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Establish a Logistic Company in Hungary ——Feasibility of logistic center

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Corvinus Logistics company of Budapest
Faculty of Business Administration
Corvinus School of Management
The Possibility of
Establish a Logistic Company in Hungary
——Feasibility of logistic center
Made by (Name)
Program (Full-time MBA)
I hereby confirm that every text, figure and table is original and my own work and does not rely on any other document or contributor (except for parts with proper references, according to the thesis guide)
Table of Contents
TOC o “1-3” h z u 1.Introduction PAGEREF _Toc436748814 h 41.1.Industry Definition PAGEREF _Toc436748815 h 41.2.Case Incentive PAGEREF _Toc436748816 h 51.3.Data-Compiling and Analysis Methods PAGEREF _Toc436748817 h 61.4.Thesis Syllabus PAGEREF _Toc436748818 h 72. Literature Review PAGEREF _Toc436748819 h 72.1. Business Case Framework Study PAGEREF _Toc436748820 h 72.2. Trends from Recently Global Economy (One Belt and One Road) PAGEREF _Toc436748821 h 82.3. Core Competencies of the Firm PAGEREF _Toc436748822 h 223.Summary PAGEREF _Toc436748823 h 254.Bibliography PAGEREF _Toc436748824 h 27
IntroductionIndustry DefinitionLogistics is a science of transport, storage, loading and unloading, handling, packaging, distribution processing, distribution, information processing, which integrates the operation of the organization and management, accordance with the needs of customers. In order to meet the needs of customers and goods, services and related information from the origin to the consumer with efficient, low-cost flow and storage of planning, implementation and control process.

Wait! Establish a Logistic Company in Hungary ——Feasibility of logistic center paper is just an example!

But from the start of the whole stuff, which is the military related procuring, maintaining and transporting material, personnel and facilities, plus the communication and needs between multi-region, the variety of the object leads the different function in the logistics industry. But most of the activities and fields belongs to the outbound logistics, such as the procurement logistics, distribution logistics after-sales logistics, disposal logistics, reverse logistics, global logistics, Domestics logistics, it’s facing the end user. And the inbound logistics is the main process from suppliers to manufacturing for their movement of components materials and finished productions.
Generally speaking, logistics is a complex business system which includes information communication and control in the process of planning, organizing and managing activities to provide good and service as a properly way.
Case IncentiveThis section justified the choice of the subject.
This paper presents a case on the establishment of an inbound third party logistic firm in Budapest Hungary. The object of the paper is to presentation of an ideal strategic logistic firm that is conceptually successful in its entire business performances and satisfies the needs and wants of customers in the chain. The company shall be formed and have a strategic associations with suppliers and customers alike, and this shall help in improving the use of their resources, and which include transportation fleets and the warehouse space. In addition, the company aims to utilize its processes and expand operations in other countries in Eastern Europe with the goal of being a large third party logistic company.
The business case was inspired by the huge economic growths in Central-East Europe and the capital flow from China, especially the established of the AIIB (Asian Infrastructure Investment Bank). This must be a huge strategy to escape the transportation blockade from West-Europe countries. And considering the location of the Hungary, as a geographically, military fact central since the I world war.
With the cold of the world economic, the developing country is the most potential area to make big progress based on its non-current market and its consumption abilities.
Also, there is a very important fact which heavily impacting the choice which can be founded related to the domestic demographic dividend in China, in that reason, china really need external market to make sure the high speed development.
In this way, both parties can be profitable from the cooperation and get rid of the economy weakness.
Data-Compiling and Analysis MethodsTo analysis the case of logistic company, I applied the interviewing, Traditional business analysis method and the global macroeconomics and its trend, the last part which basically depends on the politics cooperation relationship and investment area by main economic entities.
The detail analysis is mostly related to the currency, investment and focus on the Central-East European area.
Thesis SyllabusFirst, I will Show the background and the industry history and the situation in Central-East Europe. Then, the Advantage and Disadvantage of the business case (The logistic center), plus the connection to other region and China. In general, the connection is the most important, because it’s not only related to the logistics industry but also linked the overwhelming majority of the beneficial business in the world. At end of the exposition, I will elaborate the method to establish the logistic company and give me recommendation.
