Business Plan for International Logistics - Example

International Logistics: Business Plan Report Name Institution Course Date Executive Summary This report analyses the international logistics which deals with forwarding and reversing flow of goods and services. The report deals with C&A Company’s whose main activity is importing electronics and telecommunication gear from China to retailers in Australia. According to the report, some international activities of C&A Company include distribution, production and procurement. The report analysis many challenges that face the logistic activities in the company and need to be taken care of in order to be competitive. There are so many opportunities also that the company can utilize in order to boost its logistic activities’ effectiveness. According to the report, successful logistic activities are important for the C&A Company as it is a source of competitive advantage and therefore an effective and efficient logistic system need to be implemented, controlled and improved. Introduction Globalisation is considered to be one of the major factors affecting logistic activities (Duerre and Schwandt, 2010). International logistics is the management and development of a system that is in charge of forwarding and reversing flow of products, services, and information, in and out of a particular international organisation (Handfield and McMormack, 2008). The logistic industry has experienced logistics revolution and is characterised by many complexities, opportunities and risks. This report will discuss the international logistic activities of C&A Company including procurement, production and distribution. It will also highlight the opportunities and challenges associated with these activities and will describe a new business plan for the company taking into consideration the challenges and opportunities. Organization's Identity Company Background C&A Company is located and core operated in Victoria Melbourne Australia. The company is listed in the ASX and the main commercial activity is importing goods from China and supply to local retailers in Australia. The company specifically imports electronics and telecommunication gears such as mobile phones, computers, electronic equipment, radio television among other electronics from China and sells to the retailers in Australia. As a result of the demand for telecommunication gears and electronics in Australia, the company has dramatically grown over the years and covers a large percentage of the market. Key product/Services As seen earlier, the products imported by C&A Company from China include electronics and telecommunication gears. These products can be classified as functional and technical products. These products require a greater procurement attention due to their level of criticalness. One feature of these products is their value and profit potential. Electronics and telecommunication gears enhance profit and the company’s ability to boost its competitive advantage (Iyer, 2011). In addition, these products have a high supply risk such as the chance to failure and destruction during transportation (Iyer, 2011). These products are largely accepted in the market due to their better features compared to the competitors. Due to high value and high risk associated with electronics and telecommunication gears, they can be classified as criticals. Being critical in nature, these products are prone to reduced sales as well as customer dissatisfaction (Iyer, 2011). Customers tend to stem benefits from product features and characteristics. Functional features result in benefits that customers easily associate with. Functional benefits result in design and production decisions. The functional and technical features of a product may result to benefits including effectiveness, durability, cost-saving as well as speed (Iyer, 2011). The C&A Company’s products have been identified as cost effective, effective and durable as a result of their effective functional and technical features. International Logistics Activities Logistic activities are considered complex operations of organisations (Ronald, Ballou and Srivastava, 2007). They can be broken down into different fields such as distribution, procurement, production, after-sales, disposal and domestic logistic among other activities. INCOTERMS plays a fundamental role in the international logistics activities (Christopher, 2010). Some important INCOTERMS include free on board, free carrier, free alongside ship, cost and freight, cost, insurance and freight and delivered at frontier. The INCOTERM associated with the products of C&A Company is the Free on Board. In this INCOTERM, the duties of the seller is to deliver the goods on board, pay loading costs and provide on board receipt (Christopher, 2010). The duties of the buyers include paying unloading costs, nominate carrier and pay for the fright. Documents required for free on board INCOTERM include export licence, commercial invoice, import clearance and customary clean receipt. Some international logistic activities for C&A Company include procurement, production and distribution. Distribution can be termed as the delivery of the products and services from the producers to the consumers (Stock, Greis and Kasarda, 2000). It entails transportation, processing as well as warehousing. In C&A Company, distribution is an important activity since time, place and quantity of production differ with those of the consumption. Melbourne port is used in distribution of the company’s products to Australia. On the other hand, procurement entails activities including market research, supplier management, order controlling and ordering (Stock, Greis and Kasarda, 2000). The target in procurement includes maximizing efficiency, outsourcing while maintaining autonomy and minimizing procurement cost which maximizing security. Production entails logistic processes in a value adding system. It ensures that the customers receive the right products in the right quantity and quality. Production offers the means to attain customer response as well as cost effectiveness (Fabbe-Costes, Jahre and Roussat, 2009). Tract and tracking is an important part of production as it ensures products are safe and reliable. C&A Company can make use of this as it deals with valuable and risky products. The below chart illustrates the international logistic activities in C&A Company. Challenges Associated with International Logistics Activities There are many challenges that affect logistic activities of C&A Company. One challenges affecting these activities is bureaucracy and culture differences between China and Australia. Cultural differences exist whether