Kenyas Rose Imports to Holland Essays

Kenyas Rose Imports to Holland Essays Kenyas Rose Imports to Holland Essay Kenyas Rose Imports to Holland Essay 2008). The Future Prospects and Trends of the Flower Industry in Kenya The new trend shows the cost of production is increasing while the overall consumption is declining. Therefore, there is need to shift more attention to consumption oriented approaches. Quality, cost and diversity of products will be determinants for survival in the industry. Consumer demand for fair traded flowers shall take a front stage. Good production practices, competitive advantages and strategic behavior will determine the sustainability of the industry. Modern distribution will dominate the market with new business drivers. Different product concepts and positioning (flowers and plants arrangements) that will satisfy the increasing consumer demand for variation in personal gifts and taste will account for a significant percentage of the turnover of the flower market. Kenya will continue to dominate production in Africa because of the favorable investment policy for the flower industry, the production conditions and the improved infrastructure. It will remain a net exporter of flower products. Like China, it should focus on research so as to improve on its local varieties, strive to develop the home market, be innovative and become a self-bearing industry. In conclusion, Kenya is a very promising country to diversify the Input supply portion of the value chain. (Karabo et. Al, 2011) Background on The Netherlands (Holland) Background and Market Information Holland is located in Europe. Germany lies on Holland’s eastern border and Belgium on Holland’s southern border. On the western and northern borders, Holland lies next to the North Sea. Holland’s total land area is 41,848 km? , of which 8478 km? are under flower and foliage crops. Holland’s land area has a water mass of 18. 41%. Holland has an estimated population of 16,491,852. The average growth rate is 0. 436%. Holland’s fertility rate is below the 2. 1 –rate required to replace natural population. Life expectancy is high; 79 for woman and 78 for men. Senior citizens are seen as a potential market group, as their children left the house and the mortgage are paid off. Thus leaving this target market group with more spending money for luxuries. The opposite of this again, shows an increase of one and two person households, creating an increase in the household market. The most spoken language is Dutch, with recognized regional languages is Low Saxon, Limburgish, Frisian, English and Papiamento. Holland declared their independence on 26 July 1581, and their independence was recognized on 30 January 1648. Holland is ruled by a Parliamentary democracy under a Constitutional Monarch. The current Monarch is Queen Beatrix. Mark Rutte from the VVD is the current Prime Minister. Holland has been playing a key role in the European economy since the 16th century. Shipping, fishing, trade and banking have been leading sectors in the Dutch economy. Holland is one of the worlds 10 leading exporting countries, and has the 16th largest economy in the world. Inflation is 1. 3% and unemployment is 4. 0%. This unemployment percentage is the lowest of all the European Union member states. Holland has a relatively low GINI coefficient of 0. 326. Amsterdam is the 5th busiest tourist destination in Europe, and gets more than 4. 2  million international visitors per year. The Aalsmeer flowers uction is the largest flower market in the world, and is run by FloraHolland. The current sales of cut flowers in Holland are â‚ ¬893 Million. The consumer market is the most important offset market in Holland, since they consume two thirds of these sales. Research had shown that Holland consumers bought fewer flowers in 2005 than in 2000. The ongoing economic crisis in Holland h ad a major effect on consumer spending. Consumers blamed it on less spending money and the high prices of flowers. Quality is one of the most important criteria for buying flowers, but the cost price has become a more important priority, especially to woman. Holland consumers also look at the perishable effect of flowers. About 60% of cut flower sales are spent on flower gift bouquets. This percentage is comparable to France. About 30% of this 60% are spent on birthday bouquets. Mother’s day is also a special day with the highest percentage of sales. In 2004 sales had grown to 26% from the 20% in 2002. Valentine’s Day has also grown the past two years, respectively to 10% and 11%. Flower Industry Background The world’s two biggest flower auctions are based in Aalsmeer (VBA) and in Naaldwijk/ Bleiswijk (BVH). On average 30 million flowers are traded in 100 000 transactions annually. During 1996 each of these markets had an annual turnover of 30 Billion Dollars. These flowers originate from countries such as Holland, Israel, Kenya and Zimbabwe. The Dutch flower auctions play a crucial role in Holland’s leadership in this type of industry. Holland provides efficient centres for price discovery and transactions between buyers and sellers. These auctions use the â€Å"Dutch auction† as the means for price discovery. These