...Outsourcing Product Distribution The Right Way By Gregory Wick of Quovera As seen in: Logistics and Supply Chain online magazine Aug. 2, 2000 For Internet companies that cannot afford to buy and store their inventory or hire an internal logistics staff, outsourcing the product distribution function can be either a smart business decision or a disaster. Success or failure in distribution depends on how carefully and continuously you manage this function to make sure your distribution partners are doing the job that is expected. B2C Drives DSF Growth When distribution is not a core competency for your company and you do not have the resources to make it one, outsourcing the function can help your company grow by allowing you to focus on your mission-critical activities. There are two types of outsourcing that are common among start-ups - traditional distribution and drop ship fulfillment (DSF). Traditional distribution outsourcing involves hiring a third party to store and distribute your products through its national or international distribution network; this party provides the staff, warehouses, distribution center and transportation fleet. The second type of outsourcing, DSF, has grown in parallel with B2C retailing over the Internet. With DSF, a start-up company sells a product, charges the customer, generates a purchase order, and sends the PO to the manufacturer or supplier, who then fulfills the order by shipping the product directly to the customer. Since...
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...Running head: FACTS ABOUT OUTSOURCING 1 The Facts about Outsourcing Lawrence Smith Professor Barron Columbia College FACTS ABOUT OUTSOURCING 2 Abstract Globally, businesses have undergone unprecedented changes because of technology, the internet, and improved educational systems around the world. There are so many moving parts to having a successful business; nowadays, many organizations are outsourcing their non-core activities to external agents. Outsourcing is becoming an increasingly accepted practice for both small and large businesses of today. Outsourcing has quietly grown into a standard operating procedure for many organizations. This rising use of outsourcing represents a paradigm shift in the way companies conduct business. In today’s business environment, every company is looking for ways to reduce costs. Many are now turning to outsourcing as a weapon in their cost-cutting arsenal. But outsourcing is about more than shrinking budgets and reducing headcount. This paper will explain the term outsourcing and address why organizations prefer to outsource some of its functions in today’s business environment. Also, discussed in this paper will be the advantages and disadvantages of the outsourcing process and its rewards and risks towards the organization. FACTS ABOUT OUTSOURCING 3 The Facts about Outsourcing The word outsourcing could be described as the contractual relationship with a specialized outside service provider...
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...and customer demands require excellence of service. In distribution, selective, exclusive and intensive are three primary channels in which an organization must determine the best option in relation to products and customers. The Kimberly Clark Company provides an excellent example for today’s organizations with “a customer-oriented supply chain reorganization begun more than four years ago, K-C is improving distribution efficiencies, reducing transportation costs and shrinking its carbon footprint, while becoming an indispensable partner to retail customers” (Jamison, 2008, para.3). Technology and the Supply Chain Continuous advancements in technology offer new solutions to old problems in supply chain management as well as placing focus on the current needs of distribution in global markets. Real-time locations systems (RTLS) are among emerging technologies where “RFID is no longer considered an emerging technology. It is a proven solution with high value add and an increasingly attractive ROI, said Michael Liard, Director, AutoID for VDC Research Group.” (Zebra Technologies, 2012). Technology plays an important role in distribution where retail customers focus on inventory reduction while maintaining adequate supply to meet consumer demands. Real time information provides organizations such as Kimberly Clark with the necessary data to develop the most effective channels for distribution based on individual products and customers. Kimberly Clark’s EDI Solution Kimberly...
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...CHapter 15 supply chain management Teaching Notes It is important to emphasize that Supply Chain Management involves the entire range of production and distribution processes. Students need to understand the trade offs involved in supply chain function related to JIT, inventory management purchasing and delivery lead times and quality. Supply Chain Management requires a broad view of the entire flow from purchasing to final delivery to the customer. Supply Chain Management is becoming increasingly more important due to the following factors: 1. Implementation of JIT systems. 2. Emphasis in reduction in inventories. 3. Emphasis in reduced order cycles and reduced lead times. 4. Continuous and rapid change in products and product designs (shorter product life cycles). 5. Shorter product introduction and product development times. The importance of Supply Chain Management can not be underestimated because it ensures that the right materials are at the right place at the right time at a minimal cost and maximum quantity. In addition, supply chain management requires very careful coordination of activities between various business organizations on the chain. Integration of databases and sharing key pieces of information among the different business organizations on the supply chain not only provides timely and valuable information to companies on the supply chain, but also assists in improving the trust and the overall relationship between suppliers and their customers...
