Logistics Management and Product Coordination for CERAMICOSA

This report discusses logistics management and product coordination for CERAMICOSA, including inventory control, actions to prevent disruption of the production process, and good management towards clients. It also explores the use of Just in Time philosophy and suitable incoterms for CERAMICOSA.

Project Supply Chain

INTRODUCTION
Logistics that refers to the process of moving and coordinating resources,
material, inventory and equipment from one location to another destination of storage.
This report discuss logistics management and how CERAMICOSA can manage to
deliver its products to Furniturest so that their contract does not get affected. This report
includes various aspects of Logistics Management, these are inventory control and
actions to prevent disruption of the production process. Report also includes proper
product coordination and how CERAMICOSA ensure a good management towards the
client and how it can become more competitive. Discussion for Just in Time philosophy
of production have also been included in this report this philosophy states and considers
that production process should be undertaken by the company after it receives orders
from clients and there is no requirement of storing material and goods in advance.
Finally, what type of incoterms that can interest CERAMICOSA have discuused along
with most suited route plan.
1. Inventory
Importance of Inventory Control
A process that ensures that inventory of a company is able to maximise use of its
inventory. For Inventory Control system is employed in the company that encompasses
all the aspects of managing a company's inventories; purchasing, receiving, shipping,
tracking and warehousing and storage turnover and reordering (Shenoy and Rosas,
2018). These systems in most of the companies are performed in sequence in order to
have a well-run inventory control system. When these systems are computerized this
make better integration of all these activities. For CERAMICOSA it is very important as
 They have a contract with strict terms and according to that they have to provide
products to their customers within 24 hours of their payment to Furniturest.
Other reasons and factors that make it important for CERAMICOSA to control their
inventory are-
 Efficient inventory control helps in fluctuations in demand. Due to their contract
with Furniturest it becomes more important that their demand may fluctuate and
that requires them to control their inventory.
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 Better service to customers. Inventory control ensures availability of stocks all the
time and that is why company can provide products to their customers without
any delay.
 Inventory control also keeps continuity of production operations and smooth flow
of raw materials.
 Effective use of Working capital (Kumar and et.al., 2017). Inventory Control
ensures that inventory is available all the time and that keeps production process
going on and ensures that working capital is effectively being used.
 Avoids duplication in ordering. Company an avoid duplication of purchase when
they are controlling their inventory.
Propose actions to prevent disruption of the production process
There are various symptoms from which company can understand that inventory
is not properly being controlled and managed. These symptoms are-
 Consistent stock outs.
 High amount of obsolete inventory.
 High cost of storage.
 Delay in Shipping.
 High amount of working capital.
 Loss of cost-effectiveness.
The causes for this are-
 Poor high and less forecasting of demand.
 Ineffective and misleading communication.
 Improper tracking of the stock.
Actions to prevent disruption of Production Process are-
 Correct forecasting of demand (Thorsen and Yao, 2017). This requires that
CERAMICOSA have good and accurate timely communication with Furniturest
so that they can understand their demand and demand from Furniturest. Proper
communication will allow them to understand trends of demand.
 To adopt best practices for Inventory Control. These practices are ABC analysis,
Batch tracking, streamline stocktake etc. Company need to employ best
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practices for controlling inventory which gives most accurate results and
production process does not get disrupted because of inaccurate inventory
control.
 CERAMICOSA need to improve visibility with automated inventory control
systems.
 Important actions that CERAMICOSA need to take is that it need to integrate and
consolidate stocks at different warehouses (Luetkehoff and et.al., 2019). This will
keep stock control at all the warehouses and company will be able to carry on
production process accordingly. This is very important as CERAMICOSA is
having many warehouses at different places.
2. Distribution Stage
Variables to consider for a Proper Product Coordination
Product coordination refers to coordination and alignment of products while
distributing. For proper coordination of products variables that need to be taken into
account are-
Backorder- This refers to those orders which are cancelled by customers while in
distribution process. This should be taken into account as this increases number of
available products and also firm need to consider past trends of backorder and
customers who generally do this (Huang, He and Li, 2018). This time company have to
manage their other inventory and products with those who are cancelled by the buyer.
