Global Logistics and Supply Chain Management Issues - Assignment Example

GLOBAL LOGISTICS & SUPPLY CHAIN MANAGEMENT Couse Q1. Demand 8000 Mtrs Ordering cost $ 1000 per order Holding cost $ 2000 No. of days 365 Current order qty 4000 a) Annual Total Using Current Policy Tc = Oc + Ch. Tc = D/a CO + 1/2 QCH Tc = {8000x365/4000 x 100} + {1/2 x 4000 x 2000} – sh. 4,730,000 B. Basic EOQ model – It’s a model formulated to ensure that optical stock and optical cash is utilized out effectively Assumption i. The amount demand is constant and known with certainty ii. The demand is evenly distributed throughout the year iii. Carrying cost per unit per annum is constant iv. Ordering cot per order is constant regardless of the size of the order v. Head time is constant vi. There is no discounts vii. Replenishment is in equal butchers and unit ordered arrives at the same time Limitation of EOQ i. The annual demand may not be known with certainty ii. In practice, discount exist iii. Ordering cost will practically vary with the member of unit ordered iv. Lead time may not be constant v. Demand is not evenly distributed. There are seasons of high demand and those of how demand D= 8000 Cost = 1000 Ch. = 2000 EOQ = = = 89.44 or 89 meters Total ordering cost = D/Q X CO = 8000/49 X 1000 = $ 89,888 Carrying cost = Q/2 X CH = 89/2 X 2000 = $ 89, 0000 Question 2: Factors to consider when selecting a mode of transport A mode of transport can be generally understood as a mechanism can be used for the purpose of moving people or items from one location to another. Modes of transport can be generally categorized into two broad categories, that is, land and air. Air modes of transport include the use of aircraft or flying mechanisms such as the use of parachutes. The land category is divided into transport by water, road, rail, pipeline and cables. Although each transport mode has its advantages over the other, depending on how it is used and availability, it is impractical to conclude and say which mode of transport is generally superior to the others. This section of this paper will discuss the factors that one should consider when selecting a transportation mode to use. Cost of transport The cost of transportation in important subject to consider especially if the core purpose for the transportation is business oriented. It is generally recognized that businesses usually operate for the purpose of making profit in the long run. Thus, the cost of the transportation mode should be effective to enable the business to secure the maximum returns from this action. For example use of air transport for transportation of durable goods within short distances on land with good infrastructure is more expensive than the use of automobiles. Type of goods transported Perishable goods like horticultural products need quick delivery, so for long distances it is appropriate to use a fast mode of transport like air. This will enable delivery on time before the products lose their value. Nature of products also highly influence the mode used, for example petroleum is fluid thus is possible to be transported vial the pipeline while the nature of electricity allows it to be transported by cable transport. Security during transportation The more the mode of transport the more appropriate they become. For example, it is more secure to transport products over an insecure area, areas experiencing war and tribal clashes, via air transport than using the road which might result in destruction of products and even killing of personnel by clashing parties. Extra charges Extra charges mainly result due to using more than one mode of transport. It should be considered which mode is cheaper and is likely to provide direct transportation from the source to the destination. Using of multiple modes is likely to result in additional charges like one from loading and of loading of products before they get to their destination. Efficiency Efficiency of the transportation mode is important to consider as one may need the guarantee that the mode will provide an efficient transport from the source to destination without failure. Other factors that can be considered include; budget efficiency, securing of product value during transportation. In sum, when choosing a transportation mode one should consider the more than one factor to ensure maximum returns from the transportation activity. Third party logistic Third party logistic is generally the actions by a production company to consider involving another form to assist it with services that relate to transportation and supply of its products. A third party logistic company provides multiple services to a production firm. Such services may include; inventory managing, transportation of goods to the market, cross docking and warehousing of companies products. Third party logistics can be very helpful to a production firm. Advantages of third party logistics Third party logistics companies provide production firms with efficient professionals in the field of transportation and thus they are positive contributors to the attainment of the most efficient supply chain. These companies also present a platform where startup or small companies can be able to use their resources to their advantage and save cost in transportation. Thus, the initial cost of developing an efficient supply mechanism for its products is omitted. Securing the trust of a firm that the supply and transportation of the products are being handled professionally gives more time for the firm to concentrate in the product quality and value that it presents in the market. For example a computer production company will have a chance to concentrate in making its product more suitable in the market and leave the supply and storage to a third party logistic company. Through the use of third party logistic companies firms are able to cut costs that would be incurred by individually employing extra employees to further manage this system. Disadvantages Some of the disadvantages of the use of third party logistics is sometime you don’t get so save as much cost as you intended. Because all firms operate for the purpose of profit maximization, as much as the third party is providing you with an efficient supply chain management system you have to pay them for this service. When you chose to use a third party logistic company in supplying your products, you will lose full control over the supply of your products. Direct interaction between the production firm and the client is also eradicated in this. This is disadvantageous to the production firm since this mainly results to poor customer relation. Clients will mainly relate the product with the third party logistic company and not the production company. Direct influence of the employees that are handling the products by the production firm is also not possible. Thus, poor management of the third party logistic firm employees may cost the production firm. For example in case of strikes of the supplying firms may result in the production firm lowering its production for some time. For example a bread manufacturing company will halt its production it the third party logistic company that deals with it supplies of its products stops to operate for a week. In sum, there are some disadvantages that counter the operation of firms through the use of third party logistic firms; these firms offer a significant assistance in the production market. This is true because if we conclude that they have more disadvantages than advantages in operations then they should not be in operation. This is contrary the fact that these third party firms are in operation and are being embraced globally in assistance in supply chains improvement. Q4. Moving Average and Exponential Smoothing Forecast Month demand ∑ MA forecast Jan 80 - - Feb 90 80 80 march 70 81.3 80+0.2(90-80) = 82 April 84 84.7 82+0.2(70-82)=79.6 May 100 997 79.6+0.2(84-79.6)=80.5 June 115 104.3 80.5+0.2(100-80.5)=84.4 July 98 114.3 84.4+0.2(115-84.4)=90.5 August 130 90.5+0.2(98-90.5)=92 MAD = Moving Average = 19.4/6 = 3.23 Exponential = 118/7 =16.86 Most accurate approach of forecast is the exponential smoothing forecast due to a lower mean absolute deviation. (MAD) D. Forecast for the Next Month (Month 9) = = 114.33 Read More