2. Literature Review2.1. Business Case Framework Study
This thesis shall develop a narrative geared towards establishing a logistic company in Hungary and make leverage from the proposed silk road connecting Eastern Europe to China and the rest of the world. Moreover, the company must be established combining competitive advantage and core competencies that are consistent with effective operations strategy. According to Ross (20), logistics companies must understand of the role of logistics in modern trade and business. Moreover, Kappauf, Bernd and Matthias (4) insists that logistics comprise planning, control and execution of goods and information flow, on one hand, the logistic firm and on the other, suppliers, customers and within the company itself. Hence, a traditional distinction is made between these logistics areas when it comes to the flow of goods through a company, from acquisition to the market, and they include procumbent, production and distribution. However, in the present, definitions of logistics supplement the traditional definitions to incorporate more elements. They include disposal logistics, service management, and operational maintenance (Baykasoglu and Bartık 47). Chapman, Claudine and Jay (633) use the available data to develop a new conceptual framework on Innovation in logistic services and towards a new business model. The authors insist that a logistics firms needs to promote dynamism and fitness in a system to develop a sustainable competitive advantage (Musiolik 58). The problem is creation of an unambiguous and constant system for the performance creation of the company. The object of this paper is to analyze and present the critical strategies, success factors and technologies that shall allow this small start company to become beneficial and successful in its operations. Further, the paper shall be heavily reliant on the role of Asia Development bank in pushing for the success of the company, and through its areas of operations.
2.2. Trends from Recently Global Economy (One Belt and One Road)The international financial crisis still deeply influence continues, and keeping in a depth adjustment. By this situation, all countries are respectively taking some fiscal and monetary policy, this played an important role in stabling markets and turn around to a certain extent. But the financial crisis is more complexity than ever before.
In the fact, the fundamental of the crisis is the end of the previous round kinetic energy provided by the science and technology and industrial revolution. Plus the economic system and development model potential tend to vanish with the revealed of the existing economic governance mechanism and structure defects gradually. It caused a series of problems, such as the weakness of the growth, the rising unemployment, high debt, trade and investment down turn, the real economy stalled, high financial leverage, international financial and commodity market volatility.
As we all know, China is the fastest country in economy in recent decade and its potential still not released. The chairman Xi bring forward a proposal which point to net the potential area and willing to establish a regional economy network to push up the global power and resolve the effects of the financial crisis, this blueprint is named ‘The Silk Road Economic Belt and The 21st-Century Maritime Silk Road’ which short for ‘The Belt and Road’. (The bellowing will shorthand for ‘B&R’)
The B&R is a regional cooperation platform depend on the existing multilateral mechanisms between China and relevant countries, the symbol is come from an ancient history, ‘silk road’, carrying the banner of peaceful development and develop an active partnership for the mutual political trust, economic integration community stand on a common fate and responsibility.
The B&R is throughout the Eurasia continent and one head is vibrant East Asian economic circle, another side is the European economic circle. The B&R have two ways, one line is start from the middle of China via central Asia, west Asia to the Persian Gulf and the Mediterranean; the another line is start from China to the South Asia, and end at the India Ocean.
