Logistics Management and Popularity

Executive Summary

Logistics management is increasingly gaining popularity due to the fast pace that revolves around production and distribution of goods and services. Goods need to be transported from one point to the other in a timely and cost effective manner, and it is only high calibre logistics management that can deliver this.

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This report is going to cover the sourcing of machinery and spare parts by a civil construction company operating in Northern Territory, Australia. The fifty wheel dozers and their spare parts will be sourced from a company in Japan. The report will cover freight management, handling of the goods at ports, information systems, general material handling, and packaging and control requirements. Recommendations will be given at the end of the report. The goods will be transported by road and sea. They will have to be insured throughout the process due to their expensive nature. Delays were caused during loading and offloading of the machinery at the ports due to the fact that there were military equipments been transported by the same ship. The military equipments were given priority, causing the delays. Recommendations given include upgrading the information system of the RJ Vincent & Co., collecting more intelligence when ordering goods and placing orders early to avoid delays.

Introduction

Traditionally, it has been considered as a cutting edge logistics strategy to import components and raw materials from countries within the Pacific Rim region. However, this is not the case anymore. The practice is now common place, and a lot of manufacturers and other traders around the globe source raw materials and components from this region on a regular basis. But this practice has not made the process any less complicated. There are issues that companies importing from this region have to contend with. These issues have persisted as business in this region has grown. Culture, language barrier, trade regulations and other economic factors like currency are some of the issues that importers have to contend with. This scenario creates an especially unique situation for logistics managers who have to ensure that delivery of raw materials and components is carried out without a hitch.

This report is going to address logistics management issues revolving around the sourcing of heavy machinery from Japan. Japan is one of the countries that are to be found in the Pacific Rim region. RJ Vincent & Co., a civil engineering contractor based in Perth, Western Australia, has been awarded the contract to expand and rehabilitate Lasseter highway in Northern Australia. To this end, the firm has sourced fifty large wheel dozers from Japan. Each of the dozers has an operating weight of between 151620 to 216273 lb. They are to be imported, together with their spare parts, from Arete Trading Pte Ltd, a machinery exporting company based in Tokyo, Japan.

This is a report that explains what logistics management will involve for RJ Vincent & Company. Logistical issues to be addressed include freight management, activities that would take place at the ports, material handling, packaging, information systems, and control requirements-issues revolving around sourcing the machinery from the Japanese factory and delivering them to the construction site in the northern territory.

Engagement Objectives

This report was prepared by assistant logistics manager at RJ Vincent & Co., B.N Adeloitte. This was under instructions from senior logistics manager, Mr. Peter Howard. The major objective of the report is to provide logistical issues revolving, as earlier indicated, the importation of the wheeled dozers and their successful delivery to Lasseter highway construction site. The following are the specific objectives of the report:

  • Freight management
  • Handling at the ports
  • General material handling
  • Product packaging
  • Information systems
  • Control requirements

Scope and Methodology

The activities that would be examined by this report are as indicated in the objectives section. The wheel dozers were acquired on December 27, 2009, and they are expected to be at Lasseter by February, 2010. Construction is going to begin in mid-February, and the machinery should be on site to facilitate this. This, as a result, would be the period that will be covered by the report. The author of the report consulted Japan’s export regulation literature, documentation of the transaction between the two companies and other materials to come up with this report. The report will exclude the financial dimension of the transaction. It will concentrate mainly on the transportation of the machinery.

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Freight Management

One of the most core issues in logistics is the movement of goods from one point to the other (Milwaukee 2007). These include movement of raw materials from their source to the factory, movement of finished product from the factory to the market among others. Transport may be through road, rail, air or sea. It is up to the logistics manager to choose the mode of transport that fits the needs of the company and which is, under the circumstances, cost effective (Makarios 2003).

Logistics managers at RJ Vincent & Co. are going to make use of road and sea transport to move the machinery and the spare parts from Japan to northern territory. The combination of these two forms of transport was necessitated by the fact that the point of sourcing and the final destination are in two different continents, separated by a vast expanse of ocean.

