Haier's Carrier Selection Strategy

This assignment examines Haier's approach to selecting logistics carriers. It delves into the criteria Haier considers when making these decisions, emphasizing the importance of building long-term, healthy relationships with carriers to ensure sustainable development. The analysis draws upon academic research and real-world examples from Haier's business practices.

Running head: TRANSPORTATION AND DISTRIBUTION MANAGEMENT OF HAIER
Transportation and Distribution Management of Haier
Name of the Student
Name of the University
Author’s Note

1TRANSPORTATION AND DISTRIBUTION MANAGEMENT OF HAIER
Introduction
Haier is a Chinese electronics manufacturing company established in the year 1984. The
headquarters of Haier is located in Qingdao. The company manufactures some of the electronic
devices that are television, refrigerators, washing machine, microwaves, computers, mobile
phones and air-conditions. They distribute these products almost every corner of the globe. Their
major international markets of the company are USA, Russia, India, Pakistan, France, Malaysia,
UK and many more. They started their international journey in 1990 in an effort to tap into the
overseas markets (Haier.net, 2017). They face considerable competition in their international
market from Philips, whirlpool, godrej and other similar products. The reason behind the
company is lasting in their international markets for this long competing with these mentioned
competitors is their core value and goal. The company follows a win-win mode of individual
goal that provides sustainability to the company. It is because they are concerned to look after
the interest of their customers unlike other Chinese companies that seeks for short-term profit
(Haier.net, 2017). Their values prioritize the customers’ opinion, consider them right, and seek
for the development their products to satisfy their needs. They also believe in the
entrepreneurship and innovation. It helps the company to retain their value. Haire have revised
their strategy over time to maintain these core values. The Company currently follows
networking strategy to hold the market share and brand loyalty in their overseas markets.
The purpose of the essay is to understand the incoterms and the process of selecting
proper incoterm for the company. The considerations are discussed in relation to the selected
organization and recommendation is made in for gaining competitive advantage in the market. It
further focuses on the criterions considered for carrier selection and carrier relationship

2TRANSPORTATION AND DISTRIBUTION MANAGEMENT OF HAIER
management relating the factors with Haier. It also discusses how it can bring profit for the
company.
Incoterms Selection Consideration
The company has invested a considerable amount of money in their first half for
developing their logistics for operating in the Chinese market. This is due to the need of dealing
with the increased outsourced logistics requirements of their products. They bought sixty per
cent of the Shanghai Boyol New Brothers Supply Chain management in the Chinese market and
completely bought the complete Boyol Logistics in the international market. This helped them in
increasing their profit by 19 per cent in the first half. Later, the company made alliance with the
leading e-commerce business Alibaba with a goal of creating industry-leading standards for the
logistics. Later, Haier integrated with other logistics business like Gooday mart Logistics to
deliver efficient service to their customers (Greg Knowler, 2017). These steps taken by the
company has considerably increased their profit and efficiency. However, this is limited to their
Chinese market only. They considered foreign direct investment in expanding their business to
the overseas market. This eliminates their need of supplying the products overseas as they now
manufacture their products in their target markets.
However, this increases the risk for the company, as they are liable for the goods they are
for the product being delivered. This means that the company is chargeable for the damage in
course of transportation. In other word, the company is responsible for securely delivering the
products to the doorsteps of their customers (Stapleton, Pande & O'Brien, 2014).
Recommended Incoterm
DAP

3TRANSPORTATION AND DISTRIBUTION MANAGEMENT OF HAIER
DAP refers to delivered at place, which means the manufacturer is liable to pack and
deliver the product to the shipment. The responsibility of the goods there after, moves to the
buyers and the buyers are then liable to take responsibilities for the goods. Any kind of damage
that might occur after the products have been handed over to the shipment falls under the buyers’
responsibility.
Figure 1
Delivered at Place
Moreover, the costing of transportation is also divided accordingly. The buyer needs to
carry out the charges and responsibilities for customs clearance in the importing country, and the
risk including all the customs duty. The carriage expenses along with the terminal expenses are
to be paid by the seller in this case up to the agreed destination point. The buyer bears the costing
from the final destination starting from unloading cost under the terms mentioned in DAP
(Bergami, 2013). Adopting this third party logistics term will help the company reduce their
costing of transport. Moreover, the company will be liable for the security of the product until
packaging. Responsibility thereafter will move to the buyer and reduce the risk for the Haier.
CPT
CPT otherwise known as carriage paid to named destination can considerably reduce the
cost and risk factors for Haier. Liability of the manufacturer according to this term is to deliver

