Finished Product International Supply Chains - Essay Example

Multimodal Transport and Finished Product International Supply Chains Explain why most finished-product international supply chains are dependent upon multimodal transport operations for their implementation. (2000 words maximum) Abstract This essay underlines the basic concepts of mutlimodal transport and its importance to the finished product international supply chains. Introduction Today's globalization has encouraged enormous movement of goods all across the world. Efficient supply chains play a great part in determining that the finished product is available for sale. Raw materials are procured and the finished product is transported to the necessary destination. A finished product may be defined as a completed product which has undergone all stages of production, and which is 'bottled' or packaged, sealed and labelled as required for registration purposes. (Source:http://www.apvma.gov.au/qa/mls_glossary.shtml) Logistics is defined as the process of planning, implementing and controlling the efficient and cost-effective flow and storage of raw materials, in-process inventory, finished goods and related information from the point of origin to the point of consumption, for the purpose of conforming to customer requirements. More simply, it is the science (and art) of ensuring that the right products reach the right place in the right quantity at the right time to satisfy customer demand. It has also been defined as "the management of inventory in motion and at rest". (Source:http://www.ocs.ca/english/30_logistics.html). A supply chain is a network of facilities and distribution options that performs the functions of procurement of materials; transformation of this material into intermediate and finished products; and distribution of these finished products to customers. (Source: Ganeshan & Harrison - Introduction to Supply Chain Management) International Supply Chains are those supply chains that transcend national boundaries in their operations. The benefits of a supply chain Logistics and supply chain solutions help clients realize the many benefits of an improved supply chain. They include reducing distribution costs, improving customer service, speeding up sales process and improving customer loyalty. Multimodal Transport Operations The United Nations Convention on International Multimodal Transport of Goods (Geneva, 24 May 1980) states that "International multimodal transport" means the carriage of goods by at least two different modes of transport on the basis of a multimodal transport contract from a place in one country at which the goods are taken in charge by the multimodal transport operator to a place designated for delivery situated in a different country. The operations of pick-up and delivery of goods carried out in the performance of a unimodal transport contract, as defined in such contract, shall not be considered as international multimodal transport." In loosely coined terms of day-to-day industry usage, multi-modal simply represents a combination of truck, rail, water, and or air transport to haul everything from small to large items, from raw materials to finished goods, and from perishable to non-perishables. (Source from website < http://www.bnsflogistics.com/nov302003.asp>). Major transport growths tries to achieve a balance between providing accessibility to the markets, economic efficiency and reduce threat to the environment. Multimodal transport, that is using two or more transport modes for a trip between which a transfer is necessary, has been touted as a solution for the current transportation issues. This came into full force with the invention of the container in 1960's by Malcolm MacLean. McLean explained that while sitting at a dock waiting for cargo he trucked in to be reloaded onto a ship, he realized that rather than loading and unloading the truck, the truck itself (with some minor modifications) could be the container that is transported. (Source from website ). The improvement in productivity was phenomenal. The turnaround time for example, of a container ship was far less than that of a cargo ship, due to the ease of unloading. With the population explosion and city traffic congestion and the harmful greenhouse effect due to the pollution of exhaust fumes from the automobiles, it is often difficult to achieve a balance between the efficiencies required and the downside of transportation options. Utilizing rail, air, sea and road transport enables embracing all the positivism of the systems while negating their weaknesses. In a wholly idealistic pattern, for such systems to be seamless and perform efficiently, tons of transportation information has to be available. The resulting multimodal transport system has to have transfers that are seamless, punctual, locatable, and synchronized. These systems require extreme organization and skilled time management. Multimodal Transport Growth In Europe Whichever economy, transport is a key driver of that country's economic growth. With the advent of the European Union, the challenge of managing this growth emerges. The Trans-European Transport Network (TEN-T) conducted a study on the crucial role in the movement of passengers and goods all across Europe. The TEN-T plays a vital role in securing all modes of transport and carries about half of all freight and passenger movements. One of the key objectives of the policy was to create a multimodal transport network, to allow the appropriate choice in chosen the transport required, initiated a policy based on the fact that freight transport alone was supposed to increase by more than 60% between 2000 and 2020 and to double in the new member states. Without the new network, this increase would be impossible