auction markets are established as cooperatives by Dutch growers. The Dutch Flower Auction Concept The Dutch auctions are characterized by using a computerized auction clock. The clock provides the buyers information regarding the producer, product, unit of currency, quality and minimum purchase quantity. Flowers are then transported through the auction room, and shown to all the prospective buyers. The clock hand then starts at a high price, which is predetermined by the auctioneer, and drops until a buyer stops the clock by pushing a button. The auctioneer will then communicate with the buyer regarding the quantity he/she would like to buy. After the transaction, the clock is reset or the flowers which are left on the floor, and the process begins all over again. Sometimes a new minimum quantity is set, until all the flowers are sold. The Dutch flower auction is an exceptionally efficient auctioning system, as it can handle a deal every four seconds. Caused by the increased imports, the VBA and BVH were close to its limits in terms of capacity, complexity and expansion room. One of the answers to these limitations was the introduction of new electronic auctioning systems. Four electronic auctioning systems were introduced to the markets. * The Vidifleur Auction (VA) The Sample Based Auction (SBA) * The Tele Flower Auction (TFA) – â€Å"Buyers have to trust the quality blindfold† * The Buying at Distance Auction (BADA) Unfortunately the VA and SBA failed, but the TFA and BADA deemed great successes. The VA was terminated in late 1991, as trading was difficult through screen-based trading. The SBA was discontinued the late 1995, due to decreased numbers of transactions per hour, and the negative effect on the functioning of growers, the auction house and buyers. The TFA The TFA was created by East Africa Flowers (EAF) after the Dutch flower auctions imposed import restrictions. During the traditional import season 30% of the EAF’s flowers could not be traded. During the summer season 100% of EAF’s flowers could not be traded. In December 1994 the EAF announced the creation of the Tele Flower Auction (TFA). On 24 March 1005 TFA was initiated with 70 buyers and 2 growers. A few months later the EAF decided that growers from other countries were also allowed to use the TFA. These were countries such as Colombia, Spain, India, France and Israel. After the TFA had been in use for one year the network increased to 35 growers and 150 buyers. Buyers bid via their personal computer (PC). Their PC’s are connected to a fully computerized auction clock. Flowers are not visible to buyers, as they are not present in the auction room. Each buyer can earmark interesting lots before the auction starts. The system will then warn the buyers before each of his earmarked lots are up for sale. The system provides information regarding the producer, product, unit of currency, quality, and minimum quantity for purchase. For each lot of flowers, 2 images are presented on the PC. The auction system remains the same: Dutch Flower Auction. The buyers see the Dutch auction clock on the PC screen. When the buyer needs to buy, he will stop the clock, the auctioneer will then communicate over an open telephone connection about the quantity of flowers he would like to purchase. The clock is then reset, and the process is repeated, until the lot of flowers is sold. All flower producers send the flowers to EAF, which is situated in Amstelveen. Distribution of the sold flowers is done by transporters of EAF. All transport costs are paid by EAF. The whole TFA process in EAF is done with considerable speed, as some deliveries are made to buyers within half an hour after a sale. 30% of TFA’s buyers regularly inspect the premises and flowers. Quality control is done by TFA’s inspectors at the producers, at the distribution pint in Nairobi and at the TFA in Amstelveen. The flower prices on average were not significantly higher or lower than the traditional Dutch flower auctions. TFA expected a 50 million dollar turnover for the growing season of 1995/1996. Compared to the seven Dutch flower auction markets, TFA ranks forth. On 14 January 2010 the Mavuno Group (Kenya) and the flower auction FloraHolland announced that all activities of TFA would be integrated into FloraHolland. This means a broader sales network to all TFA suppliers. The Mavuno Group in Kenya consists of the Oserian Development Company (250 ha farm) in Naivasha, Bloom (flower exporter/ retail supplier in Holland), World Flowers (Retail supplier in the UK), Fast Track Flowers (Retail supplier in the UK, grown product), East African Flowers (EAF, clearing in Holland) and Airflo (freight forwarding ) in Nairobi. By integrating the Mavuno group and TFA with FloraHolland all their producers were able to access to the virtual clock system, alternative digital selling systems and the direct sales of FloraHolland. For the TFA suppliers and buyers this meant increased efficiency in the logistical chain. The BADA The Buying at Distance Auction (BADA) was started by the Flower Auction Holland in 1996. The concept uses the idea that buyers can connect via a modem to several auction clocks in auction rooms. This project started off with 16 buyers and six clocks. By 1997, 60 buyers were on the waiting list. Lower travel costs were reported for this auctioning system. Some Lessons the Auctioneers Learned 1. The increased use of information technology and the separation of informational and physical trading will permit more varied forms of trading, customized to different buyers’ requirements. 