Establishing a Regional Distribution Centre in the UAE - Assignment Example

1. Discuss what factors you would take into consideration when selecting a logistics company to be shortlisted for providing these services. The Regional distribution center that we need to establish in UAE will be facing a lot of competition. Normal and customary logistic support will not do much. The area that we have chosen (Jebel Ali Free Zone) is the fastest growing trade zone on earth. The trade zone alone expands of 48 km square. The aspects that we need to look forward to in our distribution center need to be quite flexible. While choosing this 3PL support, the factors that we need to consider are; 1. Transportation Management We need to look forward to multiple modes of transportation. We need to consider whether the firm has the capability of multiple transportation means at their disposal. Even if they do not have their own fleet available to them, they should be able to hire other transportation companies to do the jobs for them. Our logistic distribution center must be able to provide inbound and outbound traffic control, the route optimization services, delivery using multiple mechanisms of transport and payment services. There are in fact various business intelligence tools that come into play when we are dealing with the transportation management. 1.1 Carrier Performance Evaluation When we are considering other factors for our choice of company for the regional distribution center, we need to evaluate the performance of the candidate company based on, on time delivery, cost adherence to supplier’s adherence. Selecting the best carrier for the project would be an efficient choice. 1.2 Mode-Cost Analysis The cost associated with the different mechanisms of transportation and the cost tagged with each of them can help us evaluate the best cost efficient. 1.3 Supply Compliance Analysis When we are analyzing, we need to consider the factor of supply compliance analysis. It has often been observed in the supply chain management that the goods are sometimes delayed. They are not delivered on time. And sometimes they get delivered or shipped more than the expected amount. There can be different factors that can contribute to that operation such as customs and tax evasions. The point in evaluating the logistic support must take into consideration the leverage that the company offers. There needs to be flexibility in the company to cater for the contingencies. 1.4 Career Relationship Management The factor being considered here is that the performance of the logistic company should have an inspiring history. Where this will help in different aspects of the business, it will help in developing the long term career relationships. Which are more useful o us than to them as we will be the one looking for some regional personnel who could provide services. 1.5 Capacity Planning We need to take into consideration the factor of capacity. How huge is their capacity level? In the future how much and when can they expand it? Even if they do not have very impressive capacity, can they utilize to its maximum of what they already have? Can they avoid empty miles by engaging the empty carriages of their way back? 1.6 Cycle Time Analysis The importance of this factor cannot be overemphasized. We need to calculate the time span between the placement of order and the actual shipment of delivery. Again, this factor will be thoroughly analyzed for the new logistic company. The cycle time analysis will be judged on Goods, routes, modes, weather conditions. 1.7 Routing and Scheduling The routing and scheduling techniques of the logistic company will be examined based on their capacity and man power. 1.8 Truck/Ship Driver Performance Analysis The 3PL that we are seeking will of course be asset based (unlike 4PL). we need to examine their vehicle conditions and ship delivery performance. Being aware of it is one thing, and then making our own delivery schedules based on that knowledge will be another. 1.9 Root Cause and Claims Analysis We need to consider the causes of incidents and the claims against the damaged goods during shipment and delivery. These things will be arranged prior to any commitments and contracts. 2. Warehouse Management This is another important aspect of logistic company that we would need to analyze. The expertise of the company will be required in Inventory management, cross docking, metering, picking and other operations related to warehouse management. 2.1 Inventory Analysis The first factor that we need look for on the logistic company under the warehouse management will be the inventory analysis. The expertises that we need to look forward to be the classification and handling of the inventory by suppliers and by material or class of the inventory. The performance indicators in this area will be the inventory accuracy and managing the unexpected inventory turnover. 2.2 Warehouse Performance Analysis We can take into consideration the factor of warehouse performance and analyze it for the final selection of our logistics company. Different indicators like picking, shipping, lines per hour (LPH), percentage over time hours and percentage on time shipment will help us narrow down our choices of the potential candidates. 2.3 Warehouse Costs The cost always plays a major factor. The point of mentioning the warehouse costs is that it depends on the different dimensions and handling requirements. 2.4 Picking Analysis We need o analyze the picking ability of the company. We are dealing in three items; TVs, DVD players and computers. We need to analyze if the company has the ability to pick and store different items. 