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Supply Chain Management: A Report on Contracting of Fast and Lose Freight Forwarders

Supply chain management refers to management of the operations involved in the movement of the final products from the producer to the ultimate consumer.  In the process of moving the produced goods to the final consumer, a number of activities are involved to ensure that the goods arrive in good quality, quantity and in good time. When all these factors are met, then the level of utility for the targeted customer increases (Abraham, 2018). One of the elements which is key in channeling goods to the final consumers is freight and forwarding. Freight and forwarding refers to a firm which has specialized in arranging storage and shipping of merchandise on behalf of the shippers. This firms usually provide a range of services which include tracking inland transportation, preparation of shipping and export documents, warehousing, booking cargo space, negotiating freight charges, cargo insurance, filing of claims and freight consolidation (Grainger, 2016). This paper, therefore, analyzes the strategy of Compretudo Supermarket of getting a new Freight Forwarder from a foreign country.

Benefits of Outsourcing from Other Countries

Outsourcing from China

Cost

The supermarket can manage to import electronics, clothes and other accessories from Chinse market. China being a developed nation, which has made huge steps in improving the level of its industrialization, it is able to take advantage of its economies of scale, to make products an affordable cost, making the final price to be low. Compretudo Supermarket will therefore, manage to import at a lower cost, making it to have an assurance of continuous flow of goods into the market, at an affordable price.

Quality Products

Being a developed nations, China has made huge steps in technological advancement. The company will therefore, benefit from the advanced technology of the nation, and be able to bring into the market top quality goods. The customers in Brazil will therefore, be able to have their need met, as some of the goods which can be imported from China cannot be efficiently manufactured locally. With quality products, the company can be guaranteed revenue and profit.

Outsourcing from India

FTA Agreement

India happens to have be in the FTA agreement with Brazil.  The agreement guarantees preferential treatment for the member countries, which will work to the advantage of the Supermarket. Compretudo will therefore be guaranteed of stable supply chain, with minimal volatility rates. Role and Responsibilities of the Various Stakeholders

Compretudo Supermarket

The supermarket is the most interested stakeholder in this case. It has the responsibility of initiating the contract between itself and the Freight Forwarding Company, meeting all the contractual conditions and taking an action in case of breach to their benefit.

Fast and Lose Company

Compretudo will enter into a contractual relationship with it. It has the responsibility of stating explicitly its contractual obligations to Compretudo supermarket, meeting its obligations and taking necessary actions in case of breach.

Shipping Company

Shopping company has the responsibility of that goods are handled properly, when they are in their custody, and delivering them at the defined destination at the stated time (Shafiq & Soratana, 2019). The company should also ensure that the goods in their possession are properly insured, so reduce the losses that the importer is likely to suffer in case of damage.

Reasons for Choosing Fast and Lose Freight Forwarders

The strategy to be adopted by Compretudo Supermarket in hiring or else partnering with international freight forwarders is a good idea as it would be bring numerous benefits to the supermarket. The following are some benefits or reasons as why Compretudo Supermarket can prefer Fast and Lose Freight Forwarders that the supermarket is likely to realize:

Timely Goods Delivery into the Market

The supermarket has identified China and India as the preferred countries to import from. These countries, being far apart and in different contents, it would take a lot of time for the good to arrive to the shelves of Compretudo.  By engaging the Freight and Forwarder from these nations, the supermarket will have relived itself from the long procedures it would undergo, in case it decides to import the goods directly. Being that the Freight Forwarder will be based in these respective, they are fully aware of the legal procedures within these countries. Besides, they will be able to get the favors which comes with being resident companies. This will reduce the headache which Compretudo Supermarket would undergo in case it deals directly with the companies form which is importing from.

Reduced Tax Expenditure

According to Gronkvist (2017), freight forwarder are usually in charge of the goods which they are exporting until it is handed over to the shipper. Once the goods have been handed to the shipper, then the shipping company in liaison with the insurance company whose policy they have are in charge of the goods until they are handed over either to the Freight Forwarders of the importing nation.  At the time that the goods are in the hands of the hired Freight Forwarder, the company is responsible for all the handling cost.

