Information On The Implications Of The New Distribution Contract Business Essay Example
Information On The Implications Of The New Distribution Contract Business Essay Example

Information On The Implications Of The New Distribution Contract Business Essay Example

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  • Pages: 12 (3266 words)
  • Published: October 9, 2017
  • Type: Research Paper
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Capable: This is a expression into the deductions of the new distribution contract for the current planetary sourcing theoretical account and recommendations on the most cost-efficient agencies of providing the US market with the technological merchandises.

Introduction

Globalisation describes an on-going procedure by which regional economic sciences, societies and civilizations have become integrated through a Earth crossing web of communicating and trade. The term is sometimes used to mention specifically to economic globalization which refers to the decrease and remotion of barriers between national boundary lines in order to ease the flow of goods, capital, services and labour. Thus we could talk of globalization and the international supply concatenation ( the critical factors being that of distance ; comparative advantage and integrating ) concatenation in the same breath.

In recent times, business outsourcing has become comm

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on and a key factor in globalization. This brief aims to provide the implications of the new distribution contract signed with distributors Flotsam and Jetsam to handle technological products in the United States. The focus is on finding cost-effective methods of supplying the US Government with minimal disruptions. Our main goal as a supply chain management company is to increase sales and distribution of products, while minimizing interference in the supply chain. Ensuring homeland security for America involves addressing security threats not only upon arrival but also at their origin.

To guarantee security, it is crucial to adopt a holistic approach rather than relying on a single or limited set of measures. Implementing multiple interconnected and mutually supportive initiatives is essential. This ensures that if one layer is breached, the subsequent layer can identify or stop the intrusion. Furthermore, partnerships with diverse stakeholders such

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as the private sector, other governments, international organizations, and regulatory agencies are necessary to broaden the reach of cybersecurity.

The Current Sourcing Model:

Bright Sparks, the company, sources its technological merchandise, raw materials, and semi-finished components from various countries globally. These items are utilized for assembling and producing the technological products which are subsequently exported to the United States of America. Raw materials and semi-finished components are imported from diverse nations worldwide. One crucial component is imported from a nation that is regarded as a security concern by the US. All the imported goods are assembled into the final product in Tanjung Pelepas, Malaysia, before being shipped to the US. The reason behind selecting this specific provider for the key component is due to their lower labor costs compared to other providers, with additional tax incentives offered by the government.

Ultimately, the research division has conducted a detailed feasibility study and found that using provider A for the final component would result in cost savings. Compared to the other providers, provider A has the lowest labor costs at US $1 per component and also offers a 15% tax benefit. The feasibility study included a total of six providers.

Supplier B has labor costs of US $ 1.20 per constituent, but the Government does not offer any tax benefits. Other suppliers have labor costs of US $ 1.40 per constituent and there are no tax benefits offered by the government. In this study, it is found that supplier A offers the lowest labor costs with the additional tax benefit. However, company A is identified as a "security concern" which can have significant consequences. Ultimately, the

supplier will be perceived as a weak link in the supply chain for the products. "By examining other models, this aforementioned model would directly align with global sourcing which is described as 'unbundling the supply chain' which ultimately means that components may be manufactured in several countries and assembled into the final product in a different country" (Centre for Customs & Excise Study Guide 2010: page 38).

The Tanjung Pelepas Port, a CSI port, offers a significant advantage due to its compliance with US security demands. Flotsam and Jetsam, a US distributor, is C-TPAT accredited, meaning any holds in the United States can be eliminated. This leads to overall effectiveness as commissioned clients benefit from the velocity treatment program, resulting in minimized delays for import cargos and enhanced clearance procedures through customs. Consequently, this provides a great advantage for our merchandise.

The Risks of the Current Global Sourcing Model

Importing raw materials and semi-finished products into Malaysia from outsourced countries poses the biggest challenge in our current global sourcing model. One major risk identified is importing critical components from a country that the US considers a security risk. This can lead to delays as the US evaluates the cargo's security profile from the supplier's port to its final destination.

