LOGISTICS

Logistics

Introduction

Logistics is about operations and execution, and that makes it a people business. The raw talent is there. One of the next big challenges will be in ensuring that logistics professionals already in the field and those entering from other disciplines or from the education system have the right skill sets to survive and thrive. That will be no small challenge given the pace of change.

The need to go beneath surface logistics is particularly important for international network organisations. Similar surface operations in different countries may belie very different goals and motivations among the network’s organisational nodes in their respective countries.

Despite all the talk about reducing inventories and improving distribution networks, manufacturers are paying more to move and handle their goods. The cost of the global business logistics system swelled to hundreds of billions in amount in the past years. There is therefore a need to develop and implement cost reduction strategies in overall logistics systems in global businesses. The challenges to keep goods moving fast, efficiently, and at a reasonable cost seem to be mounting from every direction, but the tools to deal with those challenges are readily available and just needs to developed and implemented by various companies dealing with logistics.

The continuous change in Hong Kong business arena provides a great impact to different sectors. Basically, previous reports shows that consultants were commissioned by the former Port and Maritime Board to develop a Competitive Strategy and Master Plan for Hong Kong to sustain its position as a transportation and logistics hub in the face of ever increasing competition. To achieve this aim, a number of key projects were identified. One of these was the development of value added logistics parks. Furthermore, Logistics Parks refers to a kind of agglomeration of independent logistics warehouse operation (logistics centre) in particular area. Actually, Logistics Parks looks like an industrial park or state in Tai Po. Thus, planning and preparatory work for the Lantau Logistics Park is progressing well. We have identified the site at Siu Ho Wan, on the northern foreshore of Lantau Island.

Currently, the needs of the global supply chain demand the efficient and speedy movement of goods to the end user with enhanced levels of service. Increasingly, this entails the customisation of goods and services according to the requirements of individual clients. In order to maintain their competitiveness, all parties involved in the process, including manufacturers, vendors and logistics providers, must be able to offer and provide a swift and individually customised service to anywhere in the world. In connection to these, this paper aims to critically analyse the potential of the Logistics Park with respect to the GMP logistics facilities strategy. Moreover, the analysis of the survey that reveals the current thinking about the Logistics Park in Siu Ho Wan, Lantau, Hong Kong was facilitate. However, before we conduct the analysis it is very important to evaluate and discuss the overall context of logistics.

Thus, this paper was divided into two parts. Part 1 covers the overall context of Logistics. And Part 2 discusses and analyse the feasibility of GMP to make a strategic move in 2009 into a logistics park. Basically, Part 2 will include these elements as part of logistic analysis: 1) The Product/Service and Work flow in Hong Kong Office and the needs for the logistics facilities, 2) Based on the User Survey results, to develop a location facilities strategy for the company, 3.) PEST Analysis, 4.) SWOT Analysis, 5.) GMP Core Competence, 6.) Quality Plan, 7.) Risk Plan, and 8.) Change Plan.

Part 1. Context of Logistics

Value activities within any organisation are divided into two general categories, primary and secondary activities. Primary activities are grouped into five specific categories: (1) inbound logistics, (2) operations, (3) outbound logistics, (4) marketing and sales, and (5) service. Inbound logistics are those activities concerned with receiving, storing and disseminating inputs of the product. Operations are responsible for converting inputs into finished products. Outbound logistics are those activities associated with collecting, storing and distributing the product to customers. Marketing and sales concern those activities connected with providing the means by which customers buy the product and are persuaded to do so. Finally, service involves those activities that enhance or maintain the value of the product (, 1993).

Secondary, or support activities, support the primary activities and each other. These activities include procurement, technology development, human-resource management and the development of the firm’s infrastructure. ‘Procurement’ refers to the purchase of inputs not directly associated with the product. They may be purchased anywhere in a firm’s value chain. Technology development activities are concerned generally with the improvement of the product. Human-resource management involves the hiring, training and motivation of personnel. Finally, ‘firm infrastructure’ refers to those activities (such as the accounting and legal activities) that might be considered as overheads (, 1993).

Some or all of the primary and support activities may apply to a particular firm, depending on the complexity of the firm and its industry. Nevertheless, all of a firm’s activities are assigned a place within the value chain with regard to their economic impact on cost, and potential benefit to differentiation. In other words, the categorising of activities is in accordance with their contribution to a firm’s competitive advantage. This systematic and integrative approach to value-chain analysis allows all possible sources of competitive advantage to be revealed (, 1993).

