“Environment Issues in Maritime Supply Chains”

Author: Robert Sanga

Abstract

Environmental issue in maritime supply chains raised up due to global warming. This phenomenon needs to be investigated. In fact, there have been a lot of investigations about it. This essay will cover up the use of ship and shipping industry in general, then go on to the supply chain system and the effect it has toward the environment. Conclusion will be made with some suggestions for improvement and transforming shipping industry into environmental friendly medium of transport.  

Keyword: Environment, Shipping, Transport & logistics, Supply Chain system.

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Introduction

The Oxford dictionary (2017) defined the environment “the natural world, as a whole or in a particular geographical area, especially as affected by human activity.” This definition explains environment as the natural world which consists of the air, land, sea and all the living things on earth. This natural world of environment can be greatly affected by different activities created by nature itself and human, including animals.

Maritime activities have to deal with transporting goods and passenger through ship from port to port. Professor Umar Burki (Supply Chain Management, 2017) explained in one of his lectures that “a supply chain is dynamic process and involves constant flow of information, products and exchange of assets.” In other word, maritime supply chain has a broader definition since it has to do not only with transporting raw material, finished goods, products and passengers but also the require information’s as well.

There are different ways of transporting products from one place to another. It can be done by using pipeline, airway, seaway and roadway. Seaway transport by using ship as medium of transport is commonly used since ancient time. It’s suitable when it comes to transporting large amount of goods for a long distant transport. Airway and roadway are much quicker but way too expensive in compare to seaway for transporting large amount of goods.

Shipping plays a very important role in global supply chains system. For this reason, the demand for shipping keeps on increasing each year. This essay will try to answer the question on the effect of shipping toward environment. In doing so, it will takes a look at different type of ships, their trading routes and come up with recommendation to reduce the negative impact of maritime to the environment.

Ship and Trading Routes

Catherine Bjune (Ship Operation, 2016) explained that shipping is one of the oldest medium of transport systems. It’s considered to have been used for more than five thousand year. Since then there are different type of ships which were designed and operated. There had been a lot of development and innovation made toward shipping.

Professor Kenn Steger-Jensen (Supply Chain Management, 2017) had rightly pointed out in one of his lectures that “the typical cost of transporting a 20 foot container from Asia to Europe carrying over 20 tonnes of cargo is about the same as the economy airfare for a single passenger on the same journey.” As such, there is no other good alternative medium of transports in comparison to the seaway transport for transporting large amount of goods from one continent to another.

There are varieties of goods being transported through ship. These goods can be mainly classified into raw material or finished goods.  Transporting those goods across continents has great effect on the environment. It’s a part of supply chains system. It’s good that we have a good transport system but this come with a price which needs to be addressed nationally and internationally.

Ship is basically use for trading whenever and wherever there is a demand for it. Ship owner can register their ships to any particular country, even to landlocked countries such as Pakistan and Nepal. After registration, the ship can then be used to trade. The ship then has to follow the rule and regulation of the flag state.

Ship Overseas (2017) has group international ships into six groups. These are 1) Cargo ship, 2) RoRo (Roll on Roll Off), 3) Tankers, 4) Passengers ships, 5) Fishing vessel, and 6) High speed craft. It’s important to identify those groups and their function as well.

It’s cargo ship which transports all the major daily use consumer goods around the globe. These goods can be such as food, furniture, clothes and machinery. RoRo (Roll on Roll Off) type of ship is basically use for transporting the vehicles as rolling on and rolling off the vehicles from the ship is much quicker with RoRo ship than any other type of ships.

Tankers ships are for transporting liquid products such as oil and different chemicals in large quantities. The size of the ship depends on the product which the ship is designed to transport. For example, the Compressed Natural Gas (CNG) vessels carrying gas from Arabian Gulf to Asia must have the capacity of carrying at least one hundred thousand tons.

Passenger ship, fishing vessel and high speed craft have some limitation in their activities and operations. For instance, cruise ships are basically use for leisure while fishing vessels have to follow the limit granted by the authorities in fishing the fishes from the ocean. And high speed craft are not that much use in transporting passengers since airline took over as medium of transporting passenger’s for long distant after the Second World War was over in September, 1945 (US Centennial of flight commission, 2017).

The above mentioned six groups of ships have different trading routes for both national and international level trading. It’s beneficial for a company to outsource their production at a place where they can easily access raw materials. Wages and cost of production play a crucial role for most of the European, American and Australian companies in outsourcing their companies to Asia, Africa and Latin America.

