International Logistics & Supply Chain Management

December 2023 Examination

Q1. An Indian tea estate based in Assam auctions its tea leaves to beverage companies who
process the tea leaves into their brands of tea powder & instant tea premixes for sale in
different consumer markets. The management of the tea estate has decided to embark on
forward integration of tea processing and launching their own brand of tea powder &
instant tea premixes to be sold pan India. It is confident of seeing stable, strong demand
for its new brand of tea after the initial introductory phase during which the demand
could be low and require promoting & pushing the product in the market. How can the tea
estate go about its supply chain planning, and suggest appropriate supply chain strategy /
strategies for its forward integration project. (10 marks)

Ans 1.

Introduction

The tea industry in India, particularly the estates in Assam, has a long history of cultivating
leaves that are aromatic and in demand globally. Historically, these estates have acted merely as
suppliers, auctioning off their precious leaves to beverage companies who processed and
marketed them under various brand names. However, developments in market dynamics and the
rising wave of direct-to-consumer trends have now led these properties to rethink their
strategies. The decision by tea gardens in Assam to embrace integration by moving beyond
cultivation to processing and brand building is an example of this transformational change. As
Indian tea estates look to further integration by processing their own tea leaves and launching
their own brand of tea products, effective supply chain planning is essential to ensure smooth
transition and successful market entry.

Concept & Application

A supply chain strategy outlines how a tea plantation will bring goods into the business and
deliver them to customers as effectively as possible. By taking into account every step in the
supply chain, such as sourcing goods, logistics and delivery, the strategy optimizes operations
to minimize costs and maximize profits.

Supply chain strategies have come into the spotlight as volatile demand and complex global
markets have made supply chains more complex. It has become important for tea gardens to
have strong supply chain processes in place to overcome any supply chain disruption.

Unfortunately, off-the-shelf supply chain strategies do not exist. Tea estate needs to tailor its
strategy to the company, industry and business goals.

Here's how the tea estate can go about its supply chain planning and suggested supply
chain strategies:

Supply Chain Planning:

1. Demand Forecasting:

• Start by conducting a thorough demand forecasting exercise. Anticipating low initial demand,
use market research and historical data to estimate demand patterns during the initial phase and
beyond.

2. Purchasing and Production:

• Ensure reliable and continuous supply of tea leaves from the estate itself. This involves
optimizing cutting, processing and quality control to meet the production requirements of the
new brand.

3. Manufacturing Facilities:
• Invest in or upgrade manufacturing facilities for tea processing. Make sure they meet food
safety standards and are able to produce tea powder and instant tea premix at the required scale
and quality.

4. Quality Control:

• Implement rigorous quality control procedures to maintain consistent product quality. Regular
testing and adherence to quality standards is necessary.

5. Packaging and Labeling:

• Design attractive and informative packaging for tea products. Ensure compliance with
packaging regulations and labeling requirements.

6. Distribution Network:

• Establish a distribution network that covers the entire India market. This may include setting
up regional distribution centers, partnering with distributors, or using third-party logistics
providers. centralized or decentralized; Fast and slow running lists or put together in different
facilities; Location of sites; Use of specific technologies and layouts; Use of company-owned or
contracted facilities

7. Inventory Management:

• Maintain adequate but not excessive inventory levels to meet anticipated demand. Implement
inventory management system to reduce carrying costs and prevent stockouts.

8. Transportation and Logistics:

• Select cost-effective transportation modes and optimize logistics networks to shorten lead
times and minimize shipping costs.
9. Promotion and Marketing:

• Develop a marketing and promotional strategy to increase awareness of the new brand.
Consider a phased marketing approach, starting with a local market before expanding
nationally.

Supply Chain Strategies:

1. Push-Pull Strategy:

• During the introductory phase, use a “push” strategy to ensure product availability on shelves,
followed by a “pull” strategy to generate demand through marketing and promotion.

2. Local Sourcing:

• Consider local sourcing of some ingredients and packaging materials to reduce costs and
support sustainability.

3. Just-in-Time (JIT):

• Implement JIT inventory practices to reduce holding costs and ensure fresh products are
delivered to market.

4. Cooperative Relationship:

• Collaborate closely with suppliers, distributors and retailers to share market information and
coordinate supply chain activities effectively.

5. Market Discrimination:
• Use unique product features, such as regional tea blends or special processing techniques, to
differentiate the brand and create a specific market segment.