to handle. The Inter-regional traffic alone is supposed to yield 8 billion EUR per year. The result of this increase in traffic is supposed to bring in CO2 emissions up by 38% by 2020 than today. But by building a 30 axes networks, the environmental benefits would include slowing down the emissions by 4% by reducing emissions to a tune of 6 tones a year. By 2020, TENT-T will include 89500 km of roads, 94000km of railways, including around 20000 km of high-speed rail lines, waterways of 11,250 km with 210 inland ports 294 seaports and 366 airports. The roadways will extend to 4800 km offering the missing link of 12300 km of rail lines and 1740 km of inland waterways will be upgraded. TEN-T reiterates that without this expansion, freight that will record the largest growth cannot be handled and the economy will suffer. Data from source website http://europa.eu.int/comm/ten/transport/projects/doc/2005_ten_t_en.pdf The main challenges to multimodal transport Due to globalization and liberalization, countries need to keep up their transport and logistics infrastructure to stay competitive and grow economically and this needs to be ably supported by using technological advantages. The legalities introduced due to the advent of the multimodal transportation have to be tackled not in just a national fashion but over international boundaries to bring in harmonization. Multimodal Transport is also very complex to achieve. It needs very tight control and needs multiple handling and storage. It needs to rely on extensive technology for tracking purposes. Above all, unimodal operations are generally simpler, well known and popular. And they are cost effective as well for smaller scale. So, multimodal operations have to be really competitive and beneficial to convince a switch over. International Supply chains and Multimodal Transport Companies with international supply chains often are faced with huge product mix, which are procured from all over the world. In order to be successful, transport has to be organized as a by-product of the entire supply chain so that smart transport becomes fully part of a smart production process. The sources from the suppliers are cost efficiently sourced from wherever it is the cheapest for the required configuration. Therefore, it is absolutely vital to these companies that these arrive on time to be stocked and sold. They also do not want them to arrive too early because holding them for a long time in the inventories not only accrues interest but also add up data handling and warehousing charges. Therefore these companies often contract these logistic operations to third party companies that become an integral part of the supply chain and logistics related activity. Also, the suppliers may all not be located next to airports or railways or highways. Hence, accessibility to transship may not be possible with a single mode of transport. A unimodal transport may not simply meet their needs. A combination of specific transport methods is beneficial to access areas appropriately and with utmost efficiency. Possible multimodal combinations include rail-highway, ocean-highway, rail-waterway, highway-waterway, pipeline-rail, and pipeline-highway. Combinations of three modes are also sometimes undertaken. Air-highway-rail combinations are also growing in popularity. Multimodal transport: The case of the Laotian Garment exporters This is about the analysis of the garment exporters in Lao PDR who export regularly to the European union, to the port of Rotterdam in the Netherlands, one of the main European entry points. The company currently depends on the transport systems currently in place in the neighbouring countries of Singapore, Vietnam, Thailand and Malaysia. This analysis is done to prove that the currently used route via Bangkok is not necessarily the most efficient in terms of cost and time. This research has been focused on the alternative routes from Lao PDR to Rotterdam involving different modes of transport. Transport and communications are great contributors of a country's economic developments and in order to increase the trade competitiveness of the Lao PDR, multimodal transport is key. This is because transport costs, transit times and uncertainty in cost quantification are all factors that are studied when goods are exported. Currently insufficient use of key waterways, difficulties in documentation, lesser utilization of railways are all factors that have caused inefficiencies. The cost associated with transportation aligns to the fact that unit transport costs differ with differing modes and for high volumes, sea transport is the cheapest and road is the most expensive while rail being intermediate. Depending on the route chosen and the modes, attention to issues of cargo value density, marketing strategy, risk of damage and pilferage as well as security. In the case of Lao PDR PDR, Thailand, Vietnam and Cambodia there is an added issue of political instability that may affect the transport choices. Eventually, the smooth flow of freight of in the various multimodal transport corridors will determine their success. (Full case study details available at http://www.ingentaconnect.com/content/mcb/005/2001/00000031/00000009/art00003) (http://www.ingentaconnect.com/content/mcb/005/2001/00000031/00000009/art00003) Evaluation was done using multiple routes. For purposes of study, the currently used route and the four other routes were evaluated based on the multimodal operations. The first route was the traditional route used for along time. The Lao PDR was used to conducting its business with the communist countries and due to the protocol has to use Danang port. This route suffers from the fact that the transit via Vietman transit has issues due to the differences