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LIKU-8207 Supply Chain Management

Analysis of Finnpaper Oyj.

GROUP 4
232827 Brenno Damian brenno.damian@tut.fi
233001 José Raúl Berlanga Zárate raul.berlangazarate@tut.fi
xxxxxx Subodh Agnihotri subodh.agnihotri@tut.fi
xxxxxx Iqbal

1. Analysis of Mr. Lohikoski’s proposal from the perspective of customer-oriented supply chain.

In today’s world, in order to save costs, many business people often demand single contacts. Customer-oriented single sourcing reduces business-to-business interfaces and shortens response time for varying demands, since customers are often located in other countries and may have entirely different cultures. (Steinrücke & Jahr. 2012)

Though by definition the above mentioned focuses on the end of the supply chain, i.e. interaction with customer and all that is related to it, we can well apply it to the beginning of the supply chain, and more specifically to the Finnpaper proposal of Mr. Lohikoski, which focuses on reducing the number of parties regarding transportation from paper mills to Port, by directly reducing the number of ports used.

The main idea of Mr. Lohikoski’s proposal is to use the ports at Rauma and Kotka for all its outbound logistics, rather than using multiple ports around the coast of Finland. This has many advantages from the perspective of customer in the total supply chain. The main advantage is the centralization of the operations from the mill to port. Since the sea freight and port operating costs of Kotka and Rauma are reasonably low, it would be beneficial to concentrate all the outbound transport to these ports. Also, this would lead to the use of rail and road transportation, which are also the cheapest modes available. It would thus result in lower warehousing costs between the mill and the port. All the cost savings gained from the above changes in operations, would directly lead to optimization in the total supply chain.

The main goal in the customer oriented supply chain is to increase the perceived customer value, and this can be achieved only by cost reductions through effective operations optimization.

Since the business is operated on the make-to-order basis, responding to customer’s demand is also a key to improve the chain. Therefore, from Mr. Lohikoski’s proposal, the above mentioned points would be more cost effective and thus add more value to the customer’s perceived value.

2. Strengths and weaknesses of Mr. Lohikoski’s proposal

Based on Mr. Lohikoski’s proposal, many advantages and disadvantages can be examined.

The main advantage in using the Kotka and Rauma ports is that it costs less for the port operations when the economies of scale are high. Also, the ports of Kotka and Rauma are located in the South-east and South-west coasts respectively, that give them benefits based on their geographical locations. When concentrating on only two ports, the whole operation process could be standardized to a significant level. It is also possible to standardize the IT systems being used at these ports. Long term service level contracts / agreements could be made with the transport and stevedoring companies which would ease out the workload of the employees in the mill. Since the mills operating in Rauma and Kotka have the largest export volumes, changes in the logistics would not affect much the whole organization’s inland operations. Also, the number of available transport companies is more, which gives a better negotiation power for Finnpaper Oyj. It gives a familiarity in the sea conditions of these two ports which results in better forecasting.

However, on the other side, concentrating on only two ports may lead to overcrowding of the operations at the ports and therefore may require warehousing of the materials at the port. In terms of port handling costs, it would end up that the port agencies have the negotiation power in determining costs. Even though, the road and rail...
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