Transportation of Machinery and Parts from Arête Factory to Tokyo Port

Japan, like most countries in the Pacific Rim, is surrounded and isolated by sea. This been the case, sea transport is a major form of transport that connects this country to the rest of the world. Japanese ports and harbours are one of the busiest in the world, perhaps rivalled only by the ones from China (Nakai, Nagai and Yamamoto 2009).

From Arete, the fifty wheel dozers are going to be transported by road to the port of Tokyo. Due to their weight and size, it will not be possible for these machines to roll themselves from the factory into the port. Neither can they be containerised, as there is no container with the internal dimensions that will accommodate them. Most high cube containers which are used for bulky cargo have inside width of 7’8”, and the dozers cannot fit inside (Grier 2002).

Flat bed trucks will be used to ferry the dozers to the port. This service is expensive, but it is the only option that is there for the company at the moment. The spare parts, on the other hand, will be packed into palletised containers that will accompany these dozers. It is not possible to transport the spare parts inside the dozers, since the insurance company will not cover them. Exclusive container (FCL) was the option available to transport the parts (Makarios 2003).

The pickup services from the factory to the port will be provided by a third party logistics (3PL) company. 3PL are companies that specialise in providing logistic services to clients who, for one reason or the other, are unable to avail themselves on the ground to transport the materials. This is the company that will provide the flat bed trucks for transporting the dozers and make arrangements at the same time to transport the spare parts. The cost of this service will be footed by RJ Vincent & Co., since it was not covered in the quotation of the goods.

Port of Tokyo was chosen for this transportation given that it is one of the largest in Japan. It has the roll on/roll off facility that is very crucial for loading and off-loading of heavy machinery (Micke 2007). Roll on/roll off facility (or what is referred to as RoRo) is carried on by ships that are designed to ferry wheeled cargo (Vanek 2009). The cargo is able to roll onto the ship and off the same when in port by the use of built in ramps (Vanek 2009). The cargo for RJ Vincent & Co. will be ferried aboard a ConRo ship. This is a ship that can carry both containerised cargo and wheeled cargo (Gill, Ebata and Stephenson 2007).

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Transportation of Wheeled Dozers from Port of Tokyo, Japan, to Port of Darwin, Northern Territory, Australia

As already indicated, the fifty wheel dozers and the spare parts will be transported from the port of origin to Darwin port via a ConRo ship. Given the fact these ships are considered to be prone to calamities in the high seas, the insurance coverage is going to be hefty. This is because the ship has doors that open close to the waterline, and has very few internal bulkheads (Browne & Allen 2007). If the loading door of the ship is not secured properly, water can easily get inside, putting the ship at a greater risk of sinking.

Port of Darwin was chosen for this procedure due to the fact that it is also the major port in northern territory. It connects the region to the rest of the world, and it is in proximity to the construction site.

Transportation of Wheeled Dozers from Port of Darwin to Lasseter Construction Site

After been offloaded at the port, the machinery will be transported via road to the construction site. Transportation will be conducted using flat bed trucks, just like in Japan. RJ Vincent Co. has a fleet of flat bed trucks, and they will be used for this purpose. As such, there will be no 3PL involved at this end. The palletised containers containing the spare parts will also be ferried by road. The map below shows the route that will be followed when ferrying the cargo. It will be transported from the port of Darwin to Lasseter by Stuart Highway, which is marked in red in the map. The final destination, the construction site, will be Uluru, where RJ Vincent and Co. has set site office.

Roads of Northern Territory
Figure 1: Roads of Northern Territory. Source: Adeloitte (2009) p34.

Handling of the Wheeled Dozers and the Spare Parts at the Ports

Before reaching the construction site, the cargo will be channelled through two ports. Port of origin will be Tokyo, in Japan, while that of landing will be Port of Darwin, Northern Territory. The handling of the cargo at these two ports will be the same at some points, but varying points will be evidenced. This is because regulations at the two ports are different, due to the fact that they are in two different countries, and each country has its own unique set of regulations as far as movement of goods is concerned.

