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Building Sustainability in Logistics Operations, Research Paper Example

Pages: 11

Words: 3032

Research Paper

When managing a product through the product lifecycle there comes a time when certain decisions must be made as whether or not certain aspects of the plan will need to be completed or not.  There are other times when a solution to the problems the product launch is facing does not exactly fit into what the expectations held by the key stakeholders.  In these cases there must be an analysis completed to fully understand what trade-offs are worth compromising over and what other actions could be taken to mitigate the risks and still deliver the requirements to the end user.  With any plan there comes a time to make revisions and continually improve the plan to remain agile in the implementation.  Through the product launch of the products in China there were specific scenarios in which the initial plan had to be modified in order to fully realize the opportunities available to the organization.  An important area of concern is the timing of the operations.  The plan is to move at a relatively quick rate in which the organization establishes a hub of operations in China in the first period and then expand every third and fifth period.  This timeline will ultimately vary depending on how fact the operations can be established in China.

Challenges in China

There are two main challenges entering the Chinese market.  The first is the competition that is already established and the governmental implications for a foreign business to enter.  The goal was to enter markets that did not have a high level of market ownership by other commodity providers.  The problem with this is that there is already an established set of large organizations spanning the key geographical areas in which our organization is planning on launching.  Larger countries such as China may be attractive due to its large population. Although on average, China is still relatively poor, there are still large pockets of affluent potential customers. The launch of the product will require specific competitive advantages to be created in order to be successful.  Each area will need these key benefits to be communicated and exposed to the consumer so that the consumer will choose the product over the already established commodities.  Each market entry will need to have an established plan specific to the entry and sustainment of the product within each country.

In the changing globalized environment, supply chain managers and logistics experts need to look ahead to spot challenges in time and prepare the organization for upcoming challenges. The recent government regulations worldwide to increase companies’ sustainability and regulate the market, rewarding firms that are “greener” have already started. However, as companies are dealing with developing countries where regulations are just being formed, it is important to deal with the changes and be flexible as an organization. Developing supply chains that are easy to adapt to new requirements is essential to succeed in the competitive landscape of international logistics.

Review of Regulatory Challenges

Hollweg& Wong (2009) categorized the regulatory challenges of the international logistics industry as: customs documentation (export-import regulations and fees), customs broker license regulations, and restrictions in the hours of operation, cargo-handling licenses, and the change in cargo reservation laws. Further, the authors also state that future government monopoly changes can affect the profitability of international shipment. Examining six ASEAN countries’ regulations regarding shipment of goods, the study found that in every individual country, international cargo regulations were significantly higher than those that applied to domestic shipment. Many of the countries examined, such as China, Vietnam, and India are active international trading countries, therefore, their restrictiveness should be considered when planning logistics operation. As an example, the authors mention that “in China trucks are not allowed daytime access in almost all major Chinese cities” (Hollweg& Wong, 2009,  p. 21). This could have an impact on supply chain management, logistics efficiency, and profitability.

Dey, LaGuardia & Srinivasan (2011) state “the increasing sustainability within supply chains is just as important as reducing the costs and improving the sales”. The authors conclude that “Unsustainable practices hidden in the supply chain has the potential to become public information extremely quickly, leaving a company’s brand value damaged and shareholders displeased” (p. 1238). However, maintaining the company’s reputation is only one of the reasons why companies should consider introducing sustainable practices. Being prepared for government intervention is likewise important. According to the authors (Dey, LaGuardia & Srinivasan, 2011, p. 1242), many Asian and developing countries have developed or are in the process of creating policy guidelines to reduce pollution, waste, and are exercising more control over the industry than ever before. Several new and improved international standards of regulations exist regarding logistics and transport. While many of these frameworks and protocols are not yet compulsory for international companies, the authors suggest that governments – due to public pressure – are going to turn them into industry standards and regulations. One of these frameworks mentioned by the authors (Dey, LaGuardia & Srinivasan, 2011, p. 1242) is the United Nations Framework Convention on Climate Change (1992). Further protocols, such as the Kyoto Protocol of 1997, the recommendations of the Copenhagen Summit (2009), and “cap and trade” guidelines are likely to result in related restrictive regulations. The introduction of “cap and trade” agreements would affect logistics companies in particular. According to the approach, every company would have an emission allowance, and this would be recorded on their permits. If the company wishes to extend their allowances, they would need to “buy” further units at a price set by the regulator. As the authors summarize: “If a new cap and trade system is implemented internationally, the US Chamber of Commerce estimates that diesel fuel could increase by as much as 88 cents per gallon. For the freight industry, which the cost of fuel purchased today to make deliveries may not be recouped for 30, 60, or 90 days; such fuel cost increases would potentially have a devastating impact”  (Dey, LaGuardia & Srinivasan, 2011, p. 1243). This would create a great regulatory challenge for logistics companies. It is important that companies consider the risk of new regulations in order to maintain their competitiveness and profitability.

