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45Russian Journal of Logistics and Transport Management, Vol.1, No.2, 2014
© Sergei Smirnov Saimaa University of Applied Sciences
LOGISTICS AND SUPPLY CHAIN MANAGEMENT IN THEATRE
TECHNICAL CORPORATION (Research note)
Abstract
The transportation issues of the companies, doing business in Russia, are analyzed from the case study of Theatre Technical Corporation. The addressed difficulties are determined by the features of the theatrical market in Russia as well as the supply chain management as the whole. The national and international relations of the enterprise are described with the emphases on the specifics of logistics operations, which tend to be provided in accordance with Third Party Logistics (3PL) service.
Keywords: logistics, theatrical services, supply chains.
1 Introduction
The Russian Federation, which has own culture level, own quite distinctive level of people's thinking and partly located in regions with very rigorous climate, has specifics in transportation, warehousing, and other business. From the point of view of logistics, the national peculiarities affect the evolvements of different kinds of difficulties in delivering a cargo within an enormous Russian territory. How such conditions influence business of those companies, which work within the whole country?
The article tries to reveal an answer to this question by description of logistics activities of Theatre Technical Corporation. This company is one of the biggest suppliers of stage equipment and accompanying services in Russia. It means that the enterprise is ready to work with objects anywhere in the country. How the company organizes its logistics in inaccessible places with fulfillment of contractual obligations with time limitation? How to do choice of transport correctly? What kind of risks should be expected?
2 Information about the company
Theatre Technical Corporation (TTC) was founded in 1993 and has about 400 employees. With a time of work, company has become one of the leaders as a supplier of theatrical equipment in Russia.
The TTC designs equipment and builds such objects as theatres, concert halls, cinemas, bars, clubs and schools, in general, any buildings, where a stage is. The major part of a work is concentrated on Russia, as well as in Abkhazia and, periodically within Belarus. Head office of the company is in St. Petersburg. However, there are several branches around the country (Petrozavodsk, Ufa, Orenburg, and Krasnoyarsk) and one in Abkhazia. In addition, company has five own production facilities: four of them are in St. Petersburg (mechanical production, chandeliers production, sewing production, and mechanic control systems production) and one (mechanical production) is in the Rostov region. Two warehouses of the company are located in St. Petersburg and Rostov region.
Company tries to combine reasonable purchase of equipment and production of stage equipment by its own.
3 Features of the work in a market of theatrical services in Russia
The largest part of TTC's contracts (about 90%) is connected with state clients. Such kind of contracts is quite specific, because almost all state clients add in their tenders such issues as short time frame, absence of prepayments, strict requirements for equipment's operational safety, requirements for object's fire safety, etc.
Consequently, the work in such conditions has caused logistics staff to work closely with production and installation departments that are the primary clients of logistics and supply services. All departments of the company have to be ready to work as quickly as possible. As a result, there is a significant attention to rate of procurement, shipping and work of warehouses in TTC. It expressed, for example, in the agreement of special conditions for shipping's time brakes in contracts with carriers, or in constant control the availability of materials, details and finished product in warehouses. In addition, cooperators of TTC continually negotiate with the leading suppliers about their warehouse stock for the needs.
4 Logistics in Theatre Technical Corporation
One of the essential conditions, which influence the choice of transport, is that all TTC's significant logistics operations are organized according to Third Party Logistics (3PL) service. The TTC has not any kinds of own transport. That is why the company uses the services of 3PL services in shipping of cargo. Customs brokers are employed as an outsourcing tool, as well.
Foreign economic activity is quite a precise working, which requires greater attention. In the case of Russia, there are many companies, where their owners personally carry out the work with export/import activities. TTC has the same situation. One of the company's owners is responsible for international
logistics. As a result, there is no one person who is responsible for all logistics activities of the enterprise. This feature of company's structure influences ineffective work of whole logistics system of TTC and makes lost profits.
International logistics
The Theatre Technical Corporation imports many kinds of stage equipment, materials and details for productions from Europe, North America, and Asia. Besides that, there are TTC's clients in Belarus and Abkhazia, which usually receive their goods from TTC's warehouses. For this reason, international logistics includes both import and export operations. Department of financial director is responsible for almost all international logistics (warehousing abroad, international transportation, and customs clearance) and for international procurement in the company.
Internal logistics
TTC's logistics within Russia includes deliveries from domestic suppliers to warehouses, productions, and direct deliveries (rarely) to objects. Additionally, it includes transportations to all objects that placed within Russia except direct import shipments.
