AJ SB. is the country’s largest manufacturer of JB Malaysia with well- established market. AJ SB. has good reputation for quality and service. Their marketing department identified that the potential for global market is expanding rapidly and hence the company undertook exercise for expansion of the capacity for export market. The company formed team of Marketing and Materials department to study the global logistics possibilities. After extensive study, the team came up with a report on global logistics and submitted that global logistics is essentially same as domestic due to following similarities: • The conceptual logistics framework of linking supply sources, plants, warehouses and customers is the same. • Both systems involve managing the movement and storage of products. • Information is critical to effective provision of customer service, management of inventory, vendor product and cost control. • The functional processes of inventory management, warehousing, order processing, carrier selection, procurement, and vendor payment are required for both. • Economic and safety regulations exist for transportation. The company had very economical and reliable transportation system in existence. For exports as well they decided to evaluate capabilities of their existing transporter and entrusted them with the job of transport till port. For customs formalities they engaged a good CHA after proper cost evaluation and entered into contract for freight with shipping company agent. The response for company’s export was very good and the company could get as many as 15 customers within first two months and reached to a level of USD 250,000 per month by the end of first half of the year. Based on this response the export volumes were expected to grow to a level of USD 400,000 per month by the end of the year. When the review was made at the end of the year, company found that export volumes had in fact come down to the level of USD 120,000 which was much lower than it had reached in the first half of the year. The managing committee had an emergency meeting to discuss this and the export manager was entrusted with the task of identifying the reasons for this decline. Mr. Ganesh decided to visit the customers for getting the first hand information. When he discussed the matter with the customers, the feedback on the quality and price were good but the customers were very upset on the logistic services due to delayed shipments, frequent changes in shipping schedules, improper documentation, improper identifications, package sizes, losses due to transit damages etc. After coming back, the export manager checked the dispatch schedules and found that production and ex-works schedules were all proper. Then he studied the logistics systems and found that the logistics cost was very high and all the logistics people were de motivated due to overwork and were complaining of total lack of co-ordination and the system had become totally disorganised. Question 1 As the operation manager you Explain the problems experienced by AJ SB. What is the main cause of these problems? What logistics model should the company go for to ensure proper operations of the company? Bear in mind, some directors/managers may feel that you should only work in the interest of the shareholders since the business would not exist without their investments. Critically analyse the approach as an operation manager. Supporting your answer academically by referring to most recent developments. References will be compulsory. (25 marks) Question 2 How Just-in-time purchasing involves the usage of long-term contracts that result in the ability to develop and certify suppliers in AJ SB How would you suggest modifying the process in order to accommodate the new system in AJ SB ? What problems might this system create for the management? How much inventory is held at various stages of the production process? Justify your arguments analytically and support with academic and theories closely related to your explanation. References will be compulsory. (25 marks)
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