Supplier selection criteria and Issues

Discuss about the Purchasing Management Of APL Logistics.

Purchasing is the first stage, which an organisation perform to initiate the business. It is both related to buying the products or the services. Purchasing involves various strategic planning in it, which in fact produces the final purchasing. On a same note, purchasing management is a process through which companies manage their purchasing and set standards for such process. It is highly important to have a good relationship in between the service provider and its supplier. A good interrelationship means a sound exchange of each other’s capabilities, which collectively serves the different purposes of customers. Nevertheless, a purposeful business can only sustain a long existence in the market (Giunipero, Hooker & Denslow, 2012).

The selected organisation for this assignment is APL Logistics Ltd., which is a wholly owned subsidiary of a Japanese Company Kintetsu World Express, Inc. (KWE). The company is operating in most parts of world and providing solutions on logistic services. It provides its services to many different industries such as automotive, retail, consumer and industrials verticals. Its competitors are Orient Overseas (International) Limited, Nippon Yusen Kabushiki Kaisha and Maersk A/S. The operational goal is to grow with the existing & the new customers and to establish it as a developed company in the different targeted verticals (Apllogistics.com, 2017). They have succeeded to leave a huge impact on the global logistic industry with their continuous rising market shares. Some of their strategies such as smarter policies for procurement, flexibility with external infrastructure etc have publicised their global presence (edb.gov.sg, 2017).

The main purpose of this assignment is to analyse the effectiveness of the purchasing management of the APL Logistics in Singapore. The three aspects, which this assignment would focus on are the selection criteria for suppliers, costs of purchasing and Use of ICT in managing the purchasing.

The supplier selection criteria of the APL Logistics revolve around becoming global with wide range of potential industries. Currently, it has suppliers from four potential industries such as Automotive, Retail, Consumer and Industrials. APL looks for potential suppliers to explore its credibility with the help of different technologies, which it acquires through merger or acquisition of respective companies (Handoko & Lau, 2016). Merger and acquisition has remained a single most powerful weapon for the APL Logistics. They have done it in numerous of times to consolidate their place in the global logistic industries. The acquisition of GATX Logistics in US to open up its own warehouse service is the one such example. The move was to solidify its footprint in the United States of America (Berchicci, Dowell & King, 2012). On a similar note, it acquired the German based Company Mare Logistik & Spedition GmbH in the year 2002. The acquisition provided a solid platform to APL Logistics in Germany (Erkan, 2014). These are just few of such examples, which have helped the company acquire a significant position in the logistic market. The few examples that have been presented in this assignment do clearly support a fact that APL Logistics relies heavily on merger and acquisition. Moreover, it helps the company in enhancing its capabilities as a logistic solution provider to multiple industries.

ICT for purchasing operations

Merger and acquisition brings some problems as well, which needs to be countered with some effective business strategies. Below are some commonest of issues that erupt while operating as a partnered organisation through either merger or acquisition:

• Global operation: Merger & acquisition brings headquarter in the target country as well. This means that the managers need to be flexible with the different cultures in two different countries. Generally, mangers fail to understand the importance of understanding the different cultures in the target country. Managers find themselves feasible with the global culture as well. They fail to understand that performance drivers are different for different countries (Cheng & Seeger, 2012). In such circumstances, it is highly recommended for the managers that they learn to deal with the different cultures across the globe. This would provide them a good control on its global operation as well (De Mooij, 2013).
• Requirement of expertise: Many big organisations do not understand the entire stages involved in the merger and acquisition process. They neither have ample of time, so that, they could devote times behind searching the every required aspect of merger and acquisition. They do not even hire expert consultants in few cases as well, which leads to uncontrolled movement with the merger and acquisition. This is indeed very important for a controlled business operation in the target country and for attaining the set objectives from the merger and the acquisition process (Frankel & Forman, 2017). It is highly recommended to the APL Logistics Company to gather sufficient information prior to the merger and the acquisition process. Additionally, the company may also adopt an expert consultant who can guide them intelligently towards their goals and needs with the respective merger and acquisition (Galpin & Herndon, 2014).

