Question 1:

1. Managing the Supply Chain to Reduce Average Stock

Retailer, wholesaler, and manufacturer ordering cycles must be in line with the
demand pattern in order to reduce average inventory across the supply chain.

Method of Ordering:
Retailer: In order to directly meet the weekly demand of 100 units, the retailer
should place an order with the wholesaler for 100 units at the start of each week.
This plan guarantees that the store keeps very little inventory, almost none at the
beginning of each week.
Wholesaler: Every four weeks, the wholesaler should combine orders and place an
order with the manufacturer for 400 units. With this strategy, the wholesaler's order
quantity is guaranteed to correspond with the total demand over the course of four
weeks.
Manufacturer: Production schedules should be coordinated so that 800 units are
produced every eight weeks, meeting the total demand over the course of the eight-
week cycle. The following weeks will see a slow reduction in this inventory.

Inventory Levels:
Retailer:
Since the retailer orders exactly what is needed each week, the inventory level at
the start of each week is 0 units. The order is received immediately, fulfilling the
demand.
Wholesaler:
Week 1: Start 400 units, End 300 units
Week 2: Start 300 units, End 200 units
Week 3: Start 200 units, End 100 units
Week 4: Start 100 units, End 0 units
Week 5: Start 400 units, and so on.
Manufacturer:
Week 1: Start 800 units, End 400 units
Week 2: Start 400 units, End 400 units
Week 3: Start 400 units, End 400 units
Week 4: Start 400 units, End 400 units
Week 5: Start 400 units, End 0 units
Week 6-8: Start 0 units, End 0 units
Week 9: Start 800 units, and so on.

2. The Bullwhip Effect Is Present in the Supply Chain

The bullwhip effect is the term used to describe how order unpredictability increases
as one goes up the supply chain. In this case, the bullwhip effect is less likely because
the merchant must meet continuous demand, and the ordering policies are set to
match that demand.
3. The Effect of External Factors and Demand Variability on the Bullwhip Effect

(a) Random Demand: Should demand become erratic, the merchant might have to
constantly modify order quantities in order to prevent overstocking or stockouts. The
bullwhip effect may be amplified if these changes spread upstream and result in
higher order variability for the manufacturer and wholesaler.

(b) Variations in Demand Forecast Owing to Trends and Seasonality: Throughout the
supply chain, ordering patterns may need to be modified if the demand forecast
varies as a result of trends or seasonality. The bullwhip effect may result from
differences between anticipated and actual demand as a result of how each link in
the supply chain reacts to these shifts.

(c) Trade promotions by the manufacturer: If the manufacturer holds trade

promotions, it can result in a brief spike in orders from the retailer or wholesaler,
raising inventory levels and causing more order unpredictability upstream. The
bullwhip effect may be greatly worsened in this situation, especially if the
promotions induce downstream partners to engage in advance buying.

B} COVID-19 Pandemic: Current Supply Chain Interruptions and Their Effects:

The COVID-19 pandemic caused major disruptions to global supply networks during
the course of its outbreak in late 2019 and the preceding two years. Due to labour
shortages, transportation delays, and industrial shutdowns, the effects were felt
widely throughout a number of industries. Important concerns were as follows:
Raw Material Shortages: A lot of manufacturers experienced a lack of these
commodities, especially in sectors like electronics, automobiles, and medicines. This
resulted in manufacturing delays and, occasionally, total production stoppages.
Logistics Bottlenecks: The epidemic created significant bottlenecks, especially in
maritime shipping. Significant shipping delays were caused by port closures, limited
port capacity, and a scarcity of containers, which extended the lead times for finished
goods and raw materials.
Increased Costs: As a result of the disruption, enterprises had to pay higher prices for
raw materials and more for transportation. Businesses had to overcome these
obstacles in order to continue being profitable, which resulted in price rises for final
customers.
Shift to Resilient Supply Chains: Companies were compelled to reconsider their
approaches to supply chains, opting instead for more specialized and robust supply
chains. In order to protect against upcoming disruptions, there was a stronger focus
on expanding inventory levels and diversifying sources.

