The reliability of the sale of sugar molasses to the rest of the world is strongly demonstrated by key trade success indicators, such as distribution time, the quantity of supply, equal pricing, consistency of supply, affordability and health of usage, and congruence with consumer needs (Wallenberg, 2013). Molasses is known for its high nutritional content-it has high concentrations of energy-giving sugars that are very effective for use as feeds for oxen and lactating cattle. Moreover, the sugar molasses have elements that can help in boosting animals’ resistance to pandemic diseases such as the foot and mouth disease, cattle fever and also prevents the attacks by ticks. With the advent of several breeds of cattle, more people are venturing into animals farming-the practice is spreading worldwide and this calls for other more efficient ways of feeding cattle and reducing fodder wastage. Within the last 20 years, four breeds of cattle have been introduced, and the total number has doubled from 5 billion to 10 billion. It is therefore advisable to improve the production of molasses and reduce the lead time during supply especially to areas that do not have access to other alternative ways to feed the cattle.
Current issues in Molasses trade.
The sugar molasses supply business has become a hot cake to several private organizations. Business people have diverted their attention to venture into molasses supply, and this has caused the implementation of more stringent policies in molasses trade. In early 2017, the number of molasses suppliers had increased from 249 of 2015 to 317 (United Nations, 2017). Government bodies have also indirectly ventured into the business-most of the sugar industries, especially in Africa, have been encouraged to form parastatals, where the farmers can supply their sugarcane. Molasses produced from the firms are then sold out through the government agency-a portion of the profits then go to the national treasury, and this has become an additional source of government revenue (Rapuano, 2012).
Sugar industries and private molasses suppliers have adopted new forms of molasses-in East Africa, farmers blend the product with other robust animal feeds such as banana stems and silage, to reduce the amount of raw molasses consumed by the animals (Phillip, 2011). Research done by the Kenya Agricultural Research Institute revealed that on average, a dairy animal drinks 5 liters of molasses per day, to meet all its nutritional requirements. However, it was observed that under free feeding program, one dairy animal consumes an average of 15 liters of molasses per day. It was therefore advised that a blend of the feed could be made to economize on its use.
Agricultural organizations have adopted the use of online platforms for the supply and purchase of the molasses-actually, 80 percent of the sales made by UM group are solicited for online. Customers can place their orders online and also arrange for the complete procurement process (Rapuano, 2012). The company has established outlets to cater for its clients worldwide, and each of the stores is situated in geographically convenient places. For example, UM group have outlets in South Africa Argentina and Qatar, to ensure continuous contacts with its customers. Through the E-business platform, the customers can place orders through the outlets
Challenges facing the raw sugar molasses supply chain.
UM group finds it difficult to economically supply the product to its customers, especially the foreign clients (Alan Peters, 2014). Though the business can enjoy economies of scale, the current trading environment is too unconducive for consistent profit generation. The company purchases a ton of molasses at $190 and sells it out at $250-this guarantees a gross profit of $60. Considering other expenditure during the procurement process, the company gets a net profit that is less than 20%. Excise duties, clearance and forwarding charges and the costs of transportation to the clients are sometimes borne by the company.
The supply chain process for the raw sugar molasses suffers political influence, especially where the intergovernmental relationships between the country of origin and the country of destination is at stake (Andreas Wieland, 2014). In early 2017, UM group supplied molasses to only six clients out of the 97 in the Middle East-this was due to the political temperatures in the United Kingdom, and the poor intergovernmental relationships with the Arab countries. The foreign governments were blaming the Arab counties for the violent terror activities worldwide, and this international friction negatively impacted on business activities.
UM group sources raw molasses from the sugar industries and then sells it to the end users, most of whom are dairy farmers. However, for the last three years, the supply of sugarcane to the sugar manufacturing industries have significantly declined (Ankerl, 2011). In 2016, the total sugarcane supply went down by 30%, and as a result, molasses supply also went down. In late 2015, UM group purchased a total of 600,000 tons of raw molasses. The figure reduced to 480,000 tons in 2016, hence most of the clients were not able to obtain their average order quantities. Moreover, the decline in supply led to an increase in the purchase cost-consequently, the company’s selling prices also hiked. The company’s profit margin reduced by 8% for that period and it is projected that another 1.8 years are needed for UM group to come back to its healthy profits.
The desire for diversification of business activities has compelled some firms to venture into the supply of raw sugar molasses (Anna, 2016). According to the World Trade Organization, 55 new procurement firms registered for the supply of the product. Most of the firms are from the west, and this implies that the available quantity of molasses in the West is scrambled for by all these firms. The level of competition has gone high, and UM group only survives on the existing customers who developed trade partner loyalty with them. However, the new firms are trying their best to conquer the market by employing strategic marketing trick such as the reduction in prices, issuing offers and after-sales services, which are not offered by the UM group.