2. Conformance of the actual and perceived quality of the product, logistical performance and IT performance result in an increased trust factor and to a successful electronic auction system. 3. New entrants can quickly build competitive advantage with a modern auction system model. FloraHolland Since the 1950’s Holland has been at the centre of the world flower trade. It has a functional trade system to facilitate the movement of cut flowers. Flower producers from around the world assemble at the famous flower actions. These auctions offer at a central marketplace for the buying and selling of floricultural products. Flowers are imported from various parts of the world, in order to create the largest selection possible. FloraHolland is a modern business with six auction centres, a nationally-operating intermediary organization, and an import department. FloraHolland is a primary cooperative: it is owned by its 6000 members. There is no legal separation between the cooperative and the business. This joining of forces is unique in the world. 39 Clocks are operated daily at the FloraHolland centres. This means 125 000 auction transactions every day, and 12 Billion cut flowers and over half a million plants a year. FloraHolland uses Image Auctioning. This means that flowers and plants are no longer taken into the auction rooms; but stays in the cold stores. Instead, photographs of the flowers are displayed in the auction rooms, from which the buyers can purchase. The advantage of this system is that the flowers and plants can be taken directly from the cold stores to the customer after the sale. The auctioning process continually needs to be renewed and improved. Thus, at the Aalsmeer location, all the traditional clocks have been replaced by projected clocks. These clocks have been redesigned to offer more information to buyers. Now, buyers are assisted with producer logos and photographs to encourage their purchasing decisions. FloraHolland Connect offers customized services to all buyers and their retail buyers. Their intermediaries are able to assist with targeted National and International product sourcing. These FloraHolland Connect packages include negotiation support, proper registration of all agreements between producers and buyers and comprehensible logistic agreements. They also offer assistance with resolving any disputes between producers and buyers. FloraHolland Connect is also an innovative associate for customers to offer commercial support and to contribute creative ideas. Figure 1 Top 10 Cut Flowers Auction Turnover in Euros 1 000 000 Our Current Situation De Roos Florist – Amsterdam Sloten We have a 250m? shop at 8 Ditsloot Laan in Sloten, Amsterdam. We are across the highway from Schipol Airport in Amsterdam and 15 kilometers from Aalsmeer Flower Market. Our marketing consists of a web dress and advertisements in our local newspaper, the Amsterdam News. We supply flowers and gifts for all occasions, specializing in flowers, potted plants and foliage plants. We offer a wide choice of bouquets, wines, champagnes, bears, chocolates and balloons. Orders are easily processed on our website, as customers only need to register once with all their information, and then on their second and later purchases only need to log in. Purchasing methods is possible by cash transfers, iDeal, Visa, Mastercard and American express. For a delivery in Amsterdam, same day deliveries are possible if the order was placed before 12pm. For the rest of Holland, deliveries will be made the day after the order was placed. A delivery fee of â‚ ¬8 will be charged for deliveries outside of Amsterdam. Currently we are daily buying flowers from FloraHolland at the Aalsmeer Flower Market. We have skilled employees who repack the flowers and create the bouquets. Supply Chain Diversification Definition: Supply chain diversification Supply chain diversification is a manufacturing business terminology used to describe the act of increasing choices for when to order what supplies from whom to bring products to the market. In short, it describes the abundance and flexibility of the suppliers for a certain product. Supply chain diversification is not a simple method of making suppliers compete with each other for the best price. It is more about preparing ones supply chain to be flexible for any kind of problem that the market throws at you. Advantages of diversification More emphasis on value chain innovation Efforts to reinvent the industry value chain can have a fourfold payoff: Lower costs, better product or service quality, greater capability to turn out multiple or customized product variations (upgrades), and shorter design-to-market cycles. Growers can mechanize high-cost activities, re-design production practices to improve labor efficiency, build flexibility into the â€Å"assembly† process