Risks Associated with Choosing Fast and Lose Freight Forwarders

Similarly, the supermarket must expected to come against numerous obstacles which it must prepared to overcome. In business dealings, risks are actually inevitable (Gronkvist, 2017). In taking a step to engage a freight forwarder from either Brazil or India, Compretudo Supermarket will have to come face to face with numerous business risks. The following are the supply chain and business risks which are likely to be faced.

Supply Chain Risks

Possibility of Importing Low Quality Goods

When goods are on transit (freight), the handlers are not allowed to open and inspect them, unless there is a clear and compelling reasons warranting that (Lopes et al., 2017)). This means that there is a possibility of low quality goods being imported, and Compretudo realizing only when the goods are received. Informing the exported and recalling the goods may take a longer time interfering with the market flow.

Delay of Shipment and Cargo Damage

The Freight Forwarders will not be able to appreciate the urgency of having the goods delivered to the shipper and them reaching the targeted market. In case of any normal hiccup, the forwarder may not take an urgent step to ensure that the goods reach the targeted market on time.  This may cause a great delay. Mishandling during package and transport, especially if enough care is not taken, can make the goods to be damaged. This may immensely affect the quality of goods delivered in the final market.  These among many more risks, may reduce the profit realizable by the company.

Risk of Theft and Smuggling

Though Compretudo supermarket will receive a copy of bill of lading, indicating all the goods expected, there is a possibility of the freight being smuggled or stolen by the crews.  This will obviously reduce the quantities which are brought into the market, and the utility derived from the imported goods thereof.

Business Risks

Loss of Customers

There is a possibility of the goods being imported from India or China not delivered in the right quantities. Besides shipping delay can also take place. If the quantities are tampered with, and the goods are taken into the market, then the customers will lose their trust on Compretudo’s products.  Loss of customers may consequently lead to reduction in revenue and profit thereof. These among others are the risks which the Supermarket is likely to face.

Reduction in the Level of Competitive Advantage

If the company enters into a contract with Fast and Lose Freight, then it will obviously lose touch with its supplier.  The Freight Forwarder will therefore, come in as a broker in the supply chain management system.  This will, therefore, make the Supermarket not to be able to inform the supplier on the feedback   from the customers on what should be improved, to make the goods more appealing.  Customers feedback and taking their feedback into consideration when making subsequent supplies, is a powerful way of ensuring a sustainable customer relationship. In this case however, this aspect will be lacking. This may make the company to lose the current competitive advantage in the market.

Risks which can be reduced through a Contract with Fast and Lose Forwarder

The following are some of the risks which the Supermarket will be able to reduce as a result of engaging the Freight Forwarder:

Technology Redundancy

By entering into a contract with Fast and Lose Freight Forwarders, the Supermarket will be able to reduce the possibility of them applying redundant technology in supply chain management. This is due to the fact that China, is one of the giants in innovation and technology application. The supermarket can take advantage of this to guarantee their customer quality products which meet the current needs. Technological advancement is key in supply chain management, as it ensures that the whole process of goods’ movement is effective and efficient.

Risk of Manipulation by Brokers

Brokers are people who are involved in ensuring a person who buys and sells goods or assets for others. Brokers are very key stakeholders in supply chain management, as their activities influence the final price charged (Shafiq & Soratana, 2019). If the supermarket decides to use different forwarders randomly, then it may be manipulated by being overcharged.  However, with Fast and Lose, a contract will be signed, hence reducing the possibility of the Supermarket being manipulated.

Conclusion and Recommendation

Based on the above analysis, it is possible to conclude that, entering a contract with Fast and Lose Company will work to the advantage of Compretudo.  The company should, therefore, seal this deal, while taking into consideration the following recommendations:

1. A defined contract should be designed between the two companies.
2. A proper insurance policy should be signed to cater of the unforeseeable risks.

• The strategy should be reviewed annually to take into consideration the various dynamics in supply chain management.