Essay On Transportation Management Effectiveness: A Case Study On Allied Container Services Pte Ltd.

Select an organization that you are familiar with and assume that you are the transportation manager of this organization. Analyse the effectiveness of these three aspects of the transportation management, namely  incoterms selection consideration, carrier and selection criteria, and carrier relationship management.

The purpose of the essay is to analyse effectiveness of the transportation management in the transportation company Allied Container Services Pte Ltd. Allied Container operates in Singapore at a large scale. Main focus of this report is on the three aspects of the transportation management such as incoterms selection, carrier selection and carrier relationship management for the chosen company.

Discussion on key information regarding is required before going into details analysis. Allied Container Services Pte Ltd is the largest container operator and container haulier (Allied.com.sg, 2017). This company provides services such as warehousing along with transportation and container service. Singapore transportation and logistics market has grown to $40.79 bn in 2016 (m360.sim.edu.sg, 2016). Demand comes from customers as they expect more visibility in the supply chain in terms of optimisation of inventory, improvement of communication. Singapore transportation and logistics market is monopolistically competitive in nature due to presence of large number of services. Some of the competitors of Allied group are A R Transportation Freight Forwarding, Ang Ko Toon Transport service, Asta Trading Transport Agency, C & P Holdings Pte Ltd, Centurian Team and others. Allied Group has joint venture in provide better service in container depot, transportation, freight forwarding and shipping.

This present study is important to address the challenges faced by the transportation and logistics industries due to globalisation. Globalisation has paved the way of rapid growth through reducing trade barrier, mobilisation of workforce so that Transportation Company can provide services to both upstream and downstream activities in supply chain. Transportation Company such as, Allied Container Services faces challenges regarding maximising revenue in the highly competitive market, meeting international financial reporting standards and opportunities in the emerging markets. Hence, discussion on incoterms selection, carrier selection and carrier relationship management is required in the present context.

As Allied group is engaged in international transaction, incoterm selection is important for it. As stated by Bierwirth, Kirschstein & Meisel (2012), incoterm is the international commercial term maintained by companies, when two global companies enter into a contract for purchase or sell of goods. The terms are specified regarding price, quantity and characteristics of goods. Incoterm selection is required to consider as risks of shipper, carrier, consignee and responsibilities are associated with transportation and logistics business. At the time of Incoterm selection, Allied Group needs to consider the aspects such as payment of cost of every transportation segment, which party is responsible for the cargo loading and unloading and which party wants to accept the risk of loss during international shipment of product. Balm & van Amstel (2015) mentioned that Incoterm persuades the customs valuation basis of imported merchandise. Allied group is capable to handle the risk as this company has experience in the overseas depot operation. Container movement is monitored through computerised system for inventory reporting, documentation and logistics support. Technological up gradation in the supply chain management system has helped the company to be a leading transportation and Logistics Company in the competitive market of Singapore (Andersson, 2013).

Carrier Selection criteria

According to International Chamber of Commerce, there are 13 types of Incoterm that are used by transportation companies. Among the 13 types, mostly used Incoterms are Free- on Board, Ex- works, Delivery Duty Paid and Cost Insurance Freight (Stapleton,  Pande & O'Brien, 2014).  Cost Insurance and Freight can be recommended for Allied Group as this Incoterm is applied when goods are transported partially by water. Allied Group is associated with the port of Singaporty for cargo transport. In this Incoterm, responsibility is initially on the seller or on the exporter until delivery of products on the transport vessel and the clearing custom in the seller’s country (Bierwirth, Kirschstein & Meisel, 2012). Exporter needs to purchase insurance keeping importer as beneficiary. Buyer is responsible to bear the risk once the goods are shipped. This process is secured as insurance is present so that buyer can file a claim in case of loss during international transport, based on the insurance procured by seller (Balm & van Amstel, 2015).

As discussed by Talley & Ng (2013), carrier is the person for the transportation, who procures the performance of transport through different routes such as rail, road, sea or inlands waterpath in a contract of carriage. The goal of Allied Group is to minimise transit cost and maximise service in the global transportation service market. In order to fulfil the goal, this company needs to consider the issues at the time of transportation management such as cost, specific needs, customer, service provided by the competitive companies in the same market and the chances of damage, risk or delay in delivery.