There is a possibility that the cargo can go through a hazard profiling process and be examined on export from Singapore and, as a result, be subject to scrutiny when imported into the US. This creates a demand to achieve the company's goals of supply chain efficiency and effectiveness. To meet these goals, an overall policy model and risk-based sourcing scheme should be designed and

implemented.
A corporate responsibility and sustainability legal model should be created, along with policies and strategies for the supply chain based on principles of fairness and equality to improve economies of scale, comparative advantage, and market access. Additionally, an optimal global sourcing strategy and supply chain management schemes should focus on integrating networks, infrastructure, and technology development. When sourcing a critical component of the finished product, it is recommended to source from multiple suppliers.
While Bright Sparks would benefit from outsourcing their products, the fact that their operations are now in another part of the world exposes them to new risks that need to be managed.

The advantages should be deemed superior to the risks. Various challenges may arise, including disruptions in the supply chain due to scrutiny by customs, regulatory, and security agencies on both the certification and the physical cargo. Manufacturers should ensure multiple suppliers for essential components, as production may halt if these components cannot be sourced or obtained.

Among the hazards are merchandise failures, such as not meeting the required standard. The supplier may cease operations, unilaterally raising the cost of the component and intentionally restricting the product. In the global market, it is widely acknowledged that Malaysia is a prominent exporter of technological goods, with the US being one of their largest trading partners. The raw materials and semi-finished components are regularly sourced worldwide.

According to Hammels (Centre for Customs ; Excise Study Guide 2010: page 38), the use of imported inputs in countries like Malaysia has increased by 300% as a proportion of total output, highlighting the importance of outsourcing for Malaysian entities.

Security Initiatives of the United States:

In response to the terrorist attack

on September 11, 2001, on the US trade center and subsequent attacks on transportation systems, there has been a significant focus on protecting supply chains from terrorist threats. This has led to the implementation of legislation and regulations, establishment of private initiatives, setting industry standards, development of new technological approaches, and approval of security management measures. The United States has placed utmost importance on homeland security following these attacks.

The US has implemented numerous measures to enhance security on imports. These measures aim to ensure that goods entering the US are safe and free from hazards that could harm the country and its community. The US has clearly defined and legislated various security initiatives throughout the global supply chain. Governments and the international business community have had to improve the safety and security of their supply chains in order to trade with the US. Trading partners were required to align with these US initiatives following their implementation.

This involves ensuring that all participants in the supply chain possess the necessary certificates. Additionally, there is testing and validation of the contents of the cargo before presentation of the destination state’s contents. The security of the cargo during transit is ensured through the use of locks and tamper-proof seals, as well as an inspection upon entry into the United States. The goods originate from Singapore, which is a CSI-Container Security Initiative port of the United States. This designation signifies a close working relationship with the US that provides an advantage for pre-screening the cargo before it is sent to the US. The Customs representatives at the port oversee the screening process conducted by Singapore Officials prior to departure to

the US. Under the 24 Hour advanced vessel Manifest Rule, the cargo carrier must electronically submit detailed cargo information to the CBP at least 24 hours before loading containers onto a US-bound ship. Failure to do so will result in the container being denied entry into the US.

The containers must undergo pre-screening based on the hazard standards of the goods. If the containers are detained, it poses a higher risk of delays. Additionally, if the submitted information is incomplete or incorrect, the delays would last for a minimum of three days, resulting in significant costs. However, in January 2009, new regulations were released which required additional information - Carrier demands and importer demands. These requirements include details such as the seller, buyer, manufacturer, and country of origin (Centre for Customs ; Excise Study Guide 2010: page 49-50). The International Organisation for Standardisation has introduced a set of standards for the establishment and management of supply chain security.

ISO/PAS 28000 - Specification for security management systems for the supply chain, provides a global standardized management criterion for public and private enterprises. This criterion allows organizations to adopt a consistent approach to implementing supply chain security initiatives. These initiatives impact various aspects of the supply chain, including shippers, companies, carriers, retailers, importers, distributors, manufacturers, and their raw materials. In particular, the C-TPAT elements of the CSI are highly relevant to businesses as they aim to help businesses focus on their vulnerable areas and address them within the international supply chain. Importers in the US are required to develop and implement policies that enhance security not only within their own operations but also throughout the entire supply chain, from

raw material sourcing to the final destination.

