Logistics and supply chain management are two closely connected models vital for businesses to efficiently and successfully manage the flow of goods and services from suppliers to consumers. Logistics denotes the management of the physical flow of goods from the point of origin to the point of consumption, which may also encompass transportation, storage, inventory management, and other connected activities (Anca, 2019). Logistics aims to enhance the delivery of goods and decrease costs, thus guaranteeing that goods are supplied to the customer on time while in good condition. On the other hand, supply chain management incorporates the broader network of actions involved in the whole supply chain, including production, procurement, and distribution. It encompasses managing the flow of information, materials, and finances from the point of origin to the point of consumption (Anca, 2019). SCM’s purpose is to enhance the supply chain, reduce costs, improve effectiveness, and improve customer gratification. Effective logistics and SCM necessitates the companies to develop strong collaboration and communication among all stakeholders tangled in the supply chain, such as suppliers, manufacturers, distributors, retailers, and customers (Anca, 2019). Data analytics, automation, and digital platforms can also enhance logistics and SCM operations. This can benefit EcoWorld, which seeks to globalize its supply chain processes.
Risks and Benefits of Moving the Supply Chain to a Global Market
Globalizing a supply chain can be overwhelming for any organization but also presents many latent assistances. In the case of EcoWorld, some latent benefits of increasing its supply chain globally are access to new markets, diversification, cost savings, and expertise. As stated earlier, diversification is one of the essential benefits of globalizing the supply chain. By working with suppliers from diverse regions, EcoWorld can decrease its risk of supply chain disruptions. If any supplier meetings a problem, the company can, in return can, move to other suppliers from different areas, thus ensuring that production endures smoothly.
Additionally, it offers the company access to a broader range of resources and materials. Additionally, the company can access new markets by entering the European markets of Latervia and Rombia, thus helping it expand its consumer base and surge revenue. This offers a prospect for EcoWorld to tap into the growing demand for sustainable and eco-friendly products in these new markets. By differentiating its consumer base, the company can also decrease its reliance on the US market, which may be more seasonal demand for its products.
Additionally, the company can achieve cost savings by finding lower-cost suppliers, thus helping it decrease its general production costs. This can be accomplished by taking advantage of the lower production costs in nations like Latervia and Rombia, where the company gets its glass-blowing expertise and other raw materials, thus leading to amplified financial performance, profitability and more competitive pricing. The company can also collaborate with suppliers in diverse locations, offering new insights, innovation and new expertise that can benefit the company. For instance, working with glass-blowing experts in Latervia can improve the value and design of EcoWorld’s products. This can aid the business in distinguishing its products from competitors, attract new consumers and surge its market share. However, despite the benefits posed by globalizing its processes, various potential risks are associated with globalizing the supply chain. These risks include supply chain disruptions, cultural and legal variances, quality control challenges, and cost increases. These risks could arise from new suppliers in diverse locations with diverse cultural practices, legal regulations, trade policies and standards. EcoWorld should conduct detailed due conscientiousness on suppliers, establish effective communication and partnership with them, and monitor the supply chain regularly to guarantee its effectiveness and efficiency.
The Order Winners and Order Qualifiers
Various concepts can help a company achieve a competitive advantage in the industry. Some of these concepts include order winners and order qualifiers. This can be the case for our focal company, i.e. EcoWorld, as order winners and order qualifiers play a substantial part in its global manufacturing and distribution plan. Order qualifiers refer to the minimum criteria a product or service must meet to be reflected by consumers’ valuation (Richey et al., 2022). The order qualifiers of the company may comprise the quality of the hand-blown glass sphere, the health and sustainability of the fish and plants, and the capability of the environment to work with light. These necessities must be met for consumers to contemplate buying the good.
On the other hand, order winners refer to the factors that distinguish a product from its rivals, thus making them more attractive to consumers’ valuation (Richey et al., 2022). Some of the focal company’s order winners could comprise the product’s price, design, and functionality. For instance, EcoWorld could distinguish its products by giving its consumers a broader diversity of designs, customizations, and colours. Moreover, the environment’s capability to be upheld with little effort or maintenance can also be an order winner for the company.
The company can apply these concepts to attain its competitive advantage in the global market as utilizing order qualifiers ensures that the products of the company meet the minimum needs of consumers, thus offering a basic level of satisfaction. However, to truly stand out, EcoWorld must excel in the order winners, which can set it apart from its rivals and fashion a distinctive selling proposition valuation (Richey et al., 2022). EcoWorld should continue conducting market research to comprehend the necessities and preferences of consumers in the Latervia and Rombia markets. This will aid the business in classifying the order winners that are most significant to these consumers, such as design, price, and sustainability. EcoWorld can also apply its sustainable and eco-friendly products as an order winner, tempting consumers who prioritize environmentally-friendly product valuation (Richey et al., 2022). This can be accomplished by guaranteeing that the raw materials and transportation techniques in its global manufacturing and distribution plan are sustainable and eco-friendly.