Examining maritime international transport, Widdowson &Halloway (2009), research has found that security of transport services has been tightened continuously since September 11, 2001. The authors find that in many cases governments and regulators are not effective enough in communicating compliance requirements with international companies. While the OECD recommends that governments and international regulatory bodies shift from the “from a culture of control to a culture of client service” (Quoted in: Widdowson &Halloway, 2009, p. 19), compliance assessments could be introduced by individual governments without consultation with industry representatives. The study recommends that organizations introduce measures to make their supply chain more visible. This would allow governments to engage in collaborative policy-making consultation, provide recommendation for improvements, and help international logistics companies create internal guidelines, measures, and standards. Aligning self-regulation with government policies is the best approach towards full compliance and regulatory risk reduction, according to the findings of the research (Widdowson &Halloway, 2009, p. 26). The study also mentions some currently considered regulatory initiatives that might be turned into compulsory regulations for all international logistics companies. One of them is the “10+2 Rule”, setting a minimum of ten pieces of information included in import documents. The other one is 100 per cent container scanning requirement within the US for overseas cargo.

A recent OECD report (2002) highlighted international challenges of transport logistics. The paper, prepared for regulators, governments, and international organizations provides important details about the future of the industry’s global regulatory environment. One of the areas that were not covered by previous articles reviewed was training requirements and qualifications. The study recommends that this is one of the areas OECD is focusing in the future when making policy recommendations. As the document states: “It is important that both policy makers and company executives pay attention to logistics studies and practice, and make training of personnel a top priority” (OECD, 2002, p. 45). The above statement indicates that new training and qualification standard requirements are going to be introduced in the international field of logistics on a global and national level. Regarding policy-making, the report’s recommendation states that “Governments need to develop the framework to encourage private sector involvement in the financing and operation of infrastructure, while recognizing the negative effects of infrastructure use by applying “correct” pricing policy” (OECD, 2012. p. 39).

Another forum held about the global logistics and supply chain industry (World Economic Forum, 2013) found that the main vulnerability of the industry lies in over-regulation and the vulnerability of trade agreements. The analysts of the forum state that many international companies have to meet various requirements and norms set by different governments. The lack of harmonization between countries’ standards and measures would increase “trade costs more for foreign than domestic suppliers” (World Economic Forum, 2013, p. 11). “Building risk resilience” (World Economic Forum, 2013, p. 20) is also mentioned as one of the activities companies should be focusing on in order to maintain their competitive advantage. The authors, mentioning the 2011 earthquake in Tokyo state that companies should be prepared to changes and challenges, by making their supply chain flexible and creating risk assessments and contingency plans.

Managing Foreign Projects

A project is by definition a temporary endeavor to produce a unique deliverable at the conclusion of the endeavor (PMI 2008).  Just as the foundation of a house supports the entire home, the definition of the scope of a project establishes the entire trajectory of the project and determines what resources and schedule will be needed to accomplish all of the requirements of that project.  During the planning process of the project there is also the time to determine what is within the scope of the project and what risks are associated with that scope.  When scoping a project, there are multiple deliverables that need to be understood in order to create the framework of the project and to accurately understand the methodology and process of achieving those requirements.  There are also certain deliverables that must be used to incorporate the best practices of project management which include the scope statement, project charter, requirements and risk identification.  The risks of the project can determine if the project is feasible and what resources may be required to mitigate those risks.  Due to limited resources of the company’s country the business may look globally to meet the needs of the business project.  If the scope entails business ventures into other countries there will be an associated risk with that plan as well as a level of effort that will be required to learn, understand and execute key tasks to fulfill local and global rules, regulations and policies.

When crossing the borders of other countries to conduct business, there are positives and negatives associated with the implementation of those business efforts.  Some of the most common and visible differences include cultural differences, language barriers and time zone disparities.  While there are some large hurdles to overcome when conducting business that are known risks there are also other difficulties that are not easily identifiable and as easy to quantify into a risk measurement tool.  These unknown or misunderstood risks will also need to be mitigated and incorporated into the project plan.  Some examples of areas of risk that could potentially be harmful to a project’s successful completion include geographic disparities, climate or weather impacts, logistical infrastructure, information technology integration or other hazards that will need to be addressed when they occur during the project’s life cycle.  The laws and regulations of the foreign country as well as the treaties and policies between countries play key operational and strategic planning points for the project manager.  The project manager will need to manage the relationships between the project teams at home and abroad as well as understand and abide by the policies and treaties between countries.  This is an additional effort on the entire project team and should be considered in the cost/benefit analysis.