Handling at Port of Tokyo

When the 3PL delivers the wheeled dozers and the containerised spare parts, the same will be received and inspected at the terminal before been loaded to the ship (Adeloitte 2009). It is also the 3PL personnel that are going to verify what has been documented in the dock receipt. The weight and length of the cargo will be remeasured.

Port of Tokyo is automated, and as such, a huge chunk of the processing is going to be conducted by robots and other automated devices (Wassenner 2009). The containerised spare parts will be handled by an automated storage and retrieval system. This for example the automated cranes that stacks the containers vertically for easier retrieval. Sortation and sorting systems will also be utilised to divert the cargo to the locations specified by the warehouse personnel (Noland and Wadund 2007). It is important to note that the cargo will not be loaded into the ship the same day it is delivered into the port by the 3PL. This means that it will have to be housed in the port’s warehouses before been loaded to onto the ship. Documentation at this end will be conducted by the 3PL personnel and also through the direct contact between the port and staff at RJ Vincent Co.

Japan has strict export control as far as large machinery is concerned. The Coordinating Committee for Export Controls (also known as COCOM) have set strict rules that has to be adhered to when exporting heavy machinery and arms from any exit point (Gill et al 2007). Normally, it is the role of the exporter to know whether their cargo is listed as restricted, and present them to the authorities as such for inspection (Gorman 2008).

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Loading of the cargo onto the ConRo ship will take sometime. This is because military and commercial cargo is given priority, and it is cleared before the rest (Micke 2007). The ship ferrying RJ Vincent & Co. cargo will also be transporting military machinery to northern territory, and this is expected to cause some inconveniences to the constructor.

Handling of Wheel Dozers and Spare Parts at Port of Darwin

Documentation at the port of landing will be conducted by agents contracted by the company. Documentation regarding origin of cargo and declaration of the same will be made available for inspection. The logistics team at RJ Vincent & Co. expects delay during clearance given that the military cargo onboard the ship will be given priority.

Information Systems

Information is another facet that is very central to the success of logistics management. There is a constant need to exchange information from the point of goods’ origin to that of landing. It is information that makes the ease of moving components and raw materials possible. It may take place through exchange of documents or other forms of communication such as verbal (Browne and Allen 2007).

Given the proliferation of information technology, it is now possible for logistics manager to communicate electronically with the other parties that they interact with in their everyday chores. One such form of communication is electronic data interchange (which is also referred to as EDI). This is the interchange from one computer to the other of messages that are strictly formatted (Gorman 2008), and which represent business documents (Wassenner 2009). It can also be conceptualised as a sequence of messages that is transmitted between two parties via telecommunication. One of the parties, from whose the information originates, is referred to as the sender while the one whom it is been sent to is referred to as the recipient.

Exchange of data is going to take place between the logistics manager at RJ Vincent & Co. and other parties that are involved in the delivery of the wheeled dozers and the spare parts. The Transportation Data Co-Coordinating Committee (also referred to as TDCC) has developed a raft of forty five standard documents that are exchanged during business transactions (Vanek 2009). These syntax and data format documents include invoice, shipping notice, and bill of lading among others. These are some of the documents that are going to be exchanged between RJ Vincent & Co. and other parties.

These documents were exchanged electronically or physically between the parties. For example, those documents that were to be transferred between the 3PL company were delivered electronically. The 3PL, on the other hand, delivered the documents physically to the custom officials at the port of Tokyo.

General Material Handling and Packaging

The materials to be transported from Japan to Uluru, Northern Territory, are not perishable but are very fragile in their unique way. The wheel dozers are expensive piece of machinery, and RJ Vincent & Co. has made a considerable investment in the fifty pieces delivered. This is together with the spare parts that are part of the shipment.

In this light, the cargo has to be insured in transit. The insurance company that will be contracted while the cargo is in the high seas will be different with that which covered the same while in transit from Arete to port of Tokyo. The latter was contracted by the 3PL company.

