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Incoterms Selection Consideration

Discuss about the Effectiveness of Transport Management Aspects.

Transport management is constrained between different aspects that need to be managed properly to ensure that there are effective operations. In a company, the transport manager is responsible for different tasks that cover transport and logistics sector. One of the main responsibilities is to negotiate with customers on the terms and conditions of delivering the products. In these case, the Incoterms to be selected is agreed upon at the benefit of the business-customer relationship. Therefore, this paper will discuss the effectiveness and efficiency of the transport management aspects in Sony Company. The Incoterms selection, carrier selection, and carrier relationship management will be considered in this paper. Sony is a company that focuses on the production of various electronics for personal, home, and commercial use. Sony is among the leading producers of electronics in the world, thus dominating the professional and consumer markets.

Sony Group focuses on different investments such as professional gaming, electronics, entertainment and financial services. It has been ranked the fourth world television manufacturer after Samsung, LG and TCL indicating that it delivers most of its products to different parts of the globe. Due to its diversity, it has developed different outlets and branches in various countries across the world to cover the markets effectively. Through its business strategies, it has reached more customers effectively to the end users by delivering quality products. Despite being a large producer of TVs and video games, it also is known for its audio devices productions such as home theaters and car systems (Sony, 2016). Also, it has ventured into mobile production sector, and Sony Xperia has been the most famous gadget that has been produced. Therefore, Sony Xperia smartphones have been competing with other gadgets from other companies such as Samsung, Apple, and LG in the marketplace (Cavusgil, Knight, & Riesenberger, 2012). The main objective of Sony Corporation is to produce and deliver quality products to the numerous customers around the world.

The efficiency of transportation through the 3PLs is directly connected to the type of Incoterms selected by the company. Therefore, a manufacturing company or any other firm involving 3PLs should be considerate in determining the best Incoterms for the business. Some inconveniences might be caused by investing some incoterms like in cases when the importer has to undertake full responsibility for the carrier payment (Blanchard, 2010). Some people might delay payments thus affecting the trust between the company and the Third-party logistics company. The type of transactions between the importer and exporter determines the best incoterm(s) to be selected. In situations where it is a relationship between companies, an importer can be entrusted with full responsibility by paying on delivery. Learning the differences between the Incoterms will be important for both parties. The following is a figure showing the Incoterms.

Carrier Selection Criteria

Incoterms diagram (Lundesjo, 2015)

Figure: Incoterms diagram (Lundesjo, 2015)

Sony manages its relations with the 3PLs by employing type C and D forms of Incoterms to ensure that there are inconveniences with the payments. It does not mean that incurs much cost in payments of the carrier cost, rather the prices of the products are standardized to cater for those expenses (Sony, 2016). In some situations, the company requests the customers to pay the products’ price together with the importation fees so that they can pay the carrier before they are delivered. Most importers of Sony products are an end-user individual who is importing for either personal or commercial use. Therefore, Sony includes the exportation fee in the price to ensure that the products are delivered effectively. Therefore, the carrier is objected to delivering the products and claiming the payments from the company and not the customers.

Sony should be considerate of the type of Incoterms being selected to ensure that the customer trust and relationship is managed and at the same time the 3PLs feel comfortable. For instance, if Sony subsidizes the importation fee for the customers may raise the trust, thus boosting the relationships. Therefore, type E and F will be the best Incoterms to fit in Sony logistics. On the other side, the logistics company need efficient payment channel that does not require extended relationships. Due to this reason, Sony should stick to its chosen Incoterms to maintain the relationships with the customers and the 3PLs involved. The payment process should be done after delivery to ensure the safety of the products. Also, this will make the logistics company much keen about the transportation process. Therefore, after the confirmation of the cargos’ safety and wellness, the payment is then credited to the company (Chopra & Meindl, 2007).