Suez Canal Blockage (March 2021):

Impact: One of the most important maritime commerce routes in the world was
closed for six days in March 2021 when the enormous container ship Ever Given got
stuck in the Suez Canal. The obstruction had major effects on the world stage:
 Global Trade Delays: With 12% of all traffic passing through it, the Suez Canal is a
crucial chokepoint in international trade. Hundreds of ships' journeys were delayed
by the blockage, seriously disrupting global supply networks, especially for Europe
and Asia.
Supply Chain Disruptions: A number of industries were impacted by the delay,
including electronics, consumer goods, and the oil and gas sector. Goods delivery
delays caused production halts and missed delivery dates for businesses. In addition
to obstructing the movement of empty containers, the bottleneck made the ongoing
global container shortage worse.
Increased Freight rates: Shippers looked for longer and more expensive routes, like
those around the Cape of Good Hope, which resulted in a brief increase in freight
rates due to the disruption. Prices for items increased as a result of this cost increase
being frequently passed on to customers.
Supply Chain Risk Management: The incident brought to light the significance of
supply chain risk management as well as how susceptible international supply
chains are to these kinds of chokepoints. Companies started to assess and put into
practice plans to lessen these risks in the future, like expanding inventory buffers
and diversifying shipping lanes.

C}Establishing an Efficient Distribution Network

Current Situation: Global Engineers, while expanding its market footprint across
India, is struggling with distribution challenges such as warehouse space limitations
and frequent stockouts. Additionally, the company manages its own fleet, which is
plagued by issues like staff absenteeism and underutilization of transport capacity.
Possible Alternatives for Distribution Network:
 Outsourcing Distribution:
Third-Party Logistics (3PL): Partnering with a 3PL provider can streamline the
distribution process by leveraging their expertise in inventory management,
reducing stockouts, and optimizing space usage. This could also enhance the
company’s logistical reach and flexibility.
Benefits: Cost savings on infrastructure, enhanced inventory control, and
improved scalability to meet demand fluctuations.
 Centralized vs. Decentralized Warehousing:
Centralized Warehousing: By consolidating inventory in fewer, larger warehouses,
the company could reduce complexity and improve control over inventory levels.
Decentralized Warehousing: Alternatively, increasing the number of smaller,
regional warehouses could lead to better service levels, shorter lead times, and
greater responsiveness to regional market needs.
Recommendation: A hybrid approach combining centralized hubs with regional
warehouses might strike the right balance between control and responsiveness.
 Implement a Warehouse Management System (WMS):
WMS Integration: A WMS can enhance space utilization, automate inventory
tracking, and provide real-time insights into stock levels, reducing stockouts
and improving order fulfilment.
 Benefits: Improved accuracy in inventory management, reduced manual
errors, and greater operational efficiency.

 Reassess Transportation Strategy:

Fleet Outsourcing: Outsourcing transportation to a specialized logistics
provider could resolve issues like driver absenteeism and optimize vehicle
utilization, reducing the occurrence of empty return trips.
Collaborative Logistics: Partnering with other manufacturers to share
transportation routes could maximize truck loads and lower costs.

2) Improving Inbound and Manufacturing Cycles

Current Challenges: Global Engineers faces inefficiencies in its production
schedules and inbound logistics, leading to suboptimal use of transport and delays
in product deliveries.
Suggested Improvements:
 Optimize Production Planning:
Just-In-Time (JIT) Manufacturing: Adopting JIT practices can help reduce
excess inventory, synchronize production more closely with actual demand,
and shorten lead times.
Demand Forecasting: Implementing advanced forecasting tools can align
production schedules with market demand, reducing instances of
understocked shipments.
Production Scheduling Optimization: Using advanced planning and scheduling
(APS) systems can ensure smoother production flows and minimize idle time.

 Enhance Inbound Logistics:

Supplier Collaboration: Strengthen relationships with suppliers to ensure
timely delivery of raw materials, potentially through vendor-managed
inventory (VMI) agreements to prevent production delays.
Inbound Freight Consolidation: Consolidating inbound shipments can
optimize transport efficiency, reduce the number of trips needed, and lower
transportation costs.

 Leverage Technology:
IoT and Real-Time Tracking: Using IoT for real-time tracking of inventory and
raw materials can provide greater supply chain visibility and enable proactive
management of potential disruptions.