4TRANSPORTATION AND DISTRIBUTION MANAGEMENT OF HAIER
the products to the named destination for pick up by the first carrier. The costing and
responsibility thereafter lies with the buyer.
Figure 2
Carriage Paid to
The only responsibility of the manufacturer is to pack the products according to the term
and deliver it to the first major carrier in a mentioned place. Haier can obtain a certain level of
advantage using this third party logistics supply chain by reducing the costing and risk factors
incorporated within (Bergami, 2013).
Carrier Selection Criteria
The overall goal of the company is to deliver high quality products to the customers and
consider their interest along with the business interest. This helps the company to do a
sustainable business. Transportation goal of Haier on the other hand is to provide a safe delivery
to their customers. This concern is due to the types of products them manufacture in their
company. The electronic devices possess high threat of damage in transportation. The company
further seeks to reduce the expenses spent on the transportation. It makes it obvious that they

5TRANSPORTATION AND DISTRIBUTION MANAGEMENT OF HAIER
seek a reliable carrier that will safely deliver their product in low transportation cost. Moreover,
the reliable carrier will also reduce the wastage cost that the electronics companies have to
consider in the process (Choudhary & Shankar, 2014). Reduction in transportation cost will also
reduce the end price, which will fulfil Haier’s win-win concept.
Considerable Criterions
Haier needs to consider various factors before selecting their carrier. However, some of
them needs special attention as they are the primary determinant for the safe and secure delivery
of the products. They are as follows:
Geographical
This is the most important determinants the company needs to consider in the process of
selecting carrier. This is be of the operational area the company is covering. Haier has expanded
their market in almost every corner of the world. Their manufacturing facilities and destination
market is present in cities around the world (Zhao, 2012). It make it necessary for Haier to select
a carrier with maximum geographical coverage. Otherwise, the primary purpose of transpiration
will remain unattended.
Equipment
The second most important criteria the company needs to consider is the equipment the
carrier uses for their transportation. Haier manufactures electronic products which is highly
vulnerable to physical impacts. Hence, they will require a carrier that is technologically
advanced and has the capability to provide the extra care required for transiting the products
manufactured by Haier. Considering this factor will help Haier control the damage and reduce
the costing that might occur from the damage during transit. Theory of transportation states that

6TRANSPORTATION AND DISTRIBUTION MANAGEMENT OF HAIER
the primary objective of the company in transportation should focus on reducing per unit cost for
shipping, which is possible to address by reducing the damage in transit (Aguezzoul, 2014).
Transit Time
Haier also needs to consider the transit time taken by the shipping line they select for
delivering their product. It is to increase the satisfaction level of the buyer and to increase their
business. Faster delivery means they can deliver more product in short period of time that will
help the company to grow their business (Ben-Akiva, Bolduc & Park, 2013).
Reliability
Lastly, Haier needs to consider in the process of carrier selection is the reliability. It
incorporates multiple factors some of which are discussed earlier. The carrier should be precise
about their pickup and drop location and timing. The shipping line should be picking up the
products and deliver them to the exact point as mentioned and within time to ensure the success
of the purpose of transportation. Moreover, it should also ensure the safety of the product to
reduce the costing of transportation (Meixell & Norbis, 2012).
Carrier Relation Management
As per the earlier discussion, Haier aims to deliver their products safely to their buyers in
low cost. Moreover, they also desire to deliver the products in time that will further increase the
satisfaction level of the buyer. The transportation model also states similar criteria for the
transportation of the goods, which are safety, time and cost effectiveness (Govindan et al, 2012).
The company should consider these factors to generate maximum revenue. In addition to the
above-mentioned goals, the company also seeks to establish a good relation with the carrier to
ensure long-term success.
Type of Relationship

7TRANSPORTATION AND DISTRIBUTION MANAGEMENT OF HAIER
Long-term relationship with the carrier is considered as the best for any manufacturing
company considering many factors. Firstly, frequent change in the carrier company will hamper
the business of the manufacturer. Moreover, it will put the business in insecurity regarding to the
transportation. It is necessary for Haier to ensure a smooth transportation facility to keep the
business running and deliver the products to its customers. Secondly, none of the parties
involved will not be able to build trust, which is important in this line of work. The increased
reliability of the carrier will ease the process (Graham, 2013). Hence, it will be necessary to
build trust between the manufacturer and the carrier, which is possible only through long-term
relationship. Thirdly, long-term relationship with a single carrier will save the company a
considerable amount of money. Changing the carrier means changing contract, which may
considerably vary over time. Moreover, safety measures should also be taken into account, which
comes with the healthy relationship between the supplier and carrier (Winter & Knemeyer,
2013).
Process of relationship building
 Transparency should be maintained between the carrier and supplier. The data related to
route, tonnage, monthly volume and other should be properly communicated to develop
healthy relationship between the parties. Seasonal changes that might occur should also
be calculated and communicated properly in prior order.
 The opinions provided by the carrier should also be considered as they have a deeper
understanding of the geography of the location. Moreover, prioritizing their opinion will
help building trust, which is important.