Within the context of a company’s value chains, inbound logistics include activities which may or may not be a source of competitive advantage. To the extent that they are, suppliers are found to be a positive competitive force, but as existing rivals apparently benefit equally from their influence, this essentially nullifies any potential differentiation effect from inbound logistics (, 1998).

Outbound logistics—that is, activities which occur between the time the product is produced and subsequently received by the buyer—though important in general, are not significant as a source of differentiation. Because buyers have substantial bargaining leverage, they simply require these companies to provide the products requested, to a desired specification on demand. This is also expected to imply prompt and reliable delivery (, 1998).

Of particular importance and that which is the subject of this paper is the rising cost of logistics, or the movement and distribution of a company’s finished goods and products. There is lately an increasing problem of the rising costs of logistics in global businesses.

One school of thought views logistics as the umbrella strategy for many of the concepts we are discussing here - they are all relegated to implementation alternatives. Certainly the definition of logistics is: ‘organising, moving and supplying’ and as such could encompass supply as well as demand. However, at a strategic level, the view is taken that logistics deals mostly with the micro activities (such as transportation) that take place after the production of a good or service (the demand side) in order to provide value in customer service. As such, it is a subclass of the supply network strategy, and sometimes even subsumed in supply chain strategy. However, if the demand side of a supply network assumes strategic importance for an organisation (in e-commerce for example), a logistics operations strategy can be developed. It will concentrate upon distribution facility elements of supply rather than the whole (as in the wider supply chain strategy or supply network strategy) (, 2002). Logistics has adopted a more strategic role with increasing globalisation and the trend for geographic dispersal of firms.

One of the things that has been a driving force in the increasing costs, not only in logistics, but virtually in everything is the advancement of technology. It is perhaps the number one thing that drives the costs to increase. The technology development activities have, for the most part, been generated within organisations. Technology development to a commercial stage, meeting or exceeding competitive product specifications, cost reduction efforts--these are all efforts that can, for the most part, be developed and defined within the organisation and applied generally as part of the total product strategy.

Customer service for specific product problems is usually a considerably smaller component of the overall technology development effort. Basically, it involves development work focused on problems a customer is experiencing in using the product. While directed toward service for a particular customer, the effort can often lead to increased volume and/or new applications. Even though short-term and specific, the capability of providing this type of technology development can be a key factor in marketing success (, 1998).

It is undoubtedly an overworked cliché to state that manufacturing cost reduction programs, combined with effective utilisation of available resources, will contribute significantly to the success of any entrepreneurial venture. Like many clichés, however, it is, first of all, true, and secondly, sometimes neglected to the detriment of the overall business effort.

This is particularly true in situations where the product is an innovative, high-tech creation that appears to overshadow other products directed toward the same market segment. Sometimes the technical "glamour" of the product can overshadow such mundane considerations as manufacturing cost, energy and labor utilisation, and laboratory effort. Nevertheless, the planning and formulation of a technology development program without careful consideration of cost reduction opportunities can have a serious impact on the proverbial bottom line (, 1998).

Product differentiation and competitive performance will carry the product through the early phases of the product cycle, but sooner or later effective manufacturing cost control techniques will have to be included as objectives of any technology development program. This is also a driving force for the increasing costs of logistics. Labour is also regarded as one of the main cost-driver, with transport costs also being important, and given the technological choice of ultrasound equipment it was felt that there were few opportunities for reconfiguring the value chain of a company (, 1993).

Exceptions in documentation are one thing that will trigger a response and can slow the movement of goods. Accurate data collection and effective communication are tools that will avoid adding time and cost to the flow of goods in commerce, and those tools are readily available to manufacturing and distribution companies at reasonable costs. Further developments in these tools and better pricing will likely result as the adoption curve rises.

For a carrier, a new piece of business may represent a long-standing relationship between a consignee and its supplier. That's an exception for the carrier that can be easily resolved by the consignee. More shippers are looking at their carriers a little more closely as well. One of the requirements that companies look for in a carrier is affordable logistics.

Alternatives that benefit both shippers and carriers by reducing costs and optimising network efficiency may be expanding, but not as fast as some costs are rising. Insurance costs have risen as much as 300% for carriers. Some smaller carriers have elected to "run naked" (uninsured). This can put the shipper at risk should one of those carriers be involved in a serious accident (, 2002). Therefore companies involved in logistics should come up with strategies that can help cut costs or else their clients will look for other cheaper alternatives.