As stated by Anand et al. (2012), selection criteria for carrier selection can be categorised into three segments such as traffic related, shipper related and service related. In order to fulfil the organisational objectives, service related criteria can be recommended for Allied Group. The company needs to consider the aspects like, transit time, cost, reliability of the service, customer relation, accessibility, availability of the equipments, utilisation, monitoring goods and geographical coverage. Moreover, Allied Group requires considering the organisational structure while selecting carrier. The company needs to select that person or carrier, who can respond to the inquiries in need and can have the authority of decision making if any risk arise at the the time of international transport. Carriers needs to have the ability to provide financial data regarding balance sheet, income statement for the improvement of capital in the company.

Figure 1: Carrier selection criteria

(Source: Large, Kramer & Hartmann, 2013)

As suggested by Meixell & Norbis (2012), carrier needs to be selected based on the documented performance in terms of speed and reliability. In order to keep good relation with the buyer or consumers, reliability and speediness of the service is required while engaged in global transaction. However, carrier selection procedure needs to be reviewed contiguously with changing consumer demand and changing business rules. Cost cut and service improvement is required for the better pricing of services and to hold greater amount of market share (Choudhary & Shankar, 2013).

Carrier relationship management

Carriers are the medium between customers and companies to build up relationship. In order to reduce the risk of transportation across international boarder, strong relationship needs to exist between company and the carrier (Mendenhall, 2014). There are different theories for carrier relationship management. As Allied Group wants to make their position stronger in the international market, they can use any of the theories for carrier relationship management. ‘Work for a win –win’ is a strategy for carrier relationship management. A good carrier understands the best route of transportation for a company. Allied Group wants to increase revenue with minimum cost. Building effective customer relationship depends on right selection of carrier and long term relationship with the carrier. In order to fulfil this goal o the company, collaboration with carrier is important to ensure increasing profitability in their business (Graham, 2013). Therefore, a long term relationship is required.

In order to build long term relationship with carrier, it is recommended to Allied Group not to break commitment. Carrier bases the price based on the data provided by the company. Relationship with carrier can be hampered if data are inaccurate or not shipped on time and carrier may move to another company (Shang & Lu, 2012). Appropriate information is required to provide to the carrier during bid process, which can distinguish the company from the other competitors. Moreover, carrier needs to be given first priority to provide opportunity so that carrier gets incentive to contribute positively in the company (Waller & Fawcett, 2013).

Carrier relationship building can be improved through effective communication. Proper information and honest dialogue can help to manage supply chain operation effectively. Accurate invoice and effective communication can widened a discussion beyond operational requirement. Therefore, good relation between shipper and carrier can help to manage risks of transport efficiently and collaboratively. Second procedure of building carrier relationship is leveraging relationship technology and techniques (Shang & Lu, 2012). On the other hand, carriers require to understand the value of reliability and stability that the person gets from the company. Relationship management software helps to manage the customer contacts, customer needs and may highlight new opportunities effectively. Theses software can make the business level communication easier due to availability of data technically. Carriers and company both can face regulatory challenges during the business operation (Talley & Ng, 2013). In order to overcome the challenges, Allied Group can set themselves guiding principles separately in order to gain mutual success. This type of relationship in business depends on mutual trust.

Outsourcing is a business process through which a business organisation can transfer the duty of business process to the third party (Holweg & Pil, 2012). The objective of the company is leveraging benefits such as low labour cost, improvement in service quality, innovation in product and services. Outsourcing in business is required for reasons such as reduction and control of operating cost, accessibility of the world class capabilities in business operation, streamlining increasing efficiency through utilisation of time, maximisation of use of external resources (Waller & Fawcett, 2013). Allied group wants to outsource to reap four benefits for transportation management. The four objectives are better productivity, better profession result and greater revenue, analysis of report and employing business intelligence for continual improvement, technological innovation (Holweg & Pil, 2012). Through outsourcing, the company can access greater specialization in the provision of services as this process helps to get economies of scale in the global market and to set up longevity of demand for the activity. Competency, focus of potential suppliers and geographical coverage increases through outsourcing. As cited by Lacity & Willcocks (2013), outsourcing of business operation provides certain power that is not available within internal department of the business. External logistics provider can accelerate loading and unloading process of cargo and can reduce transit time in the supply chain process. Economies of scale have effects on the warehousing at the terminals of the transport company. Reliability can be brought in the transportation system of Allied Container Services Pte Ltd by bringing flexibility in the transport mode choice.