6. E-Commerce and Direct Selling:

• Take advantage of e-commerce platforms and consider direct-to-consumer sales to reach a

wider audience and gather customer feedback.

7. Customer Feedback Loop:

• Appropriate level of service to customers by product group or segment, considering: order

fulfillment requirements, inquiry and inquiry capacity and available information. Customer
service policy informs the nodes and links of the supply network.

8. Agility and Flexibility:

• Maintain a flexible supply chain that can adapt to demand fluctuations and market changes.

9. Stability Practice:

• Incorporate sustainable and ethical sourcing practices to attract environmentally conscious

consumers and meet market expectations.

10. Distribution Plan:

• Plan delivery routes efficiently to reduce transportation costs and ensure timely delivery.

The focus of your supply chain strategy: There are two ways to develop your supply chain
strategy.
 Supply chains oriented on efficiency. These are suitable for industries where the products
are either low cost or high revenue – or both. These include cement, steel, paper, commodities
and low-cost fashion.
 Supply chains oriented toward accountability. These work best where there is greater
uncertainty in demand and customer or market needs can change rapidly.

Conclusion

By carefully planning and executing these supply chain strategies, tea gardens can successfully
meet the challenges of further integration and establish their own brand of tea products in the
Indian market, and capture a share of the growing demand for quality tea products. can do.

Q2. An Indian chemical company is planning to expand its markets by exporting its
products to the European market. What are the various factors it must consider in
planning the logistics for the exports, and suggest the appropriate choice of logistics
strategy (in-house / outsourcing, etc.) for the same? (10 marks)

Ans 2.

Introduction

Expanding into international markets is an important milestone for any company, especially
when considering the complexities of logistics in the European market. For an Indian chemical
company wishing to export its products to Europe, it is important to understand that successful
logistics planning can be a decisive factor in gaining market penetration and maintaining
competitiveness. The European market, known for its stringent regulations, diverse geography
and diverse customer demands, requires careful attention to detail in logistics planning.

Concept & Application

The logistics strategy chosen must not only ensure timely and cost-effective delivery, but also
guarantee compliance with European Union (EU) regulations, which are stringent in areas.

Expanding into the European market is an important step for an Indian chemical company, and
planning logistics for exports requires careful consideration of various factors. The choice of
logistics strategy, whether in-house or outsourcing, depends on the specific needs and
capabilities of the company. Here are the key factors and logistics strategy options to consider:

Factors to Consider in Planning Logistics for Exports:

1. Regulatory and Compliance Requirements: Understand the regulatory and

compliance requirements for chemical exports to Europe, including REACH (Registration,
Evaluation, Authorization and Restriction of Chemicals) and transport regulations.

2. Product Features: Consider the nature of the chemical products being exported,
including their hazardous or non-hazardous classification, packaging, labeling and special
handling requirements.

3. Means of Transport: “Planes, Trains and Automobiles” is not just a movie title; This
can describe your global supply chain. Be prepared to manage a supply chain that involves
some combination of air, rail, land and sea transportation modes when you move goods
across multiple borders. In emerging markets, transportation can be a particular headache.
When countries begin to industrialize, industry often arrives more quickly than
infrastructure. Shipments may be delayed because there are not enough delivery trucks
available or floods have destroyed a poorly maintained bridge.
 4. Maintain Supply Chain Transparency: Shipping transparency provides companies
with opportunities to make last-minute adjustments, such as redirecting shipments around
bottlenecks or sending shipments to a new destination. Real-time knowledge provides the
flexibility needed to protect the supply chain from disruptions such as overloaded ports or
higher than expected demand. It is essential to know the location and status of the
shipment at all times.

5. Lead Times: Evaluate lead times for transportation and customs clearance and ensure they
are in line with customer expectations and market demand.

6. Inventory Management: Develop an efficient inventory management system to meet market

demand while maintaining stock levels and reducing carrying costs.

7. Supplier Relationship: Build relationships with suppliers including freight forwarders,

customs brokers and logistics providers with experience in European trade.

8. Customs and Documentation: Understand European customs procedures, import/export

documentation requirements and any certifications or permits required.

9. Risk Management: Develop a risk management plan that considers factors such as supply
chain disruptions, currency exchange rate fluctuations and geopolitical risks.

10. Quality Control and Packaging: Ensure product quality control procedures and proper
packaging to meet European standards and protect products during transit.

11. Stability: Consider sustainable and eco-friendly logistics practices in line with European
environmental and sustainability expectations.