The initiative of the is helping China and Central and Eastern European counties are rediscovering the immense economic potential that lies underneath, that has virtually remained unexploited for generations. It is important to reiterate that China has the largest GDP in the world, measured in PPP, and most of the nations in Central and Eastern Europe are emerging economies, and hence the link shall provide hope for renewed economic realizations. According to Xihuanet (n.d), the trade volume between the central and eastern European countries was approximated at $60.2 billion last year, a $23.7billion rise from the $43.9 billion reported in the year 2010. It is noteworthy to indicate that Xihuanet (n.d) reported that companies from China have invested more than$ 5 billion in those European countries, and that the central and eastern European countries have invested an approximate $1.2 billion in china. The countries in the region are playing to each other’s full comparative advantages, for instance, the countries in Europe and China, and others in central Asia are specializing in different industrial products (Pei and Wen 7). Moreover, China and the European nations have liberalized trade, and this can lead to a vibrant economic activities within the trade route mentioned above. However, Good (288), there is a state of virtual stability in the form of comparative advantage that occurs at the industry level, although changes have been hugely predicted over the years. In the present, systems of comparative advantage show more of the past benefits of the countries in their pursuit of future specialization. It is important to note that Central European countries have changed a lot over the last couple of years, transforming their comparative advantages and disadvantages. However, the pattern of trade between the CEE countries and China and their implication has been analyzed in the light of two concepts: international separation of production process and intra industry trade. International separation of the production process implies global division of the value added chain and this provides for the development of deeper specialization. On the other hand, intra-industry trade provides for horizontal and vertical differentiation of goods. An rise in the percentage of intermediate products in China and CEE countries affirms the long held belief that these countries are extensively involved in global separation of the production process in the region. The gap between China and CEE countries remain large, but the increasing rise in domestic production includes the rising fraction of imported inputs that can lead to vast competitiveness in other sectors that are downstream in these nations. The paper examines the level of symmetry between China and CEEC nations and the likelihood impacts on the logistics business, and a detail provision of trade statistics augments these generalizations. China trade with Balkan and Baltic nations has remained relatively single way, which is consistent with the traditional division of labor, in accordance with the comparative advantage theory. On the contrary, China’s trade with countries in Central Europe, and in particular, Slovakia, the Czech Republic, Slovenia, Austria and Hungary reveals a considerable and fast rising double way trade, and this affirms solid productive structures exists and converges with those in China and the rest of the Industrial world. The differences in CEE countries have implications for adjustment costs, as they are against to the smaller, in particular, intra-industry trade against an inter-industry trade, in which a rise in specialization means limited number export-focused industries. Therefore, CEE and China are fully utilizing their advantages.
The logistics business is completely dependent on the region’s infrastructure and trade between different parts of the region. Rail, road and water air means linking Hungary to Europe and Asia can be instrumental to the development of the competitive edge of the firm. This is because logistics involve the flow of information and trade throughout the entire supply chain system. The logistics encompass everything from the flow of products and service to management of incoming raw materials, production, and storage of finished goods and making of delivery of the final products to customer and even after sale services. These are the gaps the new logistics company shall fill a company established in Hungary, but operating in specifically CEE and China and expanding throughout the global world. The scale of logistics has changed a lot from the evolution of strategic linkages and new technologies that are provide more a platform for dynamism and responsiveness. The increasing value of logistics is directly related to increasing globalization of trade and liberalization of trade practices, as firms are increasingly seeking new markets, while at the same time pursuing higher production efficiencies, and tap new technological advantages beyond their own borders. The fall in trade barriers and the growth of state of the art technologies has increasingly contributed to a high value in logistics. In the present, logistic business are concentrated in purchasing management of inventories, distribution, packaging, customer services and manufacturing. The present competitive business environment is gradually allowing companies to seek a piece of the global trade and exploit the advantages that accrue from capacity production and seek efficiencies. An important determinant of business processes in the present involves the place of logistics function in guaranteeing a smooth movement of products, materials, and information throughout a supply chain for each individual company. Recently logistics has emerged as an important while at the same time recognized as a vital factor for competitive firms.
For a firm specializing in the logistics business, logistics operation success is measures through inputting, storage, transportation and distribution of physical products. Over the periods, logistics has evolved from a one-party logistics to even five party logistics, and the usage of e-logistics-networks that focus on global operations.
Companies outsource logistics services for these main reasons:
Outsourced logistics helps in reducing operating costs
Outsourced logistics helps in meeting demand variations.
Moreover, outsourced logistics is instrumental in reducing the yoke of capital investments to the other companies.
However, there are problems that appear in corporate logistics, and they include the following:
Inaccurate and delayed information
Performing incomplete services
slow, incompetent and inefficient operations
High levels of product damages
These problems have contributory factors and they include the following:
Failure in provision of inter-linked services
High rates of operating costs
High levels of inaccurateness
Compromised flexibility in response to fluctuating demand requirements
These issues have been a subject of intense research amongst the scholarly community. Most scholarly researches affirm that amalgamation of logistics plus other functional parts can be instrumental in bringing a firm to actualize the complete potential of the value addition activities and therefore realize a large competitive advantage. Furthermore, full benefits shall be realized through a reduction of operational costs and enhancement of customer services. Electronic logistics and the outsourcing of logistics business systems are minor parts of a bigger logistics market. Electronic logistics can be defined differently, but experts point out that it is better placed defined as the transfer of products using the internet and related technologies as the premium medium of information flow, and hence EDI(electronic data interchange), websites, emails and mobile applications becomes important tools in the process.