so that customized product versions can be easily produced, and increase use of advanced technology (robotics, computerized controls, and automated/guided vehicles. ) Suppliers of parts and components, input manufacturers, distributors, and buyers can collaborate on the use of internet technology and e-commerce techniques to streamline various value chain activities and implement cost-saving innovations. A stronger focus on cost reduction Stiffening price competition gives growers extra incentive to drive down unit costs. Company cost-reduction initiatives can cover a broad front. Some of the most frequently pursued options are pushing suppliers for better prices, implementing tighter supply chain management practices, cutting low-value activities out of the value chain, developing more economical product designs, streamline order processing and pulling, reengineering internal processes using e-commerce technology, and shifting to more economical distribution arrangements and systems (e. . racking systems). Increasing sales to present customers In a mature market, growing by taking customers away from rivals may not be as appealing as expanding sales to existing customers. Strategies to increase purchases by existing customers can involve providing complementary items and ancillary services, and finding more ways for customers to use the product. Developing deeper relationships with key buyers (through personal visits , customized mailings, etc. ) will more often than not pay big dividends. Building new or more flexible competition The stiffening pressures of competition in a maturing or already mature market can often be combated by strengthening the company’s resource base and competitive capabilities. This can mean adding new competencies or capabilities (by either making or buying them), deepening existing competencies to make them harder to imitate, or striving to make core competencies more adaptable to changing customer requirements and expectations. Disadvantages Perhaps the biggest strategic mistake a company can make as the floricultural industry matures is steering a middle course between low cost, differentiation, and focusing; blending efforts to achieve low cost with efforts to incorporate differentiating features and efforts to focus on a limited (niche or cache) target market. Such strategic compromises typically result in a firm ending up stuck in the middle, with a fuzzy strategy, too little commitment to winning a competitive advantage, an average image with buyers, and little chance of springing into the leading ranks of the industry. Other strategic pitfalls include being slow to adapt existing competencies and capabilities to defend against stiffening competitive pressures, concentrating more on protecting short-term profitability than on building or maintaining long-term competitive position, waiting too long to respond to price cutting by rivals, over-expanding in the face of slowing growth, overspending on advertising and sales promotion efforts in a losing effort to combat the growth slowdown, and failing to pursue cost reductions and/or production efficiencies soon enough or aggressively enough. Supply Chain Decisions Supply chain management decisions are classified into two broad categories strategic and operational. As the term implies, strategic decisions are made typically over a longer time horizon. These are closely linked to the corporate strategy, and guide supply chain policies from a design perspective. On the other hand, operational decisions are short term, and focus on activities over a day-to-day basis. The effort in these types of decisions is to effectively and efficiently manage the product flow in the strategically planned supply chain. There are four major ecision areas in supply chain management: 1) location, 2) production, 3) inventory, and 4) transportation (distribution), and there are both strategic and operational elements in each of these decision areas. 1. Location Decisions: The geographic placement of production facilities, stocking points, and sourcing points is the natural first step in creating a supply chain. The location of facilities invol ves a commitment of resources to a long-term plan. Once the size, number, and location of these are determined, so are the possible paths by which the product flows through to the final customer. These decisions are of great significance to a firm since they represent the basic strategy for accessing customer markets, and will have a considerable impact on revenue, cost, and level of service. These decisions should be determined by an optimization routine that considers production costs, taxes, duties and duty drawback, tariffs, local content, distribution costs, production limitations, etc. Although location decisions are primarily strategic, they also have implications on an operational level. 