3. Value Added Services Other than the warehouse and transportation management, some other value added services are often the decisive point between two 3PLs. the value added services that we need to consider are, light assembly, reserve logistics, packing and labeling, kitting and customs brokering. The applications that we need to consider in this area are; 3.1 Cost-Benefit Analysis This analysis can be done prior to our commitment and during our operations. Cost efficiency is the key. The two key factors will always be considered, the quality and price. 3.2 Reserve Logistics This is an extremely important application of the value added services. The reserve logistics means, handling the returns of the customers. An additional quality would be to figure out the pattern of the returns from the customers and storing them. They must be able to go deep into the reasons of return, analyze them and make adjustments accordingly. 4. Marketing and Sales The value added services that the new 3PL company will provide is not restricted to efficient supply chain, it should tap into sales and marketing. It needs to have the ability or potential to tap into sales and marketing. The application factors under this area are; 4.1 Customer Services Portfolio Analysis The managers of the logistic company should be able to analyze the customer’s services portfolio. They should be able to study these results carefully and make their decisions based on it and the profitability. If we are able to make more sales and profit through the appropriate logistics support then we believe that our search is over and we have found what we were looking for. 4.2 Customer Profitability Analysis Every class or section of customers is not profitable. Sometimes the company has to sell its goods or services at break even or loss, just to ward off the competition. The company that will be better at this analysis definitely has an edge. 4.3 Customer Service Level Analysis We need to provide our electronics in all the GCC countries. There are several other distributors that will deal with our logistics service provider. The marketing managers of the company should be able to analyze the level of services that they need to provide to every other regional distributor. They must be able to keep a keen eye on the loopholes of their level of services. _______________________________________________________________________ 2- Discuss what would be the benefits of locating the Regional Distribution Centre in Jebel Ali Free Zone. The Jebel Ali Free Zone (JAFZA) is like a dream come true for foreign and local investors who want to sell products and services in Persian Gulf and South Asia. They do not need to pay import duties and make partnerships with the local companies in the UAE. In the Jebel Ali zone, a foreign business operates as an offshore concern. Outside the JAFZA, in the UAE, the foreign companies need to make partnerships with the local companies who will share profit with them and that share is 51% of the total. But inside of that free zone, there is no such restriction. The foreign companies are free to manufacture, sell or make joint ventures. 1. Location Benefits The JAFZA free zone is located at a distance of about 35km south west of Dubai city around the largest man made port. It covers almost 100 square kilometers and about 30% is leased. The highly attractive incentives of this free trade zone have made it nest for over 850 companies. Out of which, 100 are American firms. Some key benefits of this free zone are; a. No minimum capital investment b. 100% foreign ownership c. Complete repatriation of capital and profits d. Shareholders liability is limited to its paid up capital e. No currency restriction f. No corporate taxes g. No personal income taxes h. Readymade factories i. Readymade warehouses j. Access to a consumer market of about 1 billion 2. Registration Process One other benefit of the free zone is the ease in registration. The process is quite simple. You just need to fill in a two page questioner and fax it to the authorities in Dubai. The response usually takes a week. After that the applicant needs to fill out some forms including the applicant’s article of incorporation. In short, the Jebel Ali free zone can hand the office keys to the applicant within two months time. They are actually welcoming the applicants with arms wide open. 3. Offices The cost efficient offices provide the applicants with ample work space even in that fierce competition free zone. The offices are pre equipped with all the basic necessities. They are ready to use. Electricity, water, air conditioning and all modern communication are the pre maintained items. 4. Standard Warehouses They offer excellent warehouses for various items and capacities. We can store the high quality products. Even some light manufacturing is also available. 5. Land The free zone provides land where we can build our own facilities according to our own requirements. We can get land ranging from 2500 meter square to any area. We can build custom warehouses, factories and storage areas. 6. Build-to-Suit Warehouses Another benefit of JAFZA is their ability to provide the custom built ware houses by the logistics company Gazeley. They can provide us with ware houses of 10 000 meter square. And this facility is for both the lease holders and on free hold basis. 