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Logistics Operations Management Essay Example

It is becoming increasingly difficult to ignore the fact that logistics is an important sphere of human activity as it provides fast, reliable, and efficient delivery of loads to any location. As a consequence, the related spheres are functioning effectively as well. Therefore, the involvement of logistics operations is an ever-present element of any deal, especially international ones. Regarding this fact, it is necessary to pay attention to numerous implications and aspects, which may influence the decision-making in terms of logistics operations. Needless to say, empirical perspective of these issues is important as it demonstrates a real-based appliance of logistics. Therefore, it is necessary to give an account to the following case study of transportation the medical disposables from Dubai to the Olympic Village in Tokyo, which clearly demonstrates a wide spectrum of logistical knowledge to be applied to the practice.

To be more specific, the following paper discusses a selection of the most appropriate mode of freight. Next, the paper compares and suggests sea and air carrier companies, which can be eligible for transportating loads. As a consequence, Incoterms have been also discussed. Furthermore, the paper suggest the most apt route and time frame as it is also an essential aspect of logistics operations. In addition to this, the considerations of payment and customs duties have been issued as well. As the thesis and the layout of the paper have been outlined, it is necessary to proceed to the next section.

Mode Selection

Regarding the selection of the most apt mode for transportation and delivery of medical disposables, it is important to give an account to the potential variants of freight. In such a way, it should be admitted that sea is quite appropriate way of delivering goods as long as China possesses ports, which are the 3rd and the 4th world’s biggest ports in terms of container throughput and loading capacity. The availability of these facilities is an obvious benefit for the logistics operations regarding one of potential routes with a stop in China. However, as Donald Waters reports, these ports have less than 1% of their loads going outside by the railway, which is known to be the most developed transport network in China (2010). It can be explained by the fact that the majority of logistics parks are not linked to these ports. Regarding the strengthes of sea freight, it is necessary to place emphasis on the large capacity of unloading arrived goods, which means that the entire load will be transported in one trip. As for weaknesses, it should be noted that distribution will take a long period because the ports are not connected to the railway system sufficiently. Thus, the load should be delivered faster than it may be forecasted.

Concerning air freight, it is important to admit that it is the most valuable way of transportation, especially for such expensive goods. It can be explained by the fact that air freights suggest fast, urgent, safe, and reliable transportation of expensive goods. Additionally, air freight presupposes taking down the sizes of the related inventory so that the costs will not be excessively high. Besides that, fewer inventories mean that operations will be less complicated and more efficient accordingly. The key strength of air freights is that this method is the fastest, safest, and most reliable way of transporting goods of any value. This point should also be considered. On the contrary, the most distinct weakness is a complicated pricing system. Needless to say, multiple parties are involved in logistics operations so that a wide range of factors are included in the price decision-making. Thus, there is a risk of wrong pricing, which will worsen the entire deal. Still, goods with a price of $10 000 need the most reliable transportation, hence it is necessary to discuss some related issues in order to determine the exact break-even value for the medical disposables.

It is becoming increasingly apparent that the main dilemma is referred to the costs and quality of transportation. Thus, faster transport means more costs, which are complicated in terms of pricing. On the contrary, a less expensive transportation implies more difficulties with packaging, storage, and especially distribution. Taking all these points into account, it is necessary to admit that the direct transportation to Tokyo is an important factor so that repackaging and regrouping in China is not an effective solution because it implies longer time frame for the delivery. Moreover, it is essential to note that this way of transportation does not address even the bottom line of the item break-even value. The goods are quite expensive and valuable for a successful organization of Olympic Games in Tokyo. Thus, this load requires a maximum of safety and reliability. Actually, in case the company fails to deliver the medical disposables in time or delivers them damaged, it will spend more costs on the recovery so that the choice of air freight is evident as it provides high level of urgency, safety, and reliability. The related costs will not be substantial because the goods will be traded via free trading zone in Dubai so that numerous factors which influence prices will be omitted. It is especially effective in terms of a certain supply chain, which implies mutual cooperation. Therefore, the delivery of goods will be also ensured by means of the supply chain environment.

Sea and Air Carriers

To begin with, it is necessary to discuss three potential air cargo companies, which can be eligible for transporting the medicine disposals to the Olympic Village. Needless to say, the most widespread and developed carrier is FedEx Air Cargo, which possesses a dedicated fleet of various planes. It obtains so developed network that nearly every single supply chain utilizes FedEx services. In contrast, the location of FedEx planes is quite inconvenient for the company as it will simply pay more for the plane arriving in Dubai to take the load. Hence, this option is not recommended to be taken into account. The second air carrier is UPS Air Cargo. It is similar to FedEx, but it has more functional fleet as it heavily relies on Boeings 777, which are known to be one of the most efficient planes for air freights. In such a way, UPS has a better capacity, but it is also located in the United States so that this option should be rejected as well because of the same reason of unnecessary costs. Thus, it is suggested to refer to the local air cargo services. Dubai Sky Cargo is the best choice among native air freights as long as it has managed to increase its shares during the crisis in 2008 and 2009 while the rest of air cargo companies were facing meaningful hardships. It is the most functional and resilient air cargo so that the choice is quite apparent in this case.

