Challenges And Solutions For Emergency Logistics Management

Logistics

Disuss about the Challenges of Emergency Logistics Management.

Logistics implies a detailed organization as well as implementation of operations of a company for managing and distribution of its products (Mentzer, 2008). Logistics help manage flow of products and service in points of consumption along with their origin for meeting demands of organization as well as that of customers. Logistics includes managing things physical as well as abstract in nature. Physical things include information flow, productions, handling materials, inventory control, packaging, warehousing, security, transportation and so on. Logistics management is an integral part of supply management which enables planning, implementing, controlling of various functionality from point of origin to meet customer demands. Often viewed as complex logistics system, it can however be analyzed, visualized by modeling and optimizing through simulation software. Logistics management requiring flow of goods from one point to another involves minimization of use of resource by optimizing capabilities (Waters, 2009).       

The scope of the current report deals with logistics management for the Middle East Division of Healthcare International. The company is based globally and is focused on pharmaceuticals and cosmetic product manufacturing. While managing the company’s Regional Distribution Centre in Jebel Ali it is coordinated to receive pharmaceuticals from a factory in Rotterdam in Netherlands and cosmetics from factory based in New York, USA. All these units received from various factories are assimilated in the distribution center of Jebel Ali Regional Distribution Centre prior to supplying them across other suppliers in the Middle East (Dekker, 2013).

With booming sales of the company globally, the factories supplying the Middle East zone has been functioning on full capacity. Hence, the company set up a new pharmaceutical factory in Sao Paulo located in Brazil and a cosmetic factory located in Bangalore in India. Though these factories were concentrated on their domestic markets, plans were designed such that these factories can supply to the Middle Eastern market provided the ineffectiveness of other two factories. Thus, the new factories Export Manager needs to realize the logistics issues involved in transporting of goods to Jebel Ali distribution center and other relevant issues of foreign markets. Further these factories do not have their own vehicles to transport goods and can only manage the same by leased vehicles. Thus, the various logistics issues, transportation time, inventory levels and other considerations are discussed in the report (Schönsleben, 2016).

Middle East offers an attractive and a vast market of consumers. The amount of disposable income and consumer spending is high in the region (Van Wassenhove, 2012). Majority of the population in the Middle East have tremendous propensity to spend on quality pharmaceuticals as well as cosmetic items. This offers tremendous growth potential for the Healthcare Company in the report. With growing business amongst the Middle Eastern countries and opportunities for further expansion, the company has decided to further support its growing demands from other offshore companies. While it is relatively an attractive proposition to source materials to service markets of Middle East there might be remaining certain logistic challenges that needs be attained prior to initiation of operations. Some of the important challenges that needs to be met by the company to source materials from factories in Brazil and India are;

• Geographic Location: The Middle East countries occupy an invariably large land mass which is sparsely populated(Al-Eraqi, 2008). There is long distance that needs to be communicated from one point to another. Thus, the company needs to decide on a port location that is most suited and convenient such that they are able to reach the distribution center at lowest possible costs and relatively less time. Port in UAE is Jebel Ali which will be easily accessible by pharmaceutical factories in India and from Brazil. As companies derive significant value from their logistics any additional costs might impend on the product costs which might decrease competitiveness in the market for the company. Optimization of a port location has to be arrived at such that products can easily be transported to the distribution center and from there to other suppliers.  
• Geographic Climate: Countries in the Middle East are characterized by extreme climatic conditions with high temperatures(Harrison, 2008). There is certain frequent rain burst in some locations as well. Most of the parts of the Middle East is covered with sand with no railway communications. High humidity is another factor prevailing in countries of Middle East. These factors make it further difficult for logistics operators to transport and use the products in their current state as extreme temperature of 50 degrees might have an effect on the physical and chemical properties of the products. Logistics managers needs to adhere to precautionary measures while packaging and storing their products prior to their transportation, as pharmaceuticals as well as cosmetics require certain degree of temperature to be maintained (Sheu, 2007).
• Population: Population in Middle East countries is highly scattered and this results in difficulty to cater to such population density. Bahrain, Kuwait, Qatar, Oman, KSA and UAE have relatively low population density. Such low density population entails difficulty to understand the appropriate location for the distribution center as well as locating ports for the same. Though the current company has a fixed distribution center from where products are further supplied, deciding on the port is a difficult task. Further increased heat increases vehicle maintenance costs due to wear and tear(Jacobs, 2010). The Export Manager in new factories needs to be briefed regarding such climatic conditions and advised to enter into a maintenance contract with the leased vehicle company. While transportation, the factories needs to further account for covered transport and maintaining a temperature control system in their vehicles.
• Transport Infrastructure: An important determining factor while transporting goods from factories to ports to distribution centers is the prevailing transport infrastructure within the countries. There are major roads that connect various parts of the countries especially the major cities. There are two major container terminals at Jeddah and Dammam(Salem Al-Eraqi, 2010). A dry container terminal is located at Riyadh. In case the company wants its products by air then there are International airports located in Jeddah, Riyadh as well as in Dammam. There is absence of inland waterways and interconnected railway that can connect various places in the Middle East. Transport infrastructure is important for the Regional Distribution Centre in Jebel Ali as the goods consolidated in Jebel Ali Distribution Centre will be distributed across various locations across Middle East. The distribution center will be responsible for proper distribution and supply of materials to stores across the countries to meet customer demands. 
• Customs clearing procedures: Ports and airports at Middle East are characterized by complex customs procedures. Antiquated customs techniques make it further difficult preventing flow of goods with ease. Further there are several border crossing at Jordan, UAE, Kuwait, Qatar, Bahrain, Yemen and Oman that entails difficulty in transporting of goods(Perry, 2007). The distribution center from Jebel Ali will supply goods to various centers across the countries hence; customs has an integral role to play.
• Miscellaneous Challenges: Obtaining visas for drivers, language barriers, absence of public transport, timing shifts further pose potential challenges to companies.

