Logistics Essay For DAP Fertilizer Procurement And Delivery In Kenya And Rwanda.

Price Comparison

Discuss About The Behind Management In Enterprise Business?

Logistics is a challenging field where key considerations have to be made in order to achieve the best results and meet objectives, especially in aid related logistics, usually in developing nations where transport and communications systems, and general systems are not efficient compared to the developed World (Ivanov, Tsipoulanidis and Scho?nberger, 2016). In this paper, a case of DAP fertilizer procurement and delivery in Kenya and Rwanda regions for the 2018 seasons is being analyzed. The goal is to deliver 2100 metric tons to Rwanda by January 7 2018 and 3500 metric tons to Kenya by December 15 2017. All fertilizers are packaged in 50 kg bags. The objective is to make a price comparison between prospective suppliers as well as their payment terms and marketing a clear recommendation on the best supplier to use. Another objective is to create a suitable schedule (weekly) of activities for the project in the context of the procurement and delivery of the fertilizer. The other objective is to develop a table of Key Performance Indicators to use for evaluating the performance of the team in handling the project.

One of the goals of logistics management is to ensure value for money, where effort is made to get the best prices at the most suitable terms of payment (Christopher, 2016). This requires soliciting price quotations from different suppliers and then comparing the prices per unit, taking into consideration other factors such as availability, transportation costs, and warehousing costs as well as factors such as taxes (Song and Panayides, 2012). A detailed valuation of the provided quotations are shown in the table below;

Reviewing the information and evaluating the possible costs from the four different suppliers and the terms offered, the most suitable supplier that would give the lowest costs compared to the rest is the Supplier number 1 (shaded green above) from Saudi Arabia. This supplier will deliver to Mombasa at $ 18200 (upfront payment) and $ 54605.6 as the balance payment. The balance payment is given with 5% as cost of credit payable over 120 days. While it would make sense to use Supplier Number 3 because procuring from them gives the lowest overall costs; the upfront payment for the consignment would be $ 17920 ex-Mombasa while the 75% payments would total $ 53763.36 x-Mombasa, they have bad history. They have not responded to RFQs in the past and look at the organization as a competitor. Supplier one, despite being new, has good references and would be suitable for a long term partnership as partnerships are essential in logistics. Further, the Mombasa port would be the most suitable because there is a direct route to the warehouses in Western Kenya (Bungoma) which is 898 km and to Kigali City, Rwanda, which 1498 km. From the Dar es Salaam port, the distance to Rwanda is 1431 km while to Bungoma, the distance is 1233 km.

Project Schedule

The best solution is to have the Kenyan shipment offloaded at the Mombasa port where the total costs including transportation would be $ 335305.60. The Rwanda shipment should b offloaded at Dar es Salaam port and transported by road to Kigali as the total cost would be $ 388925.6 . if the same consignment was taken through Mombasa via Kenya to Kigali, it would cost an additional $ 30380. Further, while delivery to Dar es Salaam would cost a little more, the total cost is just $ 1120. This is far less than the extra $ 30380 that would be incurred using the port of Mombasa. Further, the most economics packaging for the fertilizer is in 50 kg bags because they have the lowest associated costs and would reduce the transportation charges to the respective warehouses, given that the 25 kg bag packages would require additional space and hence lead to increased costs for transportation. Further, the supplier is giving a long period for the payments (of 120 days) and a lower extra costs for the credit period of just 3% extra. The goal of procurement and getting quotations from various different suppliers is to ensure the best quality product, delivered on time, and at the most competitive cost (in this case the lowest cost), while having the best payment terms (in this case  a longer credit period). So the the chosen supplier is Supplier Number 2, from Saudi Arabia

The schedule of activities will take into account the request for proposals from the prospective suppliers, the shipping period, the loading and clearing period for the consignment, as well as transportation and storage, and delivery to the respective warehouses. This will require the use of project management methodologies and scheduling based on approximations (Goulden, 2017), (Gurjar, 2016). The schedule of activities is therefore shown in the table below;

The transportation of the fertilizer to the respective warehouses will take a total of four weeks to complete, operating at maximum efficiency. This is because it takes one hour to fill one 35 metric tonne truck at the port. The transportation time from Mombasa to Bungoma, operating non stop and taking into account average traffic conditions will take at least 16.5 hours, so the total average time to deliver the fertilizer to Mombasa for every truck is about 24 hours, taking into account loading and offloading times. The transportation time to Kigali Rwanda will take 25 hours, taking into account loading and offloading time, the total average time is 31 hours, through Tanzania. The transportation time also takes into account how much can be transported by road by a single truck: the Kenyan laws place a maximum limit of 35 metric tons for every 40 foot truck carrier with three axles drawn by a three axle prime mover that does not exceed 18 metric tons as its tare weight. In this case, the number of trips (trucks) needed to transport fertilizer to Bungoma are 100 and to Kigali are 60 trucks.

Supplier Evaluation

KPIs are values that are measurable that demonstrate the achievement of key business objectives. KPIs are used by organizations to analyze their success (or failure) in attaining some set targets. For the logistics sector, there are various cross functional KPIs that determine performance. One of the most important KPIs in this project is transportation that includes shipping and road transport, handling (loading and offloading), and warehousing. Another KPI that is of importance is procurement, in the context of procurement costs and timely delivery (Coyle at al., 2017). For transportation, the KPI is timely delivery of the consignment. The on time final delivery is a KPI that shows the ability of the consignment carrier to deliver the consignment n time successfully. This delivery is to the scheduled date of arrival and at the appointed time and location. An accurate delivery time is critical for success of the project, given the seasonal nature of fertilizer use and the required times for both Rwanda and Kenya. The desired success rate is stated in the table below.

Cost per unit weight is another important transportation metric. The quotes show delivery ex Mombasa. The consignment has to undergo clearance, loading and, transportation to the destination. The gross net and total weight to be moved must be measured for each week and is important in ensuring the costs are kept low while delivery targets are achieved.

Another important KPI is warehousing and in this case, there are four KPIs namely: accuracy of inventory, dock to stock, on time shipping, and order accuracy.

Inventory Accuracy: This is a measure of of workers in the warehouse when preparing products. The desire is a high accuracy to nursing the right products reach the right customers. In this case, the product is homogeneous so 100% accuracy is desired and achievable.

Dock-t-Stock: Tis is a measure of the cycle time from the commencement of a receipt to the time when it is put away. This KPI is important for measuring inbound activity efficiencies to ensure availability when required

On-Time Shipping: This depends on the supplier but is a metric to show percentage shipments leaving the warehouse on time. It also shows percentage arriving at the warehouses on time

order accuracy: A KPI that shows order accuracy; this again should be 100 percent given the product is homogeneous.

References

Christopher, M. (2016). Marketing logistics. [Place of publication not identified]: Routledge, p.144.

Coyle, J., Langley, C., Novack, R. and Gibson, B. (2017). Supply chain management. Boston, Mass: Cengage Learning.

Goulden, D. (2017). How to Manage the Logistics Behind Project Management in Enterprise Business - Clarizen. [online] Clarizen. Available at: https://www.clarizen.com/manage-logistics-behind-project-management-in-enterprise-business/ [Accessed 7 Mar. 2018].

Gurjar, N. (2016). A forward looking approach to project management : tools, trends, and the impact of disruptive technologies. London: Springer.

Ivanov, D., Tsipoulanidis, A. and Scho?nberger, J. (2016). Global supply chain and operations management. New York: Springer, pp.25 -26.