UM group faces transportation problems-the company majorly uses the tankers to ferry products from the United Kingdom to Africa, India, and other Asian countries. Ship transportation is slower and riskier than any different modes of transport (Bartik, 2015). In most instances, the company experiences delays in delivery due to vessel breakdowns and underestimation of distances. In January 2015, UM group failed to timely deliver 5000 tons of raw molasses to a client in South Africa, and as a result, the client fined the company almost a third of the total cost of the order.
The future of UM group supply chain.
The UM group has a potential market for its products and services since it has considered the supply of other forms of sugar molasses, for example, the packed forms, solid forms and other blends of the product. This implies that the company shall be able to use any other means of transport apart from the sea, to convey products to the customers (Council for Community and Economic Research, 2014). Moreover, clients will have a right product mix to choose from-either the solid or liquid forms, in bulk or small consignments. Some UM group customers opted out due to the high cost of transportation and delays in delivery, hence with the compact forms that can easily be transported, it is highly likely that the customers shall reconsider working with the company.
The UM group has considered placing the products in all of their offices worldwide, to enhance the quick supply of molasses to the clients (Bernstein, 2008). If this strategy is affected, then the company shall be in a better position to gain back its customers, and even get more. It is also likely that UM group shall be able to get back all the profits lost in long-distance transportation and fines resulting from late deliveries. The company has plant f establishing its production plant, and this shall ensure enough supply of the product at a cheaper cost. Production and supply overheads shall also go down, hence assuring the company of better profits.
Key performance Indicators.
UM group should consider a timely implementation of the quick delivery policies to prevent cases of disagreements with the customers due to late deliveries (Eijffinger, 2009). This will also help in reducing the fines and consequent financial losses.
UM group should consider the competitive pricing of the products, and this can only be done if proper rates are used during the purchase and processing of molasses (Bartik, 2015). If the company’s prices are fairer than any other firm, then it shall conquer the global market for molasses.
The company should consider improving the quality of supplied molasses, and this may include blending the product with other additives (which are also animal feeds), to reduce the adverse environmental effects of the raw molasses (Gordon, 2012). This shall guarantee the firm a better position in the global market and earn reputation in environmental management and conservation.
Availability of products.
The company should ensure that the product is always available in all its outlets for timely delivery and to win client confidence on the availability of the product (Eijffinger, 2009). This strategy will also help the firm to thrive in the highly competitive environment.
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Themes for the conference.
Green supply chain management practices.
Supply chain management systems have over the years not considered the environmental impact of raw molasses supply. During the initial stages of supplies of molasses, empty vessels were used to ferry the product overseas (Eijffinger, 2009). Even at the depots, storage vessels were not designed to ensure a green environment. It is also noticed that sugar manufacturing firms do not put into consideration, environmental management practices that are aimed at reducing the emission of greenhouse gases. Global warming is majorly caused by the emission of gases that destroy the protective layers of the atmosphere. Environmental pollution cases have been observed in the heavy manufacturing countries such as India and China where the latter had an average increase in temperatures by over 8 degrees Celsius in a span of 2years. Green supply chain management practices such as the use of lagged and enclosed containers shall ensure that the molasses does not emit dangerous gases into the atmosphere, during transportation.
A study carried out by the University of California, school of business showed that the formation of an eco-friendly company is a fundamental factor to be considered- a business has higher chances of survival if its activities do not cause any harm to the environment (Wallenberg, 2013). It is also essential that the company is in terms with the national environmental management authorities. However, some organizations still operate under environmentally unfriendly conditions and as well carry out activities that are not fostering the environmental management policies. Some countries in Africa such as Kenya have adopted strict strategies to reduce the adverse environmental impact of plastic manufacturing processes and the usage of plastics as storage items. The government of the country has also banned the manufacture and supply of any plastic bag-this move were taken after the National Environmental Management Agency (NEMA), realized that the excessive use of such materials especially in the storage of goods, is contributing to a more significant percentage of environmental pollution (United Nations, 2017).
The necessity of collaboration in supply chain management.
Trade is not a one-man show-it needs the collaboration of several people of different commercial backgrounds, with the aim of achieving something better than one person could do. The manufacture and supply of sugar molasses can do better when the organization (UM group) coordinates with other subsidiary producers such as the sugar cane farmers, sugarcane manufacturers, dairy farmers and even the government (Thomas Guliet, 2013). The supply chain can benefit from the information given by farmers concerning the cost of farming, transportation, and the expected profits from cane business, such that the molasses suppliers can have the best estimate of their supply prices for maximum benefits. The suppliers of molasses should also work closely with the sugar production firms for first-hand information regarding the quality of by-products, availability and economic quantity of supply. Moreover, the production firms can work jointly with the supplier of by-product to settle on one cooperate selling price.
