Globalisation of Logistics and SCM - Assignment Example

Introduction The scope of the supply chain management of companies has increased in the last decade as they expand their operations into multiple geographical regions (Brauchle and Evans, 2008). Globalisation has transformed both external and internal business activities. The supply chain management of firms operating in transnational markets is facing numerous challenges rooted in the ability of these companies with regard to their internal management and in issues related to market compatibility (Chathoth, 2007). The theme for the first part of the assignment revolved around the importance of globalisation and logistics applications in the supply chain functions of the corporate sector. This part of the study is focused on the specific logistics features and supply chain factors being planned and implemented in Wales. More specifically, the High Speed Rail (HSR) network’s plan for connecting the UK will be considered in the study and will be analysed by assessing its impact on the economic and corporate scenario of Wales and the UK as a whole.. The relationship between Wales and other big business hubs in the UK and nearby countries is expected to improve with the HSR project. However, some reformers believe that the HSR project may not produce suitable results for the economic growth of Wales (Preston and Wall, 2008). The arguments put forward to the UK parliament by the Cardiff Business Partnership have also reflected some gaps in the HSR project in the context of improving the logistics network of the UK. Logistics trends in the infrastructural planning process of Wales The transportation planning process in the UK is now being directed towards connecting all the major business hubs and markets of each nation. In this regard, the high-speed rail network was considered by national reformers to be one of the most effective means of reducing the time required for transportation and developing a better network for economic and corporate activities. The project has an estimated budget of £480 billion and is expected to create around 40,000 jobs in the UK (Parliament UK, 2012). However, according to the Cardiff Business Partnership, the High Speed 2 (HS2) project does not consider the needs of Wales and southwest England. The Partnership has argued that in order to realise the true potential of the HS2 project, the Great Western Main Line (GWML) needs to be upgraded. Furthermore, they believe that Wales should be given a bigger role in the entire project with respect to the needs and requirements of the people of Wales and SW England (Parliament UK, 2012). A report “Written evidence from the Cardiff Business Partnership (HSR 188A)” published on www.parliament.uk also mentioned that in addition to reducing HSR’s ability to focus on the economic concerns of Wales, the development of HS2 will also weaken the business prospects of the Wales (Parliament UK, 2012). Focusing on the concept of implementing HSRs for improving transportation and freight logistics, China and Japan have successfully used HSRs to increase the significance of the logistics functions of the business sector and improve the supply chain functions of companies (Fawcett and Magnan, 2002). However, considering the individual interests of Wales, the HS2 may pose some serious threats to the social and economic integrity of the UK and Wales. Changes in the GWML are expected to increase the rate of unemployment in Wales, as it is estimated that around 21,000 jobs will be eliminated due to the HS2 project (Parliament UK, 2012). The most beneficial aspect of the HS2 project will be the reduction of travel times. Figure 1: Regional Employment Growth Rates, 2007 to 2040 (Source: Parliament UK, 2012) Considering the changes in the global logistics scenario, it seems that other means of transport are not being considered for improving the situation of Wales and the overall logistics industry of the UK. The growth of the business sector in the last decade has been substantial, and thus the demand for better infrastructural support is also expected to grow (Guerreiro, Bio and Merschmann, 2008). Hence, public and commercial roads can be redesigned to create shorter routes and reduce the time required for the transportation process. High-speed rail link and its benefits for Wales With respect to the supply chain process, companies operating in Wales, or any other outside organisations looking to expand their business in Wales, must first consider the nature of the benefits that can be derived from the geographical region (Harrison and van Hoek, 2005). Although it is among the major regions of the UK, Wales is not known as one of the primary business hubs (Horvath, 2001). Changes in the railway system will thus be of crucial importance for the annual and overall growth measurement of Wales. It has been mentioned previously in the report that while the Cardiff Business Partnership is not in favour of the HS2 project, they are willing to support the concept of HSR. In this regard, Johnson, Scholes and Whittington (2010) observe that the logistics plans of a nation are developed mainly by considering the impact of the project on national growth and the changes that will be required for individual segments of the project’s implementation. Based on this observation, the HS2 project can be justified despite the arguments of the Cardiff Business Partnership. On the other hand, the changes in the labour market of the connected regions will also change the economic implications for companies looking to develop their markets in Wales and southwest England. The case of Redrow Plc can be analysed in order to shed light on the requirements of business firms. Redrow is one of the biggest construction companies operating in the UK and Wales (Redrow Plc, 2014). It is listed on the London Stock Exchange and also has high-brand equity in the domestic markets of the UK. In the context of the HS2 project, it can generally be assumed that the business of construction companies will grow with the growth in transportation processes. Kendall and Cole (2006) support this assumption, noting that the historical development of construction shows that the construction industry has relied heavily on