Logistics Integration of “Hub and Spoke” Model Research Paper

Please don’t copy from another resource without mention reference. Avoid plagiarism, I need unique answer please. **

Learning Outcome:

1.  Demonstrate a deep understanding of the logistic function concepts and theories as well as supply chain management strategies. (Lo.1.1)
2.  Demonstrate the ability to understand complex issues pertaining to supply chain integration and strategic supply chain partnership (Lo 1.2).
3.  Apply essential elements of core logistic and supply chain management principles. (Lo 2.1)

Assignment Workload:

This assignment is an individual assignment.

Critical Thinking

The purpose of this assignment is to identify and apply Logistics and Supply Chain Management concepts/tools to suggest logistics performance priorities.

Use Saudi digital Library (SDL) search engine.

Search Title: New Approaches to Supply Chain Management Concept. Logistics Integration of “Hub and Spoke” Model.

Authors Name: MINCULETE, Gheorghe; OLAR, Polixenia

Source: Valahian Journal of Economic Studies. 2014, Vol. 5 Issue 2, p21-32. 12p.

Read out the research paper carefully and based on your understanding you should answer the following questions.

Questions:

1.  Why in in the current modern trade, the integration of economic affairs from design to completion is an important priority to every Manufacturing Companies?
2.  Define the parties involved directly and indirectly in supply chain and their role for smooth running of business?

The Answer should be within 2- 3 pages in length including the cover and appendices.

You can take any company of your choice as an example reference should be included.

***Kindly please check attachment for further information of this case study***

Note:

** Please don’t copy from another resource without mention reference. Avoid plagiarism, I need unique answer please. **

New Approaches to Supply Chain Management Concept. Logistics Integration of “Hub and Spoke” Model

Gheorghe MINCULETE

Polixenia OLAR “Carol I” National Defense University, Romania

minculetegh@yahoo.com

Abstract In the current modern trade, the integration of economic affairs from design to

completion is an important priority, which determines all economic options of companies to focus on satisfying the needs of consumers and users to their loyalty.

A supply chain consists of all parties involved, directly or indirectly, in fulfilling a customer’s request. The supply chain not only includes the manufacturer and suppliers, but also transporters, warehouses, retailers, and customers themselves.

Within each organization, such as a manufacturer, the supply chain includes all functions involved in receiving and filling a customer’s request. These functions include, but are not limited to, new product development, marketing, operations, distribution, finance, and customer service.

This article stresses the essential aspects of supply chain management in modern economics affairs, which are integrating under the functional aspect of the “hub and spoke” model.

Keywords: supply chain management, hub and spoke model, hub and spoke

system, hub and spoke network, e-commerce JEL Classification: L11, L22 1. Introduction The management of the supply-delivery chain aims to intensify the processes that

take place from the level of the suppliers of raw materials to that of the end customers. The aim is to increase the added value and to improve the use of resources and the efficiency of costs by bringing the required product at the indicated time and place with minimum manipulations and without delays.

A supply chain means a flow of goods, services, money and information through different situations (Tan, 2001). These units are legally independent companies, factories or offices far from each other, geographically speaking, or organizational entities that have the autonomy to take decisions regarding the information systems.

The concept of management of the supply-delivery chain is closely connected to Michael Porter’s idea (1985), which expresses it as a chain of values based on the processual vision on organizations. According to this idea, an organization can be seen as a

Valahian Journal of Economic Studies

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subsystem composed of sub-systems, each of them with inputs, transformation (conversion) processes and outputs.

Having in mind the logistic field, the management of the supply-delivery chain is very important, because it covers the aspects that study the flows of materials and information, the acquisitions and sales from an operative point of view, such as the transports, orders and packing, but also aspects of a strategic nature, such as the competition.

Although there is a large number of definitions on the management of the supply chain, this concept is more comprehensive than the concept of logistics.

Thus, the management of the supply-delivery chain emphasizes in essence the mechanism of planning and control of the various economic flows from the suppliers of raw materials to the end customers (Nurmilaakso, 2003).

