The Issues That Happened Occasionally

Published Date: 02 Nov 2017

1.0 Introduction

Nippon Express Company. Ltd was established in 1937 in line with the Nippon Tsu-un Kaisha Law as a semi-government transportation enterprise. This company was created by pooling assets of Kokusai Tsu-un KK (International Express Co. Ltd), which consolidated many of the nation’s light scale rail transport companies, and six other competitors, with additional funding deepened throughout Japan, and the government combined the transportation companies operation in all of the nation’s major cities into what would later become Nippon Express.

In1950, under the Express Business Act and the Commercial Law Act, the company was re-launched as a private concern. Since that time, Nippon Express has expanded and developed its business in tandem with the Japanese economy as a whole. Nippon Express has branches in 40 different countries, 223 cities 438 locations, with 17416 employees and the headquarters is in Japan.

Nippon Express is a logistic consultant, those providing one-stop business solutions that connect people and companies beyond national and regional boundaries, through diverse logistics modes, integration land, air, and marine transport.

The company established their group corporate philosophy since 2007, the three unique philosophies which are, "our mission", "our challenge", "our pride". This three components, mission, challenge, and pride have their own use of driving the company to achieve its goal.

Mission, to have a mission, the company will have a momentum and a clear path to stick with until its goal is achieved. Challenge, is how to create new ideas and value that expand the field of logistics. Lastly, pride, to inspire trusts every step of the way to achieve its goal.

Nippon Express Sdn Bhd is an international logistics service provider that spreads its influence globally. Nippon Express has 9 offices, 2 truck terminals and 8 warehouses throughout the whole of Malaysia. Since Nippon Express is providing courier services, the types of service they provide in each region in Malaysia are varied.

Nippon Express provides a more wholesome logistics service in Port Klang, Penang and Johor. This is because of the availability of warehousing there. Thus, a more complex process system is used in the area that is mentioned. Having only interviewed the Ipoh branch, we have been told of the various activities that happen throughout the process of taking in requests and delivering them in the perspective of the Ipoh branch.

The Nippon Express Ipoh branch is located at 7, Laluan Tasek Perdana, Medan Tasek Perdana, Jalan Kuala Kangsar, 30010, Ipoh. The main functions that occur in the office is monitoring and managing the requests that are sent by clients around the Perak region. The Ipoh branch has 2 large trailers to facilitate the courier services provided. There are 13 staffs that are employed to manage the branch in Ipoh.

According to Mr. Said, the interviewee, Nippon Express in Ipoh does not provide any warehousing services. The trailers will be sent to the client company or warehouse and the goods will then be uploaded into the trailers, which will then be sent to the destination requested beforehand. Though seem simple, there are various complications that requires mutual understanding of both Nippon Express and its clients to create a smooth transaction because of the limited resources that the Ipoh branch has.

2.1 Company’s Processes

Below is the diagram of the process flow explained by Mr. Said, an employee of Nippon Express branched in Ipoh:

Diagram: Process Flow

Step 1

The operation process in Nippon Express begins when a client sends in a request for courier services to Nippon Express Ipoh through the means of email or phone call.

Step 2

The requests are then taken in by the employees of Nippon Express and arrangement of date and time will then be sent to the clients to confirm the details. Nippon Express will also provide the time when the trailer will reach the client company or warehouse and the estimated time for the goods to be delivered to the destination. At this stage, Nippon Express’ staff will also inquire regarding the details of the goods – glass, plastic, food, temperature to store in and ideal environment that the goods must be stored in.

Step 3

Clients that are okay with the arrangements made by Nippon Express will then reply a confirmation via phone calls or email. If there is any mistakes in the details of the arrangements, clients can inquire and correct the error in the order. This step is to reduce any misunderstanding between Nippon Express and its client, ensuring a smooth transaction. Also, it allows better communication with its clients and understanding them better.