Sony Corporation has chosen two amongst the best Third-party logistics firms to undertake their external outsourcing. The 3PLs selected had to be eligible for the transportation of high-tech products, with great care to avoid demolitions that might lead to great losses. ModusLink Global Solutions and Penske Logistics are the companies working with Sony to ferry their production to different parts of the world (SupplyChainBrain, 2013). There are several factors that companies consider before selecting a 3PL company for their logistics. Therefore, the factors that led Sony to select ModusLink Global Solutions and Penske Logistics are discussed in the subtopics below: -

Sony is a global company, whose products are targeting markets in different parts of the world. Therefore, the transportation of the products has to be linked to a 3PL that has offices accessible to the main branches of the company and others in different continents. For instance, the manufacturing company for Sony in North America should access the logistics firm effectively. ModusLink Global Solutions is a logistics Company that is oriented to international business, and it has branches in various continents such as North America, Asia-Pacific, and Europe (ModusLink, 2016). Also, Penske Logistics has extended its business by opening offices in China and India, which are areas contributing to a significant percentage in Sony’s markets (Penske, 2016).

Penske Logistics is a company that has been focusing on providing services to General Motors, tier-one, and Daimler firms (Penske, 2016). This indicates that it has enough capacity to transport large cargo across the globe. Also, it has extended its logistics services to other companies such as Samsung and Emerson among others.  Because of the large capacity of ModusLink Solutions observed for owning eight warehouses in the United States and five in Europe, two in Mexico and fifteen in Asia Pacific, Sony selected the Logistics firm to undertakes its outsourcing services (ModusLink, 2016). These 3PLs have enough capacity to serve Sony’s logistical requirements.

Accessibility

Sony products have to be transported from the manufacturing companies of stores to their specific outlets. Since it is an international company, 3PLs involved must be having the capability to transport goods internationally. Based on the fact that ModusLink Global Solutions and Penske Logistics have warehouses in different continents, they are capable of transporting Sony products effectively to different places around the world.

The companies selected have been reliable to their other customers by ensuring that the deliveries are made in time. Also, Sony checked the reliability of deliveries by evaluating the rate damages for their services based on the previous works. Therefore, it was discovered that Penske and ModusLink are reliable companies in the logistics sector. Due to their reliability, they were offered the job of working closely with Sony by undertaking the outsourcing activities.

The products manufactured by Sony are delicate and have to be transported by an individual who has the capability of carrying fragile materials. Also, the products are of high-value that needs to be kept in safety throughout the transportation process. ModusLink and Penske have been identified as a logistical company that has been transporting high-value cargo, thus being entrusted by producers of expensive products. Therefore, these companies are capable of transporting high-tech and high-value cargo without any doubt of delivery.

Carrier relationship needs to be long lasting to enhance the businesses between the two companies. A more firm business relationship between the carrier and Sony Company will raise the trust between the two parties and renewal of the contracts can be extended or revalidated if the business is satisfied with the services. Companies that do not have firm or predictable relationships will not be willing to engage in the deep business transaction because there is not security and assurance. The logistics cost to be expected from a new company should be benchmarked with previous companies to avoid losses. Also, the services provided should be of higher quality to ensure that the company is achieving its developmental strategies (Rushton & Walker, 2007). 

The type of outsourcing relationship that was considered by Sony is the partnership type II for their logistical business transactions. There are several advantages why type II relationship was chosen by Sony to maintain the 3PLs. for instance, Type I is characterized by short-term contractual relationships, which will be between the third-party logistics firms and Sony thus making the business relationships ineffective. (Wood, Barone, Murphy, & Wardlow, 2012). Reliable business relationships need to be long-term to raise the level of trust between the parties. Therefore, an agreement made will be profitable to both businesses because they will run for a longer term that benefits Sony and the Logistics firms such as Penske (Monczka, 2010).

Capacity

Sony Corporation will be more advantaged in signing a contract with 3PLs by embracing type II partnership that is characterized by long-term contractual business relationships. In such cases, the company is secure to conduct extended business activities, thus having the assurance of their completion within the perceived period. The company can also invest in such relationships and expect to acquire a payback a time before the contract expires. Several transport services are offered in long-term contracts such as vendor certification programs, dedicated freight lanes, guaranteed annual volumes and incentives for cost reduction. Just because the parties will be involved in a business relationship for a longer time, the carrier can offer cost cuts for the services offered within their period of offering services (Monczka, 2010).