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In regard to sea carriers, first of all it is necessary to pay attention to Mainfreight, which suggests simple and reliable shipping. This organization takes the responsibility of arrangement of all necessary documentation for a successful delivery. The responsibility includes custom controls and port handling so that the goods will not stay for extra time in ports. What is more, this company has a developed network of sea carriers so that the load will be surely delivered to the required destination. Still, it has the same disadvantage because its fleet is based mainly in the United States, and the services of Mainfreight will be also unreasonably expensive. The second is DSV, which is known to serve the best handling and crating. Crating is a special service of this company and can be useful concerning safety of the medical disposables. Despite its location and related expenses, this organization is recommended to be involved in the logistics operations as it will provide a maximal safety to the transported items. Even more, DSV offers direct port-to-port communication and fast distribution. Thus, the load will be delivered in time even though it will have to be regrouped in China. As an alternative option, Sea & Air Freight International can be suggested. This company has a meaningful experience in the industry and provides reliable warehousing and handling. It is located in Vietnam so that the expenses will be lower in comparison with DSV. However, crating is a helpful service and it is worth expenses as the delivery of quality goods is the main objective of the company. It is important to mention that the quality of the delivered medical disposables may influence the decision of Tokyo’s partners to request for more exports. Therefore, the quality delivery will be a benefit for the customer as well as for the company.

Incoterms

It is needless to say that international trade is not the same as domestic one as long as it obeys special international laws. Actually, the main point of these laws are contained in the international code of trading and commerce. This code implies several groups with their peculiarities. They will be addressed later, and now it is necessary to mention that the company should consider its preferences before a choice of Incoterm as it has a strategic advantage regarding the partnership with Tokyo organization. The company seeks for the fast delivery, safe transportation, and risk recovery. In addition to this, it is quite natural to initiate a deal in terms of equal partnership as its importance is essential for both parties. These preferences can be explained by the fact that the company may establish a long-term partnership with Tokyo so that the deal is expected to presuppose mutual demands.

Therefore, CFR Incoterm is recommended to be outlined at the negotiations. CFR stands for Cost and Freight so that the company is supposed to cover the expenses on the loading and transportation to the port of destination. The company should also cover all the issues, which are related to customs and the rest of export documentation. The partner is required to pay for unloading goods and their further distribution. It is also expected to cover the insurance of the operations. This Incoterm addresses the preferences of the company as it ensures risk recovery and relative delivery safety while the responsibilities of the parties are nearly equal. These terms are also convenient for the customer as they will surely receive the ordered goods in time and do not have to deal with customs and export documentation. Therefore, these terms are worth being discussed at the negotiations.

Still, the company is required to take numerous responsibilities in order to succeed in this deal. Actually, it is not a threat for the company as it possesses sufficient capacities for meeting the requirements of a customer. What is more, this deal is a powerful motivator for the entire company as a successful outcome of the deal will increase the reputation of the company considerably because it has contributed to the arrangement of Olympic Games in Tokyo, and it is a significant achievement itself for any organization. To the largest extent, the company will get the opportunity of establishing a long-term partnership so that it pushes its performance to a new level. Eventually, the initiation of the deal in terms of CFR is evidently beneficial for both parties, that is why only one option is possible, which is worth discussion at the negotiations (Singh, 2009). At the same time, the company faces an additional dilemma.

To be more exact, CFR terms are only applicable to maritime logistics operations. As a consequence, it does not coincide with the suggestion of using air cargo services, which has been previously outlined. Still, it is worth saying that CFR clarifies the responsibilities of the parties so that in case one of the parties fail to meet the relative requirements, it will be clear which side is expected to pay the relative penalties and recoveries from the perspective of the international law. In the same way, CFR enables the company to include transportation costs in prices so that the company will not suffer from high cost spending, which will be a fair decision in accordance with the corresponding law. All in all these facts place the decision of managers in the condition in which it requires discussion of the additional aspects. The latter will make their impact on the final outcome of decision-making.

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Route and Time Frame

Speaking about potential route by sea, it is necessary to say that the ship will definitely pass through islands and riff systems. As a consequence, it will be supposed to maneuver a lot. Needless to say, it will take more time so that the delivery will be undesirably long. Moreover, such complicated and long route puts the load at risk, which is out of discussion regarding the value of the medical disposables. In such a way, the costs will be nearly the same as in case of air freight, and a danger of the goods being damaged emerges. Therefore, sea route cannot be considered as the universal solution concerning the logistics operations. The company should seek for alternative solutions of this issue as the rest of sea freight benefits are still applicable to the related logistics operations.

Therefore, it is recommended to deliver goods by sea from the port of Ningbo, China. This port obtains a sufficient capacity for regrouping and repackaging of the load so that it will be a perfect location for the first phase of the delivery. It will cause certain additional issues regarding payments and customs, but they will be given an account in the relative section. To return to the subject, it is worth saying that Ningbo port is also a convenient place for additional crating and safety control so that any complications will become explicit at their early study of influencing the quality of the logistics operations. In such a way, the sea freight from Ningbo will be the safest direct delivery of goods to the final destination, but it is an obvious fact that the goods still should be somehow shipped to Ningbo too. Thus, air freight should be also utilized.