The key point for the project manager to act upon is to ensure the requirements for the project are aligned with the scope of the project and that each requirement can be met on time, on budget and within the scope of the project.  Managing the external forces and variables will take deft knowledge of the project management process but an understanding and awareness of the benefits and potential roadblocks that would face the project.  By understanding these factors the project manager can take the necessary actions to mitigate the risks and successfully implement the project.

China Benefits and Obstacles

To fully understand the risks and rewards choosing to either move business to other countries or establish project to utilize foreign countries resources it is necessary to look at two different countries.  China is in a unique position in which they are creating an environment to be conducive for foreign investors to come into their country and enhance their global economic model.  China offers tremendous opportunities for foreign investors to conduct business in their location.  The prerequisite for the business or conglomeration of investors is to have a steady and ample capital backing.  The benefits of doing business in China include tax benefits offered to startups and large investment companies, free trade zones and distinct markets that cater to varying business types such as financial districts, manufacturing zones and other areas tailored to business growth.  The country provides the vessel to conduct business and the project manager’s role is to understand exactly what is required and the cost associate with meeting those requirements.  The benefits of project management would come from the general culture of the area including the established business culture for change and grow regarding business ideas and implementations as well as the focus on driving success.  China wants the companies to become successful in order to increase the benefits experience by their citizens and economic prosperity.

China has a clear focus on growth and building opportunities for new ventures but they also seek to build upon their foundation to develop a sustainable and profitable economic business model for the entire country.  Theseobjectives are a balance between riskier new ventures and the less risky focus on established businesses looking to increase their market visibility globally or looking to take advantage of logistical or skill based benefits.

The disadvantages mostly reside in the same core areas that would be experienced by doing business in any other country that has a difference language, beliefs system, laws, business models or geographic separation from the other country looking to conduct business activities.  Language, customs, politics and religion all play a role in project execution but there are some other areas that also are limitation to project management in China.  The hyper-competitive process of resource allocation for the project must be accounted for as a risk to the project.  Since the area of China is conducive to new ventures there are limited resources available for new countries looking for a part of the market share.  The project manager must ensure that the resources required are readily available based on the needs of the project timing and implementation project schedule.

China provides resources that are technological savvy, industrious, intelligent, and highly educated.  When projects are implemented in China it is the people and logistical placement within the globe that make the attractiveness so great.  China is limited in size but is strategically located in the East and provides the democratic governance that is advantageous to free trade and business growth.  Key benefits of expanding opportunities to China include the established business partnership between the United States and China as well as the forged path of success that has been blazed by other companies over the past few decades.  There are lessons learned and knowledge available for the project team to learn and understand about China’s cultural differences and other high impact low probability risks.  Mitigating the risks of outlined above is fairly simple and China is somewhat welcoming of businesses as long as they adhere to the rules, processes and regulations which are outlined for the business transaction.  The formidable and highly capable workforce in China allows the project team’s efforts to be centrally controlled and decentralized executed which is tremendous benefit to the project manager considering the full utilization of the project team for key action to complete the project (Gray & Larson, 2011)

The downside to China includes more than limited physical resources and their availability.  China’s culture is risk averse when it comes to new business ventures or non-established business models.  This risk is mitigated through thorough and copious documentation on the specifications, quality, quantity, purpose, project schedules and a plethora of other documentation.  This level of bureaucracy, while surmountable, can place a strain on resource allocations on the perceived non-value add project tasks.  This could become an issue that limits the ability to meet the scope, cost or schedule of the project.  This same risk aversion stance by China plays a critical role in the process of implementing new technology or goods into the market.  The requirements are more stringent for implementing new items into the market and require a high degree of testing, evaluation, regulatory compliance and other country specific requirements to successfully launch.  Understanding the needs and requirements of the Chinese counterparts and allow for appropriate budgeting of resource and all the cost of the project to be fully understood prior to moving business effort to the foreign country.

Works Cited

Dey, A.,  LaGuardia , P. & Srinivasan, M. Building sustainability in logistics operations: a research agenda.Management Research Review. Vol. 34 No. 11, 2011 1237-1259. Print.

Gray, C. F., & Larson, E. W. Project management: The managerial process (5th ed.). New York, NY: McGraw-Hill/Irwin. 2011. Print.

Hollweg, C. & Wong, M. Measuring regulatory restrictions in logistics services. Working Paper. ERIA Research Project Working Group. 2009. Print.

OECD. Transport logistics. Shared solutions to common challenges. 2002. Web. http://www.internationaltransportforum.org/pub/pdf/02LogisticsE.pdf

Project Management Institute. A guide to the project management body of knowledge. 4th. Newtown Square, PA: Project Management Institute, 2008. Print.

Widdowson, D. &Halloway, S. Maritime transport security regulation: Policies, probabilities and practicalities. World Customs Journal. Volume 3, Number 2. 2009. Print.

World Economic Forum. Outlook on the logistics & supply chain industry.Global Agenda Council on Logistics & Supply Chain Systems 2012-2014. 2013.

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