2.3 Solutions for the logistic barrier
2.3.2 Lean IT Solution
Other solution for the logistics’ barrier is the application of an effective and inexpensive lean IT. This solution can solve the problem of enabling a logistic network.
Figure 14. Cloud computing
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Lean thinking can provide features for the customer by:
Improving the quality of work processes
Reducing errors or defects in work processes
Reducing costs
Improving flow of the process
Simplifying complex processes
Reducing lead time
Improving employee morale (What Is Lean, n.d.)
Figure 15. gives an overview of the basic requirements which has been identified for the lean IT solution.
Figure 15. Requirements of Lean IT System
Source: (Hildebrandt et al., 2007)
(Figure 15) Lead Logistics Provider (LLP) has the role of a central platform that controls the logistic processes of the whole system. The logistical services are provided by sub-contracting companies. The LLP acts only as the organizer of the logistical processes without the need to
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have own assets. This definition goes in line with (Thomas, 1999): “A supply chain integrator that assembles and manages the resources, capabilities, and technology of its own organization with those of complementary service providers to deliver a comprehensive supply chain solution” (Hildebrandt et al., 2007).
Requirements four and five are central platform and development potential; they are the medium of a virtual LLP. They take over the basic responsibilities of a LLP, and act like central controlling platform and communicate with all of the participants of the system. Furthermore, the system reaches the required size to make them consistent; the solution must arrange potential for additional developments and extensions that are intended to be incorporated. For example, the intended extensions provide with the advanced tracking and tracing features (Figure 16).
Source: (Hildebrandt et al., 2007)
Figure 16. gives an overview of the architecture of the lean IT solution. The information system AmmLog System (ALS) constitutes the core of the solution. The ALS acts as a central communication platform and contact for all the companies within the network, more precisely the participating producers and carriers. Producers communicate with the ALS through one or
Figure 16. Lean It solution
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more of the provided channels, namely web front end, email and Web services. The web front-end channel requires manual interaction, whereas the email channel offers manual interaction as an option. Software operated by the producer can communicate with the ALS through the email and Web services channels to achieve the deepest process integration and the highest degree of automation. Carriers communicate with the ALS in the same way as producers.
However, regarding the offered functionality and access rights, the ALS distinguishes between producers and carriers (Hildebrandt et al., 2007).
The ALS sends and receives information through channels. Even though there are different channels that information passes through, all the critical business information is encoded as EDI messages that pass through an internal, real-time EDI (electronic data interchange) interface. Thus, internally, information from all the channels is processed in a uniform manner.
The ALS contains software components for selecting a carrier for a given shipment order, bundling freight, calculating freight charges and supporting business intelligence and reporting.
Furthermore, the system offers points for future extensions. Information is stored in a centralized database. From a software engineering perspective, the ALS is divided into four tiers in order to assure a clear separation of concerns: client tier (internet browser, email client or producer/carrier software), presentation tier (web front end), business logic tier (core ALS) and data storage tier (Hildebrandt et al., 2007).
Summary. The main factor for the SME companies is to penetrate to data and information about logistic services and get information about supply opportunities. Most of the SME companies have limited or no IT-competence and investments. They mainly focus on business competence rather than IT. The usage of the Internet by SMEs is still relatively undeveloped.
SMEs still utilize the Internet only to send e-mails, transfer files or documents or gather information. For SMEs having their own IT system faces such challenges; such as expensive
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hardware, software and barriers associated with training and integration. Inexpensive solutions, such as Cloud Computing and Lean IT system might reduce the SME’s logistic barriers.
Chapter three: Case Study Methodology 3.1 Research framework
Qualitative Method
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Qualitative research techniques include ‘small-group discussions’ for investigating beliefs, attitudes and concepts of normative behavior; ‘semi-structured interviews’, to seek views on a focused topic or, with key informants, for background information or an institutional perspective; ‘in-depth interviews’ to understand a condition, experience, or event from a personal perspective; and ‘analysis of texts and documents’, such as government reports, media articles, websites or diaries, to learn about distributed or private knowledge. (Hammarberg et al., 2016)
In depth interview
Interview questions
(total nine)
Interview participants
(total six)
Zoom application
(use for the interview)
Record the responses
Conclude final
results
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For further research we have chosen in depth Interview approach to evaluate the Mongolian SME’s logistic system and suggest them appropriate solutions. Interview questions are based on the literature review. We will interview total six employees through Zoom application, during the interview all responses will be recorded as file. After all interview process; collect the significant answers from recorded file and get the final results.