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...KARELIA UNIVERSITY OF APPLIED SCIENCES International Business Degree Program Swedish Clothing Industry Global Business Environment November 2013 Introduction The distance between people in the world is decreasing. In stores in Sweden we find goods from all corners of the world. We are intertwined in a world of mutual dependences and it is what we now call globalization. Economic globalization is a historic process and the result of human innovation and technological development. The economies in the world are integrating, particularly through trade and financial flows, but globalization can also involve movement of people and labor, as well as knowledge and technology across international borders. This means that countries can specialize and produce what they are best at. Countries across the world wills also have access to more capital, better technology, cheaper imports and major export markets. This does not mean that all countries have access to the benefits of globalization, in the poorest countries, the international community help with contributions. The question is that is globalization a treat or an opportunity? Some believe that the difference between the rich and poor countries only increased with globalization, while others argue that the difference in income or GDP between countries across the world has increased, but it is not the whole truth. Wider measurements of welfare that takes social conditions in the calculation shows those developing countries...
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...effect on make or buy decision. The vertical chain is ‘’ the process that begins with the acquisition of raw materials and ends with the distribution and sale of finished goods and service.’’ (Besanko et al, 2010, p119) The term vertical integration is used to describe firms that produce and sell their goods without relying on external co-ordination. Firm’s vertical boundaries can identify what to make (internally inside the organization) and what to buy (externally by using the market). Some of the pharmaceutical companies like Pfizer have strong vertical chains. So as to market its drugs in 150 countries, it gives high importance for production that starts by acquiring active pharmaceutical ingredients (API) and shifting them to manufacturing sites all across the globe. These manufacturing sites are either approved under the stringent laws of FDA or EMEA (2 important bodies responsible in monitoring the quality of registered products across the globe). Sometimes Pfizer also uses loan-licensing companies as external manufacturers when in-house facilities are not available or feasible. Once the product is manufactured, it is sent for quality control release and then packed and shipped to the first point of distribution (global hubs). From these locations; depending on the demand from each region; packed products (formulated products) move to the regional hubs. These hubs in turn will supply to either local hubs (within the country) to cater within the country of operations...
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...(frequently, and originally, military organizations). Logistics involve the integration of information, transportation, inventory, warehousing, material-handling, and packaging. Logistics is a channel of the supply chain which adds the value of time and place utility. Origins and definition The term "logistics" originates from the ancient Greek " " ("logos"—"ratio, λόγος word, calculation, reason, speech, oration"). Logistics is considered to have originated in the military's need to supply themselves with arms, ammunition and rations as they moved from their base to a forward position. In ancient Greek, Roman and Byzantine empires, there were military officers with the title ‘Logistikas’ who were responsible for financial and supply distribution matters. The Oxford English dictionary defines logistics as: “The branch of military science having to do with procuring, maintaining and transporting material, personnel and facilities.”Another dictionary definition is: "The time related positioning of resources." As such, logistics is commonly seen as a branch of engineering which creates "people systems" rather than "machine systems".... Military logistics In military logistics, logistics officers manage how and when to move resources to the places they are needed. In military science, maintaining one's supply lines while disrupting those of the enemy is a crucial—some would say the most crucial—element of military strategy, since an armed force without resources and transportation...
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...What is Outsourcing? Outsourcing refers to the way in which companies entrust the processes of their business functions to external vendors (Dinu, 2015). At times, an organization cannot handle all aspects of a business process internally while focusing on their core competencies. There are necessary functions that an organization would prefer to outsource. Once the function is outsourced to the service provider, they will take ownership and risk to manage the function as agreed upon by both parties. According to much of the literature and research on case studies, Figure 1 details the most commonly outsourced activities (Hoecht, & Trott, 2006). IT Outsourcing Legal Outsourcing Content Development Web Design and Maintenance Recruitment Logistics and Distribution Services Manufacturing Technical/Customer Service Human Resources Services Sales and Marketing Finance and Accounting Services Procurement Services Computer Programming Services Tax Compliance Training Administration Transportation of Products Benefits and Compensation Planning Payroll and Human Resource Functions Figure 1: The most commonly outsourced activities. Why Outsource? When an organization is considering outsourcing, they must weigh the efficiency of performing the activity internally versus the external vendor’s efficiency and evaluate the risk associated with the decision. The organization must consider both strategic and operational issues related to the decision to outsource. Greaver (1999)...