Despite the fact that air freight does not provide crating and does not address CFR Incoterm, it is necessary to mention that it is the best way to take a direct route to Ningbo. It is possible to argue that the difference in distance is not considerable, but a direct air freight will be less safe than the maritime one, especially regarding the crating services. What is more, Ningbo has an airport so that the delivery from the airport to the port and then to Tokyo will be less costly though. It can be explained by an obvious fact that handling in the port is substantially cheaper. The Ningbo airport is relatively small, but it will process the reloading and handling faster as long as it does not have as much cargo orders as large airports. Thus, the route should be the following:

All in all it is the best judgement of the situation, which is still rendering safety and relative cheapness of the logistics operations. Regarding the most apt time frame, it is necessary to say that ten days of the man period plus five days for emergency cases will be appropriate as the logistics operations should be completed fast, and the chosen approach enables the company to serve the client as fast as possible. Actually, it is a sufficient period for the delivery of the medical disposables, and it contains minimum of risks so that the shipping does not have to be boosted. Eventually, it is to be admitted that the final decision is utilizing of air and sea freights as it is the most convenient and less expensive approach. It is becoming evident that such a complicated mode requires a precise discussion of the costs and pricing, therefore being essential to give an account to these aspects as well.

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Payments and Customs

As it has been already discussed, the payments will be conducted in terms of CFR regarding the maritime phase of the delivery as this Incoterm is applicable to sea freights only. As a consequence, the choice of Incoterm for air freight is a right of the partner as the suggestion for such complicated operations belongs to the company. Therefore, the customer does not have to pay additional fee. Actually, it is the primary reason for the partner’s agreement on the suggested scenario. They will not have to take care of customs and safety considerations while the ordered load will be delivered without delay and in a good quality. It is also a reason for the company to increase the prices though, but they will not be considerable so that both parties still benefit from these logistics operations.

To be more exact, the firm will be expected to pay any custom duties in Ningbo as it is not the final destination of the medical disposables. Despite the fact it is the suggestion of the company, it is possible to increase prices but not excessively. What is more, it is strongly recommended to process the logistics operations as two independent deals. In other words, the company just orders the shipping of the medical disposables to Ningbo on its own so that Ningbo is the final destination for this deal. Then, the client orders the medical disposables, which will be delivered from Ningbo. The price, however, should include the price for the delivery to Ningbo except discussed items. In such a way, both parties will avoid a considerable taxation even though they will still be supposed to pay some taxes. This decision is entirely legal as long as price determination for a certain deal is not considered to be a fraud act, especially regarding a legal access to all relative documentation.

Speaking about the international customs laws, it is worth saying that the company will not pay for warehousing as long as the load will not remain in the country for a long period. Thus, the company will be provided with a free warehousing because the port belongs to free economic zone, that it why this area implies fewer custom duties. On the contrary, the crating should be paid though. This service is not regular and it is provided by DSV freight company. Besides that, in case the processing of load is conducted within 24 hours, the company is allowed to pay less custom duties. The most appropriate customs terms for these logistics operations are VAT as long as the company will be allowed to use its own inventory for handling and warehousing for free so that the expenses on the logistics operations are minimal.

Having considered all these points, it is necessary to admit that such complicated logistics operations occur to be less expensive than they have been initially forecasted. Numerous advantages, which offer free economic zone in Dubai, as well as in Ningbo, make a sufficient contribution to a successful conduct of these operations. The customer and the company will mutually benefit from this deal, thus the set of preferences, routes, Incoterms, time frame, and payment for custom duties are recommended to be outlined at the negotiations with the partner. They may suggest their own requirements though, but it is essential to note that the suggested strategy of the company is convenient for the client as long as it is not obliged with many complicated responsibilities while the pricing remains quite reasonable for them.

Conclusion

All in all it is to be admitted that this paper has discussed and suggested solutions to the case study of transportation of the medical disposables from Dubai to the Olympic Village in Tokyo from the empirical perspective of the related logistics operations. The paper has finally suggested that the company should use both modes of freights: sea and air. It can be explained by the fact that this combination enables the company to deliver the load via the most convenient, safe, and less expensive route. Despite the fact that additional destinations in the route imply extra costs on customs duties, the load has been decided to delivered by air to Ningbo, China. According to the international customs laws, the company will not be expected to pay substantial customs duties so that this stop is not a concern for the company while the customer will be satisfied with safety and quality of the goods transportation. It is important to note that the load will be additionally crated in Dubai and in Ningbo as long as it has expensive and important goods. Finally, it is necessary to admit that in case the company succeeds in conducting these logistics operations, it will significantly contribute to its international reputation. Doubtless, the partner may suggest its own requirements, but it is essential to note that the set of decisions, which have been outlined within this paper, are also focused on the benefits for the client so both parties are likely to accept these solutions as the load is quite valuable.

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