The company uses different technologies to enhance its expertise as a logistic solution provider. This is indeed a fact that it either has merged with few companies or acquired those just to enhance its capability as a logistic service provider. The establishments of the company in the United States of America, the European countries and other parts of world have produced some examples of such process. They have their own portal system for their aspirant users. The portal with the name MyPortal provides single log in facility to its users. It allows them access to numerous web based applications. ShipmentOptimizer is another technology, which APL Logistics use. It maintains the product flow by adhering to the dynamic rules that governs the change with the changing nature of market. ShipMaxAlliance is another technical strategy through which APL Logistics partner with the truck service providing companies. They use to enhance their loading capabilities, which help them to provide an improved service and enhanced returns on expenditures. An electronic booking service is another technological move through which the company facilitates its users to submit the shipping orders online. Production tracking helps them interact to their suppliers on each stage of production. The updates come in Electronic Data Interchange (EDI) format. Advance Shipment Notice (ASN) Management is a solution for majority of services such as packing lists, carton scanning, ASN transmission, label printing and commercial invoices. This is indeed a very important technology because it provides control on some of the few challenging tasks carton scanning (Apllogistics.com, 2017).

Recommendations would be given to the APL Logistics Company on following few potential technologies, which would enhance their existing capability as a logistic solution providing company:

• Internet of things (IOT): This would take the technology to a next level through the integration of technology in various processes, which are involved in Transportations and Warehouse Management. Inclusion of sensor within the transport vehicles would communicate the real time data on truck movement and would also allow the sharing of the captured footages (Cardoso, Mastelari & Bassora, 2013). Using such technology APL could actually enhance its control on most of the logistic operation. Furthermore, this would help the company in enhancing its customer service standard.
• Sustainable operation: Technology can be implemented to reduce the carbon emission, which is constantly proving its severity to the surrounding environment. Logistic companies such as APL Logistics can impose strict regulations on truck owners or the third party vendors to use such transportation means, which emit less carbon (McKinnon et al., 2015). This would certainly help APL gain a competitive edge over its competitors.
• Security: With so much digitalisation in the logistic industry, it is necessary that numerous data would be transmitted over internet and cloud. Such system would be more prone to cyber attacks. This is for such reason it is necessary to select some remedial action against the identified threats. In such circumstances, regular testing and security related audits would be highly required to identify any potential threat (Bichou, 2014). APL Logistics can adopt regular auditing system to enhance its competitiveness. This would not only help them prevent from the loss of business but would also enhance their customer service standard.

Purchasing is one of the parts of an entire supply chain. It is indeed the primary resource, which requires significant investments on it. It is very important that organisation take efficient moves to reduce its purchasing costs, as by doing that they would be able to cut down on the expenses. Furthermore, they would also be able to enhance their performance by incrementing their revenues. Purchasing costs involves the collection of required raw materials from the suppliers and paying to the logistic companies for receiving the materials at the manufacturing centres. Purchasing costs is a part of total cost, which needs to be controlled in order to attain the maximised benefits on the revenues (Monczka et al., 2015).

Purchasing cost analysis

Purchasing costs analysis can be analysed by calculating the total costs involved in the entire supply chain and then subtracting the collective costs of raw materials & costs incurred on inbound logistics from this. The net amount gained would give the purchasing costs for a specific product or service (Chicksand et al., 2012). It is of significant importance for the APL Logistics Company. For APL Logistics, the costs involved in filling up the required fuel, loading the product on the truck & other means of transport, minimum wages for the drivers are some important domains where they are required to make expenses on. They can improve their performance by saving much on the paid amount from the clients or the suppliers. Suppliers of APL Logistics are those different companies that represent respective industries such as automotive industry. On the other hand, its clients or the suppliers would try to save on their expenses, which is why it is necessary that APL Logistics save on its operation in order to enhance its profitability. The one saving point for the APL Logistics would be to save on paying wages to the drivers (Konishi et al., 2012). If they can negotiate with the drivers, this would be a good resource to reduce their expenses to a considerable degree. Allowing big size trucks only for the transportation (Greening, Piecyk & McKinnon, 2015). This would accommodate comparatively larger volume, which would save the spending to a considerable level. This is possible because such trucks would fulfil the capacity of smaller vehicles. Furthermore, this strategy would help in saving on paying the minimum wages to the drivers.

Conclusion

APL Logistics is one of those logistic companies in Singapore that has its presence at the global level. The company has identified the importance of different technologies that helps foster in the logistic industry. Merger and acquisition has remained one of their weapons, which they have used to establish their presence in various new markets across the globe. They have selected their suppliers from various potential resources; however, to maintain a long-term relationship with the suppliers it needs to keep it updated with the upcoming trends in the logistic industry. The use of ICT has also received wide reception in the APL Company; however, it further needs to explore its credentials with the use of various future technologies such as Internet of things (IOT). This would further strengthen their control on the operation and would also help to enhance the customer service level. It also needs to incept few changes such as allowing the license to big trucks only. This would help them cut down on their expenditures by cutting down on the minimum wages payment. Such techniques can help the company enhance its business, which would enhance its profitability structure. Supplier selection criteria, use of ICT in operation and analysing the purchasing costs are three most important parts, which can significantly influence the business of logistic companies. This is necessary also to neutralise the rising competition in the logistic industry. The company has often believed in expanding its growth with by entering into new markets. This is on the other side is not safe indeed. This is why it is necessary for APL Logistics that it takes proper consultation of experts prior to enter into new markets.

