the trailer door was opened, the trailer contained nothing but empty pallets. Tuesday night somebody turned off the switches on the battery chargers for all the lift trucks, so on Wednesday, the lift-truck batteries were dying all day. I got involved because of all the complaints from the stores. On Wednesday, Jason got my permission to pay overtime, and the last outgoing truck did not leave until 7:00 p.m. In addition we had to pay overtime at some of our retail stores because the Chapter 4 â€¢ Organizational and Managerial Issues in Logistics
He was in bad shape and the distribution center was in bad shape, so I had the opening in the Boston area and I let him have it. Actually, right now he and his family are vacationing somewhere in Eastern Canada. He needs the rest.â€
Fosdick was beginning to feel sorry that he knew all the details, but he persisted. â€œThen what?â€ he asked Easter.
â€œWell, I took over running the distribution center. I phoned Meyers again, and he and I had lunch. He thought that Jason had blown the case against Bigelow and that we should take him back. So on Friday, Meyers, Bigelow, the union attorney, the shop steward, Bigelowâ€™s supervisor, and I met. Jason, of course, was not there. It was a pleasant meeting. Everything got blamed on poor Jason. I did tell Bigelow that we would be documenting his performance and wanted him to know that Jasonâ€™s successor, meaning you, was under my instructions to tolerate no nonsense. Bigelow was so pleasant that day that I could not imagine him in the role of a troublemaker. The amazing thing was that, when he went out into the center to resume work, a loud cheer went up and all the drivers started blowing their lift-truck horns. For a moment, I was afraid all the batteries would run down again. But I was wrong. They were plain happy to see Bigelow back. You know, the slowdown was still in effect when Bigelow walked onto the floor. Iâ€™d say it was 10:00 a.m. and they were an hour behind. Well, let me tell you what happened. They went to work! By noon we were back on schedule, and by the end of the shift we were a half-hour ahead of schedule. In fact, the last half-hour was spent straightening up many of the bins that had been deliberately disarranged during the slowdown. I tell you, Tom Bigelow does set the work pace in that warehouse!â€
â€œSo what do you suggest I do at the center?â€ asked Fosdick.
â€œWell, the key is getting along with Bigelow. Talk to Meyers about the kind of records you should keep in case you decide to move against Bigelow. Be sure to consult with Meyers before you do anything irreversible. Frankly, I donâ€™t know whether Bigelow will be a problem. We never had trouble with him that I knew about before Jason was there. According to Bigelow and the union attorney, Jason had it in for Bigelow. If I were you, Iâ€™d take it easy with Bigelow and other labor problems. See what you can do instead about the inventory shrinkage.â€
On the next Monday morning, Fosdick showed up at the Providence distribution center. After gingerly looking in all his desk drawers, he had a brief meeting with his supervisors and then walked out to meet the entire workforce on a one-to-one basis. Many remembered Fosdick from his earlier visits to the facility. Because it was a Monday morning,
workers there were waiting for the trucks to arrive. While I was talking to Jason that afternoon, he indicated that he had fired Bigelow.â€
Easter lit his cigar and continued, â€œOn Wednesday, I decided to go to Providence myself, mainly to talk to Jason and to determine whether we should close down the Providence center and try to serve all our stores out of Newburgh. This would have been expensive, but Providence was becoming too unreliable. In addition, we had a big weekend coming up. When I showed up in Providence, Jason and I had breakfast together in my hotel room Thursday morning, and he told me pretty much the same thing Iâ€™ve been telling you. He said he knew Bigelow was behind all the disruption and that today, Thursday, would be crucial. Iâ€™ve never seen Jason looking so nervous. Then we drove to the distribution center. Even from a distance, I could tell things were moving slowly. The first echelon of outgoing trucks, which should have been on the road, was still there. Another 20 of our trucks were waiting to be loaded. On the other end of the building, you could see a long line of arriving trucks waiting to be unloaded; usually there was no line at all. I knew that our suppliers would start complaining because we had established scheduled unloading times. However, I decided not to ask Jason whether he had begun receiving phone calls from them.â€
â€œInside the center, the slowdown was in effect. Lifttruck operators who usually zipped by each other would now stop, turn off their engines, dismount, and carefully walk around each otherâ€™s trucks to ensure there was proper clearance. Satisfied of this, they would then mount, start their engines, and spend an inordinate amount of time motioning to each other to pass. This was only one example. When we got to Jasonâ€™s office, he had a message to phone Ed Meyers, our local attorney in Providence, who handles much of our labor relations work there. He called Meyers and was upset by the discussion. After he hung up, he told me that Meyers had been served papers by the unionâ€™s attorney, charging that Wednesdayâ€™s firing of Bigelow was unjustified, mainly because no provable grounds existed that Bigelow was behind the slowdown. Meyers was angry because, in firing Bigelow on Wednesday, Jason may have also blown the suspension of Bigelow on Monday. Jason and I started talking, even arguing. I talked so much that my cigar went out,â€ said Easter, â€œso I asked Jason, who was sitting behind his desk, for a match. He didnâ€™t carry matches but looked inside his center desk drawer for one. He gasped, and I didnâ€™t know what was the matter. He got up, looking sick, and walked away from his desk. He said that a dead rat had been left in his desk drawer, and he wanted a transfer.
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he had not expected to encounter Bigelow, who was present, clear-eyed, alert, and enthusiastic. Bigelow was happy to see Fosdick and shook his hand warmly. Bigelow then excused himself, saying he had to return to work. The truck dispatcher said that the workforce was ahead of schedule again: It was 11:00 a.m., and they were about 15 minutes ahead. Fosdick returned to his office, and there was a phone message from Ed Meyers. Meyers asked to postpone their luncheon for that day until Tuesday noon. Then Robert Easter called to ask how things were going on Fosdickâ€™s first day. Easter was pleased that things were going smoothly.
It was lunchtime. Fosdick decided to walk to a small cafÃ© where he had eaten at other times. It was two blocks from the distribution center and on the side away from the office. So he walked through the center, which was quiet since it was closed down for lunch. He walked by the employeesâ€™ lunchroom and heard the normal sounds of 50 people eating and talking. Just outside the lunchroom was one lift truck with an empty wooden pallet on it. As Fosdick watched, one of the stock clerks came out of the lunchroom with an opened case of sweet pickles from which three jars had been taken. Next came another stock clerk with an opened carton of mustard from which two bottles had been removed. One of the clerks suddenly saw Fosdick and said weakly, â€œWe take these opened cases to the damaged merchandise room.â€ Fosdick went into the lunchroom. There, on the center table were cases of cold meat, cheese, soft drinks, mayonnaise, and bread. All had been opened and partially emptied to provide the workersâ€™ lunches.
Bigelow was making himself a large sandwich when he saw Fosdick approach. â€œDonâ€™t get uptight,â€ he said to Fosdick. â€œYouâ€™ve just come across one of the noncontract fringe benefits of working at the Red Spot Providence distribution center. May I make you a sandwich?â€
1. How should Fosdick respond to the immediate situation?
2. What controls, of the types discussed in this chapter, might have been used by Red Spot Markets to reduce or eliminate the problems discussed in the case?
3. What longer-range steps should Fosdick take to control the operations of the Providence distribution center?
4. What longer-range steps should Fosdick take to improve the Providence distribution centerâ€™s productivity?
5. What longer-range steps can Fosdick take to reduce the distribution centerâ€™s high rate of shrinkage?