a company operate globally, locally or domestically (Wallenburg et al., 2011). Cultural challenges add to issues faced by C&A logistic activities. C&A Company lacks employees who can identify differences among people, language, laws and culture. The tendency to just assume that people in China have similar culture to what works in Australia is a cultural problem. Strict regulation is another challenge facing C&A logistics. In China and Australia, the logistic market is highly regulated. Regulation may be imposed by national and local authorities (Stock, Greis and Kasarda, 2000). Strict regulation often hinders the creation of the national network. In addition, regional imbalance in China is a problem in relation to distribution since it brings about the imbalance of product flows to Australia. Internationally, this imbalance is present between China and Australia which results to hitches in re-positioning empty containers (Closs and Xu, 2000). Furthermore, although China has lowered its trade barriers, including the quotas and tariffs, there still exist challenges with regard to distribution of goods. Products can be subjected to border tolls when moving to Australia. Another international logistic challenge includes poor infrastructure (Stock, Greis and Kasarda, 2000). Lack of effective transportation infrastructure, inadequate integration of the transport network and lack of enough warehousing and distribution facilities in Australia affects the logistic sector making it of low quality and inefficient. Opportunities Associated with International Logistics Activities Policy changes have created opportunities for C&A Company (Gimenez, 2006). Since the1990s, global trade agreements between countries have enabled products to flow freely unrestrained across the national borders of different countries that once protected their successful industries from outside competitors with huge tariffs, custom duties and penalties (Gimenez, 2006). Custom regulations and laws and documentation have been made easier. This may be beneficial to C&A Company. The company should adapt to their supply chains as fast as possible in order to benefit from the lower tariffs, regulations and standards within the established new trade zones. In addition, the strategic location of a country is important favours international logistic (Gimenez, 2006). For instance, in countries with mid-latitude moderate climate, the transportation system is convenient while in inland mountainous regions, the transportation network is ineffective affecting the distribution of products. Accessibility through transport network can also offer an opportunity for logistic activities. The accessibility of China is as a result of its island position which enables ease of product distribution to Australia. Also, favourable political factors may favour international logistics (Bae, 2011). For instance, issues concerning change of tax rates and revised tax laws, changes in environmental laws and changes in accounting standards affect international logistics. In China, there has been a tax reform that is favourable and support foreign investments and importation. Monetary stability in the country has been well maintained having its inflationary pressures put under control (Duerre and Schwandt, 2020). This has been supported by the sensible banking principles as well as the available lending practices. As a result the country has low inflation rates. This favours the logistic activities for C&A Company. Practicing in Business Situation As seen earlier, China has poor infrastructure which creates a logistic challenge for C&A Company. However, China is a potential importer of telecommunication gears and electronics to Australia. Importation of these products is favoured by many factors such as lower tariffs and regulations and its accessibility through transportation systems. As a result of this, the company should continue to import its products from China and sell them to retailers in Australia. Also, although Australia is highly regulated, selling products in the country is risky. However, the market potential is quite big given the population in that country, its economic growth, high disposable income and their standard of living. In such a case, C&A Company may still want to sell their products in that country. Successful logistic activities are important for C&A Company as it is a source of competitive advantage. Management has the responsibility of ensuring that the logistics of a business operate smoothly as well as cost-effectively (Gimenez, 2006). Logistic planningfor C&A Company When importing products from China to Australia, import duty and taxes apply. The INTERCORM method suitable for electronic importation is FOB where by the import duty to be paid is exclusive of the value of the products being imported. Due to the use of FOB, the electronics shipping of up to AU$1,000 are exempted from duty. The company’s products like laptops are subject to additional charges such as sales tax. The import processing charge for one laptop from China to Australia is AU$50.00 and a 10% sales tax. From China, the transportation of C$A Company’s products such as laptops can be done using sea fright since it is the cheapest mode as it counts cost per kilogram of cargo. C&A Company have contracted a manufacturer in China called Titoma Factory to manufacturer its products. The manufacturer of the electronics and telecommunication gear ordered by C$A Company are delivered to Shanghai port. The company then book shipping from this port and pays for fees including sea fright charges, port duties and VAT. From Shanghai port, delivery time to Australia is approximately 29-35 days. In order to take shorter time, the company should place order and plan in advance. The electronic and telecommunication gears arrive in the Melbourne port in a 20’ shipping containers. The port authorities start with the custom clearance whereby the company is charged duties and port fees. For instance, for 20’ container, the company is charged an average of about AU$37 for duties and port fees. Additionally, the company is required to pay import documentation fee of AU75.00 per shipping and security charge levy of AU10.00 per container. The products are then loaded on a truck and delivered to a warehouse in North Melbourne. The map for the distribution of the products is from the port via Dacklands and West Melbourne to North Melbourne where the cost of warehousing is relatively low. The company’s warehouse cost for 25 pallets of laptop cargo is AU$111.00 per week. For one laptop for instance, the cost is about AU$0.65. The cost of track transportation is charged per kilometres covered. One