7. Business Center Business Centers World (BCW) are available, which are fully functional and maintained. They provide us with custom made or conventional, fully furnished and equipped offices and meeting rooms. They can be used for both long and short term business projects. 8. Showrooms Each unit in the free zone provides us with warehouse at the back and fancy glass facade show room in the front. We can readily display our products in the showroom. The showroom holds a mezzanine floor and this space can be used as office space. 9. On site Residence The free zone provides residential facilities to the employees and workers of the factories and warehouses in that zone. The residents are provided with all the possible recreational activities, supermarkets and restaurants. 10. Hotels The hotel services are excellent and very affordable. The 2 star ‘Easy Hotels’ provide hotel services for the visitors to the area. This is very useful as the companies are being visited by their own staff and managers from other parts of the world. 11. Retail Facilities The free zone provides all the facilities to establish our own retail business, promoting our own brand name. We can establish our own retail outlets. 12. Advisory and Updating The JAFFZA authorities are very helpful and assist in choosing the best available location for the new applicants and their business ventures. The authorities keep us up to date of the recent developments and various specialized business sectors. 13. Business Matching The authorities help us find our desirable joint ventures, mutually beneficial partnerships and leveraging opportunities as they come. This is available in both sectors of local and international. 14. Dubai Trade Through a single bilingual portal, we have the 24/7 secure access to all the services of complimentary organizations which include the DP world and Dubai customs and this all can be accessed through a single login. _____________________________________________________________________ 3- Specify 6 KPIs you might you use to measure the efficiency of the operation from the point of receiving the goods at the port of entry in the UAE to the point of delivery to the distributor. (a) Explain how each of the KPIs would be calculated. (b) Explain how each might help you identify a problem in the supply chain. (c) Explain what action you might take to resolve a problem highlighted. According to geography of the Jabal Ali free trade zone and the services that we need, the following KPIs will be very much helpful in identifying and measuring the quality of services. 1. Sales Forecasting The ability to predict the sales is extremely important. Even though the free trade zone is providing a lot of benefits regarding custom made warehouses but to be able to predict the sales is the key to a successful business career. The sales forecast calculation impacts every business aspect, from production to inventory to cost and ultimately to revenue 1.1 Calculation We can incorporate the sales forecast by various tools that are available. The first one that we can employ is the forecast horizon. The forecast horizon that we will use will have three kinds of horizons, the short term, medium and long term. For the short term horizon we need to plan out the shipping and accordingly the short term sales. The short term horizon will be focused on the immediate orders and will be very quick to plan engage and complete. This forecasting is done for the coming days. The medium horizon will be working on the supply side (from Japan, Taiwan and Malaysia) and the resources dimensioning. This is comparatively complex and time consuming (it usually is planned in weeks). The precise calculation can be done based on the history of sales in different regions of the GCC. The long term forecasting will be done keeping in view the coming months. The key areas that we need to focus on are the budget establishment and the trend identification. We are supplying electronics; we need to keep up with the latest trends and the latest technologies being introduced so frequently. 1.2 Identifying Problem The key problems when dealing with sales forecasting are that the forecasts are not reliable and when they are reliable in the shot and medium term horizons, the longer the horizon, the less reliable they get. The other problem that we can face while dealing with this KPI is that the sales can be less than the forecasts. In this situation there is too much inventory left over in the warehouses. Lack of sufficient data to analyze and predict the future can be another anchor that can slow us down. 1.3 Solution to the Problem In our case, the problem of inadequate data will not be much of a bother. The Jebel Ali Free Zone is operational for a long time. The businesses are booming there. And by studying the market trends, we can safely predict the sales. To avoid long term forecasts, we need to make sufficient short term forecasts. We need to focus on sales horizons which can be interpreted in terms of days. 2. Inventory The biggest investment is in the inventory. And to strike balance in the inventory and sales is the key to the best performance of this KPI. Turning over the inventory quickly to sales is fine indicator of your healthy revenue. 