Logistics Assignment
wol22
phase_4_ip.docxIntroduction to Logistics/Supply Chain Management IP#4
Michelle Satten
Professor Synetra Hughes
February 3, 2014
Section I: Introduction
World of commerce is changing around the world, having a multiple distribution center in case of domestic sales is an added advantage to your business with some problems also. In case of logistics business weight of product can vary from light weighted products to heavy weight products. So setting up multiple centers across US gives some advantage to the company if they needs to transport heavy orders but in case of light weighted orders they can be transported from anywhere across US. Having multiple centers can speed up the delivery of products of the company but the company also needs to pay money for the management of the center, which may increase companies input cost. In order to manage multiple centers company must have right technology so that we can manage our business from single setup. In case of International business if we have some international center then we have opportunity to do business with local companies therein and increase our business but again input cost will be required for setting up the center and management. This idea will work only when we have higher SKU in an International market for our products. If we have large international mass for our orders then it can add something to our Brand value in that country that may help our company if we are thinking about expanding or setting up a new business base in that country, then there will be no problem in surviving and no investment is required in building our brand value in that country or in any other International market, but there is a risk in handling large no of international orders from one location in case of theft, misplaced orders because they have to work according to the Rules and Regulations of that country which may differ from country to country.
Section II: Decision-Making Criteria
In case of expanding to domestic market as well as in International markets first we need to analyze that market where we are going to expand, because in every case investment is required which may be constraint for our company and can reduces our profits also, so before taking any decisions we need to think about the following factors which must be considered before investing or taking any decision on expansion.
It is essential for our company to understand culture customs and economic condition of the International location where we are going to expand, and similarly in case of setting up of Multi distribution centers we need to think about the volume of order we are getting from the selected location.
We need to think about the availability of labor, raw material required transportation connectivity of the considered location and their inclusive cost before selecting a site whether domestically or internationally.
In case of International expansion our company will be abide by the rules and regulation of the international location so before investing we should know about the legal and political conditions in the considered international locations whether the conditions are acceptable to our company or not.
Input cost required for setting warehouse in domestic and international market is also an important factor in selecting a location.
Our company should take this expansion as an opportunity of doing more and more business hence highly motivated and skilled persons are required for our own benefit that can make this investment profitable.
In case of International markets we need to check the intellectual property rights in that country before introducing ourselves because that may create a legal issue for our company. (Global Expansion)
Before investing in any location we must have a financial plan like what will be the working capital, financing options, payment collection options in respective country , consulting fees, market development cost etc.
Taxes are different across various states in U.S and Internationally. SO we must have proper idea about the Customs, State duty, tariffs applicable in the respective location because that can affect the profits of our company. (Entering a foreign market , 2010)
We should think about the availability of our basic requirements like Healthy environmental conditions, water, and most important Electricity availability in those locations.
Technology must be considered for proper management before setting up a new international warehouse for effective management of our logistics business, their delivery, payment etc.
We need to do a proper market research with the help of some Marketing companies about the demands of their products and the level of competitiveness before entering in to an international location for setting up its warehouse.
Cost of our products may also affects the demand of their products so we should take care of the availability of the products in that market and their prices also because according to that we may decide about whether it would be profitable for the company to offer products at those competitive prices.
Section III: Metrics to Assess Success
Lot methodologies are available to change the progress of our success. Here I am choosing the most important metrics which can track our success effectively.
Operating Cost:
Measuring operating cost of a particular warehouse whether domestic and International tells us that where we need to make changes to reduces operating cost because lower the operating higher will the profit which results in effective business and management.
% of Demand met:
Measuring and assessing demands of our products and percentage of demands that were met during a period tells us about the functionality of the company and also indicates operationality of our company. Higher % of demands met means higher satisfaction to customer which may build brand value of the company.
Investors Growth
The returns on shareholder investments and the market value of the firm are impacted by the performance of firm
Logistics so this one also plays an important role for financial stability of the company.
Production
Production metrics tells us the state of our infrastructure. This will also include defective items produced during one period and per unit cost of our products can be calculated which reflects whether there is need to improve our infrastructure or not.