in the ministerial agencies strategies relating to transit cargo as well as the condition of the roads. Although the transit time is not more that a few days, the routing of the documents take more time due to administrative delays and therefore the total time taken is nearly a week. The sea leg is more reliable than the land leg. The sea leg constitutes 94 percent of the transit but only 49 percent of the cost. From here the cargo moves to Singapore that is a global hub with unlimited connection to Europe, and terminal handling costs are minimal. The second route was embarked upon since Lao PDR opened up its trade to the European union. The port shifted from Danang port to Bangkok. Thailand has a daily feeder to Singapore. Since there are more countries involved in this border crossing was always an issue. Unreliable customs and significant delays in traffic of import cargo were reasons of low confidence in this route. The sea leg is the dominant mode with 96 percent and costs of about 60percent of the total cost. Custom charges are about 12 percent. Bangkok is more expensive as a port, and container charges are high. Total handling charges or " tea money" constitute 13 percent. The third route, involved cargo exiting in the port of Laem Chabang with similar procedures as the Bangkok port. The route ended up being marginally more expensive and with the same transit time. Here there is no tea money involved and the sea leg is about 61 percent of total transport costs, road transport represents 17 percent of the cost, and constitutes only 4 percent of the journey. This was a better port with better efficiencies, with daily feeders to Singapore. Route four involved Lad Krabang that is an Inland Clearance Depot and promotes the concept of multimodal transport. It relieves port storage problems and imparts a certain minimum standard for the operations. The route has lesser problems, but has a higher cost since the railroad transportation is not popular. The sea leg is the most important with 61 percent of the total cost and 96 percent of the total journey. The fifth route though Port Klang in Malaysia is the newest and the most competitive for rate and transit time. The total transit time is lowest coupled with the lowest rate. Rail freight represents 15 percent of cost and 8 percent of journey, sea leg represents 53 percent of cost and 88 percent of journey and road transport takes 15 percent of cost and 20 percent constitute other costs. Although not as big or important as Singapore, Port Klang is emerging as a relatively hassle free hub with better efficiencies, with low transit times. Source (http://www.ingentaconnect.com/content/mcb/005/2001/00000031/00000009/art00003) Source (http://www.ingentaconnect.com/content/mcb/005/2001/00000031/00000009/art00003) From the above analysis, the route via Port Klang is the most efficient route that can be used both in terms of cost and time. In transport logistics, multimodal transport has gone a long way in determining the way business is done especially in case of imports an exports. Multimodal transport has emerged due to its contribution in meeting the customers' demand of more efficient, rapid and reliable deliveries. Conclusion Finished goods products supply chains depend on a primary logistic efficiency where the inventory/sales ratio is highly efficient. This inventory level is directly related to their annual revenues. In the case of finished goods manufacturers the product being there at an appropriate time to the customer whether shipped directly to the end user or stocked in stored for the right time at which point-of-sale occurs is fundamental. Hence a logistic supply chain that brings in efficiencies is crucial. The benefits offered by multimodal transport are the ability for stock to travel, increased productivity of equipment, a decrease in the number of empty transportation, delivery at the right time without long stocking periods, customization of products possible due to current needs being known at time of procurement, better bottom lines due to increased synergies, better quality of customer relationship, management of the information and competitive since cost benefits are passed on to the customer due to reduction in inefficiencies in the transport chain. The ability to comprehensively use the network to its full productive capacity allows for greater success of the multimodal network. This is because, more transfer points from the logistics center allows more customized service. There is a choice of modalities in transport to ensure maximum efficiencies are met. Therefore, it is no surprise that finished goods international supply chains are dependent on multimodal transport for their survival. The system is part of what the business models look for, highest efficiencies with low cost benefits that can be passed on to the customer and allow the company's to stay current and competitive. Sources United nations Convention on International Multimodal Transport of Goods, Geneva 24 May 1980 Accessed 5 Jan 2006 from website http://www.admiraltylawguide.com/conven/multimodal1980.html OCS logistics OCS Express Freight Logistics Accessed 5 Jan 2006 from website http://www.ocs.ca/english/30_logistics.html Hoffman, Kurt C Global Growth of 3PLs is in Response to Customer Demand March 2002 Supply Chain Brain.com Accessed 5 Jan 2006 from website http://www.glscs.com/archives/03.02.outsource.htmadcode=90 General services Accessed 5 Jan 2006 from website http://www.buyusainfo.net/docs/x_4042711.pdf Containerization - History Accessed 5 Jan 2006 from website http://encyclopedia.thefreedictionary.com/containerization Trans European Transport network TEN-t Priority axes and projects 2005 European commission Accessed 5 Jan 2006 from website Read More