2. Production Decisions A. The strategic decisions include what products to produce, and which plants to produce them in, allocation of suppliers to plants, plants to DCs, and DCs to customer markets. As before, these decisions have a big impact on the revenues, costs and customer service levels of the firm. These decisions assume the existence of the facilities, but determine the exact path(s) through which a product flows to and from these facilities. Another critical issue is the capacity of the manufacturing facilitiesand this largely depends the degree of vertical integration within the firm. Operational decisions focus on detailed production scheduling. These decisions include the construction of the master production schedules, scheduling production on machines, and equipment maintenance. Other considerations include workload balancing, and quality control measures at a production facility. * Increase production of summer flowers and lilies * Increasing scale of production of Roses and deliver to supermarkets and other mass retail chains B. Market channels in production decisions * Value-oriented customers Value in terms of prices has a significant effect on flower and plant expenditures and eventually plays an important role in explaining part of the trends in marketing these products. For example, the flats in the bedding and garden segment are assumed to be cheaper flower products compared to the others. Therefore, they are increasingly available in mass merchandise stores. People with low income who tend to buy these flowers are attracted to these low-price super centers. Value segmentation appears to be the most important market driver in selling De Roos flowers. Value will play an important role in raising sales from De Roos florist by introducing cheaper bedding plant cultivars and make large-volume sales through mass merchandise stores and supermarkets. Price will play a selective role in raising sales from potted flowering plants, foliages and cut flowers. With the increasing demand for large containers that have high-quality combinations, roses would continue to be expensive for value-oriented consumers. * Convenience Convenience will have an important role in raising sales from cut flowers and potted flowering plants. The indulgence market segment also plays a moderately important role in selling Roses, and other plant products. These market segments will provide broad opportunities for cut flower products that are mainly used as gift items, especially during calendar holidays and for special occasions. Cut flowers and potted flowering plants also fit into the coordinated and seasonal fashion trend and mostly they are a key element in indoor designs and decorations. As foliage plants continue to be widely used for interior decorations, the fashion and design market segment would also play a significant role in selling these plants. Convenience is becoming increasingly important for consumers when buying different flower and plant products. An increasing number of consumers are busy and perceive that they have less time for feeding and watering plants. Or some consumers want to buy plants and flowers that do not take weeks and months to mature. Others want to buy them in convenient containers and pots or they want products that are easily portable from one place to the other. Convenience is also one of the key factors in selling De Roos flower products. In particular, convenience would have an important role in raising sales from ut flowers and potted flowering plants. Convenience-oriented consumers will not be attracted to some of the bedding and garden plants, particularly the flats. Because these consumers do not have the time to continuously water and feed plants and flowers. They rather look for larger near-mature potted flowering plants or cut flowers. Large container and pot innovations that make plant ha ndling and growing easier or packaging innovations that improve the outside look of the container maintaining and improving plant quality would help to increase sales in this market segment. Cut flowers are coming well prepared and ready for use in arrangements, boutiques or consumers can buy them in single stems and they are easily transportable products. * Indulgence Indulgence considers a broad array of flower and plant attributes designed to meet consumers’ desires, as opposed to their needs. In this market segment, the consumers have unique attachment to the products, and they are buying not the item but the experience expressed in some ways. These consumers will buy the product because they might have connection to the products since childhood, they may like gardening and working with the plants, etc. In this group, there are also luxury or impulse buyers who pursue their intense emotion in purchasing flowers and plants. Holidays and special occasions are other aspects of indulgence that influence the market for flowers and plants. Cut flowers are the leading floral products that are used as gift items, especially during calendar holidays and for special occasions. They are also becoming increasingly appealing to the impulse purchaser. Therefore, the indulgence market segment will provide broad product development opportunities for De Roos florist. In the indulgence market segment, foliage plant will benefit from different consumer groups that purchase these plants for different purposes. Some consumers may want to have these plants, simply because they like them from experience or they know the performances of the plant from previous years. 