Part 2. Analysis

One of objective of this paper is to determine the feasibility of GMP to make a strategic move in 2009 into a logistics park. Thus, the critical analysis of the Product/Service and Work flow in Hong Kong Office and the needs for the logistics facilities was analysed. The evaluation of the results of the survey was also initiated. Furthermore, identification of the relationship between the selected strategy and the core competence of the company was made.

Basically, GMP is established in 2003 and is a customer-oriented organisation engage in the design, manufacture and distribution of plastic toys and plush toy such as capsule toy, figure, candy toy and premium item. With the concentrated effort of the management staffs and skillful workers of GMP, 4 factories ( 9001) has been established which was located in Guangdong province. The well-established corporate structure and production facilities that are backed up by experienced staffs enable GMP to meet the changing market needs. In addition, GMP uses top quality candles and materials mainly imported from USA and Austria. The present monthly production capacity of GMP is around 2 million pieces of plastic toys and 100,000 pieces of plush toys. Thus, the corporate culture encourages a strong team spirit among all departments and subsidiaries, manufacturing top quality toys to customers worldwide. Apparently, GMP is in full control over the sampling, production and cost management since GMP is in better position to offer the best service and fulfil individuals’ needs.

Product/Service and Work Flow in Hong Kong Office

Basically, the vision of GMP is to be the most dynamic and innovative toy manufacturer, building quality products that are expandable and universal. Actually, GMP has 13 staffs in HK with 2000 sq. ft. premise area for office. In addition, there are 3 factories located in Zhongshan and 1 factory in Donguang i.e. equivalent to 50 sq. ft. area.

Apparently, GMP logistic workflow and job duties are composed of 5 steps i.e.:

Step 1: Receive the order from customer (Issue PO to factory and sales confirmation)

Step 2: Deliver the material and consigned parts from HK or China factory (Check the inventory of consigned parts and issue material PO to vendor)

Step 3: Production (Arrange Quality Controller for inspection)

Step 4: (Arrange shipment from factory in China via HK to destination)

Step 5: Payment collection (Handle I/E shipping document)

With regards to this workflow, the illustration regarding organisation chart and GMP facilities was presented below:

GMP in HK office – Organisation Chart

GMP Facilities

The previous illustrations show the organisation structure and GMP facilities. Basically, appropriate logistic strategy allows GMP to have a successful development. Actually, logistics may have either internal focus, or external focus covering the flow from originating supplier to end-user. In addition, s-state flow systems are usually optimised for one of several goals: avoid shortages of the object (in military systems, especially for fuel and ammunition), minimise transportation cost, minimum time to obtain an object, or minimum total storage (time and amount) of objects (to minimise the interest losses of in-storage inventory). Logistic flow is particularly important in just in time manufacturing in which great emphasis is placed on minimising inventory.

User Survey Analysis

This paper uses survey questionnaires to gather information regarding the feasibility of the Logistics Park in Tai Ho, Lantau Island. Findings of results are shown below:

Table 1

Table 2

The previous tables show the distance between current operation location to customer and suppliers. According to the dominant response, 21% of the respondents believed that 16-30 minutes is the average distance measured in time between current operation location and customer. On the other hand, similar results are obtained when the respondents are asked about the distance between current operation locations to supplier.

Table 3

The presentation above illustrates the responses of the respondents regarding the percentage of their land transport costs in the total operation costs. Based on the survey, 22% of the respondents believed that land transport is about 11 to 15 % of their total operation costs. In addition, majority of manufacturing industry users are in average when it comes to their satisfaction regarding the current logistics operation (see table 4).

Table 4

According to the responses of the individuals, moving in or not to Lantau provides them no significant effect (see table below). Basically, the respondents’ responses reveal that the different costs regarding management and operation will be same whether the company decided to transfer or not.

Average

Interpretation

Operation Costs

3.24

Remain the same

Labour Costs

3.22

Remain the same

Material Costs

3.16

Remain the same

Storage/Inventory Costs

3.28

Remain the same

Transportation Costs

3.24

Remain the same

Land/rental Costs

2.88

Remain the same

Travel times to and form airport

2.92

Remain the same

Difficulties in serving customers

2.84

Remain the same

Problems in maintaining adequate supplier relationships

2.86

Remain the same

PEST Analysis

Another marketing model for analysis that can be utilised in order to analyse the corporate strategy of GMP is the PEST analysis (See Appendix 3). PEST Stands for Political, Economic, Sociocultural and technological factors that influence GMP’s overall performance in the market place.