3) Rebuilding Customer Confidence

Current Situation: Customers are dissatisfied with the after-sales service provided
by dealers, and the perception of Global Engineers’ product quality lags behind
that of competitors.
Suggested Actions:

 Focus on Product Quality:

 Quality Assurance Initiatives: Implement rigorous quality control measures
across the manufacturing process to ensure high standards and reduce
product defects, thereby enhancing reliability.
Continuous Improvement: Establish a continuous improvement program, like
Six Sigma, to drive quality enhancements and process efficiency.
 Enhance After-Sales Service:
Dedicated Service Teams: Form a specialized after-sales team within the
company to handle customer complaints directly and provide technical
support, complementing the role of dealers.
Dealer Training: Offer regular training sessions to dealers, focusing on both
product technicalities and customer service excellence, to improve their
ability to support customers effectively.
Service Level Agreements (SLAs): Introduce SLAs with dealers, setting clear
service standards and penalties for non-compliance, to ensure consistent
service quality.
 Strengthen Dealer Partnerships:
Increased Commissions: Consider raising dealer commissions to boost their
motivation and commitment to promoting Global Engineers’ products.
Regular Communication: Establish frequent, direct communication between
company engineers and dealers, fostering a feedback loop that ensures
customer needs are accurately relayed and addressed.
Collaborative Problem-Solving: Engage dealers in joint problem-solving
initiatives to tackle challenges collaboratively, reinforcing the partnership.
 Customer Engagement:
Customer Feedback System: Develop a robust feedback mechanism to
capture customer insights and use this data to inform product and service
improvements.
Loyalty Programs: Launch customer loyalty programs to reward repeat
business and foster long-term relationships with customers.

Question 2:

Executive Summary
Amazon's ongoing global expansion makes joining the New Zealand market a highly
advantageous prospect. Strategically locating a fulfilment centre in Auckland is crucial for
attaining prompt delivery, improving customer satisfaction, and ensuring cost effectiveness.
This report centres on the strategic significance of Amazon.com's supply chain design,
emphasizing crucial variables such as personalization, cost-effectiveness, technological
integration, and scalability.

1. Strategic Importance of Amazon's Supply Chain Design

A. Customization and Flexibility

 Amazon's supply chain is specifically intended to accommodate a wide variety of

items and meet diverse client requirements, making customization and flexibility
crucial elements.

 Amazon's fulfilment centres are specifically intended to efficiently store and handle a
diverse range of products, encompassing both compact technological devices and
bulky household items. Adaptable storage solutions and inventory management
systems are necessary to accommodate this variability.

 Amazon's capacity to modify warehouse layouts enables them to promptly adjust to

fluctuations in demand, such as temporary surges during specific seasons or the
launch of novel product categories.

 Amazon tailors its inventory to match regional preferences, guaranteeing that

popular local products are easily accessible. This strategy enhances consumer
satisfaction and minimizes delivery delays.

B. Low-Cost Design

 Amazon's supply chain strategy prioritizes cost-efficiency, which allows the company
to offer competitive pricing.

 Amazon's extensive operations enable them to engage in large-scale purchasing and

conduct efficient negotiations with suppliers, resulting in reduced prices per unit.

 Utilizing robotics and automated systems decreases labour expenses and enhances
efficiency in the processes of picking, packing, and shipping, hence reducing
operating costs.

 By utilizing predictive analytics and real-time data tracking, Amazon is able to

optimize inventory levels in accordance with customer demand, resulting in
decreased storage expenses and reduced wastage.
C. Technology Integration

 Amazon's supply chain significantly depends on advanced technologies to streamline

operations and sustain its competitive advantage.

 AI and Machine Learning technologies are utilized to predict demand, manage

inventory, and optimize routes, guaranteeing efficient and cost-effective product
delivery.

 Technology is essential for improving the efficiency and precision of fulfilment

processes, with applications ranging from robotic picking systems to automated
sorting and packaging.

 Amazon employs data analytics to oversee all aspects of its supply chain, including
supplier performance and delivery delays. This enables constant enhancement and
swift adaptation to market fluctuations.

D. Scalability and Global Integration

 Amazon has created a supply chain that can easily adapt and expand to meet the
needs of its worldwide operations.

 Amazon's fulfilment centres are designed with scalability as a priority, enabling the
corporation to rapidly expand its operations in response to growing demand.

 Amazon's fulfilment facilities are networked, enabling streamlined cross-border

logistics and supply chain management. Amazon's capacity to provide prompt
delivery for a diverse array of products is facilitated by this worldwide connection.

2. Strategic Considerations for Establishing a Warehouse in Auckland

A. Location Selection

 Auckland, the largest city in New Zealand and the country's economic centre, is an
optimal site for Amazon's inaugural fulfilment centre in the area.
  Auckland's strategic location enables effective distribution to key urban centres
throughout New Zealand, guaranteeing expedited delivery services for a significant
section of the population.

 The optimal placement for the fulfilment centre would be in close proximity to vital
transportation hubs such as the Port of Auckland and Auckland International Airport.
This strategic positioning would greatly enhance the smooth and effective transit of
goods, both within the country and across international borders.