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...as they respond to challenges in their environment. These resources can be developed in-house or developed among strategic partners or purchased. Outsourcing entails the delegation of tasks or jobs from internal production to an external entity such as sub-contractor. It is the process of placing the development of system components in another development organization with the aim of achieving cost reduction and a gain in terms of production capacity and development. The main striking features of the Nigerian economy today is that available infrastructures of all types fall far below the quantities and qualities required. This naturally results in overstretching of most facilities. Despite huge potentials in almost every sector, poor overall economic performances have made it inevitable to tap unduly and at high cost and less profit than they should be. According to Alaofin (2003), “operating costs are high in Nigeria inspite of relatively cheap labour hence, running any business according to international standards is therefore costly”. He further stated that facilities management as an area is just evolving in Nigeria through janitorial services which is the best development component, has been around for nearly (5) five decades. Security services are in the stage of development. He stated that there are various merits of outsourcing which include better focus, economics of scale in purchasing and specialization. Dalhat(2009) in analyzing the development of a service industry...
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...position in the marketplace, and the competition it faces into consideration; most times analyzed through a SWOT analysis. There are a number of ways in which the human resource functions can help a company to create more value. This function ensures that the company has the right mix of skilled people to perform its value creation activities effectively. Telecommunication Company in Bangladesh: Bangladesh has a huge potential in Wimax and submarine cable which is a new technology in the country and has attracted the foreign telecom operators. Many foreign telecom operators are coming to Bangladesh to explore the potentiality of the technology. Some interested international telecom operators who want to start a business in Bangladesh are UK-based Orange Telecom, South Korean SK Telecom and UAE’s Etisalat. The government is encouraging private sector to invest more in the industry as they think that the industry is playing a vital role in developing the socioeconomic structure of the country. AKTel has a sound HR practice and tries to motivate the employees to keep up the good works. From giving incentives to organizing cultural activities to inspire the employees and give them the feeling of being a part of the family is given importance in Aktel. Technology: This is for managing inventory, tracking sales, pricing products, selling products, customer service inquires etc....
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...CASE STUDY : Multinational Outsourcing and CSR. Inditex: The worldwide outsourcing garment industry and social community development in Morocco “Intermón claims that pressures on foreign clothing suppliers are smothering employees. […] In Morocco, where Cortefiel, Inditex (Zara), Mango and Induyco (El Corte Inglés) manufacture their products, a Tangier based textile factory sold a pair of slacks to large Spanish retailers for 3.3 euros three years ago; today, the same item sells for 2 euros. Female factory workers work 12 to 16 hours a day during the high season, because orders from Spain demand six ‐ day delivery terms in order to suit shop window change schedules.” (El País Newspaper, “Mujeres en Aprietos”, 10 ‐ 02 ‐ 2004) towards process outsourcing that responded to its characteristic labor ‐ intensive production and current competitive pressures for cost reduction and flexibility. Sector companies had been forced to redesign their business strategies, focusing on performance measurement, new competence and skill development, product quality improvements and more strategically oriented human resources management. Yet, this new strategic focus entailed unprecedented risks, especially as regards labor practices, environmental care and unfair competition. As multinational companies embarked on this process, multilateral agencies and global NGOs had begun to look into and report on wrongful practices by large corporations...