As a result of increase trading between different companies and from continent to continent, there is significant increase of third-party logistics (3PL). Yue Wu (2012) explained 3PL as external companies / suppliers which provide a range of logistics services to their clients, such as transportation, warehousing, distribution, and so on.

Canal like Panama and Suez were constructed as to reduce the long distant in transporting goods. Classes and sizes of ships were designed in accordance with those canals. Crude oil tanker like Panamax, Aframax, Suezmax have the capacity of carrying more than one hundred thousand Deadweight Tonnage (DWT) of crude oil (Maritime Connector, 2017). Canal has contributed new trading routes between underdeveloped, developing and developed countries.

Effect of Shipping toward Environment

Most of the modern ships are run by different type of fuels which are harmful for the environment. CO₂ emission and other harmful substance such as sulfur oxides (SOx), nitrogen oxides (NOx), particular matter (PM) from the ship are not only harmful to human health but also to marine environments (Poulsen, Ponte and Lister, 2015). These emissions are more harmful to those who are living in cities closed to the ports (Toxic shipping, 2013).

Moreover, there is always risk of accident with the ship due to bad weather or human error. A container ship and a big tanker ship accident could easily result disaster to the environment. Even gigantic ship like “Titanic” sank in the Atlantic Ocean on 15.04.1912. The ship was considered to be unsinkable but it sank because of the iceberg colliding (History of Titanic,  2017). Such accidents were not very common but it had happened and continues to happen even to these days.

The International Maritime Organization (IMO) was founded in 1948 for safety, security and environmental performance of international shipping (IMO history, 2017). It has adopted important conventions like International Convention for the Safety of Life at Sea (SOLAS, 1974), International Convention for the Prevention of Pollution from Ships, (MARPOL, 1973) and International Convention on Standards of Training, Certification and Watchkeeping for Seafarers (STCW). These conventions had helped in reducing both pollution and accident but it’s not an easy task to control all the negative environmental effects of shipping.

Recommendation

It’s no doubt that shipping is the bloodline of world trade. Without shipping the import and export of goods on the scale necessary for the modern world would not be possible (International Chamber of Shipping, 2017). However, all these benefits come with a price on environment and human.

Therefore, it’s recommended that there should be a checkup system for all the IMO member countries in implementing all of the conventions of the organizations. Paris Agreement, 2015 should be honor by underdeveloped, developing and developed countries so that all those legally binding climate deals are achieved. Both consumers and ship owners should work together toward achieving greener and environmental friendly ships. Third party logistics (3PL) provider should works toward giving a better integrate and effective logistics system. More research should be made in order to use more on cleaner fuel like Liquefied Natural Gas (LNG), Compressed Natural Gas (CNG), wind power and even battery ships.

Conclusion

In answering the question on “the effect of shipping toward environment” this essay has covered topics on different type of ships and their functions, trading routes and pointed out some effects of shipping toward the environments and made some recommendation for improvement. Professor Umar (2017) has rightly concluded in one of his lectures that environmental upgrading is not likely to make substantial difference unless it is supported by clear, stable and enforceable global regulation.

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References

Bjune, Cathrine (Autumn 2016). Ship Operations: Master in Maritime Management, HBV Publishing, Horten.

Climate Action (Retrieved 30.03.2018, from the website: https://ec.europa.eu/clima/policies/international/negotiations/paris_en

History of Titanic (Retrieved on 28.03.2017) website address: http://www.historyofthetitanic.org/100-years-titanic.html

IMO History (Retrieved on 30.03.2017) website address: http://www.imo.org/en/About/HistoryOfIMO/Pages/Default.aspx

Maritime Connector (Retrieved on 30.03.2017) from website address: http://maritime-connector.com/wiki/ship-sizes/

Oxford living dictionary, Oxford University Press (Retrieved on 17.03.2017) at https://en.oxforddictionaries.com/definition/environment

Professor Burki, Umar (Spring 2017), Supply Chain Management lectures notes, University of Southeast Norway.

Professor Steger-Jensen, Kenn (Spring 2017), Supply Chain Management lectures notes, University of Southeast Norway.

