Global Sourcing Model
Same question is here:
A major supermarket chain in Brazil, Compretudo sources six different product lines from two different countries.
Three product lines, described as shipments A, B and C come from different sources in your country. Please identify this country. This is the Group 1 consignment.
The other three product lines, described as shipments D, E and F come from three different sources in a neighbouring country. Please identify this country. This is the Group 2 consignment.
Compretudo wants the six shipments to be loaded into one dry 40 foot container by a consolidator with a warehouse next to the major port of export closest to your location and sent by ship to Brazil. There are two final destinations of the cargo in Brazil.
The first location in Brazil will receive the Group 2 consignment:
• Shipment D:22 pieces measure 120 x 125 x 55cm and weighs 4700kg
• Shipment E:10 pieces measure 160 x 60 x 100cm and weighs 2600kg
• Shipment F:18 pieces measure 60 x 45 x 130cm and weighs 1700kg
The second location in Brazil will receive the Group 1 consignment:
• Shipment A:10 pieces measure 160 x 60 x 100cm and weighs 4000kg
• Shipment B:20 pieces measure 120 x 80 x 130cm and weighs 4000kg
• Shipment C:6 pieces measure 80 x 120 x 40cm and weighs 2000kg
In 1500 words describe:
(a) the range of factors that may have contributed to Compretudo’s decision to outsource to Qatar and the neighboring country and the type of cost elements that could have been included in their calculation of “total landed cost”
(b)the roles and relationships between the different logistics parties in:
getting these goods along the entire supply chain from the suppliers in your country and a neighboring country to one place of consolidation in your country and loading the container;
the carriage of the goods by sea from your country, importing the goods into Brazil and distributing the two consignment groups to the consumers in Brazil.
In order to trade efficiently, it is prudent that a trader diversifies the products and services which are brought into the market. This is only possible if the country of choice for trade produces all the demanded goods and services. It is worth to note that production is the process of creating a consumable products, out of the various factors of production. However, in the event that all the goods and services demanded in the market are not available locally, then the trader will be obliged to outsource some products (Xu et al., 2016). Outsourcing of the traded good and services however, must be supported with proper valid reasons. Besides, the global economy, as well as the business terms within the area of trade and within the global market must also be analyzed. This paper therefore analyzes supply chain of Compuedo Supermarket, which is a major supermarket in Brazil.
Reason for Choosing Brazil
Compuedo being a major supermarket chain store Brazil, it has numerous customers. Consequently, the supermarket is obliged to have on its shelves, a variety of products, some of which are not produced within the country’s borders. This has necessitated outsourcing some of the products it trades. The following are the main reasons as to why the supermarket outsources these products:
Unavailability of these Goods Locally
One of the main reasons as to why Comouedo imports is that these products are not available in the local market. The products which the supermarket imports include rice, spadices, oats, electronic, clothes, and accessories. Though some of these products are locally produced, the quantities are too small for the local market. This is to mean that the demand is more than supply, hence obliging the suppliers or traders of these goods to import.
There is an existing Free Trade Agreement between Brazil and India, and between Brazil and China. The FTA eliminates the various tariffs and procedures, which otherwise jeopardize the free and efficient within these countries (Lopes et al., 2017). These agreements have been made in order to widen the markets and also hasten the local development amongst these countries. Through trading amongst these countries, which happen to be some of the giant economies, the global economy is integrated, hence facilitating mobility of other factors or production and products. Compuedo therefore, takes advantage to import these products from these countries, with an aim of profit maximization. Importation enables the supermarket to have on its shelf unique and nutritious food items and top quality electronics.
Meeting the Diverse Needs
Compuedo is one of the major supermarkets, hence serving the diverse needs of the vast market in Brazil. These needs of the consumers in Brazil keep on changing, depending on the variations in the local and international market. The local goods are not able to fully satisfy these needs. Apart from these, the imported goods, also create price and quality competition for the locally produced goods. This works to the advantage of both the supermarket and customers. The customers or consumers are able to purchase goods at a competitive price and consumer high quality. The supermarket on the other hand, is able to import or buy goods at a lower price and sell at the market price, hence maximizing profit.
Reasons for Choosing China
The following are some of the reasons as to why I have chosen China as one of the countries from which the supermarket outsources its goods:
From China the supermarket imports electronics, clothes, and other accessories. Being an emerging economy, China has a very high level of economies of scale. This enables the country to produce goods which is more than enough for its local consumption (Efstathopoulos, 2012). The surplus is therefore, exported to other countries at a very affordable cost. The rate of technological advancement is also very high, hence making the level of innovation to be very high. The cost of clothes, accessories and electronics are therefore, produced at a very affordable rate. Prices of these products from China, are low as compared to price charged by other countries. This therefore, makes the supermarket to prefer importing from China, as it makes more profit, by purchasing cheaply.
Quality refers to the ability of a product to meet the exact need of a consumer. According to Shafiq and Soratana (2019), consumers usually have needs and desires, which is what they seek to satisfy, when they purchase goods and services. As had been stated earlier, China has a very rate of technological development, which makes it to produce very high quality electronics and electronic devices. The customers in Brazil on the other hand, are very informed and demand quality goods, which are proportionate to the current technology. However, these sophisticated electronics are not manufactured locally. The supermarket therefore, imports electronics and accessories of high quality from China, to serve this demand.