Total Quality Management
Expanding the global supply chain network can have a substantial effect on the total quality management of EcoWorld. TQM refers to the management method that emphasizes meeting consumer necessities and continuously refining processes, thus improving quality and reducing costs (Anca, 2019). The company should guarantee that all apparatuses of its supply chain are combined, reliable, and meet quality values. Analyzing how the company aims to expand its global supply chain and its effect on TQM includes introducing new suppliers that need to become more familiar with EcoWorld’s quality principles (Anca, 2019). Latervia and Rombia may have diverse quality standards, and their goods may need to meet EcoWorld’s stipulations. The company should find quality contracts with new suppliers ensuring that they follow the set EcoWorld’s quality standards as failure to meet the requirements set by the company may lead to delays in the production process, damage to the company’s reputation, and eventually, loss of customers which can be detrimental to company’s financial performance and market share.
Additionally, expanding the global supply chain network can result in longer lead times, which may distress the TQM of EcoWorld. Raw materials and final products of the company may necessitate transportation through various means, such as aircraft and trucks, which are typically subject to transportation postponements, weather-related issues, and customs clearance. These problems can cause interruptions in the production process and result in missed deadlines. Thus, the company must guarantee that its supply chain is consistent and that contingency plans are in place to address any potential disruptions. Moreover, the company must communicate efficiently with its suppliers and consumers in Latervia and Rombia to guarantee that all necessities are met. Language and cultural barriers can lead to misinterpretations, delays, quality issues, and loss of consumers.
Six Sigma
Six Sigma is a data-driven quality development practice that aims to identify and eliminate process defects (Ikumapayi et al., 2020). The company can develop a Six Sigma plan encompassing the following steps. Defining the problem at hand of spoilage during delivery may require sound definition in needs in quantitative terms. A baseline must be founded by tracking the percentage of spoiled products during delivery, the grounds of spoilage, and the charge of spoilage to the business. The company can also measure the data it has collected in great detail (Ikumapayi et al., 2020). The company should collect data on the present delivery process, such as data on transportation and the time that would be taken to deliver its products. The data would be vital in determining the root causes of the problem. Once the data has been collected, the company should analyze it to ensure that it identifies the root causes of the problem. The team can use various tools, such as the Fishbone diagram and Pareto chart, to identify the most substantial reasons for spoilage. After making the necessary data analysis, the company should develop a plan to improve the delivery process. It may encompass changing the methods used by the company to transport its products (Ikumapayi et al., 2020). The final step in the Six Sigma process is control which encompasses establishing a process for monitoring and controlling the delivery process to guarantee that the improvements are continued over time. This may encompass regular temperature monitoring during transportation, regular maintenance of refrigerated trucks, and ongoing training of delivery personnel (Ikumapayi et al., 2020). Thus by following the above-described plan, the company can considerably decrease the percentage of spoiled products during delivery, which would lead to improved customer gratification and reduced costs associated with spoilage. The Six Sigma plan will additionally permit EcoWorld to classify other areas for improvement in their manufacturing and delivery processes, which can further improve their products’ quality and upsurge customer gratification.
Modes of Transportation
Globalization can considerably affect the numerous methods of transportation that EcoWorld applies for its manufacturing and distribution. Some of the various methods that the company can use to move its goods include air transportation which is the fastest mode of transportation that the company can utilize to deliver its products across. It is ideal for delivering high-value, low-weight, and time-sensitive products (Anca, 2019). Additionally, this form of transportation is appropriate for shipping fragile goods like EcoWorld’s decorative environments. However, air transportation is expensively paralleled to other modes of transportation (Anca, 2019).
Moreover, air transportation is subject to weather and air traffic interruptions, which can lead to substantial delays in product distribution. The company can also use sea transportation, a cost-effective form of transportation appropriate for shipping bulky and heavy products. Sea transportation is dependable and has a high carrying capacity (Anca, 2019). However, sea transportation could be faster paralleled to air transportation, and it is subject to delays due to bad weather, port congestion, and customs reviews.
Rail transportation can also be a suitable form of shipping products over land to long distances. One advantage of this method is that it is fast, reliable, and has a high carrying capacity. Rail transportation can also be cost-effective compared to air transportation, and it is less vulnerable to interruptions due to bad weather (Anca, 2019). However, rail transportation is limited by its infrastructure and can be affected by maintenance problems and rail congestion. Road transportation is the most common transportation available for EcoWorld’s products. It is appropriate for transporting products to the final destination, predominantly for short distances (Anca, 2019). Road transportation is flexible and can access almost any location. Conversely, it is subject to road accidents, traffic congestion, and bad weather. A 10% increase in fuel prices could substantially affect EcoWorld’s globalization plans (Anca, 2019). An increase in fuel prices can lead to increased transportation costs for EcoWorld, principally for air and road transportation. Consequently, the business may have to upsurge its product prices to uphold its profitability, which could distress its competitiveness in the industry.
