Optimizing Supply Chain Strategies for a Tyre Distribution Company

This article discusses the supply chain strategies for a tyre distribution company, including the use of warehouses, inventory management systems, and pricing policies. It also explores the integration of business processes within the company and the management of these processes. The article provides a comprehensive guide on inventory control policies and processes to optimize performance strategy.

Running head: SUPPLY CHAIN
Organization in Global Context
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Introduction
SSAS is a distristibution company that deals with car wheels. It ships tyres from
Japan, Korea, Germany, France, and the USA to the port of King Abdul-Aziz in Dammam,
Saudi Arabia. After shipping the containers, the distribution starts at the port of Dry port.
Many shops, retail centers and garages are actually set up for distribution purposes.
Distribution has to cover other major cities like tabuk, medina, mecca, Jeddah and Hial.
However, during the distribution, supply chain strategies are used in the process.
Before you start developing a business plan for a distribution company, you need to
understand a number of common, but very essential principles for organizing this activity.. Its
content characterizes the type of business in which a business entity on the basis of a contract
purchases products from a direct producer and then sells it through retail or wholesale sales,
using its own trade and logistics resources and equipment (Christopher, 2016). . There are no
uniform requirements for a distribution company’s business plan, since this activity depends
on a variety of variables - regional business characteristics, seasonal conditions, the nature of
the products sold and so on. The companys distribution strategy has to be strategically
planned and has to satisfy customers needs and wants (Fredendall, & Hill, 2016). .
Distribution company business plan
The distribution of tyres, like Goodyear, Michelin, Bridgestone, Yokohama and
continental depends on how demand and supply is set up in the markets supply chain. It
should be borne in mind that the implementation of distribution activities in some cases
cannot be limited to trade as such. Distribution is a whole range of measures to promote

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goods along the line from the manufacturer to the final consumer. In drawing up a business
plan, investments should be made necessary to create and develop other divisions of the
company that will develop effective logistics, organize distribution networks, work with
brands and familiarize consumers with new tyres of their products, increase the company's
reputation rating in regards with the tyres (Fahimnia, Sarkis, & Davarzani, 2015).
When drawing up the distribution plan of the tyre, it is necessary to decide on whose
behalf the company will act in the future (it depends on how the profitability will be
distributed). The fact is that today there are two views on this type of activity:From the point
of view of the product manufacturer, the distributor’s functions include the organization of
product sales channels, as well as the effective management of their promotion (Fahimnia,
Sarkis, & Davarzani, 2015).
On the part of the distributor, this business is the work of delivering and locating
marketable products in its territory and then bringing it to the consumer.Thus, the essence and
the ultimate goal of the activities of both entities is total - profit. Moreover, both the
manufacturer and the distributor are practically “tied” with sales volumes. But a lot depends
on the specifics of different business sectors and the resources used. The most common
practice is to act on behalf of both subjects, which is realized through the conclusion of a
special agreement between them.
Types of warehouses used
In the distribution chain processes, SSAS will use either public warehouses, private
warehouses or climate warehouses. It is important to note that distribution of tyres in major
cities is done through retail warehouses hired or leased to store the goods for the company’s
garages to act as feeders. The warehouse systems is done through batch processes. The JIT
and the inventory management systems are used in releasing the inventory to the public.

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FIFO, LIFO and many more are used in inventory management. However, for the sake of
costing and accounting purposes, FIFO is the systems that SSAS is using to manage its
inventory.
The goal of the inventory management by SSAS is to gain profit from the wholesale
trade in tyre materials by creating a wholesale base. The main difficulties lie in the
organization of search and establishment of reliable relations with manufacturers of high-
quality materials, as well as in the development of routes and efficient logistics channels. The
considered project of activity is not connected with the use at the initial stage of highly
qualified employees and the use of special technologies. The total investment costs amount to
11.855 million riyadh.
The main integral parameters of efficiency
Parameter values
1 Annual / monthly discount rate 24% / 1.8%
2 Payback (total / discounted) 21-24 / 30 months
3 Net value of 13,329,398 riyadh
4 ARR (Investment Return Ratio) 6.56%
5 IPP value (rate of return, internal) 4.71%
6 PI value (index of return) 1.15
Supply Chain Management
The project involves the opening of a base of tyres for wholesale. In the future, it is possible
to open additional activities: own production, as well as trade other products like Rims and

