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Haier's Core Values and International Presence

Question:

Discuss about the Transportation and Distribution Management of Haier.

Haier is a Chinese electronics manufacturing company established in the year 1984. The headquarters of Haier is located in Qingdao. The company manufactures some of the electronic devices that are television, refrigerators, washing machine, microwaves, computers, mobile phones and air-conditions. They distribute these products almost every corner of the globe. Their major international markets of the company are USA, Russia, India, Pakistan, France, Malaysia, UK and many more. They started their international journey in 1990 in an effort to tap into the overseas markets (Haier.net, 2017). They face considerable competition in their international market from Philips, whirlpool, godrej and other similar products. The reason behind the company is lasting in their international markets for this long competing with these mentioned competitors is their core value and goal. The company follows a win-win mode of individual goal that provides sustainability to the company. It is because they are concerned to look after the interest of their customers unlike other Chinese companies that seeks for short-term profit (Haier.net, 2017). Their values prioritize the customers’ opinion, consider them right, and seek for the development their products to satisfy their needs. They also believe in the entrepreneurship and innovation. It helps the company to retain their value. Haire have revised their strategy over time to maintain these core values. The Company currently follows networking strategy to hold the market share and brand loyalty in their overseas markets.

The purpose of the essay is to understand the incoterms and the process of selecting proper incoterm for the company. The considerations are discussed in relation to the selected organization and recommendation is made in for gaining competitive advantage in the market. It further focuses on the criterions considered for carrier selection and carrier relationship management relating the factors with Haier. It also discusses how it can bring profit for the company.

The company has invested a considerable amount of money in their first half for developing their logistics for operating in the Chinese market. This is due to the need of dealing with the increased outsourced logistics requirements of their products. They bought sixty per cent of the Shanghai Boyol New Brothers Supply Chain management in the Chinese market and completely bought the complete Boyol Logistics in the international market. This helped them in increasing their profit by 19 per cent in the first half. Later, the company made alliance with the leading e-commerce business Alibaba with a goal of creating industry-leading standards for the logistics. Later, Haier integrated with other logistics business like Gooday mart Logistics to deliver efficient service to their customers (Greg Knowler, 2017). These steps taken by the company has considerably increased their profit and efficiency. However, this is limited to their Chinese market only. They considered foreign direct investment in expanding their business to the overseas market. This eliminates their need of supplying the products overseas as they now manufacture their products in their target markets.

Logistics Investment and Alliances with Leading E-Commerce Businesses

However, this increases the risk for the company, as they are liable for the goods they are for the product being delivered. This means that the company is chargeable for the damage in course of transportation. In other word, the company is responsible for securely delivering the products to the doorsteps of their customers (Stapleton, Pande & O'Brien, 2014).

DAP

DAP refers to delivered at place, which means the manufacturer is liable to pack and deliver the product to the shipment. The responsibility of the goods there after, moves to the buyers and the buyers are then liable to take responsibilities for the goods. Any kind of damage that might occur after the products have been handed over to the shipment falls under the buyers’ responsibility.

Delivered at Place

Moreover, the costing of transportation is also divided accordingly. The buyer needs to carry out the charges and responsibilities for customs clearance in the importing country, and the risk including all the customs duty. The carriage expenses along with the terminal expenses are to be paid by the seller in this case up to the agreed destination point. The buyer bears the costing from the final destination starting from unloading cost under the terms mentioned in DAP (Bergami, 2013). Adopting this third party logistics term will help the company reduce their costing of transport. Moreover, the company will be liable for the security of the product until packaging. Responsibility thereafter will move to the buyer and reduce the risk for the Haier.

CPT

CPT otherwise known as carriage paid to named destination can considerably reduce the cost and risk factors for Haier. Liability of the manufacturer according to this term is to deliver the products to the named destination for pick up by the first carrier. The costing and responsibility thereafter lies with the buyer.

 The only responsibility of the manufacturer is to pack the products according to the term and deliver it to the first major carrier in a mentioned place. Haier can obtain a certain level of advantage using this third party logistics supply chain by reducing the costing and risk factors incorporated within (Bergami, 2013).

The overall goal of the company is to deliver high quality products to the customers and consider their interest along with the business interest. This helps the company to do a sustainable business. Transportation goal of Haier on the other hand is to provide a safe delivery to their customers. This concern is due to the types of products them manufacture in their company. The electronic devices possess high threat of damage in transportation. The company further seeks to reduce the expenses spent on the transportation. It makes it obvious that they seek a reliable carrier that will safely deliver their product in low transportation cost. Moreover, the reliable carrier will also reduce the wastage cost that the electronics companies have to consider in the process (Choudhary & Shankar, 2014). Reduction in transportation cost will also reduce the end price, which will fulfil Haier’s win-win concept.

Selecting the Proper Incoterm for the Company

Haier needs to consider various factors before selecting their carrier. However, some of them needs special attention as they are the primary determinant for the safe and secure delivery of the products. They are as follows:

This is the most important determinants the company needs to consider in the process of selecting carrier. This is be of the operational area the company is covering. Haier has expanded their market in almost every corner of the world. Their manufacturing facilities and destination market is present in cities around the world (Zhao, 2012). It make it necessary for Haier to select a carrier with maximum geographical coverage. Otherwise, the primary purpose of transpiration will remain unattended.

The second most important criteria the company needs to consider is the equipment the carrier uses for their transportation. Haier manufactures electronic products which is highly vulnerable to physical impacts. Hence, they will require a carrier that is technologically advanced and has the capability to provide the extra care required for transiting the products manufactured by Haier. Considering this factor will help Haier control the damage and reduce the costing that might occur from the damage during transit. Theory of transportation states that the primary objective of the company in transportation should focus on reducing per unit cost for shipping, which is possible to address by reducing the damage in transit (Aguezzoul, 2014).