Transit Times and Inventory Levels

The distribution center for company being located at Dubai, near  Jebel Ali Port, as it is best that the company suggests Export Managers from the two new factories to ship their products at port located at Port Jebel Ali, in Dubai, United Arab Emirates. This port constitutes the world’s largest man-made commercial port and busiest in Middle East. The port is located at 35 kilometers southwest of Dubai and in the Persian Gulf region (Jacobs, 2007). This port is mostly used by USA and other countries as well. The port currently covers a million square meters of container yard. It can also include medium to long-term cargo storage, which will be beneficial for the company. It also accommodates for passenger vehicles and is located adjacent to Dubai dry-docks and Dubai Maritime City. In times of scarcity the company can easily use the added port’s facility to store its cargo and then ship to distribution center in Port Jebel Ali according to convenience of requirements.

Further, the Port offers connectivity to Dubai’s expressway system as well as Dubai International Airport Cargo Village (Hein, 2011). The port is located at 53 kilometers from Jebel Ali hence can offer easy connectivity as well.

The company has decided that it will avail Port Jebel Ali for incoming cargo from two new factories in Brazil and India. The below is a time schedule showing the time taken by ports in these individual locations that will be taken in order to transport the cargo to Port Jebel Ali as against time taken by previous two factories at Port Jebel Ali (Wang, 2012).

Transit time by sea from current suppliers’ ports of export, Rotterdam and New York, to Jebel Ali port, compared to the ports for exporting from Brazil and India

According to sea distances and transit time required to travel for cargo ships that transport pharmaceuticals and cosmetic products the below schedule has been derived. From the below mentioned table it can be noted that time taken to transit from Rotterdam port to Jebel Ali port is 66 hours whereas between New York to Jebel Ali Port is 25 days. In case the company selects Jebel Ali port to transit its products from new factories then it might be unprofitable for the company (Mangan, 2008). As the table depicts that the time taken to transit between Port Santos in Brazil and Port Mormugao in India to Jebel Ali ports. Hence, the company will not only lose out on number of days but also on its inventory costs in case it wants to select Jebel Ali Port for transiting products from new factories.  

Transit Time by Sea
To Jebel Ali Port
Ports	Time Taken
Rotterdam	16-33days
New York	9-53 days
Sao Paulo(Port of Santos)	29-48 days
Bangalore(Mormugao Port)	13-31 days

Reviewing the level of inventory holding in Jebel Ali of pharmaceuticals and cosmetics or otherwise

Table 1: Time Table for Sea Ports Communication

Source : Author

From the above table depicting transit time from various factory ports to ports is Middle East it is highly recommendable that the company focuses on Jebel Ali port for its previous two factories and also for its new factory set up. This will enable the company ease of transit and also fast delivery schedules that can impact the profitability of the company further.