Paulina Golisnka & Carlos Andres Romano (August 2, 2012), “Environmental Issues in Supply Chain Management – Main Challenges” (Retrieved on 17.03.2017) from the website: http://www.europeanfinancialreview.com/?p=1568

Rene`Taudal Poulsen, Stefano Ponte, Jane Lister (December, 2015) «Buyer-driven greening? Cargo-owners and environmental upgrading in maritime shipping” Geoforum, journal homepage: www.elsevier.com/locate/geoforum

Ship Overseas (Retrieved on 18.03.2017) from website address: https://www.shipoverseas.com/blog/6-different-types-of-international-ships/

Toxic shipping (2013), documentation broadcasted first time at NRK on 22. 02. 2017, website address: https://tv.nrk.no/program/KOID28004013/giftig-skipsfart

US Central Flight Commission (Retrieved on 25.03.2017) website address: http://www.centennialofflight.net/essay/Commercial_Aviation/PostWWII/Tran26.htm

Yue Wu (2012), “A duel-response strategy for global logistics under uncertainty: a case study of a third-party logistics company” (Retrieved on 01.04.2017) from website address: http://onlinelibrary.wiley.com/doi/10.1111/j.1475-3995.2011.00839.x/full

"Importance of ship registration"

By Robert Sanga 

- Ship registration means registering a ship into a particular State. A ship belongs to particular country by registration. A registered ship is protected by the law of the State. Details of ship build, ownership and mortgage enter into the flag states where the ship is register. Every State maintains registers in which particulars of merchant vessels possessing the nationality of that State and flying its flag are entered. A country registering a ship issues “Certificate of Registration” which can be effectively use as a “ship’s passport” permitting entry/departure from the worlds ports (Cathrine Bjune, 2016).

There are several importance’s of ship registrations. A ship possessing no nationality – a stateless ship- enjoys no protection in international law. She is unable to engage in lawful trade since ports will deny entry to her. The United Kingdom Merchant Shipping Act 1995 provides that clearance or transire shall not be granted for any ship until the master has declared to an officer of customs the name of the nation to which he claims she belong. If a ship attempts to proceed to sea without such clearance or transire, she may be detained until the declaration is made. Furthermore, a stateless ship is liable to seizure (Richard Coles and Edward Watt, 2009).

Right to fly national flag and the attachment of legal jurisdiction over ship and crew is one of the important factors to be considered when choosing a flag for a vessel. By having those two main important rights, a ship is automatically entitles to other rights. Among other factors, right to diplomatic & naval protection, right to fish in territorial waters and engage in coastal trade (Cabotage) are very crucial for the ship. This can make a different in shipping business. For example, a ship register in Indonesia have the right to Offshore operations in Indonesia meanwhile, a ship register in Africa does not have such right in Indonesia.

It’s important for a ship owner to check up about the beneficial outcome of registering a ship in one particular country. That’s because the other parties than owners have an impact on the choice of flag. Both the commercial and technical charterers can have a certain benefit by a ship registration at the particular country. Ship registration has great effects for the administration, employees for commercial or technical part of the ship and for the passengers as well.

If a ship is registered at one of the economic sanction countries by the international communities, then it will not be possible to be trade with certain part of the world. For example, in the past few decades, Burma/Myanmar was economically sanctioned by the US & European countries. That was because the military regime had created over six decades of civil wars and human rights abuses. As a result, it was not possible for Western countries to trade with a ship registered in Burma. This had a great impact not only for the ship owner but also for all those who like to trade with that country.

The registration fees may vary from country to country as well. The requirements for registering a ship are not the same either. Norwegian owner of a ship may choose to register the ship in Norway or any part of the world. There is no limit for a place of registering a ship as long as it’s register at one particular choice of country. Even landlocked countries like Pakistan and Nepal have the right to have ship register in their countries.   

There are several effects on ship registration. That’s because ship registration is done under a public law function as opposed to its private law function (Richard Coles and Edward Watt, 2009). The following important points are among the public law functions:

(a) The allocation of a vessel to a specific State and its subjection to a single jurisdiction for the purposes, for example, of safety regulation, crewing and discipline on board;

(b) The conferment of the right to fly the national flag;

(c) The right to diplomatic protection and consular assistance by the flag State;

(d) The right to naval protection by the flag State;

(e) The right to engage in certain activities within the territorial waters of the flag State – for example, coastal fishing or trading between the ports of the flag State (cabotage);

(f) In case of war, for determining the application of the rules of war and neutrality to a vessel.