 The fulfilment centre in Auckland benefits from the city's substantial population, as it
ensures a conveniently accessible staff that is crucial for sustaining operational
efficiency.

B. Warehouse Design and Layout

 The design of the fulfilment centre should conform to Amazon's worldwide standards
while also being tailored to suit the particular requirements of the New Zealand
market.

 High-Bay Storage Systems optimize vertical space use, hence enhancing storage
capacity without necessitating a bigger physical footprint.

 By integrating Amazon Robotics and other automated technologies, the dependence

on human labour will be diminished, resulting in improved efficiency and reduced
operational expenses.

 Introducing cross-docking facilities will enable rapid processing of high-demand

commodities, resulting in shorter inventory holding periods and enhanced delivery
rates.

C. Supply Chain Integration

 The success of the Auckland fulfilment centre relies heavily on the seamless
connection with Amazon's worldwide supply chain.
  To ensure efficient inventory tracking, order processing, and delivery routes, the
fulfilment centre should make use of Amazon's exclusive logistics management
software.

 Cultivating robust partnerships with both local and international suppliers can
guarantee prompt restocking of inventory and reduce wait times to a minimum.

 By establishing collaborations with local courier firms, Amazon will strengthen its
last-mile delivery capabilities, guaranteeing prompt and dependable service for
clients in New Zealand.

3. Operational Strategy

A. Customization

 Customize the inventory to incorporate popular local brands and products that
specifically cater to the interests of consumers in New Zealand.

 Provide a range of delivery alternatives, such as expedited, next-day, and pre-

arranged deliveries, to accommodate diverse consumer requirements.

 Create a streamlined returns procedure to improve consumer happiness and foster

trust in the Amazon brand.

B. Cost Management

 Apply lean warehousing techniques to minimize inefficiencies, optimize processes,

and decrease expenses.

 Allocate funds towards sustainable energy solutions, such as the installation of solar
panels and the adoption of energy-efficient lighting, in order to save operational
expenses and adhere to New Zealand's environmental requirements.

 Utilize a blend of permanent, temporary, and contingent workforce, bolstered by

automation, to align labour capacity with swings in demand.
4. Risk Management

 Regulatory Compliance

Ensure that the fulfilment centre adheres to New Zealand's regulatory framework,
encompassing labour laws, environmental restrictions, and health and safety standards.
 Contingency Planning

Create alternative strategies to manage potential interruptions, such as delays in the supply
chain, natural calamities, or economic recessions. This involves the management of safety
stock levels and the establishment of alternate logistics channels.

5. Financial Plan and Budget

 Capital Expenditure

This category encompasses expenses related to acquiring property, constructing buildings,

integrating technology, and setting up initial inventory.
 Operational Expenditure

Calculate the anticipated recurring expenses, such as personnel salaries, utility bills,
transportation charges, and maintenance fees.
 Revenue Projections

Generate revenue forecasts by analysing the market, assessing consumer demand, and
considering growth projections.
 ROI Analysis

Perform a comprehensive analysis of the return on investment to ascertain the point at

which costs are recovered and the potential for long-term profitability.
Conclusion

Establishing a fulfilment centre in Auckland is a strategic decision that supports Amazon's

worldwide goals of customisation, cost-effectiveness, and fast delivery. Through prioritizing
efficient warehouse design, seamless supply chain integration, and a customer-centric
strategy, Amazon can swiftly acquire a significant portion of the market in New Zealand and
provide the exceptional level of service that has established it as a worldwide leader in e-
commerce.

Question 7:
1.Process Map for Sabah Furniture Exports

Cross-border trade is complex. Sabah Furniture manual export process begins from
procurement and orders of timber, and can be broadly categorised into:

• Inventory and Procurement Management: Particularly for timber which is imported on a

FOB delivery from one saw miller, the need is forecasted and orders are placed. Following
that, the timber is brought to the warehouse of Sabah Furniture, where it is conditioned and
air dried ion site for two months to ensure high standards are maintained before production
begins.

• Manufacturing: To begin productions some of the seasoned wood mass inventories will be
utilized, and other required materials will be procured from vendors in West Malaysia on a
CIF mode. After the completion of the production procedure and once all the necessary
ingredients have been obtained, finish the production procedure.

Export Preparation: Order all the necessary 40-foot shipping containers and work with the
shipping agent in order to make an appointment for the cargo shipment. Stuff and seal the
containers upon arrival and wheel them to Sepangar Bay. Then use a feeder service to send
the containers further to Kota Kinabalu (KK).