This implies that Flotsam and Jetsam, a US distributor of technological products, is a member of the C-TPAT program. The Customs Trade Partnership Against Terrorism is a voluntary compliance program aimed at enhancing the security of corporate supply chains. To maintain membership in this program, companies must adhere to strict requirements and extensively collaborate with their supply chain partners. Among these requirements is the need for importers to have documented procedures for selecting business partners. The place where a product is packed or shipped from carries significant responsibility. Importing companies are responsible for ensuring that their business partners have adequate procedures in place to prevent any changes or tampering with the shipment.

Both hazard appraisal and compliance with importer requirements are crucial for regularly checking procedures and premises. Importers must also ensure that their business partners have documented connections with other customs governments' security programs, sufficient finances to meet heightened security demands, the capacity to implement measures, and the ability to identify and rectify security defects.

The Importance of Cost-Effective Supply:

In order to avoid penalties and adhere to legislative and regulatory requirements in the supply chain, it is essential to have cost-effective methods of timely supplying products. This involves ensuring that the product is produced, transported, and cleared according to the terms and conditions of the contract. The effective management of the entire supply chain should take into account any factors that mitigate risks. Failure to comprehend or comply with customs rules during import/export processes can lead to significant costs such as border delays, increased inventory levels, and failure to fulfill contractual obligations.

According to the Centre for Customs & Excise Study

Guide 2010, nonconformity in international supply chain management can result in financial penalties or even criminal prosecution. Therefore, effective regulatory compliance management is crucial for efficient and effective supply chain management (page 36). Meeting all customs formalities and regulatory requirements is essential to avoid costly delays and the risk of financial penalties. Choosing suppliers based solely on lowest cost can be risky, as there are other factors, such as risk factors, that must be considered. Close cooperation and a strong relationship between parties are necessary in supplier selection.

Sourcing from a single supplier can be risky, as demonstrated by Ericsson's experience when a fire broke out in Philips' microchip factory and destroyed their stocks. In contrast, Nokia was able to obtain the necessary stocks from another supplier, showing the importance of having multiple providers to manage risks within the supply chain (Centre for Customs & Excise Study Guide 2010: - Case Study - Supply Chain Disruptions page 32). It is crucial to identify and strengthen weak links and vulnerabilities in the supply chain.

The United States provider poses a security risk and should be avoided to protect the company's reputation. Any association with security concerns can have negative consequences for the company's success, as reputation greatly impacts perception. However, managing these risks is necessary to efficiently and affordably serve the US market.

This could mean using providers with a good reputation. There are also other cost effective ways of serving the US markets, such as using trade agreements, becoming members of AEOs programs and being ISO accredited, and being compliant with all regulations and legislative requirements, and having a sound plan to effectively manage the supply chain to

minimize risks effectively.

Global Sourcing in the Supply Chain:

Stephen Lane emphasizes that considering the strengths and limitations of various sourcing models, it is evident that no single model fits every business driver. Therefore, the best approach is a balanced strategy in which multiple models are aligned to support different strategic business drivers.

However, only focusing on fitting drivers into theoretical models is just one aspect of the sourcing strategy equation (StephenLane @ Infosys.com.Build or Buy: Choosing the right Global Sourcing Model - Stephen Lane, Manish Subramanian and Balaji Yellavalli: page 6: April 2005). There have been companies that have made the mistake of solely considering low labor costs and basing their outsourcing decisions on this factor.
However, due to the recent global economic slowdown and the increase in transportation and other expenses, it has become important for industries to consider options that reflect best practices. A comprehensive cost model should include at least four key cost elements: supplier price and terms, delivery costs including logistics, country or region-specific costs, geography, and the costs of quality assurance as it may result in product failure, communication, performance impact, operational and quality costs, including in-plant inventory and handling, inventory maintained in the supply chain and satellite warehouse operations, and overhead.
Other costs to consider include standard costs such as risk and local tax initiatives, and situational costs such as staff procurement, agent fees, infrastructure technology and facilities, exchange rate derivatives, tooling, and mold costs.In order to provide the US in the most cost-effective manner, it is essential to consider all these elements together.