Supply chain becomes a form of integrated business process for logistics management, as it covers the flow of products from suppliers, then through manufacturing, and finally distribution channels to the customer. It has been argued that the real competition exist between supply chains and not between different companies. In recent periods, information systems have been increasingly used as a vital resource that offers support to a number of business functions. There exist similarities between strategic management of information systems and logistic information flow management. A number of research have indicated a close correlation between management of logistics and information management, as the former improves on the integrated systems of the latter towards an overall growth of the distribution processes. It is also important to illuminate the impressive role that information technology has on the improvement off the efficiency of the logistics value chain. There are certain researchers that have pointed out that the intricate logistics process which include inventory and stock replenishment, and deliveries that often demand routing and orders that should be coordinated need extensive communication. The intensity of global competitiveness and the performance of the logistics supply chain is thought of as a vital strategic tool that helps in achievement of maintenance of the competitive edge. Moreover, the considerable gains that companies get from international purchasing can be instrumental in development of a competitive edge.
It is important to reiterate that most companies outsource logistics services owing to the advantages mentioned above. The logistic company which is under discussion is modeled under a three-party system, and this consists of logistic structure, logistics process and information and reporting frameworks. All the three parts are important for the success of a three party logistics operations, and the structure of the company incorporates the people in the process, storage of inventory and socks hubs, multi- level distribution nodes and warehouses. Logistics processes and related activities include order fulfillment systems, customer relationship management (CRM), customer service, demand and procurement management. In conclusion, reporting and information data are important for a management process as they help in driving the decision, anchored on the data collected. Therefore, such include planning and development of the information systems as well as coordination and control, and multi-organizational synchronization.
Abstract Perception of the Logistics Systems
As a logistic company, the firm shall be expected to commit to the following functions typical of logistics service provides and this is often validated by survey of the users and the providers.
Function Activities
Transportation Shipping of products, forwarding, consolidation and deconsolidation, contract delivery of products, payment of freight bill and audit, delivery of consumer goods, relocations, brokerage and load tendering
Warehousing Storage, receipts, assemblies, sending back recalled products, labeling, marking and knitting
Inventory management Predictions, location system analysis, network consultations, layout, slotting designing
Order processing Fulfillment of order that had been entered
Information systems Emails, the Internet, mobile applications, EDI, ecommerce, scheduling, rerouting and expert systems
Packaging Waste management, recycling and designing
The logistics business can be ordered into two classes:
Logistics clients (e.g. producers and retailers); and
Logistics administration suppliers (i.e. outsider logistics services)
The contextual analysis manages logistics services suppliers, i.e. 3PL. For effective logistics services, Ballou (2007) highlighted the significance of coordinating IT with logistics administration information. Ballou (2007) distinguished the basic achievement variables in compelling logistics administration. These include: great arranging of the logistics framework, a very much planned dispersion association, the reasonable choice of unified organizations, a cozy association with exchanging accomplices, great logistics venture examination, the disposal of obstructions to logistics administration, the duty of top administration, and persistent change in logistics.
The Internet has been utilized as a dynamic medium of correspondence for diverting exchanges in the middle of clients and firms in a virtual commercial center. Specifically, the WWW has risen as an important new framework for dispersing and taking out numerous middle people and fundamentally rebuilding the quality chain in a few businesses. Stock and Douglas (2001) portrayed how the Internet has had an effect on diverts of appropriation in three noteworthy commercial ventures: retailing; managing an account, financier and money related administrations; and music conveyance. The Web stage has a few points of interest, which will permit an organization to extinguish some customary logistics issues. These include constant data on inventories, single information passage to minimize human mistakes as inputting of the information is taken care of by clients themselves and there is no need to re-enter the data, a continuous web requesting capacity, and multi-level secret key control so that distinctive capacities can have diverse access levels, controlled by the separate approved individuals. Christopher (2005) examined the part of EDI in logistics service provisions. Dekker et al (2013) highlighted the significance of trade in a region backing in advancing logistics service with reference to China and CEE. Gillen (2001) introduced a structure for flow, an important alternative decision making in logistics data services.