A. Political Sector

A company will not be able to gain success if they will not consider legal and political sector as part of their strategy. GMP has observed business ethics. Hence, the company considers legality in all their actions. They make sure that all their products will be useful in response to their social responsibilities. Politically, GMP has tried to be helpful in the society. In fact, the company has established GMP’s Foundation that supports science and technological advancements.

B. Economic Sector

Economically, it can be said that from the 1960s to 1990s, GMP is secured by having continuous growth rate throughout the years (See Appendix 2). Through the Management for excellence strategy imposed by , the company has been able to establish an economic stability to continue to serve and offer people from different agencies and sectors private or public, locally and globally.

C. Sociocultural Sector

Culture is an important factor in understanding an industry, because for any organisation to operate effectively it must for some extent have a general set of believe and assumptions on how culture will influence the productivity and the success or failure of any company. Culture environment is one of the important principles that influence the organisation. (1991) identifies that there are four dimensions that differentiate cultures at a national level (power distance, individualism-collectivism, masculinity-femininity, uncertainty avoidance), which help to understand that people arrive to organisations with their own national culture.

In GMP, the management sees to it that they value the opinion of their employees no matter what is their nationality. Since, this company is competing globally; it cannot be denied that they need employees form different cultures to be in the company to help in the decision making. It is also indicated that the international managers has been able to create a positive relationship in the local managers. Moreover, the management of the company has seen to it that they would be fair in treating all their employees. Prior to , , already knew that they need an expert who would help in commercialising the company to attain its goal, hence, he recruited . From then on, the Human resource sector of the company has continuously get individuals whom they know would be a big help for the success of the company. However, the proposed strategy of during that time has been an issue especially for the top management of the corporation.

, vice president of Human Resources pointed out the ’s strategic path is lacking information about how the management of the company could maximise their assets, through their human resources (, 1998). As part of the strategic change imposed which is the Management for Excellence, GMP has been able to allow each and every human resources regardless of their culture to voice out their opinion to further enhance the corporation’s structure ( & , 1996). And on the other hand as part of the society of the GMP Corporation, the members of the company always ensures that they would efficiently have a facility and technology that would be able to carry out products that would eventually satisfy all their clients.

D. Technology Sector

The complexities of achieving business success through increased efficiency, effectiveness and competitiveness, combined with innovative applications of modern technology, has heightened the awareness of both Technology and business managers towards more strategically oriented approaches for planning and management of any industry (, 1993) .As mentioned earlier, the company establishes a research and development department which is responsible for the maintenance of the quality of the product of the company, innovativeness, and ensures technological advancement for all the activities of the company.

Herein, GMP uses state of the art facilities that will secure all their analysis; they also used microporous membrane filtration to further purify the waters to be safely used by their respective customers and clients. In the 1960s and 1970s, GMP achieved a tremendous growth as the company applied its membrane separations technology to wide-ranging market function. Their technology is built upon the highest quality and functions in order to provide customer’s demands in membrane separation technology. Herein, the physical resources of the company were being monitored to maintain its efficiency to further enhance the organisation’s position to be the number one membrane separation industry in the global market.

Strengths, Weaknesses, Threats & Opportunities (SWOT) This section addresses hypothetical key strengths, weaknesses, threats and opportunities for GMP.

Strengths:

Weaknesses:

Infrastructure in place
Basis for strong management team
Possibility to evolve into range of offerings
Location is highly suitable
Very focused management/staff
Well-rounded and managed business
Marketing plan in place

Over-dependent on borrowings - Insufficient cash resources
Focus maybe too narrow
Lack of awareness amongst prospective customers
Potential need for larger premises
Absence of strong sales/marketing expertise
Emerging new technologies may move market in new directions

Threats:

Opportunities:

Major player may enter targeted market segment
Economic slowdown could reduce demand
Market may become price sensitive
Market segment's growth could attract major competition

Market segment is poised for rapid growth
New markets offer great potential
Distribution channels seeking new products
Potential to diversify into related market segments

GMP Core Competence

Basically, competence is a multi-dimensional construct. The rationalist approach couches competence in terms of the personal attributes of workers such as education level, which is often used as an objective measure of intellectual capital ( & , 1996). This approach is fairly narrow. A broader and more common definition of competence in organisational settings is that it includes an individual's demonstrated knowledge, skills and abilities (. 1998).