8TRANSPORTATION AND DISTRIBUTION MANAGEMENT OF HAIER
 Commitments from both the parties are required in this case. It is necessary for the
supplier to maintain their commitments before seeking the commitments of the carrier. It
will further strengthen the bonding.
 The opportunities should be shared with the carriers. It means that the manufacturer
should provide opportunity to the carrier to gain benefit from the process. In other words,
they should be incorporated in the business when the favorable opportunities arises.
 Operational changes should be properly communicated with the carrier and seek their
opinion in the process if possible. This will avoid unwanted disruption in the transport
process.
 Responsibilities related to the technological usage has to be shared by both the carrier and
the shipper. The shipper must ensure the minimum manual work related to the tracking of
the goods being imposed on the carrier.
Conclusion
It can be concluded from the above discussion that Haier have expanded their business in
the international market and built facilities around the world. Hence, it is important for them to
have a proper third party logistics firms to ensure the smooth distribution of their products in
their operational markets. The CPT and DAP are the two incoterm that can provide certain level
of benefit to the company transporting their products around the world. They can reduce the risk
factors involved in international transportation with proper implementation of the proposed
incoterms. However, they have to consider the criterions mention to select the right carrier for
their distribution. These factors leads to the conclusion that Haier needs to build healthy and
long-term relationship with their carrier for ensuring a sustainable development. They can utilize
the proposed process of developing relationship with their selected carrier.

9TRANSPORTATION AND DISTRIBUTION MANAGEMENT OF HAIER
Reference
Aguezzoul, A. (2014). Third-party logistics selection problem: A literature review on criteria and
methods. Omega, 49, 69-78.
Ben-Akiva, M., Bolduc, D., & Park, J. Q. (2013). Discrete choice analysis of shippers’
preferences. In Freight Transport Modelling(pp. 119-141). Emerald Group Publishing
Limited.
Bergami, R. (2013). Incoterms 2010: The newest revision of delivery terms. Acta Universitatis
Bohemiae Meridionalis, 15(2), 33-40.
Bergami, R. (2013). Managing Incoterms 2010 risks: tension with trade and banking
practices. International Journal of Economics and Business Research, 6(3), 324-338.
Choudhary, D., & Shankar, R. (2014). A goal programming model for joint decision making of
inventory lot-size, supplier selection and carrier selection. Computers & Industrial
Engineering, 71, 1-9.
Govindan, K., Palaniappan, M., Zhu, Q., & Kannan, D. (2012). Analysis of third party reverse
logistics provider using interpretive structural modeling. International Journal of
Production Economics, 140(1), 204-211.
Graham, A. (2013). Understanding the low cost carrier and airport relationship: A critical
analysis of the salient issues. Tourism Management, 36, 66-76.
Greg Knowler, S. (2017). Haier expands China logistics business as 3PL demand
grows. Joc.com. Retrieved 7 November 2017, from https://www.joc.com/international-
logistics/haier-expands-china-logistics-business-3pl-demand-grows_20140827.html

10TRANSPORTATION AND DISTRIBUTION MANAGEMENT OF HAIER
Haier.net. (2017). History | About Haier | Haier Group. Retrieved 7 November 2017, from
http://www.haier.net/en/about_haier/history/
Meixell, M. J., & Norbis, M. (2012). Integrating carrier selection with supplier selection
decisions to improve supply chain security. International Transactions in Operational
Research, 19(5), 711-732.
Stapleton, D. M., Pande, V., & O'Brien, D. (2014). EXW, FOB OR FCA? Choosing the right
Incoterm and why it matters to maritime shippers. Journal of Transportation Law,
Logistics, and Policy, 81(3), 227.
Winter, M., & Knemeyer, A. M. (2013). Exploring the integration of sustainability and supply
chain management: Current state and opportunities for future inquiry. International
Journal of Physical Distribution & Logistics Management, 43(1), 18-38.
Zhao, W. (2012). U.S. Patent No. 8,214,536. Washington, DC: U.S. Patent and Trademark
Office.