• Shipping to West Malaysia: Following that policy, containerships leave Kota Kinabalu (KK)
with shuttered containers for either Port Klang or Tanjung Pelepas (TPP) on Malaysian
register.

• Transhipment and Export to Final Destination: There are two delivery options available to
ship containers meant for European and Asian destinations: 1 months service, a 2 month
service with may be less price, cheaper.
Methods to Decrease Lead Time to Customers:
a)Shipping arrangements Improvement
• Strengthening ties with shipping agents, to ensure punctuality in securing bookings in
advance.
• Enhancing the pooling of containers among several shipping lines in a bid to reduce
waiting time.
• Promote the use of export market from Sabah directly to the main ports.
b)Management of Inventory Optimization
• Adopt the JIT mode of production in the manufacturing process to ensure minimal
storage levels for raw materials.
• Make materials from west Malaysia available from other suppliers to mitigate delays.
c)Production Scheduling Improvement
• Enhance efficiency in production by employing advanced planning and scheduling APS
systems.
• Cut lead time when carrying out kiln drying and seasoning operations.
d) Utilization of Government Support
 • Apply pressure on the government to improve the infrastructure such as blinking roads
and better port solutions and adjust – the cabotage policy.

2. Push and Pull Production Methods and Their Basics

Push Production:
In a push manufacturing system space is set aside for product manufacture ahead of time,
after which the manufactured product is slowly pushed into the supply chain to reach
specific customers. Expected demand causes production to take place. The important
distinguishing features are that all manufacturing decisions are geared towards future orders
and not existing ones.
The Sabah Furniture uses the push method purposely so as workers do.

Pull Production:
In a pull manufacturing system, the demand from customers is what drives production in
real time. Products are only produced in response to a confirmed order, which reduces
waste and excess inventory.
Sabah Furniture uses a pull technique, which means that they don't start manufacture until
they have a confirmed order from a buyer. Using seasoned wood from its inventory, the
corporation starts production in compliance with the customer's exact requirements.

However, because the process is dependent on estimated inventories and potential delays in
acquiring more supplies from West Malaysia, it is not fully optimized as a true pull system.
Two months is a long time to wait for timber to season, which makes it more difficult for the
pull process to react swiftly to unforeseen changes in customer demand.

Assessment for Sabah Furniture:

Sabah Furniture employs a hybrid methodology that integrates elements of push and pull
approaches. Despite the fact that the corporation starts production in reaction to actual
orders (pull), it appears that the system is not entirely pull-based because it depends on
forecast timber inventory (push).
The current paradigm leads to inefficiencies, such as increased costs associated with keeping
goods on hand and the possibility of supply and demand imbalances. The protracted timber
seasoning process and material delivery delays from West Malaysia are the main causes of
these problems.

Suggestions for Enhancement:

• Sabah Furniture has to improve its demand forecasting processes so that it can better align
its inventory with real demand trends and lessen its reliance on large stocks of seasoned
wood.
• By strengthening their ties with suppliers in West Malaysia, they may improve material
availability and shorten lead times, which will improve the pull process' responsiveness.

• To maximize efficiency, they should put lean manufacturing concepts into practice by
cutting waste, lowering inventory levels, and simplifying production procedures. This will
improve the system's adaptability and ability to meet client demands in real time.

• They ought to make an effort to switch to a Just-in-Time (JIT) production strategy, in which
materials are ordered and supplied only as needed for certain orders. This will improve
production synchronization and lower the cost of keeping inventories on hand.

3. Current Incoterms Arrangements

The current Incoterms arrangements for Sabah Furniture involve using CIF (Cost, Insurance,
and Freight) for materials sourced from suppliers in West Malaysia and FOB (Free on Board)
for exporting finished products.

CIF (Cost, Insurance, and Freight) for Inbound Materials: Seller bears cost up to the
destination port, including insurance.

 Pros:
- CIF shifts the risk of transportation, insurance, and freight to the supplier until
the goods reach Sabah Furniture's location. This is particularly beneficial
given the geographical challenges and remoteness of Sabah.
- Sabah Furniture can focus on its core business of manufacturing without
having to manage complex logistics for inbound materials.

 Cons:
- CIF terms typically include a premium for the supplier's handling of logistics
and insurance, potentially leading to higher costs for Sabah Furniture.
- Sabah Furniture has little control over the logistics chain, including the choice
of carrier, route, and shipping schedule, which may result in delays and
inefficiencies.

FOB (Free on Board) for Outbound Shipments: Seller's responsibility ends when goods are
loaded on the shipping vessel.

