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Introduction and Company Background.

Extracts from this document...

Introduction

Introduction and Company Background Our company is a manufacturer of female dolls. The headquarters, factory and warehouse are located in Hong Kong and established since 1993. Nowadays, our employees' number is around 400 but at the beginning stage of running our business, there were only 50 employees. We have been expanding our business because the number of customers is increasing. Most of our customers are from North America and Europe where dolls are popular toys among kids. At the present, we import raw materials from other countries: oil and refining oil into plastic pellets for dolls' body from Malaysia, nylon hair from Japan and cotton cloth for dolls' dresses from the mainland China. The combinations of those parts and packing are done in Hong Kong. And then, we export finished female dolls to our customers. As the number of orders received is increasing that pushes us to expand our factory for faster manufacturing. The cost of running a factory in Hong Kong is high mostly because of the cost of labour is so high which accounts for around 20% of our total operation cost. Manufacturing of dolls is labour intensive. So we suggest the factory and warehouses should be moved to a place where we can lower our operation cost for better profit. Dongguan in Guandong Province, China is an ideal site for consideration. After that, raw materials will be imported directly to Dongguan and finished female dolls will be exported to our customers via the Yantian Terminal and transported to and from our factory and warehouses via the transport network. Dongguan is one of China's largest manufacturing bases and the third largest exporting city in China. Dongguan is home to over 13,800 manufacturers tapping into a well-organized and low-cost labor force of China that congregates in Dongguan. It is an attractive place for manufacturers that require massive labor force. Dongguan lies in the middle of the economic golden triangle between Guangzhou, Hong Kong and Macau, with extremely convenient land and water transportation and advanced facilities in energy resources and communications etc. ...read more.

Middle

As far as the cotton cloth for doll dresses is concerned, essentially, the dresses for the dolls are manufactured in sequence so that they can go right off the delivery vehicle onto the doll assembly line in the order in which they will be assembled. The plant site making the dolls clothes is only twenty minutes away from the assembly plant, as a result, for twenty hours per day, trucks loaded with dolls dresses leave the factory every fifteen minutes. Hence, the location still delivers true, JIT (just-in-time) deliveries. * Costs 1. Land Costs As a manufacturing plant needing a large scale of land use, the cost of land is critical. This represents a potentially significant expense. However, the land cost at Dongguan is still reasonably competitive. Also, the cost of construction is considerably low as there are sufficient cheap labours readily employed. 2. Seafreight Accessorial Charges The container handling charges involved in Shenzhen are much cheaper than in Hong Kong. The table below shows the difference of charges involved between Yantian and Hong Kong terminals. Export terminal Yantian (HK$) Hong Kong (HK$) Trailer Charge (Dongguan(Yantian) 950/20' 1000/40' 2600/20' 2800/40' Terminal Handling Charge (THC) 1093/20' 2085/40' 2065/20' 2750/40' Total 2043/20' 3085/40' 4665/20' 2750/40' Difference between Yantian and Hong Kong 2622/20' 2465/40' - - If we export ten 40'containers, we can save about HK$300,000 every month! * Utilities Power Supply Dongguan has sufficient power supply with 73 power stations (each generates more than 110000 volts) supplying for the country and city at the same price and through the same net. It employs a double-loop power supply for some key enterprises. In 2001, its power supply reached 207.72 billion volts hour, which tops most of the cities in Guangdong. Water supply Dongguan has three large-scale water factories in its central water-supplying system, which boasts of a capacity of 2 million stere per day. The water factory now under construction has the capacity of 600000 stere per day. ...read more.

Conclusion

Also, third party logistics service could provide the expertise logistics services and the core business of the company could be enhanced by reallocation of labor. Impact to the Company In conclusions, using third party logistics services could reduce the company's operation and administrative cost because the logistics company provides the services including the transport operation and also the administrative work. The company does not have to spend a large amount of capital to maintain the transport or logistics team, she only needs to pay for the services charges to the logistics company. So capital would not be tied up. The company could make use the saving on other aspects to improve the company's overall performance. Another benefit is that using third party logistics network could reduce the lead time. Lead time is the major factor concerning the customer's satisfaction. The shorter the lead time, the more attractive to the customers and hence possibly increasing sales volume. Although using third party logistics services brings significant advantages to the company, there are still some risks. It would be difficult for us to control the transportation process because when the logistics services is contract-out to a logistics company, the whole transportation process is handled by that company. Our company could not monitor the process, so there is a risk of rip-off during the transportation. Also, there is a risk of disclosure of company's information. This is because when the company uses third party logistics services, much information needed to be given to the logistics company. Our company could not ensure that the information used is kept confidential. So we need to bear the risk of information disclosure. Although using third party logistics services would induce certain risks, the benefits brought to the company still outweigh the shortcomings. Third party logistics services are not only useful for reducing the cost and increasing the sales volume, but it also helps to raise the company's reputation and improve overall performance. All in all, it is worthwhile to employ third party logistics. Logistics Management Assignment 2 Page 1 of 14 ...read more.

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