Transportation and Distribution Management
Introduction
The aim of this paper is to discuss the various aspects of transportation management of Wilmar International Company with key focus on selection consideration for incoterms, criteria for carrier selection and how the company manages its relationship with carriers. Incoterms refers to commercial terms or rules that are widely used internationally for transaction and procurement processes. Transportation management is an essential element of Wilmer which ensure smooth distribution of many tonnes of products to large number of customers the world over. Therefore, the paper provides recommendations on the right incoterms for the company, appropriate selection criteria for carriers and how the right relationship with those carriers is built.
Company overview
Wilmar International Limited is an agribusiness firm with headquarters in headquartered in Singapore and is one of the major listed companies in relations to market capitalisation in Singapore. The firm’s business activities involve cultivation of palm oil, crushing of oil seeds, manufacturing of biodiesel and fertiliser and processing of grain. The core strategy of Wilmer international involves a resilient agribusiness model that is integrated. It covers, entirely, the value chain comprising of various agricultural commodities from the initial processing to branding, distribution and merchandising of broad range of those products. The company’s market spurns from China, Indonesia, and India, and about 50 more countries the world over (Wilmar International, 2016). This market is maintained by the Wilmar’s portfolio of agricultural processed products that are of high quality and the consumer- packed commodities dictate a leading target market share. Despite the large market share, Wilmar faces stiff competition from local firms such as Golden Agri-business and First Resources and international companies such as Archer Daniels Midland Company, Cargill and Indofood Agri. The company has a wide distribution network globally that covers most of the countries where its products are sold and has recently embarked on strategic investments and large acquisitions (Wilmar International, 2011).
Incoterm selection
Transport and distribution management should be a core agenda for the success of any business activities of organisation. It should be a major strategy to be applied by management to respond to a highly competitive environment globally since the traditional supply chains and models are becoming complex as they get oriented towards responding to customer needs (Hien et. al 2009). There is thus a need for every organisation to select a transportation mode that is very effective and reliable. This because the transportation function is closely integrated into other functions of the firms which include manufacturing, purchasing, marketing and distribution of the company’s products (Rushton et. al 2001). The distribution channels is a very important aspect of Wilmar International since the companies depends on its effectiveness to reach the wide range of market. The company manufactures products whose market spurns across the globe thus, and thus has to rely on a distribution firm that has enough capacity to effectively ensure delivery of products to manufacturing sites as well as distributing of manufactured and processed products to target market. The capacity should be in terms of information technology, warehousing and material handling, freight and transportation and other support services.
It is important that the company apply the appropriate incoterms for its transaction since they will ensure standardization of practices in the contract and in so doing any disputes that may arise will be averted (British Chambers of Commerce, 2012). The company has to ensure that the incoterms selected are in harmony with other contracts of carriage, load capacity and insurance. Of more importance is the capacity if the organisation selected to have the required capacity handle all the material products produced by the company. The capacity has to involve the multimodal transport which has opened the door for the company to minimise any cost and risk of theft and damage. Thus the company’s preference for containerization would give an upper hand in the selection process since the containers be used for different modes of transport. The Wilmar International has to apply the Cost and Freight and Cost Insurance and Freight under any contract, where a multimodal bill of landing is used. These will ensure the transportation company takes responsibility for the safety of the Wilmar’s products during the transportation process. The CFR application is strategic since it ensures that the selected company has the capacity to arrange for the transportation of the products from the factory to the destined port. This ensures that the company does not bear the cost of the charges at the destination point (International Labour of Commerce, 2010). CIF ensures that Wilmar International is absolved of any risk in shipping of the products which are not under its control. Moreover, the incoterms include the Full Container Load which is a door to door model which makes sure that the containers used are sealed at the products origin and opened only at the destination which provides a high security and very minimal handling (International Labour of Commerce, 2010). These incoterms were the main considerations that were used to choosing Raffles Shipping Corporation as an essential part of Wilmar International.
Carrier Selection Criteria
The selection of any mode of transport involve the organisation to assess its transportation needs and requirements so as to ensure that there is no hitch in the distribution process (Premeaux, 2007). This involves the appropriate mode of transport that will ensure that the company is able to achieve its goal of efficiency in export operation and effectiveness in terms of cost. The process of selection should also consider whether the company handles the logistics itself or aim at outsourcing the services (Chew et. al 2011). Wilmer’s products are mostly transported through shipping, while there are lesser loads transported through rail and road. The company’s products are normally bulky and of great weight which necessities the use of shipping mode of transport. Moreover, the products are mostly not perishable so the shipping mode is very appropriate. The shipping mode is very cost effective since the large volumes of products allow for cost reduction since consignments can be consolidated by freight forwarder (Perlman et. al 2009).
