Young Again Pharmaceuticals Joe Hannibal, senior director of transportation for Young Again…

Young Again Pharmaceuticals

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Joe Hannibal, senior director of transportation for Young
Again Pharmaceuticals (YAP), is gearing up for his company’s most critical
product rollout in more than a decade. YAP has developed a breakthrough liquid
suspension that reverses the aging process for anyone over 35 years of age.
Available only by prescription, the new product has been dubbed
“Twentysomething in a Bottle” by the media. Demand is expected to be very high
despite the outlandish price tag of $395 for a month’s supply.

The product is being manufactured in YAP’s Dublin, Ireland,
laboratory and will be distributed to major retail pharmacies in the United
States and Canada. Hannibal is responsible for selecting the mode and
contracting with carriers to deliver the product. He is concerned about the
safe and timely delivery of the initial product shipments in April to the
retailers’ distribution centers. The product is high value, somewhat fragile,
and susceptible to theft. Some product, stolen from the laboratory, has already
appeared on auction websites.

In an effort to make effective transportation decisions and
minimize YAP’s risks, Hannibal decided to hold a brainstorming session with his
logistics team before signing any carrier contracts. The discussion of key
risks produced the following list of concerns:

• “If shipments are late or incomplete, retailers will
penalize us with vendor chargebacks. You know they will hit us with small fines
for delivery mistakes.”

• “I’m worried about shipment delays or freight loss from
hurricanes in the Atlantic Ocean.”

• “You’ve got to consider temperature sensitivity issues. If
the product freezes, we won’t be able to sell it.”

• “I’ve been reading about all the piracy problems
experienced by ocean carriers. You know, a 20-foot container of our product has
a retail value of nearly $875,000.”

• “I worry about theft of individual cases at ports and
while the product is on the road.”

• “We’re looking at border delays and Customs fines if we
don’t properly document and mark our freight.”

• “Our brand image will take major damage if the product
gets into unauthorized distribution channels due to theft or misdirected
deliveries.”

• “The company sustainability push has led to reduced
packaging and biodegradable packing materials. If the cartons get wet or
bounced around, we’re going to end up with a lot of damaged, unsellable
product.”

• “The major U.S. East Coast ports can get very congested
during peak shipping season. That will cause delays.”

By the time the meeting was over, Hannibal realized that he
needed to spend some time looking into these issues. While he was pretty sure
that some problems were remote, Hannibal thought that it would be wise to
evaluate each one. His new concern became how to conduct an effective risk
assessment.

CASE QUESTIONS

1. Assess the risks identified in the brainstorming session.
Create and populate a table similar to Figure 10-2.

Figure 10-2

2. Based on your answer to Question 1, what are the three
primary risks that you believe YAP must address? Why?

3. What do you recommend that YAP do to mitigate each of the
three risks identified in Question 2?

4. What should YAP focus on after attempting to mitigate
these transportation risks?

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