Various Types of Risks and Issues Involved with Logistics - Essay Example

Logistic Business Report Logistic is the process of planning and controlling activities for the reason of ensuring effective transportation of goods. It is the method of choosing the best possible way of importing the goods in the specified time and quantity. There are numerous kinds of problems and threats associated with logistics. The expenditures which are incurred while moving the goods from the manufacturer’s place to the delivery destination are known to be the transaction cost. The time between order placements and the delivery of the order is referred as the lead time. The short lead time is considered to be most appropriate for logistics as it provides advantages to the consignee for cost reduction owing to fewer amounts of stocks. However, there are known to be various types of risks and issues involved with logistics. Table of Contents Abstract 2 Introduction 4 The Issues and Challenges in Selecting the Optimal Transport Mode 5 Equipment Type to Be Used in Each Part of the Journey 6 Logistics Cost 7 Logistics Lead Time 7 Logistics Risk 9 Conclusion 9 References 11 Appendix 1 12 Introduction The logistic manager of a company is bestowed with the task of getting the required kind of products from the manufacturers at a best price and on time. It calls for the requirement of making researches about the appropriate transportation modes available and the time required to receive the supply of goods without engaging much expenditures. Logistics is the method of planning and implementing along with controlling procedures for effective transportation of goods. There are numerous options of transportation which are available to the manager, such as road, air, railway and sea. The manager needs to make an appropriate choice for ensuring the supply of goods at the best price and time. The order of goods should reach the consignee at the right time and in the right quantity (Vitasek, 2006). Guangzhou, which is in the province of Gaungdong, is supposed to be the biggest center for transportation of goods with regard to international trade (China Guangzhou Municipal Bureau of Tourism, 2012). Brisbane is in the state of Queensland in Australia, which entails a swift developing economy. The fashion clothes which are to be supplied from Guangzhou to Brisbane should involve the most appropriate route (Australia TradeCoast, 2012). A total number of 12,000 pieces of clothes need to be transported to Brisbane in three containers through ships and by trucks. The shipment of the clothes needs to reach the destination in 25 days. This study would intend to provide a proper logistics solution for the above mentioned scenario. It would also aim at discussing the issues and challenges that would be witnessed while selecting the appropriate mode of transport. The Issues and Challenges in Selecting the Optimal Transport Mode The optimal transport mode which will be appropriate for the import of goods to Brisbane from Guangzhou will be shipping and truck transport to and from the ports. Numerous issues and challenges are known to exist in the course of selecting the optimal transportation mode for importing the goods from China to Australia. The logistical barriers such as government rules and policies relating to international trade should be reduced for the purpose of efficient transportation of the goods. Every country should have a proficient logistical service for enhancing international trade and developing the economy of the world. A gap which is believed to exist between the low and high income nations needs to be minimized for developing healthy trade practices. The excellence of the employed logistic services is identified to be the other factor which helps in making the appropriate choice associated with logistics. There are also other problems which arise from certain reasons such as delay in terms of loading or unloading and carrier conditions and unreliability of the carrier companies. The goods which are to be consigned should reach the consignee on time followed by the specified quality and quantity. The needs for documentations which are required for carrying out trades in between the countries are considered to be the principal issues while identifying the appropriate transportation mode. The cost and time required for the supply of goods are known to greatly depend upon a particular carrier company. The business of exporting fashion clothes to Australia from China is supposed to be the most common type of trade between these countries. The vital problem or issue which exists is the time required for the shipment of such clothes as the demand for clothes varies with seasons. The carrier company should make sure that the goods are delivered to the consignee at the appropriate time. These are the issues and challenges which are witnessed while selecting a suitable transportation mode for trade (Arvis, Mustra, Ojala, Shepherd, & Saslavsky, 2012). Equipment Type to Be Used in Each Part of the Journey The logistics services for international trade include land transport, warehousing, shipping, air freight services and third party logistics such as contract logistics. The fashion clothes which are to be imported to Brisbane from Guangzhou will be delivered by two transportation means which are truck transportation by road and shipment by sea. Truck transportation will be used for moving the goods to the port from where it will be shipped to its destination port Brisbane by ship. After unloading the goods, it will be transported to the owner of goods by trucks again. The shipment will consist of three containers and is likely to take around 25 days. The transportation system should be used in such a way which will deliver the goods to the consignee at the right time and in the appropriate quantity. The transportation mode needs to be effective and efficient to ensure the proper delivery of goods and avoid any kind of delays. It is also required to be made sure that the quality of goods intended to be delivered to the consignee is maintained during the process of shipment or transportation. Logistics Cost Logistics cost is the expenditure which includes the costs incurred for the goods to be transferred from the manufacturers to the warehouses of the consignees. The logistic costs should be minimized for the purpose of maximizing the profit of the company. The costs incurred will help in determining whether the decisions taken for the