Collaboration is also necessary to the international community for the benefits of trade-suppliers get into agreements with the government to affect tax lifts, tax reliefs and the formation of trade regions that have the powers to negotiate on supply and delivery terms collectively (Thomas Guliet, 2013). For example, a company may link up with the World Trade Organization to enjoy the benefits of international trade. When a company joins a global trade block, the chances are high that it will gain more customers due to international marketing. The trade organizations are also able to give incentives such as subsidized supplies, entry into restricted business areas and the provision of financial securities for an infant firm, or a firm that is under economic crisis. Companies under an international organization also gain collective bargaining power, hence can sell out their products at universally reasonable prices (Internationbal Monetary Fund, 2010).
Corporate social responsibility in global supply chains.
Corporate social responsibility is good for the improvement of a company’s image, and this includes public participation in activities such as environmental cleaning, international trade fares and volunteering in some state-organized activities. Such kind of involvement is very crucial for an infant organization-however, it is also vital for a firm that is facing very stiff competitions in the market (Terry Esper, 2014). Public participation enhances media coverage of the firm, and this helps in the advertisement. Whenever a firm participates in a social event, especially one that directly concerns the immediate society, it gets recognized as an entity that can perform a given task, or supply a specific product.
Through employee engagement, the company portrays an image of ‘a complex firm’ that can handle a variety of activities-a firm that isn’t limited to the supply of goods only but is also concerned about the societal affairs (Robert Handfield, 2016). Social participation is also a tool that efficiently attracts investors into a firm and also retains the existing ones. As a result, the company’s capital base increases and acquires a status that can handle more significant supply tasks.
Research work done by the University of Columbia, Department of Business studies found out that social responsibility is significant for the public image of a firm, in that the company brands itself as a friend of the people (Rapuano, 2012). The student performed a survey of 20 respondents, 17 of which responded that they make their purchases from firms known for public participation. 87% of the respondents also attested that it is easier to join or contribute funds towards a company that has direct contacts with the public, through participation in social activities. Corporate social responsibility may also be a suitable platform for a company to meet other organizations with which it can form corporate partnerships. Once a partnership is established, the capacity of a company to supply a given volume of products increases hence the organization stands a better chance of earning higher profits (Jacoby, 2015).
Understanding barriers and bridges to effective supply chain management.
There are several hindrances to an effective supply chain management, especially in a firm that supplies its products worldwide (Flint, 2016). The barriers may even surface within the company’s premises, while other hindrances may be faced during the transportation process to the port of destination. More restrictions are then experienced during the exportation and final delivery process. The trading organization may be composed of unscrupulous employees who do not heed to the trade policies that govern company affairs. Moreover, the directors may not stick to the rules of transparent business transactions-products may be received and supplied through non-transparent means and in some cases, goods may be overcharged to settle some unofficial payment agreements with a broker. Such kind of business malpractices may cause friction between the organization and the government’s security systems, though in some cases, the illegal transactions are made in favor of the security bodies (Phillip, 2011). Other barriers to effective supply chain management may include the rush for profits, without considering the quality of product and the effects it may have on the end user. In many cases, companies have lost their good reputations due to the delivery of wrong or fewer products.
Supply on order is a theory that has a double effect on the performance of companies-it can either be a disadvantage or an advantage for a firm. In any business premise, customer’s urgency of the requirement must be given the priority, and this means that for a firm to operate its supply chains very efficiently, it should be able to supply goods to a customer on request (Mentzer John, 2016). However, some firms consider sourcing for the products only after a customer has placed an order for them, and this may delay the delivery time. As a result, the customer loses confidence in the capacity of the firm to handles its urgent requirements.
Managing and measuring sustainability performance of supply chains.
Firms should be able to monitor, manage and rectify the performance of their supply chain systems through a pre-set procedure. This should involve the use of auditing systems that can capture the inefficiencies in supplies, use of company’s resources and the general performance of the supply chain, and then recommend the best way to deal with the inefficiencies (O’Rourke Kevin, 2012). Some of the factors that must be looked are the use of finances in the procurement of goods, the use of employees and their relevance in the supply chain system, the use of company’s free capital, returns from the supply activities and the employee relationships. The last factor is relevant in this section since an organization’s sustainability is only possible when the employees work as a team and are willing to exploit one another’s abilities for the benefit of the firm.
An audit can validate all the activities done by the firm, such as the outsourcing of materials and labor, and to establish the relevance of each material outsourced (McKinnon A. , 2012). An audit can also be carried out to identify the trend of the performance of a firm over an extended period, say the years. The trend of profit-making in the organization can be an indicator of the firm’s sustainability in operations. Such reports in finance generation can also be used to predict the future operational capacities of a firm.
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