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May 02, 2023

Answer:

Introduction

VBC is a Manufacturing Company that deals with premium cola products located at Ho Chi Minh City and Hanoi ucts.  It sources its packaging materials from different companies for bottles and lids. The logistics director at VBC Company has to oversee, monitor, and track all activities in the transportation of products getting in and out of the company in a timeline and within a budget. The objective of this report is to help select a supplying company with the best transport routine that is cost-effective to supply VBC Company with lids on time.

Definition Of The Challenge

VBC has been sourcing its high-density plastic lids from a distributing company in Shenzhen, China. In Bangkok, Thailand there has been found a new supplier for plastic lids with a comparable quality as that of Shenzhen’s. The challenge is: if VBC Company chooses the new supplier will the cost of transportation increase or decrease, what safety measures do they have? Will the new supplier deliver the lids on time and at the required quantity?

Considerations Of The Option

VBC Company`s logistics director could choose to stick to the current supplier in Shenzhen, China because the lids are parked before they are shipped from the company`s premises. Unlike the lids from Bangkok they are transported into a trans-loading facility in Phnom Penh, Cambodia for proper packaging hence the new supplier may take longer to deliver and may require more charges for the packaging facility and Labour. The company may also choose to do business with the new supplier as the company can be able to deliver the lids in bulk whereby, they could be making huge orders but earlier before deadline so that they can give them enough time for packaging and transport. Unlike the other supplier who is delivering the 10 boxes after a short period until VBC has an option of expedited shipping.

Evaluation Of The Option

If the company’s logistics director selects the new supplier there are few risks involved. Since the lids are being transported in bulk hopper cars it may cause damages such as some lids cracking and others loosening in a way that when it is attached to a bottle the liquid might spill off. It also involves other risks such as high transport costs, theft, and accidents that might require higher insurance fees. The packaging period taken at the trans-loading facility might affect VBC`s operations as it may delay packages in case there is a sudden rise in consumption, due to changes in the weather and long holidays.

Nevertheless, the new supplier has got a few benefits if selected even though other costs; insurance costs, freight fees and import and/or export charges, duties, demurrage, taxes may rise the delivery duty may reduce as it will be paid once in a considerable time and for a large volume of lids.

However, if the logistics director chooses to proceed with the current supplier, VCB Company may continue incurring the expedited shipping, because the supplier delivers just a few boxes of lids which does not meet the production requirements of VBC Company. If it did meet the production requirements then there would be no need to have an Ex-works option for VBC Company.

Since VBC Company has been in operation for the last two decades, it has already created a good supplier relationship with the current supplier to an extent that it could be supplied with lids on credit in case of financial constraints. This is not likely to happen immediately or soon after recruiting a new supplier. With the current supply of 10 boxes per supply VBC worries less about space, however, the pallets are not safe on shipping since they cannot be stacked as nothing can be placed on their sides. This may be very expensive for the supplier that’s why they are unable to supply in bulk as very big spaces would be required.

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