transportation for the selection of its markets and service bases. Thus, with better transportation services between Wales and cities and counties in other regions of the UK, the construction industry should benefit. An in-depth analysis of the impact of HS2 on the business processes of Redrow Plc reveals that the primary role played by HS2 will be to reduce the time and cost of the logistics segment of the company (Redrow Plc, 2014). On the other hand, average labour costs in Wales are expected to drop by £600 per month by the year 2040 as a result of the HS2 project (Parliament UK, 2012). However, the increased scope of the corporate sector will reduce the negative impacts on the business process. The development of the business segment is expected to be derived from the growth of the population of Wales by 2040. The Cardiff Business Partnership noted that the HSR projects were supposed to increase labour costs in Wales by a minimum of £130 per annum by the year 2040 (Parliament UK, 2012). Thus, it can be clearly observed that the evaluations of the implications of HS2 reported by the UK government and the Cardiff Business Partnership are not aligned, and hence the exact impact of the high-speed rail networks cannot be evaluated based solely on the estimates provided by these sources. Competitive advantages that can be gained from high-speed rail links Gaining competitive advantage in the marketplace is one of the biggest challenges for companies in the current scenario (Lowe, 2002a). With the increasing number of firms operating in the market and the rapid changes in consumer behaviour and needs, firms are trying to accelerate their service procedures without impeding the excellence of their products. Mangal and Chandna (2011) observe that organisations are now concerned about the impact of changes in the environment on their internal activities rather than on their external activities. This highlights the intensified focus on managing the supply chain processes of companies. In the previous assignment, we learned about the increasing focus on market expansion, and thus it can be gathered that business are trying to develop their logistics factors (McLaren, Head and Yuan, 2004). In this regard, the means of transport being used by firms and other entities engaged in social or national projects have to be analysed. The four primary means of transport are rail, road, ship and air. However, Lysons and Farrington (2012) mention that decisions regarding means of transportation are based on two primary factors: cost and time. Relating this to the HS2 project, it is evident that the high-speed rail network will reduce the time taken for the delivery of consignments, provided that freight trains are also upgraded. On the contrary, the initial cost of operations may increase based on the improvement of service quality, but can be adjusted by increasing the volume of shipments being made through HSR. Improving logistics is a big step for any business firm, one which will further improve its supply chain activities. As cited in the example of Redrow Plc above, the positive changes in the construction industry are quite vibrant, with an estimated 400 civil households entering Wales. Another essential segment that is expected to improve with the HS2 project is the hospitality industry, particularly the food and beverage segment (Albalate and Bel, 2010). Wales has proved to be a profitable market for international chains, such as YUM’s, KFC and McDonalds, and it has also proved to be a good market for domestic food and beverage companies, such as Brace’s Bakery, Michton and Brains Brewery (Van Weele, 2009). The logistics departments of these companies are of great importance with respect to improving their competitive advantages. Reduction in delivery times will enable these firms to boost their services and cater to a larger number of customers in new markets. Economic challenges for Wales in the context of the HS2 project As discussed earlier, the primary problems regarding the development of the HS2 project for Wales are the limited focus on Wales and southwest England and the necessity of upgrading the GWML. These factors are expected to lower the annual income of the population of Wales and also reduce the country’s market stability. Hence, the Welsh Government only partially supports the HS2 project. On the other hand, based on its own investigation, the Cardiff Business Partnership claimed that employment opportunities for the Welsh population will worsen with the initiation of the HS2 project (Parliament UK, 2012). One of the crucial points mentioned in the investigation report {Written evidence from the Cardiff Business Partnership (HSR 188A)} of the HS2 project is the increase in taxes paid by the Welsh population, which is expected to amount to around £32 billion over the next 20 years (Parliament UK, 2012). Furthermore, the Cardiff Business Partnership has also filed a petition for further investigation of the HS2 project and other HSR plans with respect to their impact on southwest England (Preston and Wall, 2008). The facts presented above can be better analysed and understood by linking them with the impact on the corporate segment. According to Hatoko and Nakagawa (2007a), business firms are seeking to streamline their operations in order to reduce their overall expenditures in the supply chain management process. Most of the big firms are trying to carry out vertical or horizontal integration, which will allow them to monitor and redesign all the internal activities being conducted in relation to the service structure of their business. Companies such as Apple Inc., Google, Microsoft Corp. and Lotus Cars, are increasingly involved in making third-party logistics firms a part of the primary corporation (Lasserre, 2012). A common practice in the integration process is the use of company-directed logistics by the suppliers of companies. However, the development of the HS2 project is expected to reduce that scope, as suppliers can opt for HSR networks for transportation, which take less time and also deliver to more customers within a given time frame. Although this is a beneficial aspect for the suppliers, the integration process of the big firms and the assets acquired for the