Consequently, the TTC has four most significant variants of logistic samples, which was summarized in Table 1.
Table 1
The specifics of logistics businesses of TTC.
№ International / internal Description
1 International Deliveries from foreign suppliers to warehouses, productions and directly to objects (Russian and foreign)
2 Internal Deliveries from domestic suppliers to warehouses, productions and directly to objects
3 Internal Transportation from warehouses to objects within Russia
4 International Transportation from warehouses to foreign objects
5 International logistics
Logistics FROM—►
The most part of necessary equipment, materials and details are purchased by domestic suppliers or official distributors of foreign companies on the Russian market. However, there is a significant part of items, which TTC imports from abroad by means of international carriers and other services.
The financial director is responsible for global logistics. The conditions of the market demand to have substantial warehouse stock or to make a product rapidly by own product facilities that also obliged to have enough quantity of
materials at each moment. Consequently, from time to time TTC restocks own warehouses for future sales. According to this planned operations, the company usually has a part of imported equipment for new clients. However, it's quite difficult to plan another part of future sales which demands imported equipment. Moreover, this is the most difficult question for the TTC's cooperators who are responsible for international logistics. That is, how to deliver needed product in a very short period? There are some standard and not standard solutions for such situations, which cannot be described due to a commercial secret of the company.
Logistics —>TO
Logistics principles to the clients in other countries depend on the location of objects. TTC has a practice of export operations only to Belarus and Abkhazia.
Logistics to Belarus is almost the same as a logistics within Russia. Russia and Belarus are the members of EEC (Eurasian Economic Commission). For that reason, they have a single customs territory without any customs duties. Usually, truck transportation of different transport companies is employed to deliver some items there.
The main challenge of last years is associated with logistic towards Abkhazia. The major feature of this state as a logistic direction is that it is the disputed territory. Abkhazia considers itself an independent state, called the Republic of Abkhazia. This status is recognized by just five countries, including Russia. However, there is no one European country that can cooperate with Abkhazia.
Last three years, TTC cooperates with the government of Abkhazia participating in about 15 objects there. There are an extremely low customs tariffs in Abkhazia. That is why it was the Question for the company: how to deliver equipment from Europe? Additionally, how to transport equipment from Russia with minimum costs?
6 Internal logistics
Logistics —>TO
This part of company's logistics very often demands quick and nonstandard decisions. Traffic time is necessary for the company in almost each case, however besides that, such characteristics as reliability of carrier and predictability of traffic time.
Such initial conditions as the market situation and structure of the company, as well as location of an object, predetermine choice of transport for each delivery. An approximate percentage of transport modes in domestic logistics to objects are presented by the following volumes:
• Road transport (65%)
• Air connection (10%)
• Railway transport (20%)
• Others (5%)
As can be seen, the biggest volume of cargo is transported by trucks. In addition, the percentage of deliveries within European part of Russia goes up to 100 %. Choice of ways for cargo delivering to Asian part of Russia depends more on the presence of railways or car roads near objects of interest. For example, once there was an object in Petropavlovsk-Kamchatsky that has no connection with the country by railways or car roads. Sea transport is not available in the winter season. During the calculation of future costs, company was forced to consider the most expensive form of transport - air delivery. There were no any other alternatives, in that case.
Another example: Primorsky Krai. Air delivery is expensive. Sea transport from European part of Russia to the Far East takes too long delivery. Car route was built recently, and there was no appropriate infrastructure. Railways are the most logical choice of transport to that region.
Transportation of goods to different localities in Siberia depends on a presence of the rivers around the required location (as a single way for delivery) or on the season (delivery during debacle is impossible).
Logistics FROM^>
In this case, choice of transport depends on provider's location. Overwhelmingly, company tries to use the services of providers from that locality, where a company office, own production or building site is situated. Respectively, in this situation company is dealing with intercity transportation.
7 Conclusions
Logistic is one of the main important parts of TTC's activities. Working with different objects located within the territory of Russia (e.g. from Kaliningrad to Sakhalin) demands efficient logistic management in the company. Well done logistic strategy with a delivery from Europe, for example to Vladivostok can save a significant amount of money for the enterprise. However, deliveries into such laborious places as North of Siberia are severe challenges for the company.
It seems that difficulties of transportation for enterprises like TCC will be on the similar level in the future despite ongoing the improvement of the situation. Different state programs to overcome the existing barriers (e.g. old infrastructure, high tariffs, bureaucracy) can hardly change the aspect country's location, which implies the intractable geographical conditions of same regions.