A survey of the academic scholarly community recommends that there are few outcomes from on small and medium-sized logistics organizations. In any case, the part of 3PL has must be progressively essential and, henceforth, the part of small and medium-sized logistics (SML) organizations. Numerous such organizations need key arranges and are taking point of interest of the advantages of actualizing IT to encourage the sharing of data among accomplices who are topographically scattered all the over the world yet are a piece of the logistics inventory network. In this paper, we depict the achievement and difficulties of a little logistics organization situated in Hungary, and the CEE region and Central Asia and China. It is important to utilize this chance to examine how the improvement of a key organization has prompted the improvement of a fruitful logistics organization. At last, a structure has been proposed to take the organization’s logistics frameworks to the next level; i.e. to transform the organization into a full-swore 3PL organization. There is undoubtedly in our psyches that a portion of the encounters and lessons gained from this contextual analysis will be of advantage to different organizations in adding to their logistics frameworks for enhanced hierarchical execution and, thus, intensity.
Running a small three party logistic business demands strategic planning, which includes the establishment of long-term decisions concerning the company’s operations. These decisions should incorporate those on corporate technique, for example, the nature of the logistics business (e.g. transportation, warehousing, and so on.), the area of conveyance focuses, outsourcing, the extent of the business, and the monetary allowance for running the logistics business. Stock administration incorporates arranging, organizing and controlling of materials stream along the logistics inventory network. The major choices ought to include the volume and timing of requests and conveyances, and the pressing of things in bunches (solidification). There are a few limitations influencing the level of stock and the rate of the material stream along the logistics inventory network. The level of stock and the rates the material stream too rely on the way of the supply and request. Transportation or delivery includes such matters as the methods of transportation, use of accessible limit, planning of transportation hardware and upkeep of transportation offices. Next is the scope quantification, and the administration of both long haul and fleeting interest drives the level of limit required. For instance, long haul choices ought to rotate around issues, for example, the number of stockrooms or circulation focuses and their ability; the quantity of transportation vehicles and the limit of the material taking care of hardware, counting the quantity of specialists. Obviously, they are determined by the interest on items along the logistics production network. Data innovation on the other hand frameworks incorporate the exercises in these territories by gathering the information on the execution and usage of assets and, in light of this, making the obliged changes to the logistics operations. Different sorts of IT can be utilized, including intranet, Internet and extranet, together with EDI, WWW and venture asset arranging (ERP). The utilization of IT likewise includes information mining and information on warehousing.
A core competency of an organization refers to certain unique feature, which delivers value to the organization’s customers as well as providing a competitive advantage in the market and contributes to the growth of the organization (Hamel and Prahalad, 1990). At the Logistics company , the core competency encompass fundamental knowledge, the capability and expertise reflected in research, and the ability of the Logistics company to attract top talents throughout the world, and these are the competencies that the Logistics company hopes will not be replicated by its rivals.
Organizations must have a clear-cut strategy in various fields that they offer to the market, and this often becomes the vital instrument for establishing a competitive advantage over other rivals (Hamel and Prahalad, 1996). A strategy can create a lot of difference between the successes of the organization, or in worst cases be the contributor for its failure, particularly, if the organization lacks this vital element in this fast changing competitive world. This is often the link between strategy and competency, noted by Hamel and Prahalad, (1990); however, Boguslauskas and Kvedaraviciene (2015) failed to affirm the relationship that exists between strategy and competency.
2.3. Core Competencies of the Firm
The future of the organization is firmly anchored on its core competencies, yet the competencies define architecture, and the characteristics of the organization in the global competitive world. The strategic architecture must assist in the establishment of the objectives for development of competence. Moreover, it is the road map of the organization’s future, as it helps in the identification the valued core competency of the organization to build. Further, the strategic architecture develops a managerial culture, a capacity for transformation, teamwork, and the eagerness to share resources, protection of proprietary talents, and long-term plans (Hamel and Prahalad, 1996). Further, it is also related to consistency of resource allocation as well as administrative infrastructure.