Step 4

After the confirmation is made, the staff in Nippon Express will then finalize the decisions and arrangements with the availability of the trailers and the staff involved prior to the day of loading. Trailers will then be sent to the client warehouse on the stated day on the request. Goods will then be loaded into the trailer.

Step 5

After loading the goods, the trailer will then move to the destination stated by the client without returning to the office of Nippon Express. Thus, this is the end of the process flow of Nippon Express logistics service in Ipoh. Throughout the period of delivering there is a grace period of 1-2 days to accommodate any unwanted situations – breakdown. When the client confirms the details of the arrangements, transaction will then be made.

2.1.1 Issues that happened occasionally

When asked about the problems the Ipoh branch faces, Mr. Said stressed that there are no major implications and issues that affect the services they provide. He continued on saying that the only problem is when the demands of the services in the Perak region overflow. In simpler terms, Nippon Express in Ipoh is unable to facilitate and take in requests from clients all at the same time because there are only 2 trailers that are available. However, the Ipoh branch will then contact Nippon Express’ Head Quarters in Subang Jaya to request for additional trailers for the excessive demand during that period of time. The request for additional trailers will then be sub-contracted to another provider. The request for the trailers from the sub-contractor will usually be handled by the main office in Subang Jaya.

Another issue that commonly occurs in the logistics industry is then mentioned by Mr. Said. He mentioned that trailers breaking down are very common and occurs every now and then. Since this is one of the structured problems that commonly occur, Nippon Express Malaysia, hired independent groups of mechanics that are on duty 24 hours every day. These issues and payments are handled in the Head Quarters.

2.1.2 Strength of Process Practiced

The main strength that can be observed is that the process Nippon Express Ipoh is very flexible and elastic. This is due to the handling of the operations through human rather than going through machines. Requests that are sent in by clients can be quickly replied and arrangements from both parties can be made spontaneously without the interference of any tedious protocols.

Besides, the process strategy that Nippon Express uses is similar to a process focus strategy, whereby the trailers are the equipment to provide delivery services. Thus, Nippon Express can cope with a more variety of requests that are sent it. Flexibility in a service industry is one of the competitive advantages as they cater to clients from different sectors of the industry.

2.1.3 Weaknesses of Process Practiced

Being one of the main strength, human errors are bound to happen if there is no usage of computers and IT to help. Requests that are approved are bound to have mistakes in them because of the various meanings of words that are ambiguous. Thus, it is very important that Nippon Express also uses computer to aid them in the operation processes to ensure a more reliable service for the clients.

Having only 2 trailers to do the courier service is very risky. Accidents that happen may cause blockage in terms of services and productivity. Arrangements and schedules are to be rearranged and rescheduled in order to cope with any unexpected incidents. Though Nippon Express does have outsourcers that provide trailers in urgent times, there will sure be a delay and a level of uncertainty and panic among the staff and employees causing unnecessary impact to the organization.

2.2 Layout

It is clear that Nippon Express Ipoh uses work cell layout to organize its staff and employees to ensure optimum performance. Though we are unable to attain the blueprint from Nippon Express representative, we drew a simple illustration that can represent the layout of the office in Ipoh.

Nippon Express Ltd. located at Jalan Kangsar, the location of Nippon Express Company had make convenient to customers because it is place at electronic shops such like Panasonic and machinery company. Besides, Nippon Express Company had a grand design in outlook with white signboard.

In the Nippon Express company Ltd, the manager’s office is facing to the main entrance whereby the branch manager can easily observe the staff work performance. Above of the door on the manager’s office, there hang the certificate of Nippon Express which acts as a tool to boost the morale of employees during work and increase the team spirit. Work schedule are also placed in order to remind and disseminate the working times of individual duties during specific days. There are no hindrances between the entrance of the office to the manager’s office that may obstruct the employees when walking into the manager’s office to discuss various urgent issues that may occur with their branch manager.