References

Apllogistics.com. (2017). Cite a Website – Cite This For Me. [online] Available at: https://www.apllogistics.com/wps/portal/apll/!ut/p/z0/04_Sj9CPykssy0xPLMnMz0vMAfIjo8zi_d0tnd3dLYzc3S0DLQ08Q8L8DMP8nY1c3Yz0C7IdFQEc6sHU/p0/IZ7_41E6IG82GG7M80I3L8U6DCPOR4=CZ6_OG9CGG82GG9Q90ITVN1VOC2EF2=MECTX!QCPAPLL_ContentLibQCPAPLLQCPAPLL_SA_HomeQCPSA-RegionsQCPSA-SouthEastAsiaQCP/p0/IZ7_41E6IG82GG7M80I3L8U6DCPOR4=CZ6_OG9CGG82GG9Q90ITVN1VOC2EF2=MECTX!QCPAPLL_ContentLibQCPAPLLQCPAPLL_SA_HomeQCPSA-RegionsQCPSA-SouthEastAsiaQCPSingaporeQCP==/ [Accessed 6 Sep. 2017].

Berchicci, L., Dowell, G., & King, A. A. (2012). Environmental capabilities and corporate strategy: Exploring acquisitions among US manufacturing firms. Strategic Management Journal, 33(9), 1053-1071.

 Bichou, K. (2014). Port operations, planning and logistics. CRC Press.

 Cardoso, R. M., Mastelari, N., & Bassora, M. F. (2013). Internet of things architecture in the context of intelligent transportation systems—a case study towards a web-based application deployment. In 22nd International Congress of Mechanical Engineering (COBEM 2013) (pp. 7751-7760).

Cheng, S. S., & Seeger, M. W. (2012). Cultural differences and communication issues in international mergers and acquisitions: A case study of BenQ debacle. International Journal of Business and Social Science, 3(3).

 Chicksand, D., Watson, G., Walker, H., Radnor, Z., & Johnston, R. (2012). Theoretical perspectives in purchasing and supply chain management: an analysis of the literature. Supply Chain Management: An International Journal, 17(4), 454-472.

De Mooij, M. (2013). Global marketing and advertising: Understanding cultural paradoxes. Sage Publications.

edb.gov.sg (2017). [online] edb.gov.sg. Available at: https://www.edb.gov.sg/content/dam/edb/en/resources/pdfs/publications/media%20partnership/EIU%20Report%20-%20Asia%20Competitor%20Barometer%20Transport%20and%20Logistics.pdf [Accessed 6 Sep. 2017].

Erkan, B. (2014). The importance and determinants of logistics performance of selected countries. Journal of Emerging Issues in Economics, Finance and Banking, 3(6), 1237-1254.

Frankel, M. E., & Forman, L. H. (2017). Mergers and acquisitions basics: the key steps of acquisitions, divestitures, and investments. John Wiley & Sons.

 Galpin, T. J., & Herndon, M. (2014). The complete guide to mergers and acquisitions: Process tools to support M&A integration at every level. John Wiley & Sons.

Giunipero, L. C., Hooker, R. E., & Denslow, D. (2012). Purchasing and supply management sustainability: Drivers and barriers. Journal of Purchasing and Supply Management, 18(4), 258-269.

 Greening, P., Piecyk, M., & McKinnon, A. C. (2015). An assessment of the potential for demand-side fuel savings in the Heavy Goods Vehicle (HGV) sector. University of Cambridge, Department of Engineering.

Handoko, S. D., & Lau, H. C. (2016). Enabling carrier collaboration via order sharing double auction: a Singapore urban logistics perspective. Transportation Research Procedia, 12, 777-786.

 Konishi, Y., Mun, S. I., Nishiyama, Y., & Sung, J. E. (2012). Determinants of Transport Costs for Inter-regional Trade.

 McKinnon, A., Browne, M., Whiteing, A., & Piecyk, M. (Eds.). (2015). Green logistics: Improving the environmental sustainability of logistics. Kogan Page Publishers.

 Monczka, R. M., Handfield, R. B., Giunipero, L. C., & Patterson, J. L. (2015). Purchasing and supply chain management. Cengage Learning.