Brazil has got a population of over 200 million. This makes this country one of the most populous in the world (Lopes et al., 2017). Besides, the country’s economy is developed, with a per capita income of $ 15, 160, according to the latest statistics. This makes the demand very high in Brazil. As had been stated earlier, the demand in Brazil, is higher than supply. This therefore, necessitates importation of goods to meet this vast demand. The high demand is coupled by the fact that the country’s market is very dynamic due to high level of exposure and consumer rights awareness. The supermarket therefore, imports these goods to meet the demand for high quality and quantity.
Reason s for Choosing India
Just like China, India is an emerging economy with a very high rate of technological and industrial evolution rate. This therefore, makes trading with this nation to be very favorable. Other than this, the following are some of the specific reasons as to why I have chosen India to be one of the countries from Which Compuedo Supermarket imports from:
Being an emerging economy, India also produces goods which is more than enough for its economy. The surplus is exported to other nations at a very subsidized rate. Besides, the industries based in India are able to produce clothes and food products such as rice and oats at an affordable rate (Xu et al., 2016). This is to mean that the industries are able to properly take advantage of the economies of scale. The supermarket therefore, import rice, oats and clothes at a low cost, passing all the middle men. By doing this, the supermarket is able to maximize its profit, and meet efficiently its operational costs. It is worth to note that cost is main factor not only to the producer, but also to the consumer. The low cos at which the supermarket imports these products, enables it to sell them to the final customers at a low cost. The customers at therefore, able to consumer quality goods, but at an affordable rate or price.
Quality is one of the main factors which affect the rate of demand for goods and services sold by a trader. As had been mentioned earlier, India is rated as an emerging economy. This is due to the various it has been able to make, in terms of developing its economy. Besides, the county is very populous, which makes it to have an affordable labor, which is a very high quality. With all these factors or production in place, India is known for production of quality food products and clothes. Consumers in Brazil treasure quality products, which at time are not fully available within the local market. Compuedo supermarket therefore, takes advantage of this attribute, to import quality products, for the benefit of its customers. Indian’s rice, oats and clothes are also perceived to be of good quality in the global market, as well as the local market. Consumers in Brazil are actually aware of this fact, hence making them to prefer products from this nation. This has however, worked to the advantage of Compuedo supermarket.
As had been stated earlier, Brazil has a Free Trade Agreement (FTA), with India. This enables free movement of goods and services amongst these nations. With zero rating of the import tariffs and elimination of the various trade barriers, it is very easy for the supermarket to import from India as compared to other countries (Lopes et al., 2017). By elimination of the barriers and a considerable reduction in the rate of the chargeable tariffs, it is cheaper for the supermarket to import from India. The supermarket therefore, take advantage of this to import high quality rice, oats and clothes, to meet its market demand, which is vast and dynamic. FTA also enables the supermarket to enjoy favorable trade relationship with India, such as after sale service, convenient transport, convenient delivery and keeping of the just in time (JIT) schedule strictly.
Supply Chain from India
Habib (2016), defines Supply chain, as the path followed by goods from the time they are produced, to the time they are finally consumed, by the intended person. The supply chain is also known as channel of delivery. An efficient supply chain ensures that goods reached the final consumer on time, hence increasing the quality of the subject product. The supply chain for goods from India is as follows:
As is evident above, the supply chain used by the supermarket is shorter than usual. The reason as to why the supermarket prefers a shorter supply chain, is to reduce the supply chain costs and also ensure that that the price charged to the final customer is affordable.
The supermarket is intending to reduce the supply chain further by eliminating the Brazilian agents. However, the fees paid to agents is not very high. This is due to the fact that the supermarket picks the imported products (rice, oats and clothes), as soon as they are offloaded. This therefore, reduces the handling costs at the agent’s premises, which could otherwise increase the final price changed to the customers.
Supply Chain form China
Unlike India, China is a bit strict on its trade procedures. This is despite the fact that there is a FTA between Brazil and China. It is however, worth to note that FTA has enabled the supermarket to operate with a short supply chain, just as in the case of Brazil. The goods imported from china are also more sensitive, which makes their handling process to be slightly complex, as compared to that of India. The following is the supply chain for products imported from China:
The above supply chain though not expensive as other typical supply chains, the supermarket intends to reduce costs and enhance the levels of efficiency.
This is the process of putting the various products together for the target market, as well as preparation of the financial statement. Compuedo supermarket does this by collecting data at the sales point, analyzing them, and putting them together in order to prepare the financial statements. In the case of preparation of the goods for market on the other hand, the supermarket, takes the goods from the various agents in bulk, then repackage them, using their own materials. These are then taken to the shelves, in order to be accessed by the targeted customers.
Based on the analysis above, it is possible to conclude that Compuedo supermarket operates efficiently, in terms of satisfying its customers and meeting its profit objectives. An import diversification should however, be devised, to ensure that the company’s market and trade activities are not interfered with, in case the FTA terms are revised or in case the agreement comes to an end.
Efstathopoulos, C. (2012). Leadership in the WTO: Brazil, India and the Doha development agenda. Cambridge Review of International Affairs, 25(2), 269–293.