Registering a ship in one particular country means that a ship belongs to the land of registration. This implies that the ship has to follow the rules and regulations of the country of registration. Any legal issue that may arise will have to deal with the law of that country. A ship sailing in the high sea will be bound to the law and order of the country where the ship was registered.

It’s possible to have a double register a ship. This has to be done at those countries when open registration is accepted.  Examples of “Open registers” countries are Panama, Liberia, Marshall Islands, UK and Red Ensign group. There are several reasons why ship owners may choose to register dual registration. For example: A ship registered under Singapore flag can be registered simultaneously under Indonesia flag. This may be done because a) accent to cabotage or fishing rights privileges, b) avoidance of trade sanctions and keeps the original mortgagee bank happy. 

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Reference:  

Bjune, Cathrine (Autumn 2016). Ship Operations: Master in Maritime Management, HBV Publishing, Horten.

Richard Coles and Edward Watt. (2009). “Factors influencing the choice of flag” Ship Registration: Law and Practice, 2^nd Edition

«Penger som motivasjonsfaktor»

Av Robert Sanga Haungo

Det var veldig interessant å lese en artikkel fra Dagens Næringsliv som omhandler blant annet «penger som motivasjonsfaktor». Det var publisert den 10.10.2014. Artikkelen var var skrevet av Ola Kvaløy, professor i økonomi, Handelshøgskolen, Universitetet i Stavanger og Norges Handelshøgskole (NHH). Han forklarte med gode eksempler på om hvilke roller penger spiller i forhold til motivasjon for ansetter. Det finnes riktignok en rekke psykologiske eksperimenter og spørreundersøkelser som viser at selvrapportert motivasjon kan bli redusert når pengeincentivene øker, akkurate som han beskrevet i artikkelen sin. Men en faktisk forverring av innsats og prestasjon som følge av sterkere materielle incentiver finnes det knapt med eksempler på.

Ifølge artikkelen hadde Petra Nicken, Anja Schőttner og Ola Kvaløy testet hypotesen om en leder som evner til å motivere sine medarbeidere med å fortelle dem hvor viktige de og jobbene deres er, kan holde seg borte fra bonuser og andre uhumskheter. Jeg synes at resultatene var interessante. Det var fordi resultatene støtter opp om nyere økonomisk teori som sier at prestasjonslønn alene kan virke negativt dersom det signalisere at jobben ikke har noen annen verdi, ingen mening, utover det rent økonomiske. Hvis man derimot – gjennom motiverende lederskap klarer å gjøre jobben mer meningsfull, vil den negative signal effekten forsvinne og materielle incentivordninger ha positiv effekt. Derfor fant de ut at budskapet at penger motiverer, er imidlertid ingen vinner på motivasjonsmarkedet.

Det er sant at folk vil selvfølgelig jobbe mer for å få forskjellige insentiver. Det kan også redusere arbeidskvalitet. Det er fordi overtid arbeid kan redusere kvaliteten til arbeid. Da vil folk jobbe ekstra bare for penger. For eksempel, renholder rundt omkring i Norge tok ekstrajobb, selv om dem ikke klarte bra med det. Det medfører til dårlig arbeidskvalitet.

 

Forskerne E.L. Deci og R.M. Ryan skiller mellom to motivasjonssystemer som er kjent som ytre og indre motivasjon. Ytre motivasjon er belønning i tradisjonell forstand, som lønn, bonus, og så videre. For eksempel, arbeidet er et redskap for å oppnå belønningen. Men i indre motivasjon den motivasjonsverdien som ligger innebygd i selve arbeidsutførelsen. Den energien som strømmer ut av en slik motiveringsfaktor grunnleggende behov.  I teorien er indre motivasjon sunnere i den forstand at den går for egen motor og er mer stabil over tid. Deci og Ryan hevder altså at det slett ikke er sikkert at belønning alltid lønner seg.

Ifølge Kaufmann, bonusinsentivene skyver ut og underminerer den ideelle, indre motivasjonen. Når bonusen er lav, går innsatsen faktisk ned, selv om man altså får en bonus på toppen av en ideell, indre motivering. Det skyldes at de to motivasjonskreftene konkurrerer om plassen i systemet. Fokusering på en bonus som er lav, vil da gi mindre effekt enn fokusering på en innvendig motivasjon som er sterk i dette tilfellet. Når bonusen er høy, vil effekten av premieringen imidlertid øke på grunn av størrelsen og kunne bli like sterk som den ideelle, innvendige motivasjonen.