The state of the current Inventory holding in Jebel Ali is for pharmaceuticals four weeks cover and for cosmetics 6 weeks cover (Rashid, 2009). The time taken in transit reflected from the above schedule shows that time taken for transit from new factories set up in Brazil and India to Port Jebel Ali will be significantly less. The items cannot be stored for prolonged periods of time as they will have an expiry date and will be perishable in nature. Hence the communication between Port Jebel Ali to distribution center in Jebel Ali is also comparatively low. Further, Port Jebel Ali contains inventory facility in case a company wants to keep its product in the store house. Thus, it will not be vital and critical to store inventory at the Jebel Ali port. But considering the free tax rates and better customs facility as Jebel Port is relatively new, the company might consider keeping its products at the Jebel Ali port facility. The port facilities and inventory systems at Port Jebel Ali is significantly good and the company might at a later period consider keeping its inventory levels at Jebel Ali Port (Mathews, 2008).  

The volumes that the previous factories will ship are approximately 5 containers every week. Further, pharmaceuticals and cosmetic goods are normally shipped in 40ft containers with 50% dry, 50% reefer to maintain +18capacity. A small percentage of goods will be transported by air when there is a requirement for goods to be dispatched urgently. In its new factory setting also it will focus on same kind of volumes or larger such that it can cater to growing demands in the market. While the two new factories starts shipping products of higher or equal capacities then it will be enough to meet the growing demands of the Middle East locations.

MedicalCare International is considering transferring the manufacturing facilities to the UAE in 5 years’ time if the GCC market continues to expand. The detailed report analyzed on current logistical challenges faced in GCC countries are huge and poses major costs as well as threats for the company. In case the company can transfer its manufacturing facilities within the next five years to GCC countries (Shah, 2012). The following are some of the benefits that the company will enjoy;

• Population Growth : High number of young population contributes to a high demand for various products. Each of the state in the country is characterized by growing population structure which lets high demand for products such as cosmetics. Further pharmaceuticals have a high demand rate owing to the international levels of medical care in the country. The current company will benefit highly from increased demand in the country and will be able to expand its operations further. this also enables availability of cheap and easily labor(Reiche, 2010). 
• High disposable Incomes: Majority of the population in GCC countries is characterized by oil and gas related economies. This contributes largely to the affluent population in the countries with large disposable incomes that accounts for the major demand drives. Hence, the company will greatly benefit by catering to such population and meeting their demands.
• Planned development goals: Countries in the GCC have focused and set their place in a planned diversified manner for development programs individually as well as collectively that can contribute to growth(Raouf, 2008). Such planned developmental features further add to the development and growth in the economy. In case the company decides on shifting manufacturing facility to GCC they will be able to avail latest railway connect and other roadways for transportation. Further major spending is being made in areas of technology infrastructure that can support logistics across countries.
• Low logistics costs: The Company incurs high amounts of costs for transiting its products from factories based at locations(Harry, 2007). In case the company was to base its operations at GCC countries it will incur relatively less costs in transiting of its products. Time delays in transiting through sea as well as by airways will also reduce that can led to high amounts of profitability for the company by less costs added to its products. 
• Infrastructural Development: Infrastructural development across the GCC will have a spillover effect and will be a strong driver for growth and investment. Such infrastructural projects will be conducive in the current company’s growth as well(Boughanmi, 208).
• Large hydrocarbons reserves: Each of GC countries contains large hydrocarbons surpluses that might act against global fluctuations. Thus, in case of global economic and financial recessions the company can expect itself to be outside of any effect due to the coherent structure prevailing in the country.
• Strong political stability and consensus: GCC countries enjoy a strong and inherent political stability as well as consensus that act as an attractive venue for investment driving growth(Sbeiti, 2010). Each of the GCC country have a stable political leader and low levels of bureaucratic indulgence in business which enables businesses to function smoothly and effectively.
• Stable economic fundamentals: GCC countries have low rates of inflation, strong and potential GDP growth rates, flourishing manufacturing and construction sector and so on. These economic fundamental contribute invariably to growth amongst companies present in the country(Al-Kandari, 2009).

Conclusion

The evaluations of logistics opportunities prevailing in GCC countries by utilization of various ports reflect the customized logistic solutions available. The scope of the current company which has decided to source from its factories based in Rotterdam, New York and Bangalore as well as Sao Paula reflects existing demands for the company products. There is immense prevailing opportunities amongst the GCC countries that can allow for growth and prosperity of the current company as well as of its products. The company at a stage later can significantly focus on moving its manufacturing facilities to GSS countries by lowering of costs in transit. This can help the company to further attain costs competitiveness and increase in profitability by value of its supply. The company can focus on meeting current demands by sea and air transport, it can purchase its own vehicle to subsidies costs further. While making its own manufacturing facility in GC country it will be able to cut costs and increase employment at its manufacturing base. Hence, it will be able to create a positive impact on the economy of the country as well.

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