2.1 Calculation The best way to calculate the inventory is to calculate the inventory turnover ratio. Generally the rule is, the higher the turnover ratio the better. The simplest equation to calculate the inventory turnover is; Inventory turnover ratio = Annual Cost of Goods Sold/Average Inventory 2.2 Problem The problem that we can face here is that the inventory turnover ratio could be too low. The other problems related with the inventory are the inefficient handling of the inventory items. The inventory management here plays a crucial rule. 2.3 Solution There are two ways to improve (increase) the inventory turnover ratio. We can either 1. Increase Sales 2. Reduce the Inventory 3. Procurement & Suppliers This is a crucial performance indicator. It is important because it is very much dependant on the other distributors in the other GCC locations. It depends on the orders and the inventory that the other warehouses can hold. It is just like the two extreme ends of a process. We need to strike a balance between the supplies and the amount that can be procured. 3.1 Calculation This KPI is relatively easy to calculate. It is mostly calculated in terms of total cost contributed to the whole process of delivery. 3.2 Problem The major problem in the procurement and the suppliers section is the order processing cost. More or frequent orders to contribute to the revenue but if they are not properly handled, they can add considerable cost to our budget. 3.3 Solution The solution to the over costing is the optimization through system and total cost orientation. The use of pallets instead of traditional packaging was introduced as a solution to frequent transportation cost. The coherence has to be established between the suppliers pattern and the logistics support company. 4. Warehousing The question of efficient warehousing of our company must address the question that whether the right goods are being stored and how effective is their turnover ratios. 4.1 Calculation The warehousing KPI can be calculated by analyzing and comparing the inventory cost and the management cost. 4.2 Problem The major problem with the KPI of warehousing is the accumulation of too much or too less of the inventory. 4.3 Solution The most affordable and efficient way of measuring this KPI and avoiding the problem of miscalculation of the inventory is that we combine certain indicators relating to inventory and the cost and try to strike a balance between them. Keeping a safety stock to account for the uncertainty will be very useful. 5. Transportation Here we should differentiate between the two transportation areas, the external and the internal transport. When we are talking of the internal transport, we mean the transport from one factory area to another. We are looking forward to light manufacturing in the Jabel Ali Free Zone so this distinction should be clear that the internal transport is only limited to that area. When we are talking of the external transport, we will be calculating the KPIs of delivering the products to other GCC countries from our free trade zone. 5.1 Calculation The calculation will be done by measuring the delivery time from our shipment area to the warehouses. The mileage will play an important role because it shows the efficiency of the route selection. 5.2 Problem The problems that we can face under this KPI are the storage of containers on both ship and the vehicles and the routing and scheduling of vehicles and ships. 5.3 Solution This problem can be solved through the application of local knowledge of routing and scheduling and defining vertices and road cross sections or joints. The patterns and routes are best calculated with the application of mathematical tools regarding the transportation problems. How much load can travel, keeping in view the mileage and the sensitivity of the goods, their packaging and manufacturing? 6. Reserve logistics With the increasing competition and strict environmental laws, the need for this KPI is more important than ever. We need to cater for the returned or defective products and the waste of our electronics product. People are more careful about environment and look up to the companies that take care of the environment. 6.1 Calculation We can calculate this KPI by measuring the items returned every year and how much did they initially cost. We would need to add in the amount for repairing or upgrading those items plus we will need to add in the cost of returning the customer’s money. 6.2 Problem The problem can arise when the cost of this logistic tool exceeds the forecasted amount. The problem can expand even further if too many customers are complaining about the defective product. 6.3 Solution The key to maintaining the balance in this department is to analyze the returned goods from the customer and effectively managing them so as to avoid extra wastage. Another solution to this is going deep into the problem of goods being returned. Trying to find the reason behind the increasing returned goods would be very logical. For this strategy to work, the reserve logistic department will have to work in coordination with the finance department as well as the main assembly line which is in Japan, Malaysia and Singapore. Works Cited DHL. (2008). discover logistics. Retrieved January 19, 2011, from www.dhl-discoverlogistics.com: http://www.dhl-discoverlogistics.com/cms/en/course/processes/procurement_logistics/definition.jsp Jafza. (n.d.). Jafza Products and Services. Retrieved January 19, 2011, from www.jafza.ae: http://www.jafza.ae/en/products-and-services/jafza-products.html Srinivasa Rao P, T. M. (n.d.). Business Intelligence and Logistics. White Paper , 12. survivalware. (2007, February 6). Luhring Survival Ware. Retrieved January 19, 2011, from www.survivalware.wordpress.com: http://survivalware.wordpress.com/2007/02/06/kpi-series-inventory-turnover-ratio/ Wikipedia. (2011, January 15). Performance Indicator. Retrieved January 19, 2011, from www.wikipedia.org: http://en.wikipedia.org/wiki/Performance_indicator Read More