More concretely, the concept of management of the supply-delivery chain is problematic because the supply corresponding to the demand implies specific managerial operations such as inventories or checks of the supply and delivery of goods and services.

Comparatively speaking, the management of the demand chain reflects operations like orders or customer care. Thus, in these circumstances the management of operations is not independent of the general economic situation. During times of recession, the management of the demand is often used due to more intense competition.

From another view point, low competition leads in times of economic boom to a management specific to the demand. It results that the management of the supply-delivery chain can be associated both to the concept of management adequate to the supply and also to the one specific to the demand.

Experts think that the especially important role of the management of the supply- demand chain is emphasized by the arguments presented below.

Internationalization of companies: globalization brought us to the situation where the companies, even the medium sized ones, have branches in many countries. Because operations are carried out over an extended geographical area, emerging needs require for the rationalization of storage spaces and transports.

Complex products: products have become complex and a single company does not own the necessary resources to achieve them. Because the development of resources from zero requires time and efforts, it could be an option to use the existing resources of other companies. Although a product is not complex, it often needs adjustment.

Changes in the conditions of the market: the rapid technological development had as a result the shortening of production cycles. Because opportunities to make profit come and go very quickly, the market is rapidly flooded and new products have to be brought on the market frequently.

For this reason, the needs and abilities of various commercial partners must be rapidly identified. In these circumstances, the management of the supply- delivery chain has an impact at least on the following essential objectives:

• the response time is the time lapsed from the moment when the customer places the order until the moment when he receives it. Because a short response time increases the degree of satisfaction of the customer, these objective increases competitiveness;
• the level of stockpiles has an important effect on profitability because a small stockpile reduces costs. It also reduces the risk of products ending their shelf time.
• the total time is the sum between the time of conversion of raw materials into end products and the waiting time. In principle, competitiveness and profitability should not exclude one another. In practice, the growths of safety stockpiles may reduce the response time. Similarly, a longer response time leads to reduced stockpiles. Because a shorter total time produces more rapid reactions, this opens the way toward the improvement both of competitiveness and profitability.

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The capacity to capitalize on / use the own production potential plays an important role. On the one hand, under usage erodes both competitiveness and also profitability because slow employees and obsolete equipment generate costs and not income.

It is possible that these costs be balanced with the income, but the adjustment of capacities / potential may be costly in its turn. On the other hand, over usage rapidly erodes capacities.

Although profitable on a short term, the deterioration of capacities can be very costly on a long term. In order to improve the use of capacities, the company must be capable of selling its own capacity when this thing is possible and of buying capacity when it is necessary (Nurmilaakso, 2003).

Specialty studies revealed the level of logistical costs between 10 and 35% of the gross income of companies. Out of these logistic costs, 60% are destined to the transportation of goods.

A study conducted by the consultancy form PRTM considers the companies with the best practices in moving products within the market as the organizations that enjoy an advantage of 45% from the point of view of the costs of the supply-delivery chain in comparison with the average of the competition (Abdinnour, 1999).

2. Functional aspects specific to the management of the supply-delivery chain in the conditions of a complex and ever more dynamic modern market, the

necessity arises to immediately identify and satisfy the requirements of current and potential consumers by using simple commercial systems (the “point to point” model) or within a network (the model of the supply-delivery chain), which will allow efficiency and profitability on a medium and long term.

If a solution of the point-to-point type is specific to a certain commercial partner, the implementation costs can be very high. In this case, a profitable solution requires a long-term relationship and a high volume of transactions.

Figure 1 presents the commercial relationship between supplier and customers, which later requires the integration in the supply-delivery chain, according to the domain of reference and specificity of the business.

Figure 1.

The “point to point” commercial model (supplier-consumers)

(Source: http://www.ipsera.com/assets/documents/ancarani_cp.pdf)

Because the commercial model previously presented is limited from the point of

view of the engaged resources (human, material, informational) for the capitalization of the business potential of a company, the economic practice recommends as being extremely

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