Customer Complaints
To attract and retain valuable customers, the price/value of products offered can be enhanced through cost reductions and service improvements in logistics activities. Along with that we need to take care of consumer complaint and their fast redressal because that will increase customer satisfaction in our products. So that must be analyzed regularly which also indicates performance of our management system and changes can be made accordingly.
Some other important metrics can also be used to check the performance of our company which includes the famous 5 PI’s or performance indicators.
- On-time receiving. - On-time shipping and delivery. - Order accuracy. - Inventory accuracy. - Returns cycle time.
Section IV: Quantitative Factors
In case of International Set up we should prefer as per the data we have. Location must be located either in France or Spain because the projected growth rate in these two areas in more than 15%.
In case of domestic Setup we have three options available that is
Increase Production capacity at East Coat
Built Manufacturing Unit at West Coast
Built warehouse at West coast
Among all these options It is better to built a combined warehouse and Manufacturing unit at West coast because it will reduce our per unit operating cost.
Section V: Nonquantitative Factors
Quantitative factors are important only from financial point of view of the company but we need to think about the Non – quantitative factors also which plays important role in business development. Here I am mentioning some of the important factors which we must consider before taking any decision
Level of Collaboration with Government, Educational and Utility Officials
Setting up of business in Domestic or International markets required support of government which can be in any form like reduced property tax, proper availability of electricity, basic amenities in the respective area etc.
Sports, Recreational and Cultural Amenities
Sports, cinema halls, entertainment facilities, hotels must be available in that area so that employees working in units can engage themselves in other activities also which are very crucial for their mental and health conditions.
Confidence in Ability of All Parties to Meet Company’s Deadlines
Suppliers of raw material, delivery unit of the company, production unit all the team members of the company must have confidence to provide the required inputs for the company from their side for proper functioning of the unit.
Political Stability of Location Site selected must be politically stable, because new political party introduces new plans and schemes which may be unsuitable for working of the company or warehouse unit. Several examples are available around the world in this case.
Climate Climate must be normal, otherwise it may affects working of the unit. For example the site neither is located in region of heavy rainfall nor in heavy snowfall because both conditions may affect productivity of the company.
Availability of Healthcare services
Proper healthcare facilities must be available in the area so that in case of any accidents employees can approach the hospital easily which is very common in case of a logistic unit?
Skilled and Cheap Labor
Site must be located in those areas only where we can get cheap and skilled labor easily which may reduce our operating cost of the unit.
Predictability of Long-term Operational Costs Site should be chosen in those locations only where economic condition are stable so that it would became easy for use to predict the long term operational cost of the unit.
Ability to Complete Real Estate due Diligence Process Quickly
Land required for the purpose must be done quickly without any legal issue remaining. We should have legal consultant for this particular issue because land is the most important and crucial factor in setting up a new manufacturing plant or warehouse.
Section VI: Conclusion
Opening an International warehouse is a wise decision because the growth in international market is quite larger than the domestic market and especially either France or Spain should preferred rather than European nation countries for setting up a new warehouse which may also add new consumer base and new presence of our company. Due to increasing demands of our products in west coast region of USA that is about 5% annually we must set up a combined manufacturing unit and warehouse because that will reduce our operating cost, delivery time and consumer grievances redressed due to local advantage that will add to the satisfaction of our customers and shareholders in our company.
References
Michael Watson, Sara Lewis, Peter Cacioppi, Jay Jayaraman (2012). Supply Chain Network Design: Applying Optimization and Analytics to the Global Supply Chain. FT Press
Bulger, S. (2013, April 24). Reasons to consider Multichannel Centers. Retrieved from Multi Channel Merchant: http://multichannelmerchant.com/opsandfulfillment_warehouse/5-reasons-to-consider-multiple-distribution-centers-24042012/
Entering a foreign market . (2010, June 13). Retrieved from Entrepreneurs First:xhttp://www.bdc.ca/en/advice_centre/articles/Pages/exporting_entering.aspx#.UYAFMvIXgWA
Larry Gigerich - Managing Director, G. (n.d.). Qualitative & Quantitative Factors Evaluated During The Site Selection Process . Retrieved from Inside Indian Business: http://www.insideindianabusiness.com/contributors.asp?id=1204