3. Inventory Decisions These refer to means by which inventories are managed. Inventories exist at every stage of the supply chain as either raw material, semi-finished or finished goods. They can also be in-process between locations. Their primary urpose is to buffer against any uncertainty that might exist in the supply chain. Since holding of inventories can cost anywhere between 20 to 40 percent of their value, their efficient management is critical in supply chain operations. It is strategic in the sense that top management sets goals. However, most researchers have approached the management of inventory from an operational perspective. These include deployment strategies (push versus pull), control policies the determination of the optimal levels of order quantities and reorder points, and setting safety stock levels, at each stocking location. These levels are critical, since they are primary determinants of customer service levels. 4. Transportation Decisions The mode choice aspects of these decisions are the more strategic ones. These are closely linked to the inventory decisions, since the best choice of mode is often found by trading-off the cost of using the particular mode of transport with the indirect cost of inventory associated with that mode. While air shipments may be fast, reliable, and warrant lesser safety stocks, they are expensive. Meanwhile shipping by sea or rail may be much cheaper, but they necessitate holding relatively large amounts of inventory to buffer against the inherent uncertainty associated with them. Therefore customer service levels and geographic location play vital roles in such decisions. Since transportation is more than 30 percent of the logistics costs, operating efficiently makes good economic sense. Shipment sizes (consolidated bulk shipments versus Lot-for-Lot), routing and scheduling of equipment are key in effective management of the firms transport strategy. Kenya’s Cut Flower Cluster Value Chain Growers Growers grow flowers, suppliers procure them, they then sell these flowers to the wholesalers or retailers before the flowers finally reach consumers. This sounds like a simple value chain, except that the players involved come from all over the world. The vast majority of flowers are grown in Europe, Africa, Asia and South America and the consumer base comprises of Western Europe along with North America and Japan. However, despite this fact, the biggest trade center is the Netherlands. The world cut flower trade is characterized by a high degree of concentration by sources. Germany is the main market for imports, and the Netherlands the worlds leading exporter. Exports from the Netherlands to Germany are a principal component of the world cut flower trade; they make a significant part of the intra EU trade, which itself accounts for a large part of the world trade. In the Americas, Colombia is the major supplier to the United States. Japan receives its supplies from a more diversified base, with Taiwan, New Zealand and Europe being the most important ones. Since the 1950? s Netherlands has been at the center of the world flower trade. It has a good and functional trade system to facilitate the movement of cut flowers, which form a majority of flowers which are traded. Flower growers from all over the world assemble at the famed flower auctions to find suitable buyers for their produce. These flower auctions offer a central marketplace for buying and selling of floricultural products with good facilities for growers and buyers and effective logistics. Flowers are imported from various countries in order to create the largest possible assortment of flowers. This allows the industry to overcome the handicap of wholesalers not having the opportunity to import directly out of these countries. Roses Roses need labour-intensive watering, pruning and treating before they can be clipped and flown daily to buyers in Amsterdam and London. The best are sold through (Dutch) auctions to florists; the less good end up in European supermarkets. Kenya emerged as a flower power when Israel scaled down its own industry. It has since lost business to neighbouring Ethiopia, which offers tax breaks and better security, but Naivashas perfect intensity of sunlight and days of near-constant length should keep it on top. In any case, the owners are stoical. Figure 2 EU Consumption of Cut Flowers and Foliage Inventory Control Inventory is the stored accumulation of any item which can be used in a process; usually applies to material resources but may also be used for inventories of information. This can include: raw materials, finished goods, and work – in – process. Operations Management; 6th Edition; Slack, Chambers, Johnston) As a retailer / wholesaler / distributor, we have decided to follow the ‘Single – Period Model’ for stock inventory. This model is used to handle ordering of perishables and items that have a limited shelf life. Currently as a retailer, we function with the following Inventory which is ordered, distributed, processed and kept on site: * Cut flowers * Ex. Roses, carnations, chrysanthemums, orchids * supply flowers to wholesale florists across Netherlands and Europe * Potted flowering plants * Ex. Poinsettias, chrysanthemums, Easter lilies, African violets * Pot and plant shipped to market * Foliage plants * Ex. Philodendrons, dieffenbachia’s, figs, scheffleras, dracaenas * Potted plants to be grown and sold for their leaves instead of their flowers (houseplants) * Flower Themes: * By Occasion Birthdays, anniversary, sympathy * By Sentiment Congratulations, Romantic occasions, thank you, get well soon * By variety Roses, tulips, plants and orchids Inventory Rules Rules which we will follow in order to optimise our Inventory Decision making will include: 1) Simplistic inventory policies work well. Using the ABCD inventory policies or simple weeks-of supply rules frequently get 15-30% more inventory than needed and lower service levels. 