Sanlu Q4

Q4

What can be done to restore consumer confidence in Chinese dairy products?

1.    Ensure the transparency of food safety report

For Government, they may:

a.    design new testing method/scaling for testing the ingredients of food

b.    publicize the food safety report immediately after checking before selling the product

c.    reduce the bribes case among companies

2.    Ensure more on food quality

Because nowadays higher expectations among consumers have increased corporate awareness of the importance of quality assurance.

Therefore, company should:

a.    improve accountability and quality assurance in the supply chain

b.    strengthen quality inspections of dairy products

c.    taking one or more of steps when considering investing in a new company

3.    Ensure knowledge of employees

By developing a stronger ethical culture:

a.    consider training programs and quality assurance processes that link product safety, consumer safety, and profit in employees’ minds

b.    encourage employees to identify quality as a company hallmark

c.    conducting training seminars in leadership and business ethics

Sanlu Q3

Q3 
What is the role of ethics in supply chain management?

Definition of Supply Chain Management

The network of retailers, distributors, transporters, storage facilities and suppliers that participate in the sale, delivery and production of a particular product. Besides, SCM can let an organization get the right goods and services to the place they are needed at the right time, in the proper quantity and at an acceptable cost.

Ethics in Supply Chain Management

Nowadays, society is concerned more about ethics within supply chain management in different aspects, and mainly in three aspects. The first one is the environmental effects. Public will concern about the treatment plants of water, treatment of solid waste and gases etc. The second one is the health and safety. Public will concern about the uses of pesticides, hormone-treatment of animals. And the last one is the consumer rights. Public will concern about the legislation about the right to safety, right to choose and the right to be heard.

For a company, there are three responsibilities for them to define the ethics process. The first one is the economic responsibilities to supply the right products and right services to their customers but not only think about the profit. The second one is legal responsibilities that those companies should obey the laws to perform the only right things. The last one is the ethical responsibilities that those companies should conduct business in a way that is morally consistent with the beliefs of society.

In the Sanlu case, different parties have the duties to perform supply chain management ethically

Retailers (Sanlu)

They need to ensure the quality assurance management has been done well. In fact, they need to ensure more on quality than on the price of the products. Also, they should ensure high visibility in the supply chain. Besides, they can hire more talented people with the high moral standard to ensure the steps have been done ethically.

Government

In order to strengthen the regulations and enforcement, they should launch a food recall system. If a food manufacturer becomes aware of a defective or unsafe product, he/she must halt production and sales. Then he/she will notify vendor and customers, report problem to AQSIQ and other quality control authorities. Otherwise, if the producer do not recall those problem products, the government will order a recall. This system can ensure those problem products will not sell to customers, and can ensure the quality of the products.

Social Media

When they discover some unethical cases of a company selling problem products or low quality products to the public, they should not hide the fact. They should report the truth to the public at the earliest.

Consumer

Although consumers may not have enough knowledge to distinguish whether a product is good quality or not, they should do more research of a product before they really buy it. They should try understand more on the product, to make sure they are buying a good product. Also, consumers can rather do a research of the company. As they can know the operation of the company, and even the best practices of the company, they can analysis whether it is worth for them to buy those companies products.

References:
Sanlu PDF
http://en.wikipedia.org/wiki/Supply_chain_management

Sanlu Q2

Q2

Referring to the case, why do companies outsource? What are the pros and cons for outsourcing?

Definition of outsourcing

Outsourcing basically mean allocating specific business activities to a specialist service provider. It may involve transferring employees and assets from one firm to another. Normally it is outsource the non-core activities.

Reasons of outsourcing:

1.   Can concentrate on its core activities E.g.

• Business strategy
• Marketing
• Product diversification

2.   Has competitive edge in its core activities

3.   Reduce the costs and the dependence on non-core activities

4.   Reduce different cost E.g.

• High taxes
• High energy costs
• Labor costs
• Production cost

Reasons of outsourcing about Sanlu

1.   Outsource the raw milk

• Get the supply from third parties
• Transfer the cost pressure of dairy farming and production to upstream suppliers

2.   Concentrate its core business on

• Dairy-product manufacturing
• Marketing
• Commit to dairy research and development
• Diversify its mike-powder products to suit different groups
• Product diversification

Pros of sourcing

1.   Reduce cost

• Salaries, operating costs, production costs (less workers and machine in production)

2.   Outsourced vendors are specialists with technical expertise

• Better quality, faster completion of task (higher efficiency)
• Easily plan risk-mitigating factors
• Share risk between both parties
• Resource optimization

3.   Can focus on core activities

• Competitive edge

4.   Less responsibility

Cons of sourcing

1.   Some with outsourcing HR / hiring activities

• Doubt on confidentiality of employee

2.   No information of working conditions & cost of outsourced company

• No control on the quality & process of outsourcing activities

3.   Different objectives of both parties

• Disturb strategic processes of both

References:

Sanlu PDF

http://en.wikipedia.org/wiki/Outsourcing

http://www.usnews.com/news/world/articles/2008/10/09/the-story-behind-chinas-tainted-milk-scandal

Sanlu Q1

Q1
How did the Sanlu milk crisis arise? Who should be deemed responsible for the crisis? Why?