Jeg er helt enig med utsagn fra Jocobsen og Thorsvik at en sterk vekt på belønning av det som er målbart, kan lett gå ut over oppgaver hvor resultater som man ønsker, vanskelig lar seg måle gjennom kvantifiserbare resultatmål. 
Det er sant. Sånn er det bare :)

Referanse:

1)      Ola Kvaløy, Ph.D. (Økonomi) Norges Handelshøgskole (NHH), 2003.

2)      Edward L. Deci, professor I Psykologi, Universitet I Rochester.

3)      R.M.Ryan, forfatter av «Vaudeville in the Dark», (2010)

4)      Geir Kaufmann og Astrid Kaufmann, Psykologi i organisasjon og ledelse, 4. utgave, Bergen, juni 2009. Fagbokforlaget.

5)      Jocobsen Thorsvik, Hvordan organisasjoner fungerer, 4. utgave, Kristiansand, mai, 2013. Fagbokforlaget.

“Online Asian Foods”

Author: Robert Sanga Haungo

1) Value proposition

- The “Online Asian Foods” is for you if you are interested in having high quality foods right at home. We bring you the best Asian dry foods packages at your doorstep. We are the only specialize one in Møre & Romsdal county. Just visit our website, choice the products right from your home or come and visit us in person at the heart of Kristiansund. We guarantee quick home delivery service of any order products to our customers at reasonable prices.

2) Customer segments

- Delivery of dry foods packages from the “Online Asian Foods” will be limited for customers in Møre og Romsdal county. The customers covering areas will increase to the national level after larger customers in Norway better know the store. The store will be for those whoever likes to taste Asian foods. However, Asian women married to Norwegian men, (age between 20 to 65 year old), who reside in a small municipality like Smøla, Tingvoll, Sundalsøra, Oppdal, etc will be specifically targeted. The customers will have an option to buy foods both offline and online. This will certainly reduce customers traveling time to a bigger municipality where Asian foods are available to purchase in person only.

3) Customer relationships

-  The “Online Asian Foods” would be purely base on Asian communities in Møre og Romsdal county. The store would also be suitable for Norwegian and all the other nationalities, irrespective of their diverse cultures and religions background. Customer will have option of purchasing food products in person as well. This means the store will be base on “Click-and-mortar” principles of Electronic business.

As part of self-service, customers will have option to choice the food products online and then make payment directly.  Both online and offline personal assistance with regards to inquiry of products will also be available. However, online version of customer services through live chat and telephone will be available only during the store opening hour i.e, Monday to Saturday from 9:00 AM to 22:00 PM. Other than that the customer can either send direct e-mail or place an order directly from the store website, which will be process on the next opening day.

The store will make sure to send a sample test product for new customers if needed.  Quality service for customers will be the main highlight of the store. English, Norwegian, Burmese, Indian (Hindi), and Chin language from Myanmar would also be use as medium of communication to the customers. This would certainly minimize language barrier as the business ideas developer Robert Haungo is good in speaking those different languages.

4) Channels

- The store website www.onlineasianfoodscom.wordpresss.com will be a basic tool to connect and advertise the Asian Foods from the store. Customers will have an option to place order directly through the website or make inquiry of products through telephone. In addition, Facebook and group mail will be operated and actively use to attract more customers.

“Norway Post” will be the channels use for home delivery for those who had placed order through the store website from a distant place. However, the owner of the store will make sure to drive and deliver if a big order is received than use postal service. This delivery method would be use in exceptional cases. For example: When a person from Oppdal make a big order then it would be better to personally make home delivery. In that case, it would also be possible to make additional delivery to Frei, Tingvoll, Sundalsøra etc because these small towns are located on the way to Oppdal. 

5) Key partners

- Priority will be given to directly connect with the Asian food vendors from Myanmar. That’s because Norwegian governments have agreement to reduce import tax from Myanmar as the country is regarded as under developed. The store would also have partnership with Asian foods supplier from Oslo in case of urgent needs.

The store would try to establish good contact with similar stores throughout Norway if there is any. Community base customers would be emphasis. Individual bloggers, Facebook group, local Newspapers, Radio & TV would be use as often as possible to introduce the store and it products to a larger audience.

6) Activities

- As to establish good contact with Asian food vendors the store owner Robert Haungo would travel to Asian countries like Myanmar, India, China, Japan, Thailand, Vietnam etc. After gathering all the necessary information about different vendors and dry food products availabilities from Asia, the owner would then make inquiry about direct import opportunities to Kristiansund. A good logistics solution will make sure the continue flow of dry food packages from the vendors to the store and from the store to customers.