2) Holding all items at all levels in our finished goods network will give us the highest service levels. Companies with multiple tiers of finished goods distribution frequently hold wrongs amount of inventory in wrong locations and suffer out of stocks despite high inventory investments. 3) It’s fine for each location or tier in the supply chain to set its own service level targets and replenishment planning frequencies. The lack of synchronized inventory policies across manufacturing stages and distribution tiers builds up unneeded inventory across the supply chain. 4) Inventory minimization should is our goal. 5) Using purchase orders or release notices for replenishment is efficient. A growing number of companies that use cut purchase orders or release notices for their suppliers are discovering it is more effective to ask suppliers to take responsibility for maintaining inventory between min/max levels. These misconceptions around inventory impact both top line and bottom line revenue. In order to improve our inventory turnover, we have followed the following guidelines: * Keeping our purchases in small batches to keep items fresh, reduce maintenance labour, and maximize the use of our selling space * Not filling prime retail space with boring inventory items * Large volume shipments may have a lower initial unit cost but when considering the additional floor time to maintain the volume and take the risk of not selling all items before the stock wilts might not be worth the savings * To fill the empty spaces, we can display already made arrangements which can be used for special occasions * Track our profitability by categorising the perishability of: * Cut flowers / Potted Flowering plants / Foliage Plants * Cut flowers and blooming plants typically have greater perishability that demands closer accounting and greater mark-ups. * Use green plants as the safest inventory back-up for funerals and holidays. * Keeping a reasonable mark-up because of the differing deg rees of perishability and maintenance one should use a different mark-up factor for the different categories of inventory. However, because of the high perishability potential, leftovers, and cooler expense, our inventory needs the highest mark-up. * Maintaining a high standard of quality as this: * Reduces spoilage of flowers * Sells easier and faster * Easier to maintain. * Less risk of problems * Commands a greater mark-up * Ability to Upgrade into special containers * Ability to add an array of items including figurines, trellis, balloons, twigs * Design into a unique arrangement * Have something unusual. Types of inventory There are currently 5 types of inventory. These include: 1. Buffer 2. Cycle 3. De-coupling 4. Anticipation 5. Pipeline Our current day to day inventory decisions are based on: 1. How much to order? In order to determine the amount of inventory to order we consider the difference between the costs associated with holding stock and compare it against the costs associated with placing an order. * We use a well known formula to assist in the abovementioned calculations is the Economic Order Quantity (EOQ) formula. * By using different stock behaviour assumptions, the EOQ formula can be adapted to different types of inventory profile. * Inventory costs directly associated with the size of the order include: * cost of placing the order * price discount costs * Stock out costs * Working capital costs * Storage costs * Obsolescence costs * Operating inefficiency costs 2. When to order? * This depends partly on the uncertainty of demand. When the order arrives, a certain level of average safety stock is retained. This is how orders are usually timed. * The level of safety stock is influenced by the viability of the lead time usage distribution which is made up of: * demand * lead time of supply * Inventory levels should be continuously reviewed when using the re-order level as a trigger for placing replenishment orders 3. How to control inventory * Computer based information systems are used to manage inventory. These systems have the following functions: * updating stock records * generation of orders * generation of inventory status reports and demand forecasts Supply Chain for Import The figure below describes the domestic part of the export supply chain. The largest flower companies have vertically integrated most of (and in at least one case, all of) the functions described above. However, the social and