Discuss about the Effectiveness of various aspects of Transportation Management and the Carrier Relationship Management of Lenovo.
In the present era of international business, effective process of transportation and distribution management is important for the contemporary business organizations in order to deliver their products in destinations around the world safely and in time. The aim of this report is to discuss about the effectiveness of various aspects of transportation management (Rushton, Croucher & baker, 2014). This will include the selection of the proper incoterm and carrier. Moreover, this report will also discuss about the carrier relationship management of Lenovo. Accordingly, recommendations will be provided, which will further help to enhance the transportation management of them.
Lenovo is one of the leading computer hardware manufacturers in world. Their product portfolio ranges from personal computer, laptops and mobile devices. Their country of origin is China; however, they are having their manufacturing facilities and logistic hubs in different countries (About Lenovo, 2017). The sector where Lenovo operates is highly competitive in nature with having several competitors in the market. Due to this reason, pricing of the products have to be kept in check in order to attract more customers. Moreover, the organizational goal of Lenovo is to provide products having updated and latest technology in affordable prices for mass market. Their organizational strategy of offering mass market products is helping the in achieving their goal of market leader in the computer hardware sector.
Thus, in order to offer the products in affordable cost, Lenovo is in the need of having effective transport management, which will help them in reducing the cost of transportation of their products from the country of manufacturing to other countries (Kaszubowski, 2012). Moreover, due to the reason that computer products are sensitive to transportation damages, carrier and incoterms should be selected accordingly.
International commercial terms also known as Incoterms are being introduced by International Chamber of Commerce. These terms are being used by the exporters and importers around the world in selecting their mode of transport. There are various Incoterms, which are being introduced for diversified and varied uses for the stakeholders in the international business (Cavusgil, Knight & Riesenberger, 2013). Thus, Lenovo being one of the leading global organizations and having operations across the world, they are in the need of effective and suitable incoterms to be used.
Lenovo involves third party logistics firms in managing their logistics and transportation along with the initiation of the supply chain software. They do not involve transportation of their products by own (Stadtler, 2015). Moreover, with the help of the latest supply chain software, they are being able to internally manage the purchase orders, shipping notices and product invoices. DHL is one of their logistic partners who foresee their distribution operation in Brazil. However, one of the key issues being faced by them is the increase in the cost of transportation. This is due to the reason that, involvement of the third party logistics is increasing their cost of transportation (Aguezzoul, 2014). Moreover, on the other hand, another issue being identified is the lack of control in the process of transportation. This is due to the reason that, due to the involvement of the third party firms, Lenovo do not have the direct control over their transportation process. Thus, it is difficult for them to control and regulate the damages being occurred in the course of the transportation. There is an urgent need for them to have their own transportation process with having effective and suitable incoterms.
Recommended incoterms
Figure: 1
Cost and freight incoterm
One of the recommended incoterms for Lenovo will be the Cost and Freight (CFR). This is due to the reason that, majority of the goods being transported by Lenovo is through waterways. Thus, this incoterm is most suitable for the water transportation. According to this incoterm, Lenovo will be responsible for the cost of transporting the goods to the destination port of the buyer (Lindstad, Asbjornslett & Jullumstro, 2013). However, the insurance cost will be bear by the buyers. This will also enable Lenovo to transport their products with lower level of trust with the buyers. This is due to the reason that, the insurance cost is being covered by the buyers and thus the associated risk for Lenovo will be lower. Thus, the security in case of any mishaps in the transportation will be looked after by the buyer (Bergami, 2013). Moreover, the risk associated with the seller will be limited to the boarding of the goods in the port of origin. Thus, the risk for Lenovo will also be less due to the use of this incoterm.
Figure: 2
Delivered at place incoterm
Another effective and suitable incoterm for Lenovo will be the delivered at place. This incoterm is being recommended due to the reason that, it will enable Lenovo to mitigate the risk and responsibility involved in transporting their products to the countries having more risk of duties, tariffs and taxes. Due to the fact that Lenovo is doing their business in majority of the countries, thus, this incoterm should be used by Lenovo. This will help them in mitigating all the risks and cost associated with tax and tariff in the particular destination country.
As discussed earlier, Lenovo exports their computer products from their manufacturing and logistics hubs to several countries of destination across the world. Thus, their key transportation goal is to transport their products safely and in time. Moreover, due to the reason that, they are producing and transporting electronic devices, thus, there is higher probability of damages in the course of the transportation (Dunning, 2012). Thus, the transportation goal of Lenovo is to have safe and secure process of transporting of their products. Accordingly, they are in the need of a shipping line or carrier, which will be cost effective as well as reliable and safe. This is due to the reason that, shipping cost is one of the major costs being incurred by them and it have implications on the end price of the products. In addition, due to the reason that, Lenovo is catering to the mass market with their affordable product line, thus they are in the need of a cost effective shipping line, which will reduce their transportation cost (Chang & Wang, 2014).
Geographical coverage
For the selection of the carrier or shipping line, there are various criterions that should be considered. One of the key criterions that should be given the maximum leverage is the geographical coverage or network of the particular shipping line. This is due to the reason that, Lenovo is having their operation facilities and destination market in various cities around the world. Thus, they will need a shipping line, which will have diverse geographic coverage around the world (Meng et al., 2013). The more will be the geographic coverage of the carrier, the more area will be covered by the Lenovo with their products. This factor should be given the most importance due to the reason that, if the shipping line cannot cover the desired geographical area, then the basic objective of transportation will not get achieved.