Six employees from three different types of Mongolian SMEs; two employees from each company:
“Bab Invest” LLC:
Baldandorj Denzen- director and Founder of the company
Mandukhai Baldandorj- manager of the company
“EM DJI DI” LLC:
Orgil Shinebayr- director of the company
Adil Byambadorj- procurement manager
“Sarana Goods” LLC:
Narangua Zorig- human resource manager
Ulziidelger Ganbaatar- manager of the company
3.2 Questions for the Interview
1. Briefly introduce about your company.
2. Do you have your own logistic system or not?
3. What kind of barrier do you have in your logistic system?
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4. SMEs most common challenge is the IT competency. Will IT competency enhance the Logistic performance of your Company? Why?
5. IT system faces such challenges; high up-front costs associated with hardware, software, training and integration. Could you purchase high cost software? Why?
6. Currently what kind of applications do you use? Is it useful for you? Why?
7. Would you prefer to customize the appropriate web software for your own company?
It will cost expensive but once you have your own software it will enhance the efficiency of your logistic system.
8. One of the solutions to these problems is cloud computing with web semantic services based on the Internet network. Is it useful for you or not?
9. How about the LEAN IT system?
3.3 Introduction of Mongolian SMEs
We have chosen “Bab Invest” LLC; “EM DJI DI” LLC; “Sarana Goods” LLC as a representatives of Mongolian SME industries to make our further research in logistic system, hoping to understand SME’s challenging problems in logistic system, to suggest an appropriate solution for them. For this study three different types of SMEs will be investigated. First company is conducting business in construction sector, and operates only from April to October.
Second company operates in agricultural and trading field, seasons of operation- whole year.
Third company is conducting business in food production sector, operates whole year. All three
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SMEs have different strategy in logistics. Depending on the different sector of their operations;
the logistic system of each companies differs from each other. For better understanding and get appropriate results and different reactions about the logistic system barriers of different types of SME; we had chosen three different sectors.
Table 4. "Bab Invest" LLC
About company
Bab Invest LLC has been established as a building maintenance, construction and production of construction materials company near Sonsgolon Road, Songinokhairkhan District, Ulaanbaatar, Mongolia. Company was founded in 2001. This company has been providing their clients with reliable solutions to their construction projects. It has 4000 m2 field with office building, cement silo, bridge crane and iron workshop. Founder of Bab Invest LLC is Baldandorj Denzin
36 Equipment
37
38 Products
Logistics (final delivery
of raw
materials, and finished products, storing products, carrying and
Concrete products: Mostly no-shipment. Customers come to the factory to purchase products. Deal with the private truck drivers to carry products.
Fresh concrete: one-time deal with private drivers. One trip is around 25,000MNT/m3
Storage: at the site near industry.
Moving: most of the products are very heavy duty.
39 moving
goods)
They use loader and country crane during the making of the concrete products.
Consumers Internal suppliers of raw materials
External suppliers for equipment components (alibaba.com;
amazon.com) How many
Employees, their job descriptions
Director- Operation and sales. Handles procurement.
Manager- Advertising, paper works.
Accountant- deal with tax and social insurance offices, payments
Book keeper -Manages book keeping.
Production manager- arrange daily activities according to orders.
Seasonal workers: 4-6 person Main
directions
Building maintenance
Construction
Production of construction materials
What they
want to
improve in their Logistic System
Better data management for better production forecasting and planning
Reliable raw material sourcing
40 Website
https://www.facebook.com/babinvest/
Table 5. "EM DJI DI" LLC
About company
“The EM DJI DI” LLC was found in 2003. The founder is SH. Shinebayar.
He transferred all 100% shares to his son Sh. Orgil in 2018. The subsidiaries:
“EM DJI DI AR and Key” LLC; “Namirlan” LLC; “Altan Zoos Invest”
LLS. The board of directors (the head company’s owner and subsidiary’s consultants; executive directors) initiate the current year planning, and approve financial statements. This company has been established as agriculture SME to provide customers with health wheat. At the same time the company imports plant protection products from China.