The fifty wheel dozers will not be packed due to their bulkiness. They will be transported as individual units. The spare parts are the only ones that are going to be containerised. They will be containerised at the factory of origin but may be repacked at the port’s warehouses to ease inspections.

Control Requirements

There will be control measures put in place throughout the transportation of the cargo. The logistics manager needs to put into place these requirements to increase efficiency and efficacy of the whole process. One of the requirements was to order the machineries early enough put into consideration the unforeseen delays that may take place. The ordering was done early to ensure that the equipment will be on the ground in time for the commencement of the project.

Conclusion

This report was prepared by the assistant logistics manager at RJ Vincent & Co. this is following orders from the senior logistics manager from the same company. The report addressed several issues that were going to be put into consideration by the logistics team at the company.

Freight management will involve both road and sea transportation of the cargo. The cargo is composed of fifty wheel dozers and their spare parts. They will be transported on road from the factory to the port of Tokyo. From there to the port of Darwin, the cargo will be transported via sea, and again via road from Darwin port to Uluru. The machinery will be handled at two ports, that of Tokyo and that of Darwin. The information system involved exchange of documents and other form of information between the company and other parties involved in the transaction. The materials will be insured throughout the process, given that it is very expensive.

Recommendations

In the process of compiling the report, there were several issues that the writer identified. These issues carried enough weight to be brought to the attention of the senior logistics manager, who had ordered the compilation of the report. The same were expressed in forms of recommendations by the author of the report. These recommendations are as stated below:

There is need to place orders early enough to make sure that unforeseen delays do not mar the operations of the company. For example, the military shipment that coincided with the company’s shipment is likely to cause delays to the delivery of the equipments.

There is also need for enough intelligence to be collected regarding the route that the delivery is going to take and any factors that may hamper the delivery. This shipment will coincide with the monsoon season in the port of Darwin. What this means is that the machinery may be exposed to weather elements like excessive rain and corrosive, salty water of the port that may make it ineffective once it gets to the field. There is also going to be a problem with transporting the machinery to the interior parts of northern territory where road construction is planned to commence.

The information systems of RJ Vincent & Co. need to be upgraded. There was a problem with exchange of information between the logistics manager and the parties involved in the delivery of the machinery. There were delays in sending documents to the 3PL Company and Arete, the source of the equipments. The problem was traced back to the antiquated information equipments in RJ Vincent & Co. if this problem is not rectified at the present, it will cause major delays that will cost the company financially in the future.

Bibliography

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Browne, M and Allen, J 2007, The Supply Chain For Jeans: Assessing Transport And Energy Consumption, 11th World Conference on Transport Research, Berkeley, California.

Gill, B Ebata, K and Stephenson, M 2007, “Japan’s Export Control Initiative: Meeting New Non-proliferation Challenges”, The Non-Proliferation Review, 2007, 29.

Gorman, MF 2008, “Evaluating The Public Investment Mix In US Freight Transportation Infrastructure,” Transportation Research A, Vol. 42, Issue 1, 2008, pp. 1-14.

Grier, DV 2002, “Comparison of Inland Waterways and Surface Freight Modes,” TR NEWS 221, Transportation Research Board, 2002, p. 17;

Makarios, EM 2003, The Wahine Disaster: A tragedy remembered, Wellington: Grantham House, 50.

Micke, AM 2007, M/S Color Magic, London: Doubleday, 345.

Milwaukee, NF 2008, Improving the Energy Efficiency of Freight in the United States Through Commodity-based Analysis,” Transportation Research D, Vol. 5, No. 1.

Nakai, K Nagai, H and Yamamoto, F 2009, “Japanese regulation on GMP/GQP and its challenges”, Journal of Pharmaceutical Innovation, 2009, 56.

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Vanek, FM (2009), “Sustainably Distributed? An Environmental Critique of the UK’s Sustainable Distribution Policy,” World Transport Policy and Practice, Vol.6 No.2

Wassenner, BB 2009, Sharp rise of the Yen challenges Japanese. Web.

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