Equipment availability
Another important criterion is the availability of the latest equipment and with different capacity of the shipping line. This factor is the second most important in choosing the carrier for Lenovo due to the reason that, the product portfolio of Lenovo includes the computer hardware and mobile devices. These types of material will require extra care and attention in handling and transporting in order to reduce the rate of damage. Therefore, it is important to determine prior to the selection of the shipping line, whether the chosen shipping line is having enough and suitable equipment to handle the products of Lenovo (Wang & Meng, 2012). The more equipped will be the shipping lines; the less probability will be there for damage of the products. This will eventually reduce per unit cost of shipping for Lenovo. According to the theory of transportation, one of the key objectives of effective process of transportation is to reduce per unit cost of shipping. In accordance to that, Lenovo have to select the shipping line, which will have latest and suitable equipment and will help them to reduce the shipping cost.
Average transit time
Transit time being taken by the carriers should also be considered by Lenovo. This is due to the reason that, the more effective will be the shipping line, the less transit time they will consume in transporting the goods. Involvement of the less time in transit will help them to provide the goods to their buyers in less time. Thus, the buyer satisfaction will get enhanced for them (Bang et al., 2012). Moreover, the reliability of the carrier should also be determined due to reason that, it is important to determine that, whether the carrier can transport the goods safely and without any mishaps or unwarranted incidents. Determination of these factors will help Lenovo to select the carrier, which will take less time in transporting their goods safely.
Pickup and delivery
Another important criterion that should also be considered is the reliability of the shipping line along with their delivery and pickup effectiveness. This is due to the reason that, the key motive of shipping carrier is to pickup and delivers the goods in time and in right place. For instance, if Lenovo chose a certain carrier, then they have to ensure that the particular carrier will pick up their goods to be transported in time and from the right place (Liu et al., 2014). On the other hand, they will deliver the goods in time at the right destination. This should be ensured due to the reason that, if the chosen carrier cannot deliver or pick up their goods in time, then the transportation will not be effective and it will create negative impression on the buyers over the delay. In determining this factor, evaluation of the background and past experience of the carrier will be helpful and will help to understand their standings in the market in terms of goodwill and reputation.
According to the model of transportation, the basic three objectives are the cost effectiveness, timely delivery and reliability. As discussed earlier, the transportation goal of Lenovo is to have cost effective mode of shipping along with reducing the chance of damage in transit.
The relationship between the consignor and shipper should be in long term basis. This is due to the reason that, one of the key factors that influence the transportation process in the international business is the trust. It is important due to the reason that, in the process of transportation in the international business, certain risks are being associated with both the consignor and the shipper (Monczka et al., 2015). There are various instances where shipper have transported the ordered items but have not got the agreed price from the buyer or seller. On the other hand, consignor has paid the amount of shipping but goods received by the buyer are faulty and different. Thus, initiation of the long term relationship will help both the consignor and shipper to continue with their business agreements along with the enhanced level of trust and understanding.
Conclusion
Thus, it can be concluded that, the existing process of transportation of Lenovo is oriented to third party logistics firms. This report have discussed about the possible incoterms that can be used by them in order to have their own transportation process. Moreover, recommended incoterms will help them to mitigate the risk involved in international transportation of their goods. This report have also discussed about the various criterions, which will help Lenovo to select the perfect and suitable shipping line in order to transport their goods. Various process of enhancing the relationship have also been discussed in this report, which will further help Lenovo in effectively managing their shippers.
References
About Lenovo | Lenovo. (2017). Www3.lenovo.com. Retrieved 7 November 2017, from https://www3.lenovo.com/en/lenovo/
Aguezzoul, A. (2014). Third-party logistics selection problem: A literature review on criteria and methods. Omega, 49, 69-78.
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Bergami, R. (2013). Incoterms 2010: The newest revision of delivery terms. Acta Universitatis Bohemiae Meridionalis, 15(2), 33-40.
Cavusgil, S. T., Knight, G. A., & Riesenberger, J. R. (2013). A framework for international business. Pearson.
Chang, C. C., & Wang, C. M. (2014). Evaluating the effects of speed reduce for shipping costs and CO 2 emission. Transportation Research Part D: Transport and Environment, 31, 110-115.
Dunning, J. H. (2012). International Production and the Multinational Enterprise (RLE International Business).
Kaszubowski, D. (2012). EVALUATION OF URBAN FREIGHT TRANSPORT MANAGEMENT MEASURES. LogForum, 8(3).
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Liu, Z., Meng, Q., Wang, S., & Sun, Z. (2014). Global intermodal liner shipping network design. Transportation Research Part E: Logistics and Transportation Review, 61, 28-39.
Meng, Q., Wang, S., Andersson, H., & Thun, K. (2013). Containership routing and scheduling in liner shipping: overview and future research directions. Transportation Science, 48(2), 265-280.
Monczka, R. M., Handfield, R. B., Giunipero, L. C., & Patterson, J. L. (2015). Purchasing and supply chain management. Cengage Learning.
Rushton, A., Croucher, P., & Baker, P. (2014). The handbook of logistics and distribution management: Understanding the supply chain. Kogan Page Publishers.
Stadtler, H. (2015). Supply chain management: An overview. In Supply chain management and advanced planning (pp. 3-28). Springer Berlin Heidelberg.
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