41 Products
Plant protection products (wheat from insects)
Fertilization product
Wheat Equipment
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Trucks to carry products
Tractor
1. Import products and raw materials from China:
by truck through Chinese city Ereen and Mongolian province zamiin-Ud;
by railway from China to Ulan bator; Mongolia.
2. Storing; saving their products in the company’s warehouses
Consumers Farmers from Selenge; Bulgan; Khuvsgul; Darkhan; Tuv;
Arkhangai; Uvs; Khovd; Dornod provinces.
Ministry of Food; Agriculture and Small Industry
Ministry of Nature; Environment and Tourism Suppliers Raw materials import from china- shanghai; Russia
Cooperation Warehouse of Ministry of Food; Agriculture and Small Industry
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Six Warehouses of the Agriculture Support Funds
Companies warehousings,
Company’s rural branches Employees In the office 10 employees;
At the agriculture site 10 employees Main
the plant protecting production trading;
the greenhouse industry.
What they
Product tracking system
Insurance
Logistic centralized system and monitored by state.
Website Facebook
Currently don’t have web pages
Table 6. " Sarana Goods" LLC
About company
Sarana Goods LLC was established in 2017. One of the national organic product producer as SME. The main production of the company is the organic honey. Currently has seven different types of glass bottled honey supplying it to the Mongolian market.
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Founder of the “Sarana Goods” LLC is L. Naranzul.
Products
Three different types of honey jars
Tea flavors (dried lemons; tea leaves)
Honey sieve packaged as one spoon
Wooden honey spoon2
Wooden bark box
Equipment Releasing honey from beehive
45 Logistics
(final delivery
of raw
materials, and finished products, storing products, carrying and moving goods)
About the logistics: ship every month their raw honey from the Selenge Province by bee breeding factory’s Truck.
Packaging and storing the final products at their own Factory place.
Shipment of the glass bottles from China by Train.
Delivery of final Honey Products to the Retail stores by company’s own car.
Consumers Consumers who is preferring organic products
Suppliers Bee breeding factory in Selenge province in Mongolia
Glass bottle supplier from China.
Cooperation The retail stores which the company supplies their products:
Home Plaza;
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CU convenient stores; three company stores.
Employees Sarana Goods LLC has five employees:
Executive Director
Conduct business in Food factory.
Provide consumers with reliable organic honey products.
What they
want to
improve in their Logistic System
Tracking delivery goods
Facilitate Logistic Process
Constant communication with drivers
Website Facebook
Facebook: Sarana Goods C:\Users\Narangua\Downloads\introduction of zugiin bal.docxC:\Users\Narangua\Downloads\introduction of zugiin bal.docx
47 3.4 Interview steps
This study is aimed to investigate three different types of SME industries. Total six interviewees; from each company two employees will be interviewed by Zoom application.
Discussion will be recorded as a file. From final responses we will collect the significant answers to get further Result of the research.
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Chapter four: Findings
Brief introduction: Total interviewees N=6 (from three SMEs)
For this study we interviewed total three SMEs and six employees (two employees from each company). We made interview questions with each individuals and got different and same responses; we analyzed the responses in table approach; equated them and got the significant results.
Assume that six interviewees cover 100%. Numbers indicates the total of responses; percentage indicates how many interviewees agreed or not agreed out of 100%.
4.1 SME’s Main Directions business in construction field; 33% of company is in agriculture field; and 33% of company conducts business in Food production field. We aimed to do our investigation in to three different type of SME.
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4.2 Company’ s Logistic System
According to the interview Question: “Do you have your own logistic system or not?”
For instance, the employee of the “Sarana” LLC answered: We have own delivery car; which make deliveries of final products (honey) to retail stores which we have contracts. Delivery of raw honey from the bee breeding factory; sometimes need to rent truck and driver.
Table 8. Logistic system and renting truck
Characteristics
Do not rent private driver N; %
Rent private driver and Truck
total
Have logistics (N; %)
2; 33% Em dji di 2; 33% Sarana 4; 67%
Do not have logistics (N; %)
0 2; 33% bab invest 2; 33%
Total 2; 33% 4; 67% 6; 100%
Figure 17. SME's main directions
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From table 8. We can summarize that total 67% of interviewees responded that their company has their own Logistics; and 33% of them responded they don’t rent private drivers and truck;
33% responded they have own company car which make the delivery process but at the same time they rent private driver and truck when it is crucial. Total 33% of interviewees responded they don’t have own logistics and rent private drivers and truck.