Inspection- Inspection refers to checking of the products before they are distributed.
This includes elimination of products that are defective and under standard. This
requires that companies have extra stock so that it can manage and fulfil requirements
of products while distribution. This is an important variable for product coordination.
Many companies who are conscious about quality of their product undertakes
inspection at various stages so that they are sure about quality of their product. This
stage also includes inspection at the time of distribution of the product.
Decision- Decision refers to decision of buyer about quantity of purchase and suppliers
decision about quantity of sale. This affect product coordination.
Action to ensure these variables-
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 Inspection should be carried out timely and effectively so that it reduces chances
of elimination of the product on the basis of quality at last moment when products
is ready for distribution.
 Decision of Buyer and Seller should be timely and properly communicated to
each other on time and clearly so that last minute problems can be avoided.
Good Management towards Clients
Good management towards clients is very important, there are various reasons
that states why good management for clients is important (Zhou and Wan, 2017). This
increase client base and enhance goodwill and reputation of company. To do this
company needs to take some decisions that are as follows-
Properly Understanding demand of Clients- First action and most important action to
take for client management is to understand their needs and requirements properly. For
this firstly their needs are required to be identified and then properly articulated to justify
that they have been properly understood by company. This can then be communicated
to client to validate the order.
Quality of the product- clients should be provided best quality product. This is not only
important for client but also increases competitiveness of the company. This is an
important contributor for company to stand strong in competition.
Timeliness- Order of the clients should be completed on standard time and within time
which have been contracted. This helps to build trust in clients' mind that their order will
be completed on time and they will be delivered their order on time (Tanaka and et.al.,
2018). Proper time management also contribute in competitiveness of the company.
This refers to efficiency and effectiveness of the company.
3. Intermediate and Final Warehouses
CERAMICOSA has decided to rent intermediate and final warehouses so that it
can quickly supply demands of its clients. In contract with Furniturest which supply to its
customers within 24 hours of payment. This time is very tight and to maintain and follow
terms of contract decision to rent intermediate and final warehouses is correct. By this
action CERAMICOSA will be able to supply fast which is not just a term of the contract
with Furniturest but an effective and important step towards internationalize business of
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CERAMICOSA. This will enhance their brand image and effective customer service will
increase their customers as well. This is a important and necessary step for complying
with terms of contract. This proposal is correct and significant step towards
internationalize business of the company. This becomes more important when
customers can make online purchase and in this case company may ave to deliver at
any place within the country and that requires that company do have their stock at such
places from where it can be delivered fast to clients and customers.
Geographically ideal locations for warehouses in Stockholm, Palermo, Vienna is
near stores of Furniturest this will create ease for warehouse to deliver goods fast
whenever they are demanded by Furniturest and clients. When it comes to deliver
goods and products across the country. The way Furniturest is delivering goods across
the country the same method and route can be adopted by CERAMICOSA to deliver its
products and orders to the clients. Other aspect of this is that clients who can make
online purchase are of Furniturest in such case can deliver products to Furniturest with
their responsibility to send products to customers. This is why idea; location for
warehouses in these cities is near stores of Furniturest or from where delivering
products quickly is possible for warehouses to stores and clients of Furniturest.
Routes from central warehouse to final customers. In this situatin if it is
considered that client is from Rosersberg and product needs to be delivered from
Stockholm then ideal route for this will be from Stockholm to Solna and then crossing
sollentuna to Rosersberg.
In case CERAMICOSA is required to deliver product from Palermo to Cosenza then
ideal route will be Palermo to Reggio Calabria to Lamezia Terme to Cosenza.
In case CERAMICOSA need to send goods from Vienna to Hollabrunn then route that is
required to be followed will be from Vienna to Klosterneuburg to Stockerau to
Hollabrunn.