. (1998) expressed concerns that the rationalist approach defines competence in indirect terms, as these descriptions do not indicate whether the worker uses these attributes. Sandberg advocates the use of an interpretative approach to discover the workers' definition and understanding of their jobs. In Sandberg's view, this interpretation determines the workers' definition of job competence and therefore the range of skills they utilise at work.

In connection to this, GMP core competence is its strength in products tailoring. Furthermore, GMP customised their customer’s needs with the flexible production and logistics flow support and captured the toys niche market in toys capsule and other toys value-added packaging service with the highest quality control in all their products. Actually, GMP core competencies includes activities such as test marketing; product and brand positioning; packaging; determining product options, product feature, styles and product quality; deleting old products; and providing for customer service. Thus, GMP’s products tailoring is important when a company is pursuing a product development or diversification.

Quality Plan

Quality planning, as defined by (2003, ), ‘is the process of identifying the quality standards the project needs to comply with, to achieve the required condition and satisfy the terms of the contract’. Quality policies are guidelines set down in the norms of the industry quality standards and the subsequent planning done according to it. The policy is important as it lays the foundation for the complete procedure to make quality implementation a successful venture. There are certain activities that the firm need to take upon starting with customer requirements and ending with successful implementation of the project by customers in order to ensure that all quality procedures and standards applicable for the project are followed, all the reviews and tests are planned and conducted. The following are such activities:

Compliance to applicable Standards/Guidelines.

Preparation of Quality Plan.

Preparation of Test plans and assessment of test coverage.

Approval of plans.

Problem of recording and resolution.

Necessary focus on measures of quality.

The tracking measures of the project quality will be conducted at two levels: (1) checking the project management against best practices or current project management standards to ensure that the management function will be able to achieve the project’s objectives and (2) auditing the implemented project management system against the declared system. Tracking the quality tasks in a quality plan would provide the project team members with a wealth of information and consequently use that information in the decision-making processes, thus helping the project team approach its project objectives. Additionally, quality management can be achieved through planning documents presented to the project team during scheduled meetings such as the project quality plan, quality control plan, inspection reports, non-conformance reports (NCR), concessions, change requests, commissionings and data books and manuals. The mentioned documents will assure that the project will achieve the preset objectives.

Risk Plan

As part of the development of this report, an assessment has been made of the major risks which could affect successful and timely completion of the project. The Project Manager will be responsible for maintaining a log of these risks as the project progresses, for identifying and implementing appropriate risk management strategies and for communicating the status of major project risks to those involved. The table below identifies the main risks likely to jeopardise the successful delivery of this project and the associated strategies designed to address them.

Risks

Areas of Risk

Impact on Team members/Stakeholders

Risk

Risk Management Approach

Timeline is set without reference to the scope and resources available.

Stakeholders feel their needs are not being met within the time constraints

Project fails due to lack of commitment

Ensure that time, funding, and resource levels are realistic.

Senior management commitment

Stakeholders are reluctant to participate in the project due to a lack of senior management commitment

The project falters or fails to gain traction amongst key stakeholders

Ensure the business case is clearly communicated to senior management and they officially sign up to sponsor key phases.

Domain Expertise

Stakeholders do not provide the right resources to the project at the right time

Lack of the correct domain expertise at each stage of the project will delay or suspend the project until available.

Options should be explored to ensure domain expertise is made available as required in the project

User expectations not met

Stakeholders suspicious and unsupportive of project

Project is not based on a mutual trust

Ensure expectations are realistic and be open and

honest about progress and issues

Scheduling Problems

The project team, as they are not full time on this project, will

have on-going support and development

roles for existing systems while they are on the project.

Lack of real commitment on the project

Recognise the pressure on the team and be explicit

about what tasks will be dropped or where normal

commitments can’t be met.

