International Logistics Strategy for Yariba Cream's Expansion in MENA

This case study analyzes the international logistics plan for Yariba Cream, an ice cream company from Peru, aiming to expand its business in the MENA region, starting with Egypt. The report explores various strategies and techniques for market entry, considering factors like transportation, logistics, and supply chain management. It examines the procurement process using the Krajlic matrix, focusing on strategic items, bottleneck components, non-critical items, and leverage products. The case study also delves into demand and order management, inventory management, facility location, warehousing, packaging, and transportation. It emphasizes the importance of strategic choices, such as facility selection and warehouse management, along with the role of transportation in international logistics. The report concludes with a discussion of the challenges and opportunities associated with Yariba Cream's expansion, offering recommendations for optimizing its supply chain and achieving its business goals. Finally, the case study includes a detailed risk assessment with mitigation strategies, covering competitors, underutilization of resources, high investment, sales revenue, and shipping considerations.

INTERNATIONAL LOGISTICS

Executive Summary
Yariba Cream which deals in ice cream made by organic food is planning to expand their
business in MENA region and the first country which is selected for expansion is Egypt.
Different types of strategies and techniques is used by company for expanding as proper research
is required before investing large amount of money. This report will shows the different types of
modes which could be opt by Yariba Cream to enter into foreign market by considering factors
like transportation, logistics, supply chain management etc. Each and every factor has positive as
well as negative aspects which must be considered by evaluating strategies. Importance of
warehousing and facility location is discussed by taking circumstances of Yariba Cream.

Contents
Executive Summary.........................................................................................................................2
Contents...........................................................................................................................................3
INTRODUCTION...........................................................................................................................4
MAIN BODY...................................................................................................................................4
Procurement............................................................................................................................4
Demand Management and Order management......................................................................5
Inventory Management...........................................................................................................6
Facility Location.....................................................................................................................7
Warehousing Management.....................................................................................................7
Packaging and Materials Handling.........................................................................................8
Transportation.........................................................................................................................8
International Logistics............................................................................................................9
CONCLUSION..............................................................................................................................10
REFERENCE.................................................................................................................................11

INTRODUCTION
International logistics refers to planned activities which includes flow of goods and
services to other country with the aim of acquiring customer share in that market (Murphy and
Knemeyer, 2018). Main aim of this approach is to enhance profitability and customer share in
the competitive market by fulfilling customers’ needs and demands. For this report, YARIBA-
CREAM is taken for consideration which provides different varieties of ice cream like Aguaje,
Capilum and Lucuma. Demand management and how it affects procurement and inventory
management will be discussed. Besides this, strategic choices like facility selection, warehouse
management or packaging will be scrutinise. At last, role play by transportation in international
logistics will be described by taking functional example of Yariba Cream.
MAIN BODY
Procurement
Krajlic procurement matrix is also known as purchasing portfolio matrix and used by
companies to prioritise their buying activities according to the result involved in it and its profit
or loss impact on business operations (Wang, Yang and Yin, 2015) . There are two factors on
which matrix are based on i.e., profit impact or financial situations and supply risk.
Strategic Items: Strategic items are those which have high supply risk but on the same
side, profit produced from selling them is also high in nature. Besides this, product should be
unique in the market and must provide high value to the customers as then only they would be
attracted towards it (Hatefi and et. al., 2015). For instance, Aguaje flavoured sorbets comes
under this category as there is 60% demand of it and is unique to the public which fulfils above
mentioned requirements. Due to its uniqueness in the market, Yariba Cream must try to become
the only supplier in the market as then only it would be possible for them to earn high
profitability and maintaining long term partnership with the supplier and consumer (Pang, 2015).
Bottleneck components: Those item which has high supply risk but contributes low profit
to the company is known as bottleneck components. As mentioned above, Lucuma ice cream is
unique in the market but has only 10% of sales portion which reflects low contribution of profit
to the company. Due to uniqueness and low availability of product, pricing power is kept by
company or supplier only and market demand fluctuates on the basis of it only.

Non critical: This type of products does not hamper profitability of company as low
investment is required while purchasing it with low risk as well. Raw materials which are used to
make final products or ice cream would come under this category.
Leverage: Products which can be easily available in the market and provided by more than
one supplier is known as leverage product items. Company which provides product to the
supplier has more power and can easily fluctuate price and supply according to their profitability.
Yariba Cream should launched flavoured ice cream which will be provided in cups and sticks so
that customers can eat it any time they wanted (Arvis and et. al., 2016).
Yariba cream must make a blend of various product and its categories by launching new
products in to the market according to customer demand so that institutional risk would be
reduce resulting in better future of the company (Agrawal, Singh and Murtaza, 2015).
R.
#
Time
frame
Risk description: Suggested Mitigation:
1
ST Competitors Yariba cream has to face many big competitions
like Nestle, gourmet etc in the Egypt market. To
tackle it, company must conduct survey and
make strategies according to their competitors.
2
MT Loss due to underutilisation of resources According to report, there is only 30% utilisation
of resources which leads to higher cost incur due
to inventory cost and underutilisation of
resources. To mitigate it, company must hire new
employees and expand their market share
through marketing strategies. Proper utilisation
leads to higher production of good thus higher
sales revenue.
3
LT High investment 18,000,000 dollars with the interest rate of
22.50% on EBIT will be there while entering into
Egypt. To mitigate it, company must produce and
sale 1,800,000 SKU in a year which could only be
possible if company touches their highest
utilisation of resources.
4
LT Sales revenue As mentioned, company must sell their product
above the cost price to attain profitability in a
long term. To do this, Yariba should increase their
marketing budget as it will assist them in
enhancing brand awareness thus better sales.