12. Permissions and Documentation: Documentation plays an important role in transportation

of goods across cities, states and countries. Most of the time in my experience, the complexity
of paperwork, permissions and documentation increases in direct proportion to the distance to
the destination.

Transporting goods across cities and states within the same country is usually not that difficult.
Certain permits and approvals for the product and mode of transportation must be checked in
advance from local authorities. In logistics for export, all the necessary details like address of
buyer, seller, quantity of goods etc. have to be mentioned in the paperwork. In addition, the
goods also have to be cleared through customs and inspected when demanded.

Logistics Strategy Options:

1. In-House Logistics:

• Benefits: Better control over the supply chain, flexibility and the ability to tailor logistics to
specific needs.

• Consider whether the company has the expertise, resources, and infrastructure to manage
logistics effectively. This approach is suitable for companies with significant export volumes
and experience in international trade.

2. Outsourcing Logistics:

• Advantages: Access to logistics experts, established networks and cost-effective solutions.

• Consider outsourcing to experienced logistics providers who can handle the complexities of
international shipping and customs. This option is suitable for companies with limited
international logistics experience or resources.

3. Hybrid Approach:
• A combination of in-house and outsourcing strategies can be effective. For example, the
company may handle some aspects of logistics in-house, while outsourcing others, such as
customs clearance or warehousing.

4. Partnership and Alliance:

• Cooperate with European logistics partners, distributors, or freight forwarders who have local
expertise and established networks in the European market.

Conclusion

The choice of logistics strategy depends on the company's resources, expertise and long-term
goals. This may also evolve as the company gains experience and expands its presence in the
European market. Indian chemical company should implement these best practices will
experience benefits. However, it is even better to implement them all in the context of a
compliance strategy. There is a difference between being compliant and adopting a compliance
strategy. Basic compliance keeps the company out of trouble with regulators, but an overall
strategy requires more planning and understanding of international European markets and
regulations.

Q3. An Indian manufacturer of home appliances sources raw material & components from
suppliers in India & China.

a. Compare the various options of transportation modes to source the required raw
material & components explain the choice of the appropriate transportation modes for the
same. (5 marks)

Ans 3a.

Introduction
Sourcing raw materials and components from suppliers in both India and China involves
considering different transportation methods to optimize cost, time and efficiency. The choice
of transport mode depends on factors such as nature of material, distance, urgency and cost
considerations.

Concept & Application

Here are some common transportation modes and the factors to consider when choosing
the appropriate mode:

1. Sea freight:

• Advantages: Economical for large quantities, especially for sourcing from China. Suitable for
bulk materials and components.

• Considerations: long transit times, possible delays at ports, and the need for storage if lead
time is critical.

2. Air freight:

• Advantages: Fast and efficient for urgent or high-value components. Suitable for small,
lightweight and high priority shipments.

• Considerations: More expensive than sea freight, limited cargo capacity, and possible
restrictions on hazardous materials.

3. Rail freight:

• Advantages: Economical for large quantities, especially for sourcing within India or from
neighbouring areas of China. Suitable for bulk shipment.
• Considerations: limited access in some areas, longer transit time than air freight, and handling
requirements for certain types of materials.

4. Road freight:

• Advantages: Versatile and cost effective for regional or short distance sourcing within India.
Suitable for small shipments and just-in-time (JIT) delivery.

• Considerations: Limited to long distance transportation, possible obstructions and delays

caused by traffic or weather conditions.

5. Intermodal Transportation:

• Advantages: Provides flexibility by combining multiple modes of transport, such as road-rail

or road-ocean, to optimize cost and time.

• Considerations: Requires efficient coordination and potential delays during mode changes.

6. Courier Services:

• Advantages: Ideal for small, high-value and express shipments. Suitable for critical
components or samples.

• Considerations: Expensive for bulk materials, limited cargo capacity and restrictions on some
items.

7. Pipeline Transportation:

• Advantages: Efficient for transporting liquids or gases such as petroleum products or

chemicals.
• Considerations: Pipelines require infrastructure and are limited to specific types of materials.

Factors to Consider When Choosing Transportation Modes:

1. Cost: Evaluate the transportation cost for each mode, including freight charges, handling and
customs charges. Consider your budget and cost-efficiency.

2. Transit time: Assess the urgency of the shipment. Faster methods such as air freight are
suitable for time-sensitive materials, while slower modes may suffice for non-urgent items.

3. Distance: Geographical location of suppliers in India and China plays an important role in
mode selection. Longer distances may be suited to sea or air freight transportation, while
shorter distances may work well with road or rail options.