Coordination with other initiatives

Team members develop a sense of confusion over priorities

There are other known initiatives with

potentially overlapping or conflicting scope

or timescales

Application of scope management, early definition

of interfaces, open communications

External Changes affecting Project Scope

Confusion over reorganisation of project scope

Changes imposed externally may affect

GMP processes or interface specification

e.g. changes to the national qualifications

framework

Project team must keep up to date with external

developments and plan project timetable

accordingly

Change Plan

According to (1981), the heart of the project management concept is good control; therefore it must be carefully planned. Very elaborate and complex control tools are not needed; the control tools should be adequate only to assure compliance with the overall project plan. Therefore, the project implementation plan should provide the basic elements of the control process. Project control is the process of reducing the deviation between actual performance and planned performance. Measurements are taken on each of the three project constraints of time, performance, and cost (, 1993). This project will be monitored and controlled on a day-to-day basis by the Project Management. Progress and development will be assessed by evaluating the work finished, recognising variances, certifying issues are determined and recognising the quality of delivered outputs.

(2003) stated that one of the fundamental realities of project management is that there will be variances between what is actually transpiring and the plan. He pointed out that all plans are guesses, and while our best guesses may be quite good, it is unlikely they will be perfect. And the higher the level of uncertainty is in projects, the greater is the likelihood that guesses are substantially off the mark. In it plays the biggest part of having a project plan, so that the level of uncertainty could be significantly decreased with preparing for possible situations that may arise. There are three areas of the project which need constant monitoring and control: schedule, performance (of the software and of the users) and cost. They are considered as critical areas by most project managers as they are the factors in which project participants have power over. Project issues must be identified, prioritised and dealt with swiftly to ensure that dependent activities are not affected. Some of the more common control problems were enumerated by (1993). They are presented in tabular form below.

Control Problems

Schedule Problems

Performance Problems

Cost Problems

Delay of critical activities

Poor quality

Inadequate budget activities

Change of due dates

Poor functionality

High labor cost

Unreliable time

Maintenance problems

Poor cost-reporting estimates

Poor mobility

Increase in scope of project

Technical problems

Poor precedence

Lack of training

High overhead cost relationships

Corrective actions that can be taken for scheduling problems include: (1) Expediting; (2) Eliminating marginal activities; (3) Combining related activities; (4) Revising milestones; and (5) Adjusting time estimates (, 1993). Key issues that must be addressed in the cost control of a project are as follows: (1) Better estimation of time, resources, and cost; (2) Clear communication of project requirements, constraints, and available resources; and (3) Better coordination of project functions; (4) Timely reporting of project requirements: time, materials, labor, budget (, 1993).

Where an issue proposes a modification to the delivered output of the project a Change Request (CR) will be recorded. Each CR will be documented (including initiator, reasons and a description of the change required) and evaluated in terms of its impact. The appropriate actions required to resolve the requested change will then be determined. A report on outstanding Change Requests will be presented for consideration at meetings of the project team. Changes that need to be made to the detailed project plan will be identified throughout the life of the project. Any changes that require a change to the high level plan will be reconciled and reviewed with the Project Sponsor and Project Team approval will be obtained at the next meeting.

Also, through constant project communication, impact statements, non-conformance reports (NCR), change requests and concessions (discussed above), modifications and variations orders (VO), extras to contract, drawing revisions and specifications and configurations revisions (, 2003), the scope of project work is controlled through such documents.

Logistics Park Relocation Decision

Based on the analysis, GMP drive is in sales & marketing strategy. Thus, GMP should maintain this advantage to have continues progress. In addition, Hong Kong office is a hub for sales contact point not a logistics hub.

Basically, the first priority of GMP is to increase its labor for Sales & Marketing Dept and invest factories facilities rather than logistics Dept. thus GMP should consider labor force increase rather than moving to another location. Apparently, the second priority of GMP is to capture larger share market in plastic/plush toys with the highest customer service it can provide, namely its price flexibility and value-added service.

With regards to the foundation of the organisation, GMP was only established at year 2003 thus, it is not financially feasible to move to another location as it has not mature its position enough in the market. Since GMP products 90% mainly are delivered by ocean and only 10% by air. There are no necessary to move our Logistic Dept. to Logistic Park.

Financially, it is wiser to increase its investment in Labor or 3rd Party Logistics services instead. GMP may hire 3rd party logistic that can be provided their facilities In Logistic park for instead of establish our own office. Our currently have 4 warehouses in China factories are comprehensive and specified storage candy. There will be high investment involved in Logistic Park. Hence, GMP moving to Siu Ho Logistics Park in 2009 is not its priority and is very unlikely to make this move.