However, the work cell implemented in Nippon Express Ipoh ensures close contact between the staff. This layout allows staff to interact and communicate information and problems that occurred without much wastage in time or resources. Since Nippon Express Ipoh mostly receives the orders from emails and phone calls, there are no receptionists in order to facilitate walk-in customers. Also, there is small area for a documental rack for information system, the printer located at a common point of the office whereby everyone can easily access the printing facility. All documental racks are placing at the small area side of the office which can easily for the employees movement.

As conclusion, there has a well office layout of Nippon Express which all the employees are connected to each other. Therefore, Nippon Express company is a successful company because the good office layout had lead them move more faster and the information is flow faster, this is the one of the competitive advantage from other company

2.2.1 Strength of Layout

One of the advantages of the layout that is used by Nippon Express is that the layout used does not hinder any communications when various information are disseminating at once. Individual work stations allow employees to perform the job required easier and faster without much hassle from when compared to table sharing.

Furthermore, the branch manager’s office is located at the heart of the shop lot, allowing a thorough observation on the performance of individual employees and understanding them better. In addition, being at the center of the office lot, employees can easily access the branch manager without any hindrances. This is very important during urgent hours and emergency situations.

2.2.2 Weaknesses in Layout

One of the major weaknesses in the layout above is that the working equipment – printer, Photostat machine – are shared by all the employees in the office. Thus, when there is a need to share, there may be a delay and an obstacle in performing the task more effectively.

Besides, the documents and files of requests are located at the far back of the shop lot. This can cause employees to walk a distance before being able to gain important information on of previous transactions.

3.0 Literature Review

3.1 Outsourcing

In recent years, a lot of companies have adopted outsourcing to help them manage the operations in their companies. Outsourcing means "buying a service from an outside party (Agent) who is beyond the managerial control or perimeter of the client organization (Principle), on an ongoing basis for a transaction fee" (Banerjee, Arindam; Williams, 2009). Other than that, outsourcing was used to ease up capacity shortages and also increasing the production of the companies. Familiarly, outsourcing decision of manufacturing processes was determined by the capacity utilization rate and also focus on individual process (Dong,S.C.; Yi, C.K.; Tz, Y.C., 2007).

If one of the companies wants to adopt outsourcing, the company must understand the key dimension that will influence the degree of outsourcing. The researchers and practitioners found that the key dimension that will influence outsourcing are the expertise of the vendor, the environmental stability of the offshore domain, the physical barriers to outsourcing complex business process such as communication problems and proximity issues; the possibility of knowledge leakage from the outsourcing domain and also the consideration of scale and cost (Finlay and King, 1999).

Besides that, researchers found that IT outsourcing creates strategic advantage for firm in terms of potential market opportunities and also access to highly skilled labor at low cost (chen et al., 2002). However, even outsourcing has brought or created a lot benefits, but it also entails numbers of risk factors (Auburt et al., 1999; Earl, 1996). Dhar and Balakrishnan (2006) has found that the risks factors was in knowledge; people; contract management; performance measurement; formulating scope; deciding the budget and schedule estimates; knowledge/expertise; cost and time estimates; measurement of performance and quality standards. Other than that, the researcher have also categories the outsourcing risk in contract category; privacy and security; decision process; scope; loss of IT expert; hidden costs and also diminished tech returns (Tafti, 2005).

3.2 Offshore Outsourcing

Evaristo (2005) found that offshore outsourcing was defined as "the delegation of non – core operations or jobs from internet production within a business to an external entity (such as a subcontractor) in a country other than the product or services will be sold or consumed". In another words, offshore outsourcing is the practice of hiring an external organization at foreign countries (oversea) to perform some business functions in the country other than the one where the products or services are actually manufactured or developed.

