Team Zebra

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Nisha Vaidyanathan's picture
Video submissions: 

RoboCanada Case

Team Zebra

Good afternoon. We are Team Zebra. In this short video, we present our recommendations for RoboCanada Inc., who seeks to leverage growth opportunities in Asia.

Currently they have 2 logistic hubs: one in UK and the other in Canada - to service their main markets in North America and Europe. In Asia, they have identified new markets in Kazakhstan, Pakistan and South Korea. Now we need to find the 3 best countries to build a new logistic hub. The hub would primarily be supplied from existing factories in Southern Europe and Northern Africa.

 

We have analyzed the Zurich risk room data and have come up with our recommendations. We compare the various risk factors consisted of 7 countries, mostly spread in Asia and eastern Europe, to gain from the proximity to the new markets and provide dynamism and resiliency in the supply chain.

Following is our brief agenda:

  • What are the key considerations for a logistic hub?
  • How do we select the best 3 countries?
  • What are the risks & how do we mitigate these risks?
  • What are the other areas of concern?
  • Conclusion

 

First we find what is the important risk factor we should consider when building a logistic hub based on data of existing logistic hubs. Second, according to the important risk we identify and the situation in existing logistic hubs, we find the best 3 countries. Then we will analysis the risk and try to mitigate them.

Lastly, we will give more consideration about risk.

What is a logistic hub?

Logistics hubs provide not only traditional activities such as storage, but also value-added logistics services such as labelling, assembly, semi-manufacturing, and customizing. These centers combine logistics and industrial activities effectively in major port areas to create country-specific and/or customer-specific variations or generic products.          

What is the main consideration for a logistic hub?

Reliability, speed of response, flexibility, cost and quality 

How do we select the best 3 countries?

Method 1

We use Principal Component Analysis on the Zurich risk room data for the year 2014. We try to explain the data using a two-factor model. The quality of the model is 64%. Factor-1 explains 49% and Factor-2 explains 15%.

The main components of Factor 1 are as below (1 – highest & 5 – lowest):

1. Transport infrastructure

2. Corruption

3. Burden of customs

4. Electricity supply

5. Expropriation

The main components of Factor 2 are as below (1 – highest & 5 – lowest):

1. Efficacy of enforcing contracts

2. Information infrastructure

3. Burden of government regulation

4. Political violence

5. Seismic disasters

Method 2

We have used the simple risk factor rating system, from IBM SPSS tool, to derive our final rankings. First we rank the 9 countries (2 benchmark and 7 potential) across 6 different risk categories. Then we combine all the rankings and arrive at the final rankings for consideration. 

The top 3 countries as per our rankings are:

  1. Malaysia
  2. China
  3. Thailand

 

Few interesting trends are seen in this ranking method, for example Malaysia has really emerged as even less riskier than Canada in terms of business risk. Similar trend is seen in social risks where China is more favorable than Canada.

What are the risks & how do we mitigate these risks?

Now that we have established the top 3 countries, we compare their risks with that of the U.K. In these graphs we can see in red how the U.K. ranks and in blue how Malaysia, China, and Thailand compare in all the risks we have measured.

For example in this slide (slide 15) we can see that Malaysia is much riskier than the U.K. in human rights.

China in this case shows greater risks due to natural disasters and Thailand has risks related to government regulations.

 

Now Let us observe the trends in risks from 2007 to 2014.

 

From 2007 to 2014, Malaysia Risk Trends have reduced. The exceptions are political and technical risks. For China and Thailand – there is an increase in business, political and environmental risks.

We have listed the risks involved with working in these countries as well as the countries most affected, the significance to RoboCanada and the control the Company has over them. We also pointed our recommendations to mitigate these risks.

Risk management plan

What are the other areas of concern?

Top Risks to Supply Chain

Electricity supply, and Information infrastructure: To mitigate these risks the company can work with the local authorities improving the local infrastructure. As for electric supply new renewable sources are available and will help prevent energy shortages.

Corruption: Robocanda has to take into consideration that by installing a hub in a foreign country they will face cultural and social differences. To overcome this the company has to invest in the people as well. The investments will not only be training for employees but also investing in the community development.

Additional Risk management

Zurich risk room is not the panacea and after comparing major factors influencing disruptions in the supply chain as published by the world economic forum, we have identified few parameters which are not accounted directly in the Zurich risk room, like extreme weather, terrorism, maritime piracy to name few. Further analysis of various additional risks identified from the world economic forum report, shows that these important factors can affect the final decision as well. China and Malaysia are still doing well in comparison with UK, whereas we need to come up with the risk mitigation plan for Thailand for extreme weather as well as terrorism. The risk management plan for extreme weather, terrorism as well as maritime piracy is to build redundancy through supply chain and hedge the risks through insurance.

The Triple – A Supply Chain

In conclusion, we would like to say that the best supply chains aren’t just fast and cost-effective.  They are also agile and adaptable, and they ensure that all their companies’ interests stay aligned. The choice of the three countries showcases the triple-a strategy and how RoboCanada can benefit by implementing these strategies.

We thank you for your time and consideration.

Appendix 1:

Component Score Coefficient Matrix (using SPSS)

 

Component

Factor 1

Factor 2

Inflation

.081

-.147

Burden of government regulation

.058

-.212

Burden of customs procedures

.096

-.056

Prevalence of trade barriers

.066

-.084

Trading across borders

.082

-.061

Efficacy of enforcing contracts

.024

.236

Credit availability

-.013

-.107

Exchange rate fluctuations

.084

-.045

Quality of labour

.069

.134

Corruption

.097

.008

Human rights

.076

-.002

Political violence

.073

.203

Expropriation

.088

-.101

Currency inconvertibility

.071

-.071

Epidemics

.039

.158

Seismic disasters

.021

.179

Storms and floods

.040

.022

Transport infrastructure

.097

-.066

Electricity supply

.093

.081

Information infrastructure

.063

.228

 

Total Variance Explained

Component

Initial Eigenvalues

Extraction Sums of Squared Loadings

Total

% of Variance

Cumulative %

Total

% of Variance

Cumulative %

1

9.861

49.306

49.306

9.861

49.306

49.306

2

2.902

14.511

63.816

2.902

14.511

63.816

3

2.122

10.610

74.427

 

 

 

4

2.037

10.183

84.610

 

 

 

5

1.403

7.013

91.622

 

 

 

6

.916

4.580

96.202

 

 

 

7

.451

2.255

98.458

 

 

 

8

.308

1.542

100.000

 

 

 

 

 

 

Appendix 2:

Appendix 3:

 

 

 

 

 

 

 

 

 

 

References: 

Bibliography

  • Zurich risk room
  • New Models for Addressing Supply Chain and Transport Risk, World Economic Forum
  • HBR, The 21st century supply chain
  • Pankaj Ghemawat, Redefining Global Strategy