The Sony Corporation is supposed to undertake analysis towards the best-fitted form of 3PL relationships to be employed. It is not a must to create similar relationships on all the 3PLs involved in the outsourcing activities. Rather, cost analysis can be undertaken to evaluate which of the relationships will be cheap and effective and the desired length of the transactions. Therefore, all the decisions made pertaining the 3PL relationships should be for the benefit of Sony Corporation.

Conclusion

In conclusion, the effectiveness of transport management strategy is determined by the decisions made by the logistics manager in the company. The methods of delivering the products to the customers can be profitable depending their efficiency and reliability. Sony Company needs to hire a carrier that is competitive and reliable.  The reliability of transport and logistics services will highly depend on the type of relationship perceived between the parties. The most effective partnership is having a long-term contractual relationship, which builds up trust on conducting business activities. The company should always have a contingency plan to cater for the cases of inconveniences and misfortunes with the carrier firm. Therefore, the business operations will be undertaken in a balanced and secure ground.

References

Blanchard, D. (2010). Supply chain management best practices. Hoboken, N.J.: John Wiley & Sons.

Bowersox, D., Closs, D., & Cooper, M. (2007). Supply chain logistics management. Boston, Mass.: McGraw-Hill/Irwin.

Cavusgil, S., Knight, G., & Riesenberger, J. (2012). International business. Upper Saddle River, N.J.: Prentice Hall/Pearson.

Chopra, S. & Meindl, P. (2007). Supply chain management. Upper Saddle River, N.J.: Pearson Prentice Hall.

Lundesjo, G. (2015). Supply chain management and logistics. Kogan Page.

ModusLink, (2016). Supply Chain & Logistics Solutions - ModusLink Global Solutions. Retrieved 5 August 2016, from https://www.moduslink.com/

Monczka, R. (2010). Purchasing & supply chain management. Andover, Hants. South-Western/Cengage Learning.

Penske, (2016). Penske Logistics - A Leader in Logistics Services. Penskelogistics.com. Retrieved 5 August 2016, from https://www.penskelogistics.com

Perret, F. (2007). The essentials of logistics and management. Lausanne: EPFL Press.

Piltz, B. (2011). Incoterms® 2010. Internationales Handelsrecht, 11(1), 1-7. https://dx.doi.org/10.1515/ihr.2011.11.1.1

Rushton, A. & Walker, S. (2007). International logistics and supply chain outsourcing. London: Kogan Page.

Sony, (2016). Sony USA - Electronics, PlayStation, Movies, Music, Product Support. Sony.com. Retrieved 3 August 2016, from https://www.sony.com/

Special Topic Forum on Supply Chain Management in Emerging Markets: Critical Research Issues. (2013). J Supply Chain Manag, 49(1), 116-116. https://dx.doi.org/10.1111/jscm.12017

Stadtler, H. & Kilger, C. (2005). Supply chain management and advanced planning. Berlin: Springer.

Sudalaimuthu, S. & Raj, A. (2009). Logistics and management for international business. New Dehli: Prentice Hall of India.

SupplyChainBrain, (2013). North America's 50 Most Successful 3PLs. Supplychainbrain.com. Retrieved 5 August 2016, from https://www.supplychainbrain.com/content/logisticstransportation/reverse-logistics/single-article-page/article/north-americas-50-most-successful-3pls/

Taderera, F. (2010). Principles and practice of international logistics. Saarbrücken: LAP LAMBERT Academic Pub.

Wang, X. (2015). Operational Transportation Planning of Modern Freight Forwarding Companies. Wiesbaden: Springer Fachmedien Wiesbaden.

Waters, C. (2007). Global logistics. London: Kogan Page Ltd.

Wood, D., Barone, A., Murphy, P., & Wardlow, D. (2012). International Logistics (5th Ed.). Boston, MA: Springer US.

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