A lot of companies was adopt offshore outsourcing, that is because of offshore outsourcing can help the companies to achieve major benefits such as reduced cost for the products or services; increase flexibility; higher quality of services; and access to new technology (McFarlan and Nolan, 1995). McAulay et al. (2003) found that cost was the major factor for them to choose offshore outsourcing. Besides that, a lot IT managers was reported that offshore outsourcing can help them to enhancing competitiveness; improving service quality to their customers and also creating strategic advantages for their company.

However, even outsourcing has brought or created a lot benefits, but it also entails numbers of risk factors (Auburt et al., 1999; Earl, 1996). The risk factors will be the degree of expertise in outsourcing and IT operations on both client and vendors side; uncertainty due to imperfect information regarding market demand as well as technological changes; loss of institutional knowledge like the chance that knowledge in the enterprise will eventually be lost as employees are displaces or retrained in reorganization; and loss of control over outsourced functions like cultural differences, language barriers, geographical and time zone (Chen et al., 2002; Evaristo et al., 2005).

Pfannenstein and Tsai (2004) found that if the companies wish to implemented offshore outsourcing, the company have to develop improved methods for evaluating the desirability of outsourcing projects and also must evaluating their value. And the researchers believe offshore outsourcing will be implementing by all the companies after 10 years.

3.3 Trade-offs between Outsourcing and Information Sharing

After reviewing 10 journals articles, most of the researches identify that outsourcing able to save cost (Amold, 2000; Aubet et al., 1996; Bienstock and Mentzer, 1999, Kriss, 1996; Meckbach, 1998; Hendry, 1995; Welch and Nayak, 1992). The savings of cost are due to the vendor or service provider able to supply goods or services much cheaper even with added transaction cost, operating cost (Bers, 1992; 2000, Gurbaxani and Whang, 1991). However, outsourcing today is different from outsourcing in the past. To make an organization’s perform more efficiently, it must 1st provide valuable information to an external party, also known as contract manufacturer (CM) (Chamberland, 2003; Gottfretson et al 2005; Venkatraman, 2004). The natural question in mind, is whether the benefits of outsourcing is more that the costs of information sharing with a 3rd party.

In today’s hyper-competitive environment, characterized by constant change, market unpredictability, and the pressure to reduce cost and cycle times, coupled with the globalization trend has provided further impetus to the growth of outsourcing (D’Aveni et al., 1995). The optimal shipping quantity and the optimal wholesale price of the producer, the optimal transportation price of the provider, and the optimal purchasing quantity and retail price of the distributor are characterized and evaluated in a decentralized (in which every party is an independent profit seeker), a partially centralized systems (in which two parties together to maximize their joint objective but the other party acts independently). This statement shows clearly that organizations today only look forward to making individual profits.

Many researchers have investigates supply chain contracting issues under demand information asymmetry. Corbett and de Groote (2000) and Corbett (2001) study the cost information asymmetry issue in the context of EOQ and inventory models, respectively. Ha (2001) extends Corbett and Tang’s (1998) model to a price-sensitive stochastic demand setting. With an example of the power function distribution of costs, we illustrate that the wholesale price offered by Original Equipment Manufacturer (OEM) for each semi-products is the same under integration and turnkey.

According to Carbone (2004), Hewlett Packet (HP), claims that the organization had shared too much strategic information with its outsourcing party. This eventually leads to giving control to the CM and suppliers. Thus, it is important to control the amount of information that is to be shared among the alliances in order to keep the status quo of the partnership between OEM and the CM.

According to Kroes and Ghosh (2008), that through outsourcing an organization can be able to attain competitive advantages among competitions. It is important to manage a strategic alignment between firm’s competitive priorities and outsourcing activities (Kroes & Ghosh, 2008). This means that the benefits of outsourcing a firm’s activity to a CM outweighs the costs of sharing valuable information as long as there is proper management of the firm’s competitive priorities and knowing where the firm wants to go.