The second step will be to register the store with Brønnøysund registration. Only after completing official registration of the store, the “Online Asian Foods” webpage would be built. The store webpage would not requires to be so advanced but expert web builder would be hired just to make sure that customer can choice the right food products and make payment smoothly. That’s for online part of the store.

Then the third step is to obtain attractive location where the customer can purchase Asian foods in person. The store would make sure to rent a place at Amfi Faktura, Storkaia brygge that is located in central Kristiansund. This well-known locality would definitely help the store to have a better contact with larger customers.

Finally, marketing and advertisement will play a very important role. The store will make sure to sale quality food at a reasonable price to attract customer. This would imply that the cost of all activities, such as procurement, warehousing, transport & logistics etc. should be minimize so that the end product that is the actual dry food packages be affordable to customer.

7) Resources

The first part is human resources. A very qualify human resources would certainly be the most important resource in delivering value proposition of the store. The success of the store would depends on the main resource person communication and transport networking skills. That’s because the store would be base on importing products from Asia and then sale them to customers in Møre & Romsdal county.

The second part is material resources. Delicious and easy to prepare, high quality Asian food products will be the first and most important material resources without which the store can’t be run. A discount sale would be make if the store have difficulties in sale of products before products best use periods. 

The third part of resource requirement will relates to management of products. A place for warehousing of the imported products, car for transportation, landline phone, smart phones, computers, internet, website for the store, a well-known locality for renting the store which has a good electricity and water connections, good lighting system for the products, shelves, tables, chairs, cleaning materials, refrigerator, etc. would then be needed.  

8) Cost structure

The estimated budget for running the “Online Asian Foods” is estimated to be one million Norwegian Kroner. The store will need that sum of money as startup capital. It may takes minimum two or three year for the store to be beneficial.

As it will be a family store runs by the owner and his family, the salaries cost for employees, some activities and resources cost will not be calculate in the budget. That is because the owner is going to invest those expenses. This means the cost structure will be accounted for things that the store actually need to spend for running the business.

The store will use fixed cost & variable cost in calculating total expenditures. The estimated cost structure for the store can be divide in smaller units as follow:

Fixed costs:	Quantity	NOK
Brønnøysund registration per year	1	6 000,-
Additional customer service provider per year	1	30 000,-
Apartment renting cost for store per month	1	10 000,-
Website maintaining cost per year	1	10 000,-
Warehousing cost per year	1	100 000,-
Shelves	4	20 000,-
Tables	2	2 000,-
Chairs	4	2 000,-
Cleaning materials	3	1 000,-
Samsung RS7567THCWW refrigerator	1	9 990,-
Lighting system for the store	4	3 000,-
Used transport car (Iveco ML75E184,0 177HK)	1	149 000,-
IMAC 21.5" MK142H/A AIO  (Desktop Computer)	1	12 490,-
EPSON XP-750 Multifunction printer	1	1 699,-
Huawei Mate 8 with dual-Sim, 6” screen (Iphone)	1	5 690,-
Total fixed costs	-	362 869,-

Variable costs:	Quantity	NOK
The administrator travel cost to Asian countries	2 round trips	20 000,-
Variety of Asian dry foods packages investment cost	3000 packages	400 000,-
Goods transport cost between Asia & Norway per year	3 round trips	30 000,-
Goods transport within Kristiansund & Møre og Romsdal	3000 x 12	36 000,-
Products packages cost per year	2500 x 12	30 000,-
Electric bills per year	2000 x 12	24 000,-
Various advertisements cost per year	1000 x 12	12 000,-
Internet & mobile connection fee per year	549 x 12	6 588,-
Insurance cost for the store & materials per year	1000 x 12	12 000,-
Total variable costs	-	570 588,-

Thus:

Total fixed costs                                                        362 869,-

Total variable costs                                                    570 588,-                               

Estimated total fixed & variable cost                     933 457,-

9) Revenue stream

The store will makes income mainly from sales of physical products in Møre & Romsdal county. That’s by sales of dry food packages from Asia. The store will makes relatively good profit since the store will be directly importing products from Asian vendors.

Then it will go on in collaborating with other stores so that it may able to takes commission. This mean if the “Asian Online Foods” goes short of some products then the store will make arrangements to get those products to customers from other stores. These activities may not generate a lot of income but prioritizing and providing customers need is important.

