Business Logistics

Business Logistics

Introduction

Supply chain management is an important concept and in order for one to clearly understand the nature of a supply chain network, it is important for them to comprehend the participants in the supply chain (Ivanov & Sokolov, 2009). The participants in any supply chain network include all parties involved in the supply of the product in question from its original location to the final consumer. Each of the parties involved in the supply chain play an integral role as far as the entire supply chain is concerned. Each party actually contributes towards ensuring that the product is able to reach the final consumer (Ivanov & Sokolov, 2009). This paper will analyze the supply chain network of involved in the joint venture between Freshfoods, AML and the carrier company to facilitate the importation of mushrooms from Europe to India. It will analyze how the costs, risks, profit and loses should be shared among the various participants in the supply chain network.

Mr. Singh has read about the supply-chain concept that attempts to identify and link all the participants from suppliers’ suppliers to customers’ customers. Who are all the participants in the supply chain, a part of which has been discussed in the case?

A specific look at the supply chain network which seeks to import frozen mushrooms from Europe to India reveals that there are several parties who will be involved in the supply of the product right from its primary location in Europe, to the European company exporting the product down to the final consumer in India. This therefore implies that the first participant’s as far as the supply chain network is concerned are the European farmers. This is because it is the famers who actually grow the mushrooms and without them, they would be no product to supply in the first place (Mentzer, 2012). The second participant in the supply chain network is the European company. This is in case the company is purchasing the mushrooms directly from the farmers. However, Mentzer (2012) notes that in case there are middlemen involved in purchasing the mushrooms directly from the farmers and selling the same to the European exporting company, then the second participant in the supply chain is the middlemen.

The third participant after either the farmers or the middlemen is the European company from which Freshfoods intends to purchase the mushrooms from. In order for the company to export the product from Europe to India, it must employ the services of a carrier such as a shipping organization. The shipping organization employed constitutes the fourth participant in the supply chain and in this case, the carrier is represented by Mr. Veejay. The fifth participant in the supply chain is the logistics company that will be involved in clearing and forwarding the goods from the port of arrival to the party importing it. In this case, these services are provided by AML which is also therefore the fifth participant as far as the entire supply chain is concerned. The sixth and final participant with respect to the supply chain described above is the Freshfoods products company itself (Fredendall, 2010). Freshfoods products are the final participant in the supply chain since it’s the party that will be directly involved in the supply of the product to the final consumer.

Logistics partnerships involve sharing costs and risks. What are all the costs and risks that this venture entails? How might they be shared?

Mentzer (2012) asserts that any logistics partnership venture involves a significant sharing of costs and risks involved in running the partnership venture. These risks and costs are associated with supplying the goods from its primary location to the final consumer. There are various risks and costs in the scenario described in the case. Starting with the risks, first and foremost, there is the risk of mushrooms getting destroyed by adverse weather conditions. Secondly, there is the risk of the mushrooms getting destroyed or stolen while on transit from the farms to the European exporting company (Fredendall, 2010). In addition to that, there is also the risk of the products getting damaged due to mishandling at the European company’s premises. The fourth risk involves transportation of the goods through the carrier whereby such goods might get destroyed due to mishandling while at the hands of the carrier. The fifth risk involves damage to the goods while at the ports and finally, the sixth risk involves damage of the goods while at Freshfoods’ premises. In addition to the risks, there is also the aspect of costs. The costs involved are transportation cost from farms to the premises of the exporting company. Cost of storing and transporting the goods from Europe to India and cost of storing the goods while in transit from Europe to India (Fredendall, 2010). The final aspect of cost is the cost of clearing and transporting the goods from the port to Fresh food’s premises.

In order for the supply chain process to work effectively, Arlbjorn (2010) asserts that there should be an equitable formula for sharing the costs and risks associated with the venture. In order to achieve this objective, each party should assume the risk associated with their specific roles as far as the entire supply chain is concerned.

Negotiate an agreement or agreements that share the costs, risks, and possible profits and losses from the venture being considered.

Already stated, the need for an equitable formula for sharing the costs, risks, possible profits and loses among the parties in the venture is one that cannot be understated. First and foremost, in the scenario described above, each and every participant should assume their equal share of risk and costs, the famer should assume the risk of loss due to adverse weather conditions (Mentzer, 2012). On its part, the European exporting company should assume the risk associated with transporting the mushrooms from the farms to their premises and any damage that might occur while the goods are still in their premises. The carrier on their part should assume the risk of any loss occurring while the goods are in transit to India. On its part, AML should cover any risk associated with provision of logistics services while the goods are at the destination port and finally, Freshfoods should bear the risk associated with any losses that occur when the goods are in its premises.

Just like the risks, all these cost should be borne by the party directly involved in handling the product (Fredendall, 2010). For instance, the transport cost from farms to premises should be borne by the exporting company, the shipping cost from Europe to India and from the port in India to Freshfoods premises should be borne by AML and finally the storage cost of the goods while in transit should be borne by the carrier providers.

When it comes to the profit and losses between the partners, the most appropriate formula should be one that ensures that parties which assume the biggest risk and costs in terms of the monetary valuation of the two aspects receive the largest share of the profits and at the same time, such parties should bear the largest share of the losses.

Conclusion

All in all, supply chain network describes all parties involved in the supply of a commodity from its primary location to the final consumer. In the scenario described in the case, the participants in the supply chain include: the mushroom famer, the European exporting company, the carrier company, AML Company and Freshfoods. All these parties have to share the risk, costs, profits and losses in an equitable manner that will see the risks and costs apportioned according to the roles played by each of the aforementioned parties. In addition to that, the profit and losses should be shared in a manner to reflect the risk and cost burden borne by the participants.

References

Arlbjorn, S . (2010). Supply Chain Management. New Hampshire: Academica.

Fredendall, E. (2010). Basics of Supply Chain Management. New York: CRC Press.

IIvanov, D. & Sokolov, B. (2009). Adaptive Supply Chain Management. London: Springer.

Mentzer, J. (2012). Supply Chain Management. London: SAGE.