Insurance Costs
It is characteristic that with globalization, there is a tendency to increase insurance costs due to the utilization of numerous forms of transportation across borders valuation (Richey et al., 2022). The transportation of raw materials via aircraft and the final product via aircraft and then truck poses numerous risks, including damage, theft, and loss. Thus EcoWorld will requisite to get insurance coverage to protect against these risks. Utilizing multiple modes of transportation also upsurges the probability of accidents occurring during transportation. Each mode of transportation carries specific risks, such as the possibility of a plane crash or a truck accident. Insurance coverage must be obtained to cover these risks, probably leading to amplified insurance premiums valuation (Richey et al., 2022).
Additionally, the transportation of goods across borders also presents additional risks, such as customs and regulatory compliance matters. Thus, the company must guarantee that they conform to all customs and regulatory requirements in the countries where they operate; failure to do so could result in delays, fines, and legal disputes. Gaining insurance coverage to protect against these risks will increase insurance costs.
Product’s Seasonality
EcoWorld’s products tend to skew towards November/December as it becomes a traditional holiday gift. This can pose a challenge to the company’s profitability and financial performance. Thus the company should adjust its manufacturing and distribution to consider this seasonality (Anca, 2019). The company should consider numerous strategies, including increasing production during the off-season to guarantee an adequate inventory to meet demand during the holiday season. This may necessitate the business to invest in additional manufacturing equipment and hire more workers to yield the necessary inventory.
The company should also adjust its marketing and sales strategies to centre during the holiday season. This could encompass fashioning holiday-themed advertising campaigns and offering special promotions and discounts to inspire consumers to buy their goods as gifts. The company should also consider partnering with retailers to upsurge their delivery channels (Anca, 2019). By working with retailers, EcoWorld can reach a broader consumer base and increase sales during the holiday season. EcoWorld should contemplate offering limited-edition holiday-themed products to create excitement and surge demand (Anca, 2019). This could comprise unique designs or packaging only available during the holiday season. Furthermore, the company should carefully manage its inventory to guarantee adequate stock to meet demand without overproducing and experiencing excess inventory costs. This may necessitate applying an inventory management system to track demand and adjust production accordingly.
Inventory Valuation Method
The company can use various inventory methods to appraise its inventory. One such method the company should consider is using the First-In-First-Out (FIFO) method for inventory valuation (Richey et al., 2022). This method proposes that the oldest items are sold first and values inventory founded on the cost of the oldest items. Since EcoWorld’s products have a clear seasonality, this method would help the company precisely track the cost of goods sold during the holiday season and guarantee they are constantly supplied with the inventory at the end of the season. Creating and maintaining an inventory of a final product incurs numerous costs, such as raw materials, labour, storage, and insurance. Globalization can affect these costs in numerous methods of valuation (Richey et al., 2022). Transportation costs for raw materials and finished products may surge due to longer distances and diverse modes of transportation.
Additionally, tariffs and taxes can also add to the cost of goods. Insurance costs may increase due to the risk of loss or damage during transport. Furthermore, maintaining inventory in numerous places can surge storage costs valuation (Richey et al., 2022). To mitigate these costs, the company can consider negotiating bulk transportation rates with carriers, outsourcing some manufacturing processes to nations with lower labour costs, and applying a just-in-time inventory system to decrease storage costs. The company can also consider agreeing with local suppliers in all markets it has roots in to reduce the costs it may incur while transporting its products.
In conclusion, logistics and supply chain management are two closely connected models vital for businesses to efficiently and successfully manage the flow of goods and services from suppliers to consumers. The management should ensure due diligence in evaluating whether to invest in European counties. This is because it would lead to increased costs such as insurance; thus, it would necessitate the company evaluate whether it would be beneficial to globalize the supply of its products.
References
Anca, V. (2019). Logistics and supply chain management: an overview. Studies in Business and Economics, 14(2), 209–215.
Ikumapayi, O. M., Akinlabi, E. T., Mwema, F. M., & Ogbonna, O. S. (2020). Six Sigma versus lean manufacturing–An overview. Materials Today: Proceedings, 26, 3275-3281.
Richey, R. G., Roath, A. S., Adams, F. G., & Wieland, A. (2022). A responsiveness view of logistics and supply chain management. Journal of Business Logistics, 43(1), 62–91.
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