3.4 Strategic Outsourcing

Strategic outsourcing is the operation of shifting a transaction previously governed internally to an external supplier through a long-term contract, and involving the transfer of staff to the vendor (Lacity and Hirschheim, 1993; Barthelemy, 2001). Outsourcing has become a critical strategic decision that can allow organizations to develop and leverage the capabilities required to compete in today’s global business environment and greatly influence the performance of the organization. Besides that, outsourcing is also one of the competitive advantages for the organization. Therefore, outsourcing is a trend that will continue over time.

There are many authors have studied the competitive advantages that outsourcing can have on the firm. The firm should focus on activities in which it possesses a sustainable competitive advantage, and externalize those in which it competing companies have a specific competitive advantage (Venkatesan, 1992; Quinn and Hilmer, 1994; Sislian and Satir, 2000). Besides that, outsourcing also has an effective influence on cost savings and enables the organization to reduce the operating costs (Jiang et al, 2006; Kimura, 2002).

Transaction Cost Theory

The two main outsourcing approaches are Transaction Cost Theory (TCT) and Resource-Based View (RBV). Transaction cost theory has been dominant means of explaining outsourcing as an economizing approach whereby cost efficiencies are achieved by assigning transactions to different governance mechanisms. For examples, asset specificity, small number bargaining and technological uncertainty. Besides that, Transaction cost theory specifies the conditions under which an organisation should manage an economic exchange internally within its boundaries and the conditions suitable for managing an economic exchange externally (Williamson, 1975 Williamson, 1985)

Resource-based View

Resource-based view is use to examine the role of specialized capabilities as a potential source of value creation in relationships between firms. Some examples are capability complementary, strategic relatedness, relational capability-building mechanisms and cooperative experience. Besides that, resource-based view which indicate the firms as a bundle of assets and resources that if employed in distinctive ways can create a competitive advantage (Peteraf, 1993 and Barney, 1991). On the other hand, proponents of the resources based view also argue that heterogeneity in an organization’s knowledge-based and capabilities explain differences in performance and the sustainability of a competitive advantage (Teeca et al., 1997).

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Strategy outsourcing is very important as it brings the competitive advantages to the organization such as the specification of activities and the reduction of operating costs. Outsourcing must be a distinctive feature of organization in the industry because if most of the firms in the same industry were also applied outsourcing then the strategic advantage would no longer be valid (Porter, 1996)

3.5 Applying Outsourcing Concepts into Nippon Express

Being an organization which initially originated from Japan, Nippon Express ventured into Malaysia without most of its resources. Thus, in such circumstances offshore outsourcing is required to handle daily operations efficiently and effectively. According to the interview session, it is found that Nippon Express in Ipoh practices the use of contract service provider in terms of trailer rental and local mechanics that are on the watch 24 hours a day. Since Nippon Express main headquarters is in Japan, the resources Nippon Express holds in Malaysia is limited, thus by using offshore outsourcing, Nippon Express can be able to meet the demands and reduce and interference in the daily operations of the services Nippon Express provides.

In accordance to the concepts discussed, it is also important for Nippon Express to manage a proper strategic alignment with its outsourcing activities to form a seamless interdependence relationship between the Nippon express and the contract provider. According to the research journals and articles mentioned, an organization can attain competitive advantage when strategic alignment between its competitive priorities and its outsourcing activities. As such, Nippon Express should keep a clear goal in order to achieve competitive advantages through using outsourcing. Sharing too much information on its core competencies can cause harm to the organization as an outsource provider can eventually integrate vertically and increase the heat of the competition.

A large organization such as Nippon Express needs can implement strategic outsourcing with the contracted parties. Being in a foreign country, far away from the base country in Japan, Nippon Express needs to form transaction based relationship whereby, it is able to perform activities at a much lower cost compared if Nippon Express had done it on its own. One of the activities where Nippon Express can outsource is its IT databases. Nippon Express can hire a specialized company to maintain databases regarding the information of clients to improve work efficiency. However, it is also important to ensure the privacy of the information not to be sold to close competitors. Thus, databases of valuable customers must be maintained by Nippon Express itself. Since IT is an ever changing industry, it is difficult for Nippon Express to keep its system up to date every now and then, thus, hiring third party to operate the database system may reduce the technological uncertainty that may appear.

