MGT 322

QUESTION ONE

1. What are the roles of Third-party logistics firms in a smooth running of Supply chain process of a multinational organization?

Third-party logistics firms refer to providers of a variety of essential services and processes provided to a business by an outsourced or external company, including transportation, storage, and distribution to the final consumer (Bohling, 2013). Outsourced logistics helps a company in the transportation services of their product. The company reduces the transportation cost since the outsourced company will develop a strategic distribution route that will be less costly. These companies help in choosing the best carrier services of the product to minimize damage. In case a customer needs to return a certain product, the outsourced company acts as a link between the customer and manufacturer by returning the products and eventually delivering the right product to the customer. This reduces the time a customer complains is solved hence improving customer service.

Outsourced companies help in inventory management controls. This is achieved by ensuring that the company does not have excess stock that is not needed. Besides, they ensure that there is reduced obsolescence of the products. The outsourced company hires staff that are less costly on a casual basis and not a permanent basis. According to Makhatho (2016), there’s a reduced labour cost. The hired staff are most qualified; hence they are able to deliver the best. The company's maintenance cost is also reduced since the outsourced company looks for the cheapest but reliable source for maintenance purposes.

On information and communication integration, third-party firms help a company in promoting attention to requests from customers. After receiving complains, they are able to provide reliable problem-solving skills to meet customer demands. With the use of ICT, there is staff flexibility to change according to the arising issue's nature. Hence, there is no need to hire other staff, thus reducing cost. These third-party firms handle the company's information through the use of ICT new technologies; hence, the company is free from data bleach. As a result, there is accuracy in the work done that is achieved through the auditing process.

QUESTION TWO

2. What are the motivational factors companies going internationally?

As the company grows, some find the need to go global to expand their business. The reason behind internationalization is risk diversification. This helps the company to spread or diversify the risk of the company. Thus, companies become more immune to consumption changes in trends of the markets. Hence, external factors will not affect their business i.e. climate change or the country's political and economic instability. A company may decide to go global so as to enjoy new market opportunities. Opportunities such as lack of competition in the abroad market make a company venture into it, thus enjoying the first-mover advantage. The demand for the product and changes in trends favoring the product in a foreign market also motivate the company to go global.

Economies of scale also motivate the company to internationalize since the company can reduce the cost of transportation and distribution of the products (Raychauduri et al., 2020). After internalization, companies are able to produce their products at a lower price in some countries due to factors such as wages reduction, flexibility and component cost. As a result, the production cost will decrease while the volume of production increases. For a company to achieve its goals, it requires well qualified and skilled employees. This motivates a company to go global to look for alternative labour sources that are less costly but efficient.

Growth and profitability is another essential factor that motivates companies to go global. When a product is manufactured at a lower cost in a certain country, it results to increase in profits. As a result, the company is able to expand in production and venture into new markets to respond to domestic market seasonality. A company manufacturing a unique product is motivated to go global because its product is not common, hence enjoying a first-mover advantage in the new market. The need for growth also helps the company to get new ideas on production, low-cost materials, and a well-trained workforce.

QUESTION THREE

3. On what ground companies choose developing countries location for offshoring. Use examples. (Mention the country and decisive factors)

Offshoring refers to outsourcing the company's processes overseas from industrialized countries to a less developed country to take advantage of lower-cost (Schmid, 2018). For a company to offshore these services, it has to consider different factors like technology infrastructure. Before offshoring, a company needs to look at availability, connectivity, security, and technology quality. This includes backup systems and continuity solutions. An example is South Africa which has well and improved telecommunication infrastructure. The risk profile of a country also is another major factor to consider before offshoring. A country hit by recurrent disruptive events like political unrest or a natural disaster like a tsunami is not suitable for offshoring. Terrorist attacks in certain countries like Afghanistan or Iraq also should be considered since there is a high risk of business brought down due to terrorist attacks.

According to Raychauduri et al. (2020), the availability of skilled labour in offshoring county is another factor to consider. With skilled managerial personnel like in Mauritius, there's a surety in the quality of work done. The skill pool in such a country should be high, so the hiring cost is less compared to a country with less skill pool. The offshore sector's size is also important since there will be market availability, skilled labour, and low-cost materials. The market potential in a country should be taken into consideration when offshoring. This includes the attractiveness of the local market and also access to nearby markets. If a country has no better roads to transport products to the local markets, it is not suitable for offshoring.

Government policies governing the country to outsource are of importance to the company. If the tax rate is low as the United Arab Emirates, then there is a need to offshore in such a country since there will be a lot of profit after-sales. The level of corruption in a country and prevailing business culture and ethics also should be considered. The country's living environment, including quality of life, diseases infection rate, and serious crime occurrence rate, is a major consideration. Moreover, the staff's travelling time to report to work, the frequency of the flight, and time difference in the country to offshore should be observed. Legal protection and laws of a country should also fit your outsourcing demand.

References

Bohling, J. (2013). Outsourcing and third party logistics. GRIN Verlag.

Makhatho, M. (2016). Enterprise application integration framework for third-party logistics.

Raychauduri, A., De, P., & Gupta, S. (2020). World trade and India: Multilateralism, progress and policy response. Sage Publications Pvt.

Schmid, S. (2018). Internationalization of business: Cases on strategy formulation and implementation. Springer.