logistics choices were appropriate. This cost will help in identifying the most proper form of logistics available for the company in future (Tseng, Yue, & Taylor, 2005). The financial requirements for the transportation of 12,000 pieces of fashion clothes would be about 10 AUD per unit cost. The total shipment of the specified quantity of fashion clothes to be transported from Guangzhou to Brisbane would, therefore, involve a value of 120,000 AUD. The goods will be loaded on a truck with a fee of 1,500 AUD and transported to the dock. The goods will be shipped from the dock in three containers at a total cost of 8,400 AUD to Brisbane. The shipment of the goods will be delivered to the intended destination in 25 days. Therefore, these are the costs which would be incurred for the transportation of goods from China to Brisbane. Logistics Lead Time Logistics lead time is the quantity of time which is required for the delivery of goods from the time of order placement. This particular time is known to greatly depend on the nature of the logistics services and the characteristics of the product. The time is further classified into long and short lead time. The long lead time may pose a threat in case the market is found to be unstable, which makes the delivery of the consignment of goods to be unpredictable. This tends to trim down the profit margin as the company will require selling the goods at discounts along with losing customers. The short lead time may pose a threat to the competitors, such as selling goods at discounts (Nordas, Pinali, & Grosso, 2006). The long lead time is considered to be the extended time which is required for the consignment of the goods to be delivered to its destination from the manufacturer. In case of this kind of a lead time, the goods reach the consignee after a long period of time which signifies that the goods are transported at a lower cost. The goods are ordered in bulk amounts which provide the advantage of stocking the goods for future demands. The orders should be placed after estimating the time required for the delivery of goods for catering to the demands of the customers on time; otherwise, there might prevail a risk of selling the goods at lower prices or discounts in case of an unstable market. Such a situation will lead to losses for the consignee along with stocking huge amounts of goods, which further drives up the expenses for the consignee (Rushton, Croucher, & Baker, 2010). The short lead time is believed to be the shortest time required for delivering or providing the goods to the consignee. It generally entails higher costs for delivering the consignment of goods to the consignee. However, it enables the consignee to maintain less stock of goods, which, in turn, helps to reduce the relevant expenses. It enables the consignee to briskly respond to the demands of the customers, which enhances the profits. Rapid responses with regard to the customers’ demands might also prove to be riskier for the competitors as they might lose customers along with being compelled to sell their goods at lower prices (Rushton, Croucher, & Baker, 2010). Sea transport Air transport Cost 0.7 AUD per unit 1.7–2.0 AUD per unit Time 25 days 2–3 days Source: (ETCN, 2012) Logistics Risk There are a number of risks which are known to be associated with logistics services. The carrier may hold up the delivery of goods to the consignee owing to various reasons, which may adversely affect the trade. There may also prevail a risk of capacity and allocation instability for the carrier. The congestion on the road and port may hamper the time which acts as a significant factor for sending the goods to the consignee. The financial instability of the carrier company might also pose a risk in relation to the carriage of goods to its destination. The improper execution of the trade policies and regulations might also give rise to difficulties for the transport company as violating of such trade regulations may call for legal actions against it. The alterations in the weather conditions or rather the climatic changes can also pose a risk in the process of transportation as adverse weather conditions might delay the delivery of the goods (Rajan, 2010). Conclusion Logistics is the method of planning, implementing and managing the procedures for the efficient transportation of goods. The goods should be delivered to the consignee at the right time and in the right quantity. The above discussion narrates a situation where a certain quantity of fashion clothes needs to be delivered to Brisbane from China in 25 days. The transportation of the goods would involve two different modes which are truck for transporting the goods to the port of Guangzhou and ship for transporting them to Brisbane. These mentioned modes of transportation have been identified to be the appropriate ones by the Logistics Manager. The costs which are incurred while transporting the goods from the manufacturer’s gate to its destination are known as logistics costs. However, numerous types of risks are known to be associated with logistics, such as climatic changes and various trade regulatory policies. References Australia TradeCoast. (2012). Australia trade coast region. Retrieved from http://www.australiatradecoast.com.au/ Arvis, J. F., Mustra, M. A., Ojala, L., Shepherd, B., & Saslavsky, D. (2012). The logistics performance index and its indicators. Trade Logistics in the Global Economy, 1–55. China Guangzhou Municipal Bureau of Tourism. (2012). Travel news. Retrieved from http://www.visitgz.com/. ETCN. (2012). Air shipping from Guangzhou China to Brisbane by China Southern Airline. Retrieved from http://trade.e-to-china.com/product-p63ABF1/Air_shipping_from_Guangzhou_China_to_Brisbane_by_China_Southern_Airline.html. Nordas, H. K., Pinali, E., & Grosso, M. G. (2006). Logistics and time as a trade barrier. OECD Trade Policy Working Paper, 35, 4–29. Rajan, H. (2010). Manage risk, monitor performance, and deliver results. White Paper, 2–4. Rushton, A., Croucher, P., & Baker, P. (2010). The handbook of logistics and distribution management. United Kingdom: Kogan Page Publishers. Tseng,Y., Yue, W. L., & Taylor, M. A. P. (2005). The role of transportation in logistics chain. Proceedings of the Eastern Asia Society for Transportation Studies, 5, 1657–1672. Vitasek, K. (2006). Supply chain and logistics. Terms and Glossary, 1–167. Appendix 1 3 dimensional (Cost) 8400 AUD 7063 km (Distance) 25 days Guangzhou to Brisbane (Time) Read More