From the result we can conclude that SME company have insufficient logistic system whether the company has the own car to deliver products they rent the truck if it’s crucial.
Explanation on own Logistic system: Having own logistics depend on the type of SME company. When the company operates the whole year (4 season) the probability of having their own truck is higher comparing to the company which operates seasonally (construction company). Two companies which were interviewed operates whole year (Sarana Goods; Em DJI DI LLC) have their own truck and car. Bab invest LLC operates seasonally (from March till October) do not have their own truck and rent trucks if it is needed.
4.3 Barriers confront in Logistic System
According to the interview question: “What kind of barrier do you have in your logistic system?”
For instance, the “Bab Invest” LLC director said: Can’t share our information directly with drivers and customers and between employees. Cannot track our logistics.
The “Bab Invest” LLC manager said: It’s challenging that we don’t have the constant drivers and truck and the renting cost is always fluctuating when we plan our delivery and logistics.
We have barrier on managing our production and logistics.
The employee of the “Sarana Goods” LLC explained: It is hard to track our shipping to the supermarkets when we make our delivery by own car and with renting truck.
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Table 9. Barriers confront in logistic system
Barriers
The logistic system barriers have been reported by the SME employees. The most significant responses are written in (table 9). All interviewees total 100 % reported that they cannot track and manage logistic process of the company; second significant barrier is that Mongolian road infrastructure is poor; have road traffic during the day time.
From this result we can conclude that most important barrier in logistic system is that SME company in Mongolia don’t have IT systems which can track their logistic processes.
Explanation on the most common barriers in logistics: For the SMEs managing and tracking their logistic process is the most common problem of all issues. During the interview all six interviewees responded that they confront such challenge. For instance, when company makes delivery to retail stores it is hard to track the delivery car and the product quantity which stores (customer) are needed. During logistic process making notes; doing transactions manually are taking time and consuming money.
52 4.4 IT system advantages in Logistics
According to the interview question: “SMEs most common challenge is the IT competency.
Will IT competency enhance the Logistic performance of your Company? Why?”
For instance, the “Bab Invest” LLC director answered: Yes, it will enhance our logistics.
Because we can manage our logistic process and production. And reduce the cost. If IT logistic system penetrates in Mongolian market.
The “Em Dji DI” LLC director said: Yes, the integrated logistic IT system will facilitate our logistic process, we can get the mobile apps and through that we can decide our international transactions. Because we import our products from china. We can track our process.
Table 10. IT System and improvement in Logistics
Improvements
Total 83% of the interviewees responded that IT competency will improve their logistic process by managing and tracking their delivery process. 17% employee responded that they will consider about IT system when company starts to export products abroad. 33% of the interviewees responded IT system will reduce their logistic cost (Table 10).
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From this result we can conclude that IT system can facilitate the logistic process of Mongolian SME Factories.
Explanation on IT system which can enhance the Logistic process: If the IT System penetrates in Mongolian market it will facilitate the whole logistic process (managing and tracking production and delivery) of the SME. It will reduce cost and save time.
4.5 IT system challenges: High cost software and hardware
According to the interview question: “IT system faces such challenges; high up-front costs associated with hardware, software, training and integration. Could you purchase high cost software? Why?”
For instance, the employee of the “Sarana” LLC said: Our company cannot purchase the expensive software currently, because our business is just getting familiar with customers. And it’s just expanding and nowadays we are not that efficient with profits. But it is getting better day by day. And it will be challenging to learn our employees to the IT system. But further it will be efficient to connect to the IT system and it will facilitate our job.
The “Bab Invest” LLC manager responded: Construction process in Mongolia depends on a season. In Mongolia the cold seasons take about 6 months. That’s why We conduct business for the rest of six months in a year, that’s why we cannot afford expensive hardware and software. We need cheaper way to solve the problem. In Mongolia we don’t have the local logistic IT systems yet. For the international IT system, the price is so high and it will be challenging to train our employees on it.
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Table 11. The interview result indicates about 83 % of employees reported that their company cannot afford the expensive Software and Hardware.
Table 11. The interview result indicates about 83 % of employees reported that their company cannot afford the expensive Software and Hardware.