environmental standards used in the flower industry do not apply to parts of the supply chain beyond the â€Å"Cold room†. When the stock arrives on the aircraft, the aircraft needs to travel at a constant cool to cold temperature to the final destination. In order to maintain the freshness of the inventory throughout the supply chain, the following needs to be considered when transporting and storing: * Inventory, flowers and plants, need to be stored in appropriate packaging to enable it to have as little human handling as possible. Cut flowers and potted plants need to be kept and maintained at cool temperatures throughout the end to end supply chain * Distributors need to drive improvements in flower and plant temperature management during distribution (demand-pull) * Day-ahead flower and plant ordering by growers is requ ired to ensure that adequate time is available to cool the products prior to transportation * Transportation should offer precooling services to ensure that all flowers and plants are transported within the desired cool temperature * Investing in equipment needed to ensure adequate initial cooling and to prevent breaks in the supply chain end to end Source: nri. org/projects/NRET/2607. pdf Export and Import Regulations and Taxes Duties and VAT It is vital to ensure that you pay the correct duties and VAT on all products that you import. There are number of different excise duties (e. g. Alcohol or Tobacco duty) that apply to goods, and you need to be sure that you are paying the correct rates. As small businesses may not be VAT registered, the rules will vary depending on the product, you should be certain to clarify the duty or VAT you will need to pay, and how this will change if you register for VAT in the near future. Depending on the amount you import and export, some business will be entitled to claim back some of the duty or VAT payments that you make. A number of businesses are also entitled to delay payment of duties (mainly for goods imported from outside the EU). Customs Entries If you are importing from outside of the EU or from special EU territories (including the Canary Islands and the Channel Islands), then the goods you bring in will almost always need to be entered and declared to Customs and Excise as they arrive (Either yourself or by an approved agent). If you are importing or exporting from within the EU, then a customs declaration is not usually necessary. Although if you are VAT registered, and your EU imports or exports exceed a set amount (currently ? 233,000 a year) you will need to fill in a supplementary declaration form each month. Payment Currency It is important to remember that when you import or export goods, you may be required to pay (or accept payment) in a number of currencies. You need to arrange with the supplier or buyer in advance who will bear the costs of exchanging the currency (e. g. From Euros to Pounds); this can affect the costs a considerable amount and may need some negotiation to find the fairest option. In most cases the buyer (importer) will pay the currency conversion charges, although it now a lot easier for payment to be converted as it enters the bank account (particularly with Euro payments). Open Account (OA) This type of payment is preferable to small businesses when importing, helping you keep positive cash flow. It is however much more preferable to have payment in advance when exporting. Documentary Letter of Credit (LC) This is where the customer’s bank provides a ‘letter of credit’, which promises to pay the supplier as long as the terms are met (and the bank has the money to pay) (ILC). There s also a ‘confirmed irrevocable letter of credit’ (CILC). This is a promise by a UK (or a large world bank) to pay the supplier, and is even more secure than an ordinary letter of credit. A letter of credit is the most secure way to be paid, but you must be careful to ensure that all documents related to the sale are correct, as a serious mistake can make the letter of credit worthless. Terms of Delivery It is essential that all importing or exporting be covered by an effective set of delivery terms. In the event of a late or damaged delivery, the costs to the importer could be huge. Incoterms are a set of international standard definitions that allow terms to be set without the risk of confusion, even when translated into different languages Incoterms help to set out fair compensation rules in the event of a late, damaged, or missing delivery. They can also set out fair payment details once a complete delivery has been made. Import Duties All merchandise coming into the Netherlands must clear Customs and is subject to customs duty assessment unless the goods are duty or tax exempt by law. Customs duties are, generally, an ad valorem rate (a percentage), which is applied to the transaction value (EU Euro) of the imported goods based on the cost of the goods, insurance, and freight charges. A commercial shipment below 22 Euros: no duty and no VAT collected. * A commercial shipment between 22 Euros and 150 Euros: no duty but VAT is collected. * A commercial shipment over 150 Euros: duty and VAT are collected. Import Taxes On imports the tax is assessed on the CIF d uty