Hamel and Prahalad (1990) insist that the core competencies should be considered as the gateways for the future as they tend to direct the organization to set its own unique provisions. The gateway phenomenon provides a challenge to the organization to achieve success in the future through the already established core competencies. The competencies become core, and provide value to the customer, and are yet different from other rivals, but they can be extended in new products, a confounding and perplexing proposition (Rajput, Contino and Henning, 2014). Hence, to attain the vision for the future, the core competencies must go through the phase of redevelopment. In the same way Motorola developed their products around flat screen display when focusing for the future, the Logistics Company must develop its product to aim for the future.
Boguslauskas and Kvedaraviciene (2015) complain on the difficulties of identifying an organization’s core competencies. However, Core competencies must be nurtured and protected to protect the organization from fragilities in the future such as a loss of market share, qualifies employees, and the focus of the organization. The competencies should be thought of as the glue that sticks the existing organization, and they can be thought of as the engine for new business development for the organization.
According to Hamel and Prahalad (1990), core competencies do not wear out and diminish with increasing use. In complete contrasts to physical assets that deteriorate over time, core competencies become more enhanced as they are increasingly being used, shared and applied across the organization. Nonetheless, they still must be nurtured and protected, as often knowledge may fade it not used constantly.
According to Hamel and Prahalad (1990), the three tests that are useful for identification of the core competence, and these tests demand that a core competence should include the following; offer access to a broad variety of markets, contribute enormously to the end-product benefits, and be a challenge to the rivals to imitate. The Logistics Company’s ecosystem should be an obvious success of core competence, and these will be difficult for other competitors to imitate.
Assume for the purpose of this paper, that the company has ten corporate clients in Europe and China. Besides, it has acquired warehouses and fleets of trucks at their headquarters in Hungary, and the loans for trucks acquisition and warehouses have all been sourced from the proposed Asia development bank. The company should consider its main operations to include distribution of goods and other value addition services, and the company employees approximately 100 workers across the region. It should be remembered that people are intricate of the logistics business, and good management staff model can be very important in predicting the success of the company. The company can also adopt three part time teams of employees at the head office when necessary.
The table below details in-bound logistics of the firm in Hungary
Container cargo handling and then transportation from the port in Hungary to the warehouse in Hungary, a process known as drayage
Breaking of bulk cargo and handling for storage and delivery, a process known is logistics as devanning
Import declaration
Store to store storage bypass
Inventory and warehousing management
Packaging and Testing
Deliveries within Hungary
Reverse logistics
Value addition services
Quality repairs and checking
In this paper, an attempt has been made to examine the encounters and achievement of a small three party logistics that, is in-bound, primarily serving the needs CEE and China on a variety of products. Given the core competencies discussed above and some that may be applied in the future, the success of the organization must rely on multiple variables, and they include the following:
consumer loyalty
rehash client visits to customers and consequently enhanced business for the company
Responsiveness to customers and client necessities
In any case, the administration ought to bolster the advancement of such organizations to empower the corporate organizations to contend in the worldwide business sector. As of now, logistics firms get just some backing for preparing and training. They ought to add to an IT framework that is adaptable and ready to suit Web-based logistics data frameworks. The arrangement of costing should be enhanced to highlight quality including assets or any type of waste as far as under-used hardware, HR, stockroom space, and so on.
The contextual investigation displayed in this paper exhibits the significance of little logistics organizations. It additionally demonstrates the essentialness of vital collusions and the ramifications of provincial society on organization arrangement and, henceforth, on helpful bolster work. The accompanying are key parts of the contextual analysis that we trust would require further consideration:
Regional governments must act quickly to realize the outcome of infrastructure and trade relations investments and hence back up such small and industrious organizations is expected to prepare and instruct representatives in little
It is imperative for little logistics organizations to get specialized backing from customer organizations. Representative strengthening is key in little logistic organizations. An organization ought to figure out how to regard all clients. Instructing the clients on the most proficient method to utilize the logistics data framework will surely enhance levels of consumer loyalty and lessen reverse logistics expenses to a sure degree. Execution measures, measurements and costing frameworks ought to be created to bolster little logistics organizations in performing all the more productively. Online data will lessen correspondences hindrances such as intricate logistics operational frameworks. Not only money related but also non-budgetary variables, including substantial and impalpable components, ought to be considered while legitimizing interests in IT anticipates. Such ventures ought to not be just founded on monetary execution measures, for example, return on Investment.
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