Basically, business leaders face an unprecedented level of market turmoil and dynamism. The globalisation of markets, the liberalisation of the former East-bloc economies, the increasing diversity of the workforce, and the rising ubiquity of the Internet are only a few of the factors driving rapid change. Actually the evaluation of results shows that the success rate of the companies that will consider creating or relocating to Logistics Park in Tai Ho, Lantau Island is moderately low.

Basically, this results shows that the relationship of the selected strategy and the core competence of the company is the changing economy. Such changes mandate responses on the part of individual businesses but this begs several questions of managers: do we need to respond, when should we respond, and what should be the nature of our response? While managers have faced similar questions in the past, there is growing agreement that the pace of change has quickened: managers have less time to respond to change.

In GMP, it can be said that strategic change that they implemented in the company can be considered a successful move since it heightened the company sales and profits just after the change has been taken (See Appendix 1). In addition, the strategic change made by the company has been able to promote a good management and marketing strategy for the organisation as a whole which resulted for the company to be considered as the largest and leader of producing new and innovative products in terms of membrane technology industry.

Change is a social process that should be undertaken in continuing phases and not just a decision event (, 1998). Hence, to the strategic changes made by the company, it can be seen that GMP has been able to sustain the development of the changes imposed in the company. The company has considered strategic change as their primary activity in realising that it is essential to attain their corporate mission and objectives. The company learned that even if implementation is the sensible or physical steps of employing an innovation. Individuals and their relationships are regarded as the major components to its successful execution, and sustainable mechanisms are needed to achieve the development and improvement in its procedures. The recognition of sections for improvement is the first level of the process of change, followed by the integration of plausible solutions to address conflicts and issues that are being identified. Actions in these sections are being held independent of position within the working organisation.

Recommendations

First and foremost, to effectively control costs as well as resources, the company should consistently pursue cost reduction/efficiency initiatives and should not delay taking any action if the need arises. The company should target what they perceived as low entry cost service industries as alternatives to their own rapidly declining trades. With the presence of competitive pressure, the owner-manager should sympathise with the notion of defensive strategy.

For companies not only in GMP, costs should be split up into fixed and variable costs, and marginal cost should be calculated. A capacity output should be recognised. Any owner or manager involved in logistics should think of himself as following a focus strategy with an emphasis on cost reduction, rather than product differentiation (, 1993).

As mentioned, labour was regarded as the main cost-driver, with transport costs also being important, and given the technological choice of ultrasound equipment it was felt that there were few opportunities for reconfiguring the value chain. The owner or manager should therefore perceive his firm as a low-cost operation, which aimed to achieve an operational cost minimum. In pursuing this cost-focus strategy the owner-manager will be unsympathetic to notions of responding to attacks on his strategy. On one level he would feel that it was very hard in any case to discover potential moves. On another level he would also feel that if the value chain were not susceptible to reconfiguration, and cost was being tightly controlled, this was the best passive deterrent (, 1993).

Management of logistics operations should use market research of any kind, and the forecasts of outside bodies like trade associations should also be taken into consideration. A price reduction by the management would bring forth a price reduction by their strongest competitors, irrespective of whether business conditions were normal, buoyant or depressed, and the same was felt to be true of price increases.

Consistent with this, management should not think that the company had a certain amount of ‘elbow room’ in pricing within which a price change would not bring about a reaction by competitors. It is important to remember that a number of theoretical arguments are examined for conjectured demand curves with relatively inelastic segments about the prevailing average price. They may best be understood as deriving from switching costs which customers must bear in changing suppliers.

In one study, one owner-manager confessed that switching costs of some customers were low, which suggests that a certain measure of customer ignorance encouraged lack of price responsiveness, though quality of service might also have played a role here. The owner-manager reported that changes in costs and changes in demand were the main reasons for altering selling price. A non-uniform price tariff was adopted with different prices being charged for large and small traders. Price rebates were offered in the form of bulk discounting.

Large institutional customers in the public sector were perceived to be relatively more price sensitive than other purchasers and seemed to put tight controls on costs. The owner-manager said, ‘On big orders the odd penny per square foot is significant’. The sorts of institutions he had in mind were hospitals or universities, which might make very big orders of several hundred window blinds at once, but would expect to pay only a very low price (e.g. a few pounds) per blind. These institutions were very tightly cash-constrained over the period concerned, as a consequence of budgetary stringency for most large public-sector institutions.