 Pros:
- FOB allows Sabah Furniture to control shipping costs beyond the loading
point, enabling negotiations for better freight rates or service levels.
- Sabah Furniture can choose the shipping company, route, and schedule that
best align with its operational needs and customer requirements.

 Cons:
 - Sabah Furniture is responsible for the goods until they are loaded onto the
vessel, which includes handling the complex logistics of getting goods from
Sabah to the port. Given the logistical challenges in Sabah, such as limited
shipping options and higher costs, this responsibility adds significant risk.
- Delays in arranging shipments, availability of containers, and reliance on
shipping agents could lead to penalties from customers for late deliveries,
especially under stringent supply agreements.

Is This the Optimal Arrangement?

CIF is generally beneficial for Sabah Furniture due to its location and the complexities
involved in transporting materials from West Malaysia. However, Sabah Furniture might
explore options like negotiating lower CIF costs or taking more control over shipping
(possibly using EXW or FCA terms) if it can manage the logistics better.
FOB works well in giving Sabah Furniture control over exports, but the associated risks due
to the challenging logistics in Sabah may outweigh the benefits. Sabah Furniture might
consider alternatives like CFR (Cost and Freight) or CPT (Carriage Paid To), where Sabah
Furniture manages the freight costs but transfers the risk sooner.

4. Specifics of Sabah Location and Inherent Challenges

Sabah, located in East Malaysia on the island of Borneo, encounters many geographical,
logistical, and economic obstacles that impact its capacity to deliver efficient customer
service for export clients. The problems include restricted direct shipping routes,
dependence on feeder services to West Malaysian ports, and limitations associated with the
state's infrastructure, workforce, and regulatory environment. The geographical remoteness
of Sabah from major international trade routes, combined with its dependence on
transshipment via ports in West Malaysia, hampers its competitiveness compared to other
exporters in the region.

5. Inherent Challenges:

a) Geographical Isolation:
 Sabah does not have direct shipping links to important markets like Europe,
Japan, and other regions in Asia. Before being transported, exports need to
be sent to ports in West Malaysia, which increases the duration and expenses
of the shipping procedure.
 Malaysia's cabotage policy mandates that only ships registered in Malaysia
can carry products between Sabah and West Malaysia, limiting shipping
alternatives and increasing costs.

b) Logistical Challenges:
 Sabah's ports are managed by government-linked companies (GLCs) and have
a lower container handling rate of 14-16 containers per hour, whereas West
Malaysian ports can handle up to 30 containers per hour. Consequently, this
results in the occurrence of delays and a subsequent rise in expenses.
  Transportation expenses in Sabah are elevated due to its challenging
geography, regulatory obligations, and inadequate infrastructure. For
instance, the road freight rates that are determined by the distance travelled,
the low quality of roads, and the necessity of using stronger vehicles because
of the mountainous landscape all contribute to higher expenses.
 Insufficient container interchange facilities and the dependence on backhaul
routes result in frequent unavailability of containers, leading to shipment
delays.
 Shipping delays contribute to higher inventory holding costs. Insufficient
shipping schedules and ships operating at maximum capacity further impede
the prompt delivery of goods.

c) Economic and Regulatory Challenges:

 Goods imported from West Malaysia incur a price increase of 20-30% as a
result of transportation expenses and the implementation of the cabotage
policy. In addition, materials such as tyres and batteries are priced 15-20%
lower in West Malaysia.
 Insufficient skilled local labour has led to a dependence on immigrant labour
from Indonesia and the Philippines. The absence of local training and skills
development results in elevated labour costs.
 Furthermore, the requirement for permits and supplementary
documentation, such as removal passes for timber-related items, leads to
longer lead times and increased expenses.

Impact of Each Group of Constraints on Sabah’s Competitiveness:

a) Income and Market Constraints:

 Standard export payment terms (30% on shipment and 70% on receipt) and
longer delivery times increase accounts receivables and impact cash flow.
 Lack of direct shipping connections limits the ability to explore new markets,
restricting growth potential.

b) Cost Penalties:
 The higher costs of imported materials, transportation, and logistics services
reduce profit margins and make Sabah Furniture less competitive compared
to furniture manufacturers in regions with better access to raw materials and
shipping routes.
 Labor and Training Costs: Dependence on foreign labour and the lack of local
training facilities contribute to higher costs, while the inability to source
labour from West Malaysia without work permits adds complexity and
expense.

c) Infrastructure and Service Constraints:

 The slow handling rates, reliance on outdated ships, and limited capacity at
Sabah ports add significant delays to the supply chain, increasing costs and
reducing competitiveness.
  Poor road conditions and low weight limits for vehicles increase
transportation costs and reduce delivery speed.

d) Shipping Penalties:
 The need to tranship goods through West Malaysia increases freight charges
significantly, making Sabah Furniture's products less competitive in terms of
price.
 The unreliability of shipping connections, cancellations, and container
shortages further complicate logistics and increase delivery times and costs.