purpose of logistics will be rendered useless because of the plan (Nakagawa and Hatoko, 2007b). The logistics lessons learned from China The efficacy of China in the context of developing, maintaining and utilising HSR networks for growth and prosperity have been cited above. An exhaustive study of Chinese rail networks revealed the primary difference between the HSR plans of China and the UK. According to Nakagawa and Hatoko (2007b), the Chinese government has used the HSR network mainly for long routes which have helped the country’s corporate sector to spread their operations over a larger marketplace. In comparison to the 100 miles of HSR planned for the UK, China has already established over 6000 miles of an HSR network all over the country (Sky News, 2014a). The HSR network of China is also purportedly double the size of Europe’s and Japan’s railway networks. These facts suggest that China’s absolute focus on the development of business processes has not only helped the country in improving its services for the social sphere and domestic business firms, but has also demonstrated the strength of its logistics network to international companies (Preston and Wall, 2008). According to Lambert (2006), the key difference between the planning process in China and the UK is the basic objectives of the two countries. China is trying to urbanise the entire nation, while the UK is only focusing on short-haul routes and the primary market zones of the country, thereby ignoring the growth opportunities of regions such as southwest England (Givoni, 2006). With respect to the technical aspects of the HSR, while China is using bullet trains to develop its HSR networks, the UK’s functional body for the project has yet to select a uniform train for implementing the HS2 project. According to Johnson, Scholes and Whittington (2009), cost is a big factor in the launch of the HS2 project. However, Chinese HSR networks have also proved to be efficient in terms of cost. An 800-mile journey from north Beijing to west Shanghai costs around £100 for a first-class fare and around £55 for second class. The entire journey takes four hours and 48 minutes (Sky News, 2014a). Regarding the planning of the HS2 project, Preston and Wall (2008) argue that the UK government should reframe its policies and processes in order to improve the implications of the proposed HSR networks by including the aspects of growth and development of all the nation’s cities. The initial stage of the planning process began with a small scale operation; however, with the completion of the planned activities, the project plans are not being extended (Lejeune and Yakova, 2005). Adopting a Wales logistics plan with a global outlook The logistics activities of a given company are not only dependent on its capabilities, but are also directly related to transportation and infrastructural developments in the market and in the nation where the operations are being carried out (Chen and Paulraj, 2004). Croxton et al. (2001) point out that the expected growth of emerging economies slowed down after the global recession of 2007–08, mainly because of the limited transportation and infrastructural facilities of these nations. For instance, India is one of the BRIC nations (the others being China, Brazil and Russia) and also has the second-largest population of any country in the world (Germain, Claycomb and Droge, 2008). Nonetheless, India has been unable to leverage the benefits of its enormous population of 1.25 billion because of insufficient urbanisation and limited transportation networks in the country (Ho and Tang, 2009). This, in turn, reduces the attractiveness of the Indian market to international entrepreneurs. This example reflects the necessity for companies to have proper logistics departments and also includes the factors which are the primary requirements for the corporate and social growth of any geographical area. With respect to Wales, the HS2 project has been criticised because of the limited opportunities being presented to the Welsh population and also because of the implications for the economic stature of Wales. Another essential supply chain factor is that the means of transportation used by companies also affect their operational processes. As cited by the Cardiff Business Partnership, High Speed 1 (HS1) and HS2 have failed to establish a proper route from Wales to Heathrow; in other words, this signifies that air channels have been cut off from the business and social spheres of Wales. Relating this to global supply chain and logistics concepts, Havlik (2009) argues that an organisation’s selection of the means of transport is mainly related to the organisational processes of the business. Moreover, as the price of fuel is increasing, corporate use of air transport has been reduced. The construction and food and beverage industries were considered to be the most benefited segments in relation to the HS2 project, both of which mainly operate via rail and road transport processes. Thus, the implications of the HS2 project for Wales are well within the objectives of the corporate sector. However, expansion of the HS2 plan and the HSR networks of the UK should be redesigned in order to benefit the Wales, SW England and other ignored segments of the country. Conclusion The logistics process designed by a given country is based on the financial implications, economic changes, trade development and social facilities that can be provided to its population. The HSR plans and HS2 projects were the focus of this report. The Cardiff Business Partnership reported a number of drawbacks in the HS2 project plans of the UK government that can hamper the economic prosperity of Wales and southwest England. A reduction in employment opportunities and an increase in taxes may not be appropriate for the Welsh population. However, the trade benefits for Wales are expected to increase in the long run with the improvement in the transportation network. Considering the claim that the HS2 project will provide adequate employment opportunities for Wales even after the upgrading of the GWML, the HS2 project can be considered a viable long-term source of development for Wales. Read More

 

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