kilometre covered by a track carrying 2-5 tonne of cargo is AU$0.63. The distance from the port to the warehouse is 55.72km. Thereby carrying 2-5 tonnes of laptops from the port is approximately AU$35. Suitable location of distribution centres should be in regions such as East Melbourne, Rosanna, Carlton, Parkville and South Wharf since this are regions found closer to the customers. The products are transported in trucks from the warehouse to the distribution centres when order has been placed by the consumers. The use of this logistic plan will enable the company save a lot of money and speed up its distribution process. Implementation of a logistic plan The success of a logistic plan for the C&A Company is evident in how effective and efficient it is. Even if a logistic plan is well designed, it has the potential to fail if it lacks well-planned and resourced implementation plan (Malik, 2010). In order to continue with the momentum created during the planning process, the implementation process should start immediately after all the plans have been put in place (Malik, 2010). Also, continual quality monitoring as well as evaluation of logistic activities should be put in place from the start of the implementation process in order for any barriers and challenges to be resolved without affecting the logistic system. For instance, three months after the implementation of the logistic plan, the company should evaluate its effectiveness through the use of measurement indicators to determine the ability of the plan to reduce cost, increase speed and satisfy customers. For the plan to be effective, the company should carry out some implementations. The third-party logistics can be implemented in the logistic activities of the company (Mortensen and Lemoine, 2008). 3PL entails using external group or organisation to carry out logistic activities that are often considered internal works (Mortensen and Lemoine, 2008). When the company exports its products from China, it should consider hiring an organisation to assist with the distribution logistics and supply of product to the customers. This will enable them save cost. Another key factor in place to assist the company in its logistic plan is integrated planning (Bidgoli, 2010). One main challenge that the company faces with regard to logistics is that, information for decision making tend to be scattered, making it hard to access. Closely related to process automation, technology that helps in developing a single “work place” can be essential in the success of logistics activities in C&A Company. The company should establish a dedicated satellite network in the city. The mainframe of the company’s headquater should maintain all the records of the available stock at every distribution centre. Improvement of a logistic plan Significant improvements can be made in the logistic system in order to take advantage of the opportunities presented and eliminate any barriers that may threaten to hinder logistic activities. One way to improve the logistic plan of C&A Company is to look for a better location for the warehousing activities of the products. Although North Melbourne is a suitable location for warehousing, other places may be better in terms of accessibility and cot of transport. This will lower logistic costs and take advantage of the low tariffs regulation. In addtion, the inventory management function can be used to link up all the steps of the distribution operation and eliminate the need for decisions such as selecting a lower-cost carrier having a lower performance (Bidgoli, 2010). In addition, the company can utilize the links to the customer through internet access. Orders of the telecommunication gears and electronics can be done through online tools such as emails and social media. This will allow the order management process to eradicate some steps and also reduce the lead-time from days to minutes (Bidgoli, 2010). This will increase the accuracy and speed of the distribution process. The above example highlight the ability of automation in improving the distribution process, reducing the cost in the long run. Logistic control Logistic management and control involve the balance between minimizing cost while certifying availability objectives. Availability of products and services is considered the output of the logistic system (Bidgoli, 2010). In considering the input side, logistic control entails the minimization of costs resulting from holding inventories, production, distribution, procurement, warehousing, and administration of logistic activities (Mallik, 2010). Control of logistic activities in C$A Company should be directed towards the control of logistic output as well as the input of logistic system. Important entities of logistic control include service level, transportation costs, warehousing cost and production costs (Christopher, 2010). In order for C&A Company to be able to overcome all the challenges facing the logistic activities and take advantage of the opportunities presented, it should set goals and standards for performance; it should also measure its logistic performance and take any required corrective measures. There are so many methods that the company can use to measure the performance of logistic activities. These methods include control charts, productivity ratios, audits and budgets (Christopher, 2010). The techniques for measuring the performance of logistic activities offer a comparison to the present and past performance. All the challenges facing the logistic activities can be seen as changes. In controlling logistic activities in C&A Company, the main focus should be to retort to change by predicting future states of the logistic activities (Christopher, 2010). Logistic control systems should aim at assuming possible future outcomes so as to come up with ways to respond and guide future decisions. Conclusion The logistic industry has experienced logistics revolution and is characterised by many complexities, opportunities and risks. C&A Company deals with the importation of telecommunication gears and electronics. International logistic faces many challenges, including cultural differences and strict regulations. Opportunities that have presented themselves for the international logistics include monetary stability, accessibility and lower tariffs and regulations. For logistic activities to be effective in C&A Company, there are many new plans, implementations and improvements that can be done. For instance, use of new technology can improve the distribution operations. Use of 3PL can allow the company take advantage of the opportunities of logistic systems. 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