Leveraging Sabah Furniture’s Role with State Governments:

a) Advocacy for Policy Reforms:

 Sabah Furniture should lobby for the relaxation of the cabotage policy to
allow more shipping lines to operate between Sabah and other international
ports, potentially reducing shipping costs and times.
 Push for infrastructure development funds from the state government to
improve roads, ports, and logistics facilities in Sabah, enhancing overall
efficiency.

b) Incentives for Investment:

 Sabah Furniture can work with the government to create incentives for
private investment in shipping, logistics, and port handling equipment, aimed
at reducing costs and improving service quality.
 Encourage tax incentives or subsidies for companies that invest in local skill
development programs to build a more skilled workforce and reduce reliance
on foreign labour.

c) Enhancing Market Access:

 Collaborate with the government to establish direct shipping routes to new
markets in the APAC region, such as Thailand, Indonesia, the Philippines, and
Northern Australia, to diversify market access and reduce dependency on
current routes.
 Leverage government trade agreements and partnerships to reduce export
tariffs and enhance competitiveness in key markets.

d) Development of Container Pools and Logistics Hubs:

 Work with the state government to create a container pooling system among
shipping lines and develop logistics hubs that can facilitate smoother
container management and reduce delays.
 Establish a regional logistics hub in Sabah to attract more shipping lines and
promote Sabah as a strategic export point in the region.

e) Improving Labor Market Conditions:

  Partner with the state government and local educational institutions to
establish training programs that build local skills in manufacturing, logistics,
and supply chain management to reduce dependency on foreign labour.

Question 9:

(a) Problems that Need to Be Solved for the Geoff & Co. Profit Margin Discrepancy and
the Dairy Processor Geoff & Co. today has a 12% profit margin, whereas the dairy
processor only makes a meagre 5%. The processor is faced with a substantial
difficulty as a result of this discrepancy, and they must look for ways to improve
overall profitability by either increasing their profit share or renegotiating conditions.

Budget Allocation: 25% of the MRP is set aside by Geoff & Co. for marketing,
distribution, and packaging costs. The processor looks into if these expenses are
reasonable or if there are ways to cut them without sacrificing quality because they
are worried that they might be overstated.

Issues with Stock Turnover: A 5% discount is provided by Geoff & Co. on the basis of
a projected 15-day stock turnover. Sales and margins suffer if the stock does not clear
within this time frame. In order to preserve profitability, the processor must consider
other options for accelerating stock turnover or renegotiating the terms of the
discount.

Increasing Procurement Prices: The processor is struggling to maintain their already

thin margins in the face of rising procurement expenses. To preserve financial
sustainability, measures to reduce or offset these growing costs must be found.

Method of Approaching Resolution

Examine Cost Distribution: Examine Geoff & Co.'s 25% cost allocation in detail to
determine whether these expenses are justified. Determine possible ways to reduce
costs or boost productivity inside the current structure.

Negotiate Improved Terms: Discuss a review of the profit-sharing plan or a change in

transfer pricing with Geoff & Co. The objective is to achieve a balance that sustains a
win-win cooperation while increasing the processor's profitability.

Update Stock Turnover Contracts: Review the stock turnover terms and the
corresponding discount structure. In order to protect profit margins, think about
introducing steps to speed up turnover or changing the terms of the discount if the
existing stock clearing rates are not up to par.
 Investigate Vertical Integration: For more control over the value chain, think about
acquiring a marketing and distribution company strategically. This action may
improve profit margins and lessen reliance on outside middlemen. Evaluate the
approach's viability and possible advantages in detail.

a) Supply Chain and Logistics Tasks for a Baseball Game or Rock Concert Delivering Aid

Phase of Planning:

Event coordination:
Task: To guarantee a smooth execution, cooperate with local law enforcement,
humanitarian organizations, and event organizers.
Sequence: Decide on the date and venue of the event and specify each stakeholder's
specific roles and duties.

Development of Logistics Plans:

Task: Create a thorough supply chain and transportation logistics plan.
Sequence: Choose the best routes for transportation, make schedules, and decide
what tools and resources are needed.