These routes are ideal for sending goods from central warehouses to the location of
clients. Though one considerable factor is that all these three locations in their
respective countries are not at centre of the country and that is why they may incur
extra cost for delivering goods from one location to another and that is why company
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needs to find ways in which it can save money and at the same time maintain its terms
of contract.
4. Just In Time
JIT approach of inventory management attempts to refill and schedule materials
and inventory exactly when they are required. This approach of inventory management
avoids stock of inventory when it is not required. This is done to avoid cost of storage
and and this also avoids conversion of products to obsolete (Mtar and Smondel, 2019).
Objective of JIT is to increase inventory turnover and reduce connected cost and
storage cost of the inventory. JIT requires should be an optimum synchronization
between manufacturing cycle and delivery of material. It means that when delivery of
inventory is due manufacturing process should be completed on time which requires
that process starts at time as well.
Main Element of JIT are-
 Continuous Improvement- JIT attempt for continuous improvement in process of
manufacturing and production and other linked activities. This attempts to attack
fundamental problem of the process that cause any difficulty and challenge for
company.
 This is a very simple system and easy to understand. This contributes in easy
management of inventory and production process by undertaking process when
it is required.
 JIT is an effective tool and method for controlling quality of the product and
process.
JIT attempts to eliminate waste of following-
 Waste of defect products.
 Waste of time.
 Transportation waste.
 Inventory Waste.
 Waste from overproduction.
 Processing waste.
There are various advantages that suggest that companies can adopt this approach-
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 Keeps stock holding cost minimum. It allows for effective utilization of waste and
have a favourable impact on rent, which otherwise is very high.
 It reduce chances for expire and outdated products.
 This attempts to take the best utilization of resources.
 Increased efficiency and higher quality products.
 Eliminate overproduction.
Along with this many advantages JIT also have few disadvantages, which are-
 it requires high reliance on suppliers that they will supply required material at
time and this is out of control of manufacturer.
 Cannot meet uncertain increase in demand as there will be no stock of inventory.
 Even more than expected demand from a customer can cause shortage of
material and parts.
In context of applying JIT at warehouse of CERAMICOSA it is not a wise decision as
this company have signed a contact with Furniturest according to which it has to deliver
goods within 24 hours of payment (Mtar and Smondel, 2019). And if company applies
JIT that have a very high chances of causing shortage of material. This is why it is not
ideal for CERAMICOSA to adopt JIT philosophy in their organisation. This can also
present difficulties when clients make online purchase. This is why company should
work on traditional method of inventory management.
5. Incoterms
Incoterms that stands for International Commercial Terms. At the international
transport of goods lot of things need to taken into account (Yaakub and et.al., 2018.).
Most important from which is contract with foreign suppliers. To ensure everyone is
aware of their obligation and minimize ambiguity Incoterms have been established.
To free client from any kind of management and responsibility appropriate terms
are-
Delivered Duty Paid- This terms refers to situation where seller possesses the
responsibility to deliver the goods to the buyer and all the duties and taxes including
import duties and taxes are also paid by seller of the goods. The responsibility for
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unloading remains with buyer. This term places maximum obligation on seller and free
buyer/client from maximum responsibilities.
Delivered at Place- In this when goods are ready for shipment all the necessary
packing is carried out by seller so that goods can be delivered to clients safely at cost of
seller. All the necessary formalities of exporting are also fulfilled by seller at their and
risk. This term that is why is most appropriate for client reducing their responsibilities
and management.
Incoterms that interest the Seller most is-
Ex Works- This term states that in this case most responsibilities and cost is incurred
by buyer and all the risk lies with buyer for delivering goods to destination which
reduces seller's cost (Acharya, 2017). This allows CERAMICOSA to give 10% discount
to Furniturest. This term interest the seller most.
Free Carrier- This is also beneficial for seller in case delivery of goods is not in the
premises of seller. In this case Furniturest requires to collect goods from central
warehouse in their countries.
6. Route Planning System
Route planning systems are software packages that generate and schedule the
best suited routes for transportation (Perelman, Evans III and Schaefer, 2017). This also
generate digital map of road networks and holds information on;
 Customer Location
 Collective and delivery window
 Types and Quantity of goods to be delivered.