4. Volume and weight: Consider the volume and weight of the materials. Larger, bulk
shipments may benefit from sea or rail transport, while smaller, lighter shipments may use road
or air options.

5. Types of materials: Different materials have unique handling and safety requirements.
Hazardous materials or temperature-sensitive goods may require specific methods of
transportation.
6. Reliability and efficiency: Evaluate the reliability and efficiency of transportation modes,
including transit times, infrastructure, and likelihood of delays.
7. Customs and Regulations: Be aware of customs and regulations for international shipments,
especially when sourcing from China, and make sure the mode chosen complies with these
requirements.
Conclusion
The appropriate transportation mode or combination of modes will depend on the specific needs
and preferences of the Indian manufacturer. It is common for companies to use a mix of
transportation modes to optimize their supply chains. The selection should be in line with cost-
efficiency, speed and the nature of the materials being obtained. Additionally, the Indian
manufacturer should work closely with experienced logistics partners to manage the
complexities of international transportation and customs processes.
b. The manufacturer plans to launch its range of smart home appliances for which it
will need to import chips from reliable suppliers abroad. From which countries can the
manufacturer source such chips? How can it facilitate such procurement process over the
long term in a consistent & reliable manner? (5 marks)

Ans 3b.

Introduction

Purchasing chips from trusted suppliers overseas for smart home devices is a common practice
for manufacturers in the electronics industry. The choice of countries for sourcing chips
depends on a variety of factors, including type of chips, supplier reputation and supply chain
considerations.

Concept & Application

Here are some countries from which the manufacturer can consider sourcing chips, and
strategies for facilitating the procurement process over the long term:

Countries for Sourcing Chips:

1. China: China is a major center of electronics manufacturing, and has a strong semiconductor
industry. Many global suppliers, including foundries, operate in China.

2. Taiwan: Taiwan is known for its semiconductor manufacturing capabilities, with companies
like TSMC and MediaTek being major players in the industry.

3. South Korea: South Korea hosts major semiconductor manufacturers such as Samsung and
SK Hynix, which are known for producing memory chips and other semiconductor products.

4. United States: The US is home to semiconductor giants like Intel, AMD and Nvidia. It is a
source of advanced microprocessors and specialized chips.
5. Japan: Japan is known for its technological advancements and precision manufacturing, with
companies like Toshiba and Renesas operating in the semiconductor sector.

6. European Union: Many European countries have semiconductor companies, with Germany
and the Netherlands being notable players.

Strategies for Facilitating Long-Term Procurement:

1. Diversify Suppliers: Avoid excessive dependence on any one supplier or country. Diversify
your sources to reduce supply chain risks and ensure continuous supply.

2. Supplier Relationship: Build strong and long-term relationships with chip suppliers. Open
communication and trust can lead to better terms and reliability.

3. Supplier Audit: Conduct regular supplier audits to ensure quality and compliance with
industry standards. This helps in maintaining the quality of the product for a long time.

4. Supply Agreements: Establish long-term supply agreements with suppliers to ensure stable
chip purchases and potentially negotiate favourable terms.

5. Supply Chain Visibility: Invest in technology and systems that provide real-time visibility
into the supply chain. It helps track shipments, monitor inventory, and anticipate potential
disruptions.

6. Buffer Inventory: Maintain buffer inventory to protect against supply chain disruptions and
ensure a consistent production schedule.

7. Technology Upgradation: Stay updated with the latest technological advancements and trends
in chip manufacturing to adapt to changing requirements and specifications.
8. Intellectual Property Protection: Implement strategies to protect intellectual property and
ensure the security of chip design and technology used in its products.

9. Risk Management: Develop a comprehensive risk management plan that considers

geopolitical factors, currency fluctuations and other supply chain risks.

10. Alternative Suppliers: Identify alternative chip suppliers in different regions to have
backup options in case of supply chain disruptions.

11. Local Representation: Consider setting up local offices or representatives in the countries
from which you source chips. This can facilitate communication and resolve issues more
effectively.

12. Legal & Compliance: Comply with international trade regulations and intellectual property
laws to avoid legal complications that could hinder procurement.

Conclusion

By considering these strategies and sourcing chips from reliable suppliers in different countries,
the manufacturer can ensure a consistent and reliable procurement process in the long term.
Flexibility, diversification and maintaining strong supplier relationships are important to
successfully manage chip procurement for smart home devices.