The account given might well have been different for institutions like commercial factories in large industrial estates. There was no such thing as a controlled price (e.g. set by government or trade association) or a recommended price for this service. No collective industry action was ever taken. The owner-manager did not agree with forming coalitions and would not contemplate blocking tactics against rivals. Advertising was undertaken, promoting the firm’s service over that of its rivals.

Newspaper advertising had been tried, but was found to be ineffective. The owner-manager was prepared to increase advertising in slump conditions but not to reduce it in boom conditions. Competition was perceived to be generally strong, but weak in some aspects (, 1993). Logistics companies would benefit to following the right choices this company under study has made.

Alternative packaging designs may be the last bit of low-hanging fruit available to companies who have exhausted most other distribution cost-reduction opportunities. While results vary by company, changing the weight, size, shape, material, and/or handling of a package can yield significant savings in packaging, transportation, and storage costs (, 1998).

Conclusion

From the analysis, majority of the business organisations today operate in a turbulent and dynamic business environment. The contemporary business environment is undergoing a metamorphosis as rapid technological innovations, competitive markets, diverse customer preferences, and extensive global operations prevail in it. To ensure continuous operation and survival in today’s rigid business environment, a business firm has to be open to change and improvement. Business processes, services, products and operations should be consistently subject to evaluation and refinement. The norm is to deliver quality products and services while maintaining flexible and effective operations.

One of the most vital aspects of a business operation is the management of the supply chain and its logistics. The supply chain and logistics should comprise of the coordinated arrangement of manpower, technology, and production processes that transforms raw materials into tangible products or services. Basically, the supply chain and logistic processes determine how business firms secure materials, exploit people, utilise machines, and follow business processes to develop specific products and services for the satisfaction of consumers. This business operation is crucial as any defect in one area can render adverse impacts to the others. Thus, management of the logistics entails strategies and constant monitoring to ensure its consistency to deliver outputs to the customers at the most convenient time.

Apparently, while costs of the transportation and distribution of goods and products are increasing, it is not without a solution. Development and implementation of cost reduction strategies in overall logistics systems in global businesses is needed in order to combat increasing costs. Although the strategies can help, a large factor is also contributed to the kind of management that is running the company. Without good management, the best cost-cutting strategies would still be useless.

References:

Appendices

Appendix 1

GMP Summary of Operations, 2003-2004 (in thousands except per share and employee data)

Item

1st Quarter

2nd

Quarter

3rd

Quarter

4th

Quarter

Net sales

$747,979

$703,162

$657,515

$621,893

Cost of sales

336,165

312,422

292,827

272,222

Gross profit

$41 1,814

$390,740

$364,688

$349,671

Selling, general, and administrative expenses

268,672

256,483

241,130

226,784

Research and development expenses

58,001

60,907

55,032

47,066

Restructuring charge

34,750

Operating income

$ 85,141

$ 38,600

$ 68,526

$ 75,821

Other income, net

3.149

Interest income

6,182

6,723

3,914

3,450

Interest expense

(13,408)

(9,907)

(8,226)

(6,543)

Income before income taxes

$77,915

$ 35,416

$ 67,363

$ 72,728

Provision for income taxes excluding nonrecurring tax benefit

17,531

7,615

14,483

18,180

Income from continuing operations

$ 60,384

$ 27,801

$ 52,880

$ 54,548

Income from discontinued operations

Net income

$ 60,384

$ 27,801

$ 52,880

$ 54,548

Net income per common share:

Income from continuing operations

$ 2.17

$ 1.00

$ 1.90

$ 1.96

Net income per common share

2.17

1.00

1.90

1.96

Cash dividends declared per share

$ .47

$ .43

$ .39

$ .35

Financial Data

Working capital

$250,711

$224,691

$246,107

$249,277

Capital expenditures, net

48,119

68,331

56,734

46,650

Depreciation and amortisation

29,181

28,741

24,757

23,504

Property, plant and equipment, net

255,468

235,662

189,241

162,588

Total assets

783,706

734,339

650,621

576,149

Long-term obligations

102,452

103,347

104,048

104,978

Shareholders' equity

$478,160

$434,853

$406,948

$365,547

Number of employees at year end

5,755

6,132

5,868

5,832

Appendix 2

Figure 1: Porter’s Five Forces Model

Source: . (1980).

Appendix 3

LOGISTICS

0 comments:

Post a Comment

LOGISTICS

Next

Newer Post

Previous

Older Post

0 comments:

Post a Comment