Transportation and Procurement

Purchasing Tools and Materials

Task: Obtain or lease the necessary medical supplies and event equipment.
Sequence: To guarantee preparedness, schedule the prompt acquisition and delivery
of all necessary supplies.

Transportation Arrangements
Task: Plan people, equipment, and supply transportation logistics.
Sequence: Arrange transportation so that it arrives on schedule and sets up quickly
at the event site.

Setting Up and Performing:

Venue Preparation:
Task: Prepare and set up the locations for seating, staging, and aid delivery.
Order: Get there early to give yourself enough time for equipment testing and setup.

Event Management:
Task: Manage the event's implementation, resolve any issues that come up, and
arrange for the aid to be distributed.
Sequence: Continuously monitor the event to maintain smooth operations and
ensure efficient aid delivery.
Post-Event
 Breakdown and cleanup after the event
Task: Assemble all of the equipment, tidy the area, and make sure that everything is
put away or returned correctly.
Sequence: Plan and oversee the cleanup operation to return the location to its initial
condition.

Assessment and Documentation

Task: Conduct a thorough analysis of the event's success, gather input, and assess the
effectiveness of the aid distribution and logistics.
Procedure: To guarantee better results for subsequent events, do a post-event
evaluation to determine strengths and places for growth.

8. Answer
Findings
Distance from supplier to fulfillment
Centre(in KM)
FC1 FC2 FC3
SD 42 9 39
SF 27 60 24
Distance in Between Demand and fulfillment centres
DN DE DS DW DC
FC1 9 36 33 33 18
FC2 42 51 30 24 39
FC3 51 15 18 48 33

Time taken to travel in Between demand & fulfillment

centre
DN DE DS DW DC
FC1 2 4 4 4 2
FC2 2 3 2 2 2
FC3 5 3 3 4 4

Which FC should cater to demand of North, South, East, West, Central city for the
items to remain freshest (least old) under following conditions?
FC1 will cater to both the demands of north and central. It will take 2 hours for both case.
FC2 will cater to both the demands of the south and west. It will take 2 hours for both case.
FC3 will cater to the demand of the east. It will take 3 hours.
What is the minimum number of total trucks which will depart from the FCs if same
truck can be used for delivery of Farm and Dairy products?
Minimum number of total trucks will be required – 5 trucks.
From FC1 – there will be 2 trucks to north and central.
From FC2 – there will be 2 trucks to south and west.
From FC3 – there will be 1 truck to east.
What is the weighted average age of farm and dairy products in the above case?
Time taken from supplier to Time taken from
fulfillment Centre(in Hour) FC to demand
FC1 FC2 FC3 centre
SD 6 2 5 FC1 2
SF 3 6 3 FC2 2
FC3 3
Time taken from supplier to Weighte
fulfillment Centre(in Hour) Averag d
e Time average
of time of
produc product
FC1 FC2 FC3 t Time
SD 8 4 8 6.66
SF 5 8 6 6.33 6.5

The weighted average age of dairy product is 6.66 hours.

The weighted average age of farm product is 6.33 hours.
Total weighted average of the products are 6.5 hours.

There have been new plans for improving the infrastructure utilization. Two decisions
are taken:
a. No customer orders for farm and dairy products will be fulfilled out of FC2,
and
b. From an origin FC to a destination Demand Centre, the trucks fulfilling farm
and dairy products' demand CANNOT be different i.e. Single truck will be
running between any pair of FC-Demand Centre combination

Which FC should fulfill farm and dairy product orders for which Demand Centers for
the items to remain freshest (least old)?
Time taken in Between
DN DE DS DW DC
FC1 2 4 4 4 2
FC3 5 3 3 4 4
 Distance in Between
DN DE DS DW DC
FC1 9 36 33 33 18
FC3 51 15 18 48 33

FC1 will cater the demand of North, west and central.

FC3 will cater the demand of East and South.
In Question 4 if, additionally, the cost of fulfilling 1 unit of farm or dairy product for
FC1 and FC3 to different Demand Centers are as follows:
in Rs. DN DS DE DW DC
FC1 1 3 4 4 2
FC3 4 2 2 5 3
Demand from each centre is 2000 kg and 2000 ltr of farm and dairy products
respectively. What is the cost of providing best customer experience i.e. deliver the
freshest products?
Cost –
For For
Farm Dairy
Product Product
s s
FC1 14000 14000
FC3 4000 4000
So total cost will be Rs.36000 .