The criteria applied by this company touches on the carrier’s organisation structure, professional reputation, communication, pricing and financial stability. The carrier’s organisational structure should ensure that there is point-of- contact that is specifically dedicated to Wilmer International. Such a structure ensures that there are carrier’s representatives who can respond to the company’s concerns and one who has authority to make important decisions on carrier’s behalf. The carrier should be a very active member-in-good-standing in international, national, regional and local trade or various industry groups. In addition, the carrier should manage to provide a current list of its customers to the company. This provides an opportunity for the company to enquire about the carrier’s performance from those customers. The financial information of the carrier should be available for the company to assess its ability to carry out large business responsibilities that regards to insurance and other financial risks that may arise in the distribution process (Meixell & Norbis, 2007).The company will be able to assess the past and present performance which it will use to determine the carrier’s ability to continue staying in business and the financial capability that will enable it make vital improvements on capital. The carrier should also have a pricing structure that is not exaggerated so that it is in-line with other providers of the transport services. Thus the company looks into the recent rating and flexibility in pricing in relation to length of the contract and volume of the products involved. The selection criteria also includes the information technology application of the carrier which will ensure efficiency in billing, communications and documentation of data. This technology should also ensure efficiency in inspection procedures so as to comply with any policies set by the regulatory authorities (Kapoor & Kansal, 2003). The carrier should also be operating the right fleet size and enough equipment and of the appropriate type in the vessels the company requires. This should go hand in hand with the experience of handling the cargo similar to the company’s products and have measures that will prevent mixing of products with others to prevent contamination.
Carrier Relationship Management
As business operation expands in response to increasing market demand, there is a need to have a holistic transport management which will provide the ability to strategic planning, consolidation and optimization of all the transportation that include outbound, inbound, international and domestic (DING , 2012). This is done while considering the cost and restraint in the real world. In order to achieve this, organisation should ensure that the relationships it has with its customer brings value to both itself and the carrier so as to have a win- win situation (Jang. ,2006).Wilmer international transportation needs revolve around positive relationship with any carrier so as together it can be able to achieve its desired goals. These goals involve lower spend on transportation, maximizing the utilization of the transportation assets and at the same time optimizing the number of containers on shipment. The company also aims at ensuring that there is increased cost accuracy relating to charges from the carriers and improving the management of these charges. The company also desires to have its delivery made on time so as to attain a high level of customer service. This is possible if responsiveness and agility of supply chain is enhance through a good relationship with the carriers. Just as the company tailors its programs to fit its business strategy of satisfying customer needs, it should also do the same for the select carriers. This should be done by viewing the carriers as partners to Wilmar International and therefore, teams whose main role is to diligently handle carrier relationship should be established. However such a relationship should be based on rules that driven towards the fulfilment of the contract requirements. As such, the relationship team should strive to establish a relationship that focuses on transparency especially where the need for contract changes arises.
A collaborative attitude should be developed through improved communication with the company’s carrier partners so that avenues for discussing mater relating to transparency issues are created (Lambert et. al 2008). Lack of transparency can bring down any effort to collaborate in building business relationship that is well intentioned and value generating to the parties involved. The relationship can also be created through involvement of both parties in most aspects of pricing and charging. This will ensure that the appropriate rates are used, whether they are their own rates or international rate. A positive relationship will ensure that the company brings down the cost involved in transportation while at the same time ensuring on time delivery of products to the target locations (Handfield, 2002). The company’s teams of carrier relationship should also pursue a long-term relationship, and endeavour to maintain it. This will ensure a sustainable relationship with the carrier partners which will align the company’s needs and the carrier’s needs (Lambert et. al 2008). By so doing the company will be able to offer the best options for the carriers while at the same time reaping big from the dedication of the carrier to offer the best transport services.
Conclusion
The effectiveness in transportation management is closely linked with the distribution needs of the any organisation. The selection process of the appropriate carrier, however, bears the overall responsibility of determining whether Wilmar International will meet its transportation needs and requirements. This ensures that the company maintains it strategic goal of maintaining an integrated agribusiness model that is robust. The choice of the appropriate incoterms ensures that the company partners with a carrier that has the capacity to sustain its transportation needs while at the same time ensuring that the standards are maintained in any contract. This is where the company will be able to focus on the needs of the consumers which it must satisfy through proper distribution of its products to target market. However, the company should have selection criteria that is oriented towards its own needs so that any company selected has the ability to meet them at reasonable cost and quality. Such a criteria should focus on the carrier’s performance both past and present especially in terms of experience with similar type of cargo of the company’s products. The, company’s needs be meet properly if a win-win relationship is established with carriers so that to avert any hitch to the distribution process.
Reference
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