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tubes. The intentional narrowing of the range of products sold is associated with the need to
consolidate supplies at the initial stage of the company's operation and to improve logistics.
The project provides that the main object of the distribution company will be the
territory of the base with an unheated covered warehouse located on it, the necessary access
routes for road and rail transport. On the territory of the base there is a room for the
company’s office and a change house for a staff of 100 sq. m and 20 square meters.
The main competitive advantage of the newly created company is to work with direct
suppliers of tyres, which will give an opportunity to form competitive prices for the products
sold and to guarantee its delivery in various volumes. The demand for this product is due to
the increasing pace distribution in the region and the high market demand for high-quality
tyres materials. It is assumed that by the time of the project payback period a stable client
base of at least 5% of the regional market capacity will be formed. (Hugos, 2018).
The business is not seasonal, investigator but it seems expedient to begin work on
creating a base and registering a distribution company even before the onset of the work.
Activities to find the location of the base must be completed by end of day, and the first
active purchases begin in the morning. The time limit for registering an enterprise and
signing lease and investment contracts is 2 months for the warehouses. The optimal legal
form of a distribution company is an individual entrepreneur with Stages of project
implementation (example): Stages Conditions Terms Market analysis, performing technical
and economic calculations.
Development of statutory documents, conclusion of investment contracts 10-30 days
Acquisition or rental of process equipment, vehicles, consumables Within the framework and
on the terms of concluded investment contracts 10-30 days Installation and installation of
necessary technological equipment At the expense of credit or investment funds 10-30 days

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training company personnel In accordance with the areas of activity and the nature of the
product, which is to work with 1-30 days Marketing
Managing Inventory in Supply Chain Management Warehouse
It should be noted that the regional market at the height of the tyre distribution season
suffers from a significant shortage of these materials. Sales and marketing plan Realization
products are carried out with the help of active and passive sales, including through its own
online store with pre-ordering delivery. Information about the company's activities and
product range will be placed in the regional and federal mass media, specially published
catalogs and other information platforms. The schedule of the wholesale base is seven days a
week, from 09.00 to 18.00. These days trade is conducted by two sellers, if necessary,
employees of the company can be transferred to work in two shifts. Sales of products to end
consumers are made on the terms of self-delivery and full prepayment of the consignment of
goods. The company assumes the formation of a diversified pricing policy, under which
consumers will be given discounts and deferred payments.
The company’s managers are charged with monitoring receivables. To do this, it is
necessary to equip the base with appropriate vehicles and equipment. High-quality execution
of loading and unloading operations requires the acquisition of: Wheeled excavator - for bulk
materials. Calculation of staff costs № Position Salary (in ru Execution of all administrative
procedures in the company is assigned to the individual entrepreneur. The manager is
supposed to have knowledge in the field of entrepreneurship, accounting, technology of
working with tyres materials and ensuring labor protection. They should also develop a
detailed business plan of the distribution company with calculations. Financial plan and
performance evaluation. The approximate amount of investment costs is estimated at
11,855,000 riyadh. Of these, it is supposed to invest own funds in the amount of 3 million

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riyadh and attract credit resources in the amount of 8,855 thousand riyadh. The loan rate is
18% per annum, the term is 36 months. Repayment is made by annuity payments. The first
payment is made no later than three months from the date of its receipt. The effectiveness of
the wholesale base project (distribution company) for the trade in tyres materials is estimated
using standard integral indicators obtained by analyzing the predicted financial results of
activities for a certain period.
The profitability of distribution is calculated based on the analysis of the following
data: Expense and receipt of funds. Result of activity, expressed in monetary form for the
current date. The overall financial result of the company. A discount rate of 24% makes it
possible to talk about significant financial sustainability of the project with a low level of risk
(see table 1). With an average mark-up on goods sold around 20% and an average monthly
turnover of finance at 20 million riyadh, the timely repayment of the loan is expected and the
enterprise goes to self-sufficiency in 3 years from the moment of launch. You can speed up
the process by attracting additional funding from the co-founders. In this case, it is intended
to convert the form of activity into an LLC and early repay the loan. The distribution of
profits between the co-founders is planned on the basis of shares in the authorized capital.
Net profit upon reaching the payback period is expected to be at the level of 25-30 million
per year (Wang, & Cullinane, 2015)..
Design an optimal supply chain for given product and market situation to meet
organisational strategies.
Meanwhile, SSAS company plans to build a strong sales platform for B2B partners, using
advanced traditional and digital marketing, database technology analysis, while providing a
financial solution for the supply chain. CI partners have a supply office in Mecca, factories
and supplier resources in China, Germany, Turkey and Russia (passenger and commercial

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cars, motorcycles, trucks, special cars and trains). The purpose of this cooperation is to
achieve a stronger position in the purchase of auto parts, car accessories and related
equipment.
Key business processes in the supply chain
One of the most common definitions of the supply chain, based on a synthesis of the opinions
of many leading foreign experts, is as follows: a supply chain - three or more economic units
(legal entities or individuals) directly involved in external and internal flows of products,
services, finance and / or information from the source to the consumer.
Specta part of ERP systems; Moreover, integrated logistics supply management is not
an end in itself, but one of the most important elements of optimizing a company's business
processes. Electronic trade has connected the buyer and seller directly: intermediaries are
often not needed, and the customer begins to understand how difficult the company’s drug
line is and makes its choice , given the new factors (Mangan, Lalwani, & Lalwani, 2016).
Propose Inventory/Stock control policies and processes to optimise performance
strategy
Companies like SSAS, meanwhile, have to learn how to make direct deliveries of
goods to a much wider audience of customers, since in many cases going online means
switching from selling wholesale to retailing and from mass service to individual service. At
the same time, sellers should not only be able to organize delivery, but also make every
interaction with a customer as convenient and simple as possible. E-business has unique
technological capabilities of personal service. The ability to manage the supply of a huge
number of small lots, plus the individualization of relations with customers - these are the
modern criteria for the success of e-commerce and logistics. A new business strategy is

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emerging. Now effective ways of interacting with the client, allowing him to become part of
the logistics chain and involving him in internal business processes, are developed using a
single logistic strategy that allows you to manage customer relationship (Customer
Relationships Management, CRM) and SCM. Types of business process connections . Each
company has its own supply chains, since their leaders in each case see their company as
central and therefore consider potential members of the network structure, proceeding first
and foremost the interests of the company. In this regard, the network structure of the supply
chains of this company, perceived by the other participants, is arbitrary in relation to them.
Since each company is simultaneously a participant in a different supply chain, it is important
that all managers understand: the roles and perspectives of all participants are interrelated.
Investigate supply chain issues to develop a proposal for a supply chain for this
organisation
Therefore, the integration of business processes within the company and the
management of these processes will be successful only when it is carried out expediently
from the point of view of each participant, although the degree of participation and role will
be different every time, which we will discuss below. Integration of all business process links
across all supply chains and their full management, as a rule, does not occur. The factors of
such integration are inherently situational, for each link they will be their own, in addition,
the levels of integration of different links and different periods of time can also change
significantly. Therefore, at any given time, certain links for a central company turn out to be
more important than others. As a consequence, an important task arises - the reasonable
allocation of limited resources across links to various business processes occurring in supply
chains.

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Discuss which aspect of the chain should or could be optimised and discuss how this is
affected by the various environmental impacts on the supply chain.
Four main types of relationships between business processes can be distinguished in
these chains: managed, tracked, unmanaged, and links to objects that are not part of the
supply chain, i.e. external. Managed inter-process communication is communication that the
central company considers necessary for integration and management. She can manage these
relationships in collaboration with other supply chain companies. The central company
integrates and manages process connections with first-level customers and suppliers.
Implement the new supply chain
The central company is also involved in managing relationships between processes at
other levels that are not relevant to first-level suppliers. Tracked connections between
processes. Compared to the inter-process managed links, the tracked links are not so critical
for the activities of the central company, although they are also important, therefore they
must be integrated and managed by other companies that are part of the common supply
chain. The central company monitors or verifies, as necessary, how these connections are
integrated and managed (Wisner, Tan, & Leong, 2014). Uncontrolled connections between
processes are those that the central company is not actively engaged in and which are not so
critical for it to allocate resources even for their monitoring. In other words, the central
company either completely trusts other members to manage these connections, or because of
limited resources, leaves them at the complete discretion of the other participants in the chain.
For example, a manufacturer may have several suppliers of packaging tyres, but as a rule, the
manufacturer does not integrate and manage the links that go from these suppliers further
down to the organizations that grow trees.

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Of course, it is important for the manufacturer to have a reliable supply of tyres, but
he does not think that he should actively engage in relations between the suppliers of tyres
and their suppliers along the technological chain. Links to objects that are not part of the
supply chain.
Control policies for items of stock
Managers understand that their supply chains are influenced by decisions that are
made elsewhere. Chains in some way related to them. For example, a supplier of a central
company can also serve in this capacity in the chain of its main rival. Therefore, the structure
of the chains of this supplier can affect the number of employees allocated to design products
for the central company, or the size of the products allocated to it in case of shortages, as well
as measures taken to protect confidential information. This feature leads us to the need to
establish a fourth type of business relationship - links with objects that are not part of the
supply chain. These links connect members of a central company's supply chain with non-
members. Relationships of this kind are not considered as relationships of the central
company’s supply chain structure, although they may affect its performance indicators and its
network supply chains and indeed do have such an impact. How tightly companies integrate
and manage connections beyond the first level.
In order to achieve specific goals in the chains, for example, uninterrupted availability
of products, improving their quality, reducing overall costs in all supply chains, in some cases
companies work through other participants and sometimes do without them, acting
independently. (Monczka, Handfield, Giunipero, & Patterson, 2015). At the same time,
farmers are encouraged to purchase raw materials and equipment at contractual rates. This
allows us to achieve higher quality raw materials (in this case tomatoes) and at the same time
lower prices. However, with this approach, there is no financial loss for farmers.

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