Conclusion

The study concludes that as Allied Container Services Pte Ltd wants to expand its business in the international market, the company needs to consider three aspects of international transportation management such as incoterms selection, carrier selection and carrier relationship management.  Cost minimisation, increase in revenue and building strong customer relationship is the main goal of the company. Incoterm selection consideration is important for Allied group as the global transport is associated with several risks such as shipper risk, carrier and consignee risks. At the time of international commercial agreement thus price, quantity and the quality of products need to be considered. Carrier selection is important for Allied group as Carriers are the medium to maintain long relationship with international customers. However, Company needs to build good relation with the carrier as well as carriers can help the company by choosing right route for transportation and mode to minimise cost and transport time. In order to build up long term relationship with the carriers, the company needs to provide reliable and specific data regarding freights, goods, and price to carriers. In case of false or inappropriate data, the relationship may hamper and carrier may shift t other competitors in the market, which can be a disadvantage for the company. The context of outsourcing has been discussed as outsourcing can bring efficiency in the transportation service management in this company in the form of minimisation of cost, innovation, improvement in service quality.  

References

Allied.com.sg. (2017) Transportation.. Allied.com.sg. Retrieved 25 May 2017, from https://www.allied.com.sg/transportation.html#1

Anand, N., Quak, H., van Duin, R., & Tavasszy, L. (2012). City logistics modeling efforts: Trends and gaps-A review. Procedia-Social and Behavioral Sciences, 39, 101-115.

Andersson, S. (2013). Could suppliers take greater transport and owner responsibility?: Evaluation of changed Incoterms at GKN Aerospace.

Balm, S., & van Amstel, W. P. (2015). Public purchasing as game changer in smarter and cleaner urban freight distribution.

Bierwirth, C., Kirschstein, T., & Meisel, F. (2012). On transport service selection in intermodal rail/road distribution networks. BuR-Business Research, 5(2), 198-219.

Choudhary, D., & Shankar, R. (2013). Joint decision of procurement lot-size, supplier selection, and carrier selection. Journal of Purchasing and Supply Management, 19(1), 16-26.

Ding, J. (2012). Assessment of customer relationship management for global shipping carrier-based logistics service providers in Taiwan: an empirical study. WSEAS Transactions on Systems, 6(11), 198-208.

Graham, A. (2013). Understanding the low cost carrier and airport relationship: A critical analysis of the salient issues. Tourism Management, 36, 66-76.

Holweg, M., & Pil, F. K. (2012). Outsourcing complex business processes. California Management Review, 54(3), 98-115.

Lacity, M. C., & Willcocks, L. P. (2013). Outsourcing business processes for innovation. MIT Sloan management review, 54(3), 63.

Large, R. O., Kramer, N., & Hartmann, R. K. (2013). Procurement of logistics services and sustainable development in Europe: Fields of activity and empirical results. Journal of Purchasing and Supply Management, 19(3), 122-133.

m360.sim.edu.sg (2016) Singapore's Transportation And Logistics Market To Grow To US$40.79 Billion In 2016. Retrieved 25 May 2017, from https://m360.sim.edu.sg/article/Pages/Singapore-Transportation.aspx

Meixell, M. J., & Norbis, M. (2012). Integrating carrier selection with supplier selection decisions to improve supply chain security. International Transactions in Operational Research, 19(5), 711-732.

Mendenhall, C., (2014).  What is Carrier Relationship Management? Retrieved 25 May 2017, from https://www.transportationinsight.com/blog/co-managed/2014/04/carrier-relationship-management-part-1/

Rushton, A., Croucher, P., & Baker, P. (2014). The handbook of logistics and distribution management: Understanding the supply chain. Kogan Page Publishers.

Shang, K. C., & Lu, C. S. (2012). Customer relationship management and firm performance: an empirical study of freight forwarder services. Journal of Marine Science and Technology, 20(1), 64-72.

Stapleton, D. M., Pande, V., & O'Brien, D. (2014). EXW, FOB OR FCA? Choosing the right Incoterm and why it matters to maritime shippers. Journal of Transportation Law, Logistics, and Policy, 81(3), 227.

Talley, W. K., & Ng, M. (2013). Maritime transport chain choice by carriers, ports and shippers. International Journal of Production Economics, 142(2), 311-316.

Waller, M. A., & Fawcett, S. E. (2013). Data science, predictive analytics, and big data: a revolution that will transform supply chain design and management. Journal of Business Logistics, 34(2), 77-84.