 Vehicles available and capacities and
 Patterns of drivers' shifts.
This system has many benefits-
Implementation of route planning system have reduced operating cost and met
increased demand with no need to extra staff. Considerable benefits of Route Planning
System are-
 It reduces time of journey.
 Save fuel and cost.
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 Increased reliability of delivery schedules.
 Improves customer satisfaction.
 Better use of vehicles.
There are two types of Route Planning Systems, which are-
Journey Planners-
These systems use digital maps to calculate the best routes and estimated time
of delivery. This allows for avoiding right-hand turns and traffic to save fuel and
eliminate waiting time. This allows looking at orders and assemble them into routes.
With journey planners one can calculate time and distance of the whole journey. One
can try different until best option is found.
Vehicle routing and scheduling Package-
This system take a large number of customer orders and calculate most effective way of
meeting them. These can take into account road speed, load size, customer opening
hours, driving hours and many other factors (Tabrizian and Eshghi 2017). Suggested
routes are assessed by dispatch staff and make refinements based on their
experiences.
There are various factors that requires consideration before selecting most suitable
route planning system. Which are-
 Fleet Size
 Number of Users
 Number of customers
 Number of depots
 Number of calls to be routed.
 What support training and development is available.
 Do users need to be experts in computer.
 Availability of support for 24 hours.
All these factors need to be considered before selecting route planning system.
For CERAMICOSA best route planning system is Vehicle routing and scheduling
package. To justify this it can be said that Journey planners important consideration is
saving fuel and time but it does not include customer factors making it less useful for
those who are into the process of transporting goods and products to end customers.
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CERAMICOSA does that and it needs to deliver its products to customer within 24
hours of their payment which requires to find best and shortest route for transportation.
In Vehicle routing and scheduling Package various factors are considered like speed,
load size and customer opening hours etc. This suggest that companies that are directly
involved in the process of delivering products to customers need to use this method for
planning route (Tabrizian and Eshghi 2017). One important factor that justify use of
Vehicle routing and scheduling Package is that this takes large number of customer
orders and using this can allow company to deliver goods to all the customer in single
journey and if not then best way and time in which they can deliver goods to all its
customers.
CONCLUSION
On the basis it can be concluded that companies need to properly control their
inventory and manage it. This is important to eliminate any last minute problems and to
deliver products to the customer on time. Proper management of inventory is also
important to prevent any kind of disruptions in production. Prevention of disruption is
important otherwise it may increase cost and wastage of material and efforts. This
report also included Proper coordination of product at distribution stage. Actions that
can be taken for product coordination have also been included in this report. Just In
Time an philosophy for Inventory Management have also been included in this report.
This philosophy states that inventory should not be stored in advance and should only
be stored when order received by the company or warehouse. Lastly, Route Planning
system, its importance and what kind of route planning system will be useful for
CERAMICOSA have also been included in this report.
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REFERENCES
Books and Journals
Acharya, S.R., 2017. Incoterms and its Application in Contract. Verdict. 1(3). pp.47-50.
Huang, H., He, Y. and Li, D., 2018. Coordination of pricing, inventory, and production
reliability decisions in deteriorating product supply chains. International Journal
of Production Research. 56(18), pp.6201-6224.
Kumar, G.A and et.al., 2017. Effective Inventory Management system through selective
inventory control. Imperial Journal of Interdisciplinary Research. 3(6).
Luetkehoff, B and et.al., 2019, September. Development of a Methodology for the
Analysis and Evaluation of Alternative Actions in Disruption Management in
Production. In Working Conference on Virtual Enterprises. (pp. 143-150).
Springer. Cham.
Mtar, K. and Smondel, A., 2019. JIT inventory control and manufacturing SME
performance. Human Systems Management. 38(3). pp.243-255.
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Publications.
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Yaakub, S and et.al., 2018. INCOTERMS Selection Factors and Its Effect on Export
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