In June, Jiangsu media reported a two-month surge in the number of babies diagnosed with kidney disease. The scandal broke on 16 July after sixteen infants in Gansu Province, who had been fed on milk powder produced by Shijiazhuang-based Group, were diagnosed with kidney.  On 15 September, the company issued a public apology for the contaminated milk powder. In addition, the authorities reportedly seized 2176 tons of milk power in Sanlu’s warehouses. An estimated 9000 tons of product has been recalled. The government Arrest and fire some relevant people as this milk crisis is serious and hurt lot of babies.

There are few reasons of the milk crisis.

• The growing per capita income in China
• Chinese people desire for Western diets
• The increasing dairy consumption and demand for milk and dairy products
• The Infant formula is more popular due to heavy advertising by producers. They convince many young Chinese parents to buy their product because of nutritional value and quality of their products
• The breastfeeding was declining in China
• Wealthier families also often opted to use infant formula to fit their busy lifestyles
• Some unscrupulous producers of infant formula had made and sold low-quality milk products for higher profit and personal gain
• The inter-regional competition in both product sales and milk sources intensified, dairies were pressured to keep their costs low, even at the expense of their product quality, in order to stay competitive.
• The milk center also mix with low-quality soy-protein power to lower production costs which is also illegally tainted with cheap and impure melamine scrap

Who should take responsibility?

Farmer

• An open secret in the dairy industry that adding melamine or other protein-boosting chemicals to milk
• They are greedy to earn more money instead of doing an ethical business
• Little education background àdon't know the impact of melamine
• They have no penalty if they give a poor quality of milk
• They did not sign any contract àdid not have clear guideline or standard of the milk

Supplier

• Provide the toxic materials (Melamine) in the milk powder

Milk collection station

• They keep adding melamine
• Since the raw milk is already polluted by farmer, the content of melamine is more

Sanlu

• Announce the accident to the public lately
• only focus on profit but ignore the quality control

Fonterra

• Since the price is so low compare with other dairy companies, they should question about why the price is so low
• They obtain the milk from different sources which are not registered

The (government)quality control department

• Fail to check the quality of milk content
• Allow the poisonous milk powder enter the market

Shijiazhuang officials

• Refuse to recall the Sanlu milk products
• Decide to inform public only after Beijing Olympics (late report)

Government

• Do not have a tight restriction on protein
• Have limited safety guidelines
• Have the responsibility to educate the customer
• lack of encouragement of breast feeding
• Impropriate on handling complaints (not hiding the complaints)

Retailer

• Should have social responsibility to ensure the safety of product
• Should have refund to customers

Consumer

• Too much concern on high price product
• Should be a smart consumer ( do more research to compare different brand)
• Too much trust on the “inspection free’ label àmistanken

References:
Sanlu PDF
http://www.usnews.com/news/world/articles/2008/10/09/the-story-behind-chinas-tainted-milk-scandal
http://www.theguardian.com/world/2008/sep/12/china

Sanlu Background

Background

Sanlu Group CO., Ltd. (SJZSGCZ) was a state-owned Chinese dairy products company based in Xinhua District, Shijiazhuang, the capital city of Hebei Province. It produced one of the oldest and most popular brands of infant formula in China. New Zealand's Fonterra owned 43% of Sanlu.

In September 2008, their baby milk powder has been found out that it contained melamine. Melamine can cause kidney stones and other complications. This news shocked the world. This made people to concern the food safety problem again.  

References:
Sanlu PDF
http://en.wikipedia.org/wiki/Sanlu_Group

HIT

Company Visit 5

Company Name : Hongkong International Terminal Limited

Company Address :  HIT Tower 1, Terminal 4, Container Port Road South,Kwai Chung, Hong Kong

Date of Visit : 27 March 2015

Schedule :

1. Presentation of company information
2. Visit Control Tower
3. Visit terminal

Company Background:

HIT is one of the busiest container ports in the world. It is established in 1969 and owned by Hutchison Port Holdings. It operates 12 berths at Terminal 4, 6, 7 and 9. It is very important to Hong Kong’s economy.  It has large amount of customers including Namsung Shipping (H.K.) Limited and Wan Hai Lines Limited. It has integrated supply chain network with logistics services.

Presentation of company information:

We have saw a model of HIT. It has displayed the area of each terminal. Also, the speaker has told us the owner and partner of each terminal. The business of HIT is mainly loading and unloading. It can move 30 times per hour for each machine. HIT has around 70% of transhipment which is also important business for Hong Kong. Besides, The staff has introduce different country terminal to us too.