Haier also needs to consider the transit time taken by the shipping line they select for delivering their product. It is to increase the satisfaction level of the buyer and to increase their business. Faster delivery means they can deliver more product in short period of time that will help the company to grow their business (Ben-Akiva, Bolduc & Park, 2013).

Lastly, Haier needs to consider in the process of carrier selection is the reliability. It incorporates multiple factors some of which are discussed earlier. The carrier should be precise about their pickup and drop location and timing. The shipping line should be picking up the products and deliver them to the exact point as mentioned and within time to ensure the success of the purpose of transportation. Moreover, it should also ensure the safety of the product to reduce the costing of transportation (Meixell & Norbis, 2012).

As per the earlier discussion, Haier aims to deliver their products safely to their buyers in low cost. Moreover, they also desire to deliver the products in time that will further increase the satisfaction level of the buyer. The transportation model also states similar criteria for the transportation of the goods, which are safety, time and cost effectiveness (Govindan et al, 2012). The company should consider these factors to generate maximum revenue. In addition to the above-mentioned goals, the company also seeks to establish a good relation with the carrier to ensure long-term success.

Primary Criteria for Selecting a Carrier

Long-term relationship with the carrier is considered as the best for any manufacturing company considering many factors. Firstly, frequent change in the carrier company will hamper the business of the manufacturer. Moreover, it will put the business in insecurity regarding to the transportation. It is necessary for Haier to ensure a smooth transportation facility to keep the business running and deliver the products to its customers. Secondly, none of the parties involved will not be able to build trust, which is important in this line of work. The increased reliability of the carrier will ease the process (Graham, 2013). Hence, it will be necessary to build trust between the manufacturer and the carrier, which is possible only through long-term relationship. Thirdly, long-term relationship with a single carrier will save the company a considerable amount of money. Changing the carrier means changing contract, which may considerably vary over time. Moreover, safety measures should also be taken into account, which comes with the healthy relationship between the supplier and carrier (Winter & Knemeyer, 2013).

  • Transparency should be maintained between the carrier and supplier. The data related to route, tonnage, monthly volume and other should be properly communicated to develop healthy relationship between the parties. Seasonal changes that might occur should also be calculated and communicated properly in prior order.
  • The opinions provided by the carrier should also be considered as they have a deeper understanding of the geography of the location. Moreover, prioritizing their opinion will help building trust, which is important.
  • Commitments from both the parties are required in this case. It is necessary for the supplier to maintain their commitments before seeking the commitments of the carrier. It will further strengthen the bonding.
  • The opportunities should be shared with the carriers. It means that the manufacturer should provide opportunity to the carrier to gain benefit from the process. In other words, they should be incorporated in the business when the favorable opportunities arises.
  • Operational changes should be properly communicated with the carrier and seek their opinion in the process if possible. This will avoid unwanted disruption in the transport process.
  • Responsibilities related to the technological usage has to be shared by both the carrier and the shipper. The shipper must ensure the minimum manual work related to the tracking of the goods being imposed on the carrier.

Conclusion

It can be concluded from the above discussion that Haier have expanded their business in the international market and built facilities around the world. Hence, it is important for them to have a proper third party logistics firms to ensure the smooth distribution of their products in their operational markets. The CPT and DAP are the two incoterm that can provide certain level of benefit to the company transporting their products around the world. They can reduce the risk factors involved in international transportation with proper implementation of the proposed incoterms. However, they have to consider the criterions mention to select the right carrier for their distribution. These factors leads to the conclusion that Haier needs to build healthy and long-term relationship with their carrier for ensuring a sustainable development. They can utilize the proposed process of developing relationship with their selected carrier.

References

Aguezzoul, A. (2014). Third-party logistics selection problem: A literature review on criteria and methods. Omega, 49, 69-78.

Ben-Akiva, M., Bolduc, D., & Park, J. Q. (2013). Discrete choice analysis of shippers’ preferences. In Freight Transport Modelling(pp. 119-141). Emerald Group Publishing Limited.

Bergami, R. (2013). Incoterms 2010: The newest revision of delivery terms. Acta Universitatis Bohemiae Meridionalis, 15(2), 33-40.

Bergami, R. (2013). Managing Incoterms 2010 risks: tension with trade and banking practices. International Journal of Economics and Business Research, 6(3), 324-338.

Choudhary, D., & Shankar, R. (2014). A goal programming model for joint decision making of inventory lot-size, supplier selection and carrier selection. Computers & Industrial Engineering, 71, 1-9.

Govindan, K., Palaniappan, M., Zhu, Q., & Kannan, D. (2012). Analysis of third party reverse logistics provider using interpretive structural modeling. International Journal of Production Economics, 140(1), 204-211.

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

Greg Knowler, S. (2017). Haier expands China logistics business as 3PL demand grows. Joc.com. Retrieved 7 November 2017, from https://www.joc.com/international-logistics/haier-expands-china-logistics-business-3pl-demand-grows_20140827.html

Haier.net. (2017). History | About Haier | Haier Group. Retrieved 7 November 2017, from https://www.haier.net/en/about_haier/history/

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.

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.

Winter, M., & Knemeyer, A. M. (2013). Exploring the integration of sustainability and supply chain management: Current state and opportunities for future inquiry. International Journal of Physical Distribution & Logistics Management, 43(1), 18-38.

Zhao, W. (2012). U.S. Patent No. 8,214,536. Washington, DC: U.S. Patent and Trademark Office.

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