There is a strong need to focus on the total landed cost instead of solely considering low labor

costs and disregarding other relevant costs (Centre for Customs & Excise Study Guide 2010: Reading 7: page 39).

Choice of Partners in the Supply Chain:

"Foreign and in-country partners share management responsibility along with risks and rewards that match their investment. A proper balance allows the foreign partner to effectively handle investment risks compared to a confined center approach." A robust supply chain and supplier base management control system provides essential fact-based insight for all key areas including sourcing, supplier selection, contract compliance, supplier management, and outsourcing decision-making. The selection of suitable partners in the supply chain is a comprehensive process that considers all factors, rather than focusing solely on partners with a cost-oriented perspective, which can ultimately lead to unforeseen costs.

StephenLane @ Infosys.com.Build or Buy: Choosing the right Global Sourcing Model- Stephen Lane, Manish Subramanian and Balaji Yellavalli: page 4: April 2005). It is also crucial to have knowledge of the country of origin, its location, and production details of all the suppliers in order to recognize their vulnerability to security threats. Suppliers located in countries that are more susceptible to security threats could impact their production and cause delays in the supply chain. Receiving components, raw materials, and products from countries that pose security concerns in the global market could compromise the received products. The accuracy of cargo and delivery dates would ensure that suppliers can consistently deliver on time, which is crucial for assessing the risk they may pose. Adequate measures for cargo dates, choice of transportation mode, and rerouting procedures during natural disasters should be in place.

It is also crucial to assess the physical security of the provider's country, considering terrorism as a

significant factor. It is important to inquire about factors such as the materials used to manufacture the product, compliance with regulations, and the physical security measures implemented in the production facility. Gathering information regarding the provider's internal processes in manufacturing the product would provide valuable insights into their security and control measures during production.

Suppliers should ensure that the entire production process and their staff do not pose any security risks. Furthermore, the provider must be able to prove their compliance with all relevant United Nations Resolutions, such as ensuring no child labor is involved in the production of the goods.

The Advantages of AEOs for Bright Sparks:

In order for Bright Sparks to enjoy the benefits associated with AEOs, they must apply for membership and become ISO accredited. Being a part of the Customs authorized Economic Operator Scheme and having International Standards Organization accreditation will grant Bright Sparks the necessary certifications and recognition.

The AEO - Customs Golden Client strategy offers green light facilities for authorized clients, resulting in reduced business costs due to simplified and faster customs procedures. The certification program provides benefits such as being an accredited and trusted client, allowing Bright Sparks to continue operations smoothly during chaotic situations. Additionally, it leads to improved relationships with regulatory and customs authorities, resulting in fewer cargo inspections and controls. Company certification also helps in avoiding security controls.

Firstly, an inspection of paperss will be conducted to assess hazards and develop measures to mitigate them. The assessment will determine whether customs authorities should continue using radiation checks or switch to x-ray or gamma beam technology for Non-Intrusive Inspections. However, implementing these types of controls can be time-consuming and expensive,

leading to delays in delivering goods.

Decision:

The brief contains essential information about the implications of the recently signed distribution contract with Flotsam and Jetsam, who will distribute technological products in the United States. It also includes recommendations on the most cost-effective methods for supplying the US market, taking into account various initiatives in the country.

To increase operational competitiveness and position themselves well for the economic turnaround, Bright Sparks must leverage their global capabilities and source their back-office services from countries and suppliers where they are performed most efficiently. Managing the risks associated with the current global sourcing model effectively and efficiently is essential to optimize supply chain policies and strategies based on principles of fairness and equality. This will improve economic scalability, comparative advantage, and market access. We need to adjust US security initiatives to ensure necessary certifications are obtained and regulatory requirements are met. Most importantly, cost-effective methods must be employed throughout the supply chain to ensure timely production, clearance, and delivery of the product. Partnerships are integral to globalization, and joining the AEOs strategy would benefit Bright Sparks by allowing operations to continue uninterrupted during disruptive incidents.

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