Senco is a company that is based in the United States. Senco deals in the manufacture of laptops. Demand for laptops has increased over the last couple of years. The increase in demand for laptops is in proportion with increase in the level of technology (Hallett & Hallett, 2010). Senco Electronics Company has been operating within the United States only since its formation. All production operations, supply and sales are done within the country.
However, the company now has to produce in large quantities following an increase in demand for laptops. This has led to an increase in the cost of production and distribution. This has subsequently prompted the management to start weighing other options that can be effective in reducing production and transport cost (Coyle, 2009).
It is important to note that the main objective of any business organization is to maximize its profits. A business has to incur as minimal costs as possible to achieve this objective, and this is what Senco has been challenged to do.
In its bid to reduce costs, Senco Electronics Company is considering starting production firms in China where the laptops will be assembled and then transported to the United States. The distance from China to America is very long; therefore, transport cost is expected to be high. For a company to be successful in today’s business environment, it has to be in a position to respond to the situations that come up in the market quickly.
Senco Electronics Company has to respond to the increasing demand for laptops quickly to continue with its success. Assembling laptops in China means that there may be inconveniences due to the long distance involved. For instance, it might be a challenge for Senco to ensure constant and timely supply of laptops.
Therefore, the company will need to have warehouses in the US where the final products will be stored to ensure constant supply. The holding cost of stock will end up increasing since the company will have to store more laptops (Coyle, 2009).
The other factor that needs to be considered is a means of transport that will minimize costs. Transport by air is faster and more efficient. However, this mode of transport will be costly. Transporting laptops by air will be effective in ensuring that Senco Electronics Company will be in a position to meet the increasing demand for laptops. It is predicted that demand for laptops will grow by about 10% in the next five years.
However, transport by air is too expensive, and this will affect Senco’s profitability in a negative way. On the other hand, transport by ocean could be an alternative. This means of transport is relatively cheap. However, sea transport is slow and less efficient, thus Senco may not be able to meet the increasing demand in time (Taylor, 2003).
It is important to consider the long-term implications of the decisions made by the company. Senco has to store more laptops in order to increase its supply if it opts for sea as its means of transport from China to the US. Holding cost in the next five years will be too high. Supply might not be efficient if the company does not have a warehouse. This will lead to loss of customers. Holding cost will be less and supply will be highly efficient if Senco opts for air transport (Axsäter, 2006).
Decision and criteria used to arrive at the decision
Air transport will be worthwhile in the long run, despite the fact that the cost involved will be high. I recommend air transport based on the need to keep efficient and constant supply of laptops, especially in the US market where demand is rising. Air transport would save holding cost as opposed to sea transport and ensure unending supply of laptops. This would ensure that no customers are lost. Senco would end up maintaining profitability in the long run.
References
Axsäter, S. (2006). Inventory control. New York, NY: Springer.
Coyle, J. J. (2009). Supply chain management: A logistics perspective. Mason, OH: South-Western Cengage Learning.
Hallett, F., & Hallett, G. (2010).Transforming the role of the SENCO: Achieving the national award for SEN coordination. Maidenhead: McGraw Hill/Open University Press.
Taylor, D. A. (2003). Supply chains: A manager’s guide. Harlow: Pearson Professional Education.