After two or three year the store will be well known to a lot of customers. It may be interesting for other online companies to come and advertise their products through the “Asian Online Foods” website and network. The store will be then accepting such advertisements as to generate extra income. It is important for the store to be known to customer at a larger level. 

Task 2: The Balanced Scorecard                   

A success of business is greatly depends on how well the balanced scorecard is handle by the company. Check and balance is important. Below are the main objectives of the “Online Asian Foods” which are follow by the four major components the balanced scorecard known as: 1) Customer issues, 2) Internal efficiency measures, 3) Financial, and 4) Innovation.

Objective of the “Online Asian Foods”

- The store will serves as the one that provides high quality Asian foods to those who are residing in Møre og Romsdal county. The customers will have the option to buy those products online or in person at the store located in Krisitiansund. The store will try to serves minimum 10000 customers after two or three year of starting the business. This will increase after the store is better known to lager customers. More customers mean more revenue stream for the store and more quality Asian foods for those who like to have them at home.

By stating the above objectives the store has specific covering areas for customers, i.e. those who are residing in Møre & Romsdal county, the number of customer serve can be measurable, action can be taken according to the targeted customers, it’s relevant foods supply system for those who love Asian foods and then it has certain timeframe i.e. two to three year in achieving the targeted objectives and eventually increase the performance.

Four major components of the objective

1) Customers issues

- Customer satisfaction will be the first priority of the store.  To understand and serve the customer better the store will open “customer feedback” mail box both for online and offline customer. This would enable the customers to have free choice of commenting whatever they may feel about the store.  Customer rating system for delivery time, quality of foods, prices of the food, variety of food choice, quality of customer services etc. will be developed after one year of getting open feedback and trying to improve on those open comments from the customer.  

The store will systematically work to reach customer at larger level. As a result of this plan, aim would be made to reach extra customer each year. Measurement would be made on which medium of communications are most effective in reaching the customer. If group mail on Facebook is effective then the store will work more on it. And make a target to serve at least 2000 extra customer each year. This would imply that by five year, the store would certainly be well known to most of the customer in Møre & Romsdal county.

2) Internal efficiency measures

- The store will makes sure to have efficient flow of food supply directly from the vendors. This may not be easy until and unless the store has a good networking system. That’s the main reason why the owner himself will be traveling to those Asian countries and establish good contact with the actual vendors.

Value stream mapping for information and flow of the products will be taken carefully. By this way, the store will able to update immediately if problems should arise in transport.   Alternative option of getting products from the other stores and vendors will be made as to ensure good delivering system for covering customer needs.

Zero tolerance policy for none delivery of order products would be the target of the store. This policy will ensure that the customer get what they pay for at the right time and at the right place.

3) Financial

- The financial target of the store is to increase the revenue by 25% in 12 months. This may seem uneasy to reach but financial target is of course flexible. By having such target, only by then, the success of store can be measure.

To achieve the target allocating budget to support business is important. No extra credit would be taken if until and unless that can create profitable income in a short period of time. To achieve efficient financing system, the store will start up the business only with those products which will generate immediate income.

The store will work on to balance the budget. This means the store will not be spending more than the income that the store will be generating with startup capital within two or three year. This literally means a careful decision will be taken for extra investment.  

The store will work hard on maintaining good warehousing system, which will check up and prioritize the products according to the demand of customers. The store will use local newspaper, radio and social media like Facebook, individual bloggers as to promote the products. In this way, the store will able to hold the capital, balance the budget and at the same time make some profits.

4) Innovation

- The store will look forward to use the most innovative logistics solution as to provide the best products to customer at reasonable cost. This means the store will gives great emphasis on both information and material flow by using the latest technology.

A good payment system would be developed on the website. This will enable the customer to make payment online. The encrypted technology system will be use so that the customer will feel safe to make payment online.

The store website will be updated frequently and good transport system in delivering customer order will be set up. The most innovative payment terminal will be made available for all customers.

 Delivery products to customer at the right time, right place, and right quality with right price will be achieved by innovative logistics solution of the store.

References:

1) Lecture notes & assignment from Mweiumo, Edward Deodat (2016), Molde University College, Specialize in Logistics.

2) Chaffey, D (2014). Digital Business and E-Commerce Management: Strategy, Implementation and practice. 6/E. Pearson.

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