5
MT Shipping Proper equilibrium must be made between
inventory cost and shipping cost as both are high
in nature. So shipping must be done through
water or road as it is less costly in nature. But in
urgency, air cargo should be u se so that
customer experience engagement remains high.
High Competitors Underutilisation of
resources
Medium Sales revenue High investment
Low Shipping
Low Medium High
Consequences

Demand Management and Order management
Demand management refers to a practice conducted by companies to manage their
products demand and supply so that maximum profit would be generated. It includes, sensing the
future demand of the product, shaping the demand so that price would remain still or increase,
translate the demand into supply so that customer experience engagement would be enhanced to
a certain level (Govindan, Soleimani and Kannan, 2015) . For instance, Yariba Cream has three
different product i.e., Lucuma, Capilun and Aguaje flavoured ice cream which ranges from 300-
350 EGP. So management role would be to maintain the demand according to customer reaction
towards product so that positive image would be generate in the mind of customers. On the other
hand, if it is not manage then chances of getting loss would be higher. For example, if Yariba
Cream supplies large quantity of product in the market then their demand would automatically
reduce as its uniqueness would be vanished from it.
Order management refers to a way of organising and managing supply chain of the
products so that higher efficiency and productivity would be attained by company (Sanchez
Rodrigues, Harris and Mason, 2015). It includes, data collections, processing of orders according
to its priority, inventory management etc. It plays an essential role in customer service
management as delay in orders makes a negative image in the mind of customers. For instance, if
any product ordered by customer or supplier is delivered late, then customer experience with
Yariba Cream becomes low which leads to low profitability and customer footfalls in the future.
Proper order management will enable Yariba cream to solve various problems like contracts with
more than one party at the same time, live tracking of products transported to other place, sales
and purchase orders etc (Taniguchi, Thompson and Yamada, 2016).
To attain pre-set target, Yariba Cream should opt advanced technology in their supply
chain so that proper management of products and its delivery would be achieved by them thus
reducing cost price.
Inventory Management
It is a process compromise of three major steps i.e., ordering materials or goods which will
be used by company to make their final product. Storing of raw materials or goods as it takes
time of occupies total quality ordered in the first place and last step is using inventory according
to company’s mission and vision (Crainic and Montreuil, 2016). So management of above three

steps is known as inventory management. Main role of IM is to maintain stock of products
requires at present and in future so that company can maximise their usage of available resources
by reducing the cost price and inventory cost.
There are three types of inventory which is always present in Yariba cream i.e., raw
materials, work in process and finished goods. For instance, Yariba Cream raw materials would
be organic fruits, and then it will take time to get processed and become final products. At last,
final product will be store in warehouse and distribute in the future according to the demand. All
these factors bring cost to the company which leads to higher cost price and lower profitability.
There are different types of cost which comes along with inventory like obsolescence
cost which means when products are sold below the cost price. Storage cost means cost which
incurs while handling the inventory like utilities cost, facilities cost, handling cost, insurance cost
etc. Yariba Cream must try to maintain their inventory with the help of economic order quantity
or EOQ so that all these cost would be avoided. EOQ shows the actual quantity of product which
should be order by company to avoid any type of inventory cost resulting in better profitability.
Formula of finding EOQ is 2* demand of unit* cost of order/ holding cost and the last amount
will be square rooted (Mangan and Lalwani, 2016) .
For instance, if Yariba Cream is selling 10,000 products in a year and its inventory cost is
5 dollar and fixed cost is 2 dollar then 2*10000*2/5 which is equal to 89 approximately. So
appropriate order to reduce cost price and fulfil customer demand is 89 pieces. .
Facility Location
Facility location is a strategic decision in which location of the centre where company
will operate their business, warehouse where they will store their inventory etc is decided. Main
role behind FL is to reduce cost price of the product, provided high and fast customer service and
continuous scanning of external environment so that company can change their strategy
accordingly (Çalışkan, Kalkan, M and Ozturkoglu, 2017) . Logistics network optimization is a
way of finding best and efficient combination of the factors mentioned above so that company
can align their business operations with their pre-set goals and target.
To find the optimum location for Yariba Cream, they must consider various factors which
are mentioned below with functional example of it. First factor is natural resources, means
company location must be nearby natural resources like water, electricity, transportations etc.
For instance, if there is no water, then Yariba Cream needs to bring water from other places