Visit Control Tower:

We have visit the control tower which have separated into two teams. One is doing planning duty before the ship arrive the terminal and the other one is to control the activities when the ship arrived. It is real time processing system called OMS to supervise the situation of the terminal. Also nGen is a system to enhance the communication between partner and information transmit. It is less time consuming and increase efficiency.

Q&A :

1.      HIT owned a special management system called nGen, it is a system that control the whole function of the terminal. What are the competitive advantages you gained from it? If nGen encounter any technical or unexpected problems, are there any safety measures for HIT to continue the terminal operations?

nGen  is a system to control the operation of the terminal, including ship and yard planning, gate operations, and vessel operations; plus overall operations monitoring, equipment utilisation, productivity, and costs optimisation. Controller can find where the foods are easily. It enhances the efficiency of managing the terminal. Moreover, it has over 100 user-definable business rules for the controller to do the fine-tuned. It is user-friendly. HIT can handle more throughout by using nGen. As there are many professional technicians, the technical problems would be handled quickly.

reference: HIT: https://www.hit.com.hk/en/Innovation/Improving-Efficiency.html

2.      The terrorist like ISIS become more and more popular. What measures has HIT taken to ensure the safety of the cargos? How can you prevent the prohibit products inside the cargo?

As HIT would not know the goods inside the cargos, it cannot make sure the safety of the cargos. HIT can only trust their customers. It would know the background of the customer first. If their backgrounds do not have any problems , it would cooperate with them.

3.      The cost like the wage of labor is increasing. What measures has HIT taken to deal with the increasing cost?

The speaker did not mention in the visit. However, we guess the company could  try to decrease their operation cost and  their expense. Besides, the diesel fuel has been replaced by electricity in their handling operation. It can directly lower the cost and more environmental friendly. Next, the company might try to computerize the task in order to lower the labour cost.

4.      There are always typhoons hoisted in Hong Kong during summer. How serious would the typhoon affect your operation?

HIT operates 24 hours everyday. It only stops their operations, including labor and machine, during typhoon. Besides typhoon signal, it will depend on the speed of the typhoon. Until the typhoon have leave Hong Kong and it is in a safety situation, it will stop all the operation. If it is black rainstorm warning, HIT will operate normally.

5.      What are the effects to your company after the labor strike?

The speaker did not mention in the visit.

We think that it does affect to the company. No doubt, the shippers and other related companies have suffered a serious delay or forced to re-route in order to change another terminals. It directly affects company's profit. The most important thing is their reputation is affected. Since the company is providing the best, efficient and reliable service to customers, the labour strike influence the transit time and after the image of the company.

In fact, there are many well equipped and efficient ports which providing similar services. We think that Hong Kong is facing a serious competition and all companies want to reduce their operating cost especially the labor cost. HIT is not the one who suffer the problem, the industry is facing these challenges. In the long run, the workers in the logistics industry would be suffered the most. Also, the whole economy of Hong Kong will be affected and directly reduce the competitiveness.

6.      How does HIT get involved in corporate social responsibility?

As a leading private container terminal in the world, HIT also takes corporate social responsibility as important as its business. For HIT, environmental protection is their ongoing mission, in order to conduct its business in an ethical and socially responsible manner. Therefore, HIT get involved in many environmental protection activities, which included air pollution control measures, noise pollution control measures, waste management and resource efficiency, waste water and water conservation and energy consumption.

Besides environmental protection, HIT also get involved in other activities, such as re-build school in Hong Kong and Mainland China. Also, HIT has constructed some volunteers work among employees, i.e. visiting elderly people, to let them join the activities to get involved in the corporate social responsibility together.

7.      With the advancement of terminal business in Singapore and Mainland China such as Shanghai, Guangzhou and Shenzhen, what HIT is doing these years to keep its competitive edges and compete with other competitors?

Although Hong Kong has the advantage of deep harbor that many big cargo ships can still enter such small harbor, different from Mainland China, Hong Kong has limited land space for HIT to develop. Although there are already 9 terminals in Hong Kong for cargo shipping but its capacity has already saturated and it may not be enough to fulfilling the increasing demand of cargo shipping. This may lead some potential customers shift to using Singapore or Shanghai. So HIt has try to gain more land from Government to expand their business as to handle more ships. Also, the size of ships are going to be bigger and bigger, which means more capacity per ship, and more cargo carry to terminal and ship away. So increasing capacity of terminal is the main requirement to increase HIT's competitive.

Reflection

By visiting HIT, it is a good experience for us to learn about how the terminal operates in Hong Kong. There is interesting that visiting the controlling floor of HIT and taking the bus to run around the terminals. When visiting the controlling floor, we can see that how HIT employees control those machine in the terminal based on the information of the computer in a real time basis. Those computers and software are powerful that they can foresee the consequences if they wrongly calculate the weight of container and allocate the place of cargo accordingly.  

Reference 
https://www.hit.com.hk/en/Innovation/Improving-Efficiency.html