It is also at utmost importance that Nippon Express then creates a trusting relationship with the outsourcer through countless business transactions together. When a positive relationship is achieve, Nippon Express will then attain strategic outsourcing which translate to competitive advantage in the near future.

4. 0 Conclusion

As a whole, Nippon Express is an international organization based in Japan. Nippon Express provides logistical services which rival some of the major organizations such as DHL and Fed Ex. Through an interview conducted, we learnt about the organization’s processes and office layout of a Nippon Express branch in Ipoh. This information is deemed as valuable as it is not usually made known to clients and customers. Though being a small branch of a larger organization, Nippon Express Ipoh operates as an important link between the north and south branches in Malaysia. The staffs are to monitor and arrange demands from clients nearby to ensure the seamless flow to make sure the service provided is efficient and effective.

Through conducting the fieldwork and a surface research on a logistics company, we understood the key processes that Nippon Express Ipoh uses. Starting from the request of courier service to arranging the specific time and date where both party are satisfied takes a lot of focus and attention. Also from the confirmation to the loading of goods from the client’s warehouse, arrangements are made in order for the service to be reliable and trust worthy. In addition, when the goods are being sent to the destination, there are chances of the trailers breaking down half way and delay may happen. We also learn that Nippon Express outsources the mechanics that are on the call for 24 hours to minimize the unwanted losses in terms of time and money.

Nippon Express layout in its Ipoh branch serves as an eye opener after learning about Operations management. The reasons the tables and equipment are placed play an important part in ensuring a comfortable and efficient work area for the employees. The workstations are placed as such is to encourage interaction and teamwork between one another. Also, the office equipment is also placed in an easily accessed area for everyone to use. The branch manager’s office is also located at the center of the shop lot in order to monitor the individual performances of the employees and staff while also provide an easy route for employees to access to when emergency situations occur.

Outsourcing is also an important criterion in a logistics firm. Through the interview, we understand how Nippon Express, a logistics company, uses outsourcing to solve various structural problems and issues that commonly occur such as break down and delays. Through the literature review, we understand about how a company can use third party firms to solve problems and limitations out of the home country by using offshore outsourcing. This outsourcing concept relates well to Nippon Express as it is originally based in Japan. Having limited resources in Malaysia, Nippon Express uses outsourcing to fulfill the limitations that hinder the service it provides.

We also learn that strategic outsourcing is very important to create a competitive advantage in terms of cost and efficiency. It is important for Nippon Express to manage a good strategic alignment with the competitive priorities and its outsourcing activities to ensure that the sharing of information with a third party is worth for the growth of the organization. There are also 2 levels of outsourcing – TCT and RBV. TCT is an outsourcing concept which supports the idea that outsourcing helps an organization reduce cost in its daily operations because of various factors. RBV on the other hand, suggests that organizations should create value between the collaborated firms in order to achieve better understanding of the needs of the outsourcer and the organization.

There are many ways to improve the current Nippon Express, especially in Ipoh. One of the ways is to purchase more trailers to fit the demand of the clients in the region Nippon Express Ipoh covered. It is important that they do not depend solely on an outsourcer when the lack resources. Depending on an outsourcer only gives the outsourcer more bargaining power of the price and these little things influences the performance of Nippon Express.

That being said, Nippon Express Ipoh is doing a good job through the service they provide to the clients. The process of the operation is simple and takes into consideration the many factors that may affect the outcome of the service. Thus, Nippon Express should continually provide services that can satisfy the clients that requested for its service.

Lastly, we would like to take this opportunity to express our gratitude to Nippon Express Ipoh for providing us with information regarding the process and layout of the office. We would also like to thank Mr. Said, the representative of Nippon Express by sparing his time to have an interview with us.