Freight Transport Management - Peer Reviewed Journal

Internal Code: MAS3248

Peer Reviewed Journal

Case Study: The global sourcing challenge for Safework Co. Ltd. Safework Co. Ltd. is one of the largest distributors (importers) of safety clothing and footwear in the UK. They do not have shops. They sell safety clothing and footwear directly to large institutions such as factories, warehouses, construction companies, and government agencies. They also do not produce clothing or footwear; they purchase products from suppliers from all over the world. They have two warehouses in the UK, one located at Leeds and another one at Milton Keynes. Both warehouses have their own trucks. Customers can order via telephone, online, or fax. The warehouse at Leeds delivers products to customers at the Northern part of UK while the warehouse at Milton Keynes takes care of the Southern part of the UK. The director of Safework, Peter Jones attempted to review their business strategy because their sales growth, profitability and share value have been underperforming over the past three years. The review concluded that most of the clothing and footwear they offer were more expansive than two of the competitors. To clarify this, John Edwards, the marketing director of Safework conducted a more detail market analysis. The analysis pointed to the fact that the competitors are no longer sourcing their main clothing and footwear products from the UK or European suppliers; they are sourced from South East Asia and China. These competitors also created their own brands, but outsource manufacturing to suppliers from low-cost countries. Taking advices from John, Peter asked Jenny Wilberforce, the purchasing director to investigate the possibility of sourcing cheaper clothing and footwear from low-cost countries while maintaining similar product quality. According to Jenny, Malaysia is the cheapest source for rubber footwear, China for fabric clothing, and Vietnam for leather safety footwear. A saving of 30% in terms of unit purchase cost is expected. As indicated by Figure 1, the cost of purchase is usually 30% of the total operating costs. Based on Jenny’s findings, Peter instructed Kenneth Smith, the logistics director, to propose a logistics strategy to enable the import of the above products from Malaysia, Vietnam and China to the two warehouses in the UK. At the moment all European and UK suppliers deliver their products directly to the two warehouses of Safewear. The deliveries of products from the European and UK supplies are straightforward; it takes usually only two to maximum six days to complete the delivery, usually by road. The logistic department managed by Kenneth usually only gives instruction to suppliers and coordinates inbound logistics activities. Activities related to transportation, custom declaration, payment of import duty/tax are taken care by appointed forwarders. Sourcing from Malaysia, Vietnam and China requires a whole new logistics setup and strategy. Kenneth explained to Peter, “even though we could purchase products at a lower unit price, we have to consider many other potential additional costs such as transportation, warehousing, inventory, stock-out, quality control, current exchange, duty/tax, and additional resources to perform global logistics and supply chain management. Also, we may not have the knowledge, resources and capability to transport the different products from these different countries to the UK at the most effective and efficient manner.” Questions:  Suggest suitable transportation mode(s) (e.g. air, pipeline, rail, road, sea) for the import of safety clothing and footwear from the suppliers in Malaysia, Vietnam and China to the two UK warehouses. You must explain and justify your suggestions with appropriate arguments. 2. Propose suitable exit points (e.g. ports) from Malaysia, Vietnam and China and import points to UK. Again explain /justify your suggestions and support them with convincing arguments and additional information about the locations /facilities chosen. 3. Produce a simple annotated flowchart/process diagram describing the supply chain required to bring leather footwear from Vietnam to the northern warehouse in Leeds. NB You must cover all stages and should indicate key processes and documentation where required. 4. Evaluate the sustainability of your options showing how it compares to existing legislation and discuss how this could be improved to minimise the environmental impact and conform to United Nations 2030 proposals.