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...International Expansion Zara was found in Spain, 1974. With the successful opening through out Spain, Zara starts to expand in 1980s. Firstly Zara entered Portugal, later on United States and France. Then in 1990s the expansion reached Mexico, Greece, Belgium, etc. Now Zara has really been a globalized brand. Zara can be found in 86 countries, 5887 retail stores worldwide according to the latest data research. For the latest markets Zara just invested in are Australia, Taiwan, Azerbaijan, South Africa and Peru. In 2012, there were 360 stores newly opened in the world. Depends on different countries, zara expands more in Asian countries like China, Japan. (Inditex website)In China zara increased its presence to 156 new stores in 2011, at rate of 3 stores per week. (THE ECONOMIST, 2012) |Number of Zara’s stores in major Countries (Inditex website) | |Asia |Europe |North America |South Hemisphere and Africa | |China: 138 |Spain 332 |Mexico 56 |Australia 8 | |Japan 83 |France 126 |United States 45 |Brazil 39 | |South Korea 39 |Italy 90 |Canada 22 |Egypt 4 | |Saudi Arabia 26 |Germany69 | |South...
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...Journal of Applied Business and Economics Global Business Management: Current Trends and Practices Michael Wisma Saint Joseph College of Indiana Today, problems associated with global business management have been identified as factors that negatively impact the performance and productivity of multinational corporations and in turn, adversely affect regional and national economic growth. While factors related to logistics and distribution are important when selecting international suppliers, they are inadequate when considered in isolation of internal and external forces. This paper engages in a comprehensive and systematic analysis of global supply chain management, particularly in terms of micro and macro cultural considerations. INTRODUCTION Organizations are facing increased global competition, economic uncertainties, and changing markets. Technology is changing the way we conduct business and manage information. Outsourcing of significant functions within businesses and organizations complicates the landscape of supplier relations. Suppliers and vendor partners may be located in the same city, region or country. But they are just as likely to be located halfway around the world, adding new challenges to business management. The growth of international strategic partnerships has risen exponentially in the last twenty years. Competing in a global marketplace has made it increasingly important to align business strategies with a risk management strategy...
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...8. John’s Personal Experience 9. Conclusion 2 By Team Four – Informal Definition By Miles, Snow & Coleman, “Managing 21st Century Network Organisations” – Formal Definition 3 “…multilevel hierarchies have given way to clusters of business units coordinated by market mechanisms rather than by layers of middle-management planners and schedulers.” “…linked competitive success to doing fewer things better, with less.” Dynamics, Snow C., Miles R & Coleman H. Managing 21st Century Network Organisations, Organizational Winter 1992, pp. 5-20. “Established firms downsized to their core competence, de-layering management hierarchies and outsourcing a wide range of activities. New firms eschewed growth through vertical integration and instead sought alliances with independent suppliers and/or distributors.” Summer Miles, R. & Snow, C. Causes of Failures in Network Organisations, California Management Review, 1992, pp. 53-72 4 Marketers and Distributers Producers Designers Suppliers 5 Globalisation • Competition has reduced all margins; thus, firms must cut costs and improve efficiencies – economies of scale • Strong new players at every stage of the value chain Technological Change and Technology Transfer • Shorter product life cycles • Lower barriers to entry, firms have become ‘stateless’ and can move freely across international boarders • Faster, lower cost communications and computer technologies Deregulation • Legal and policy changes...
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...S LEGO GROUP: AN OUTSOURCING JOURNEY w 910M94 PhD Fellow Marcus Møller Larsen, Professor Torben Pedersen and Assistant Professor Dmitrij Slepniov wrote this case solely to provide material for class discussion. The authors do not intend to illustrate either effective or ineffective handling of a managerial situation. The authors may have disguised certain names and other identifying information to protect confidentiality. Richard Ivey School of Business Foundation prohibits any form of reproduction, storage or transmission without its written permission. Reproduction of this material is not covered under authorization by any reproduction rights organization. To order copies or request permission to reproduce materials, contact Ivey Publishing, Richard Ivey School of Business Foundation, The University of Western Ontario, London, Ontario, Canada, N6A 3K7; phone (519) 661-3208; fax (519) 661-3882; e-mail cases@ivey.uwo.ca. Copyright © 2010, Richard Ivey School of Business Foundation Version: (A) 2010-11-12 PROLOGUE The last five years’ rather adventurous journey from 2004 to 2009 had taught the fifth-largest toy-maker in the world — the LEGO Group — the importance of managing the global supply chain effectively. In order to survive the largest internal financial crisis in the company’s roughly 70 years of existence, resulting in a deficit of DKK1.8 billion in 2004, the management had, among many initiatives, decided to offshore and outsource a major chunk of LEGO’s...
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