which will impact on final cost price of the product. Other is transportation, which means proper
transportation must be there so that goods will be transfer from plant to supplier or customers
(Arvis and et. al., 2018). For instance, if there are no arrangements of truck or roads from plant
to customer place then time taken for transferring will be high resulting in high inventory cost.
Warehousing Management
Warehouse is a place where raw materials, work in progress material and final product is
stored by company. Main purpose of warehouse is to provide goods at the right time and right
place so that organisation productivity won’t get hamper in a negative way. Different types of
warehouses is describe below,
Distribution Centre: It is a kind of warehouse which is used for storing the product for a
shorter duration of time. These are selected between the production plant and supplier address so
that goods will be shipped without taking much time (Song and Parola, 2015). For instance,
Yariba Cream can store their ice cream in the morning and then distribute by evening so that
they does not need to visit their production plant again and again.
Private Warehouse: These types of warehouse are owned by private firm only so that
they can store their goods in them. Main aim behind this strategy to store goods in bulk so that
future uncertainty regarding product would be attain (Christopher, 2016) . But it requires high
amount of investment which could become complex for small and medium type of organisation.
For instance, Yariba Cream can buy a place and use it for distribution and storage purpose as
well.
Public Warehouse: These types of places are owned by local or central government to
assist companies for smooth business operations. Warehouse houses services are provided in
exchange of money for temporary period of time. It is one of the cheapest ways of storing
inventory in bulk.
At last, it can be said that Yariba Cream should take public warehouse in their first
priority as it will assist them to reduce their cost price by reducing inventory cost. Other than
this, in peak time, company can use distribution centre as one of their option.
Packaging and Materials Handling
Packaging is a process of using different types of materials to cover or wrap the product for
its protection from external environment. Main purpose of packaging is the safety of product,
presentation of products to the potential customers, to maintain cleanliness of product, to provide

instructions for the usage of product etc (Dube and et. al., 2016) . Materials like paper, plastics,
metal, wood, wire etc is used for packaging. Yariba cream must use biodegradable material to
package their ice cream as it won’t harm the society or environment and can easily be recycle in
the future resulting in cost saving for long run.
Transportation
Transportation refers to movement of goods or services to one place to another so that
customer fulfilment would be satisfied. There are different types of transport infrastructure like
roads which can be used by companies to supply their products within the city or which can be
reached through roads. Another is railways through which company can send their goods from
one city or states to other but within the country. Ports, waterways, airports, can be used by
companies to transport their business from one country to another (Piecyk and et. al., 2015).
Yariba cream must use waterways or airports to export their business from their home country as
high amount of investment in the starting is not feasible at all. After it becomes successful,
company can open their own production plan and can used roads and railways to transport their
product.
International Logistics
It is essential for any company to conduct different types of research before going to start
business operations in other countries as it is an expensive and time consuming way of
expanding business. There are different way through which Yariba cream can enter into Egyptian
market which is described below by considering various mode of entry,
Joint Venture: It is the way of expanding the business with the help of local company in
the foreign market so that both the companies can share their knowledge, resources etc to
increase profitability and productivity (Gammelgaard and et. al., 2015) . Yariba Cream can joint
venture with companies in Marrakesh with the aim of getting local customers insight which
could be helpful in future.
Export: Direct export is one of the fastest methods of expansion in which goods are
transported to other country without even opening their production plant in there. It is also
known as virtual plant. There are many benefits of using this strategy as it is a simpler way of
testing product feasibility in other market without even going there. It also assist in protecting the
patents or trademark of the company (Kucukaltan, Irani and Aktas, 2016). For instance, Yariba

Cream can export their products from Peruvian to Egypt before even starting business
operations.
Wholly owned subsidiary: WOS is a way of opening new production plant in the targeted
location so that potential customer’s requirements would be fulfilled (Fernie and Sparks, 2018).
It requires lots of capital or investment in the starting company needs to hire employees,
buildings, machinery etc to run their business.
At last it can be said that Yariba Cream must opt export in the initial phase of the product,
after monitoring the feasibility of product market, company can joint venture with local
company. At last, when company needs to start their business and make plant five times more
capacity than Lima plant then company should go for wholly owned subsidiary.

CONCLUSION
As from the above mentioned case study and information, it can be summarise that
logistics plays an essential role in the success of an organisation as it is directly associate with
cost price and efficiency of it. Warehouse management assist company to enhance their
efficiency and productivity by providing goods to the sellers and customers at the right time and
right place. To attain this, transportation of the company must be smooth as it directly makes
impact on inventory cost, time taken to supply product and efficiency of it. At last, to attain
overall productivity in international logistics, it is mandatory to have a flexible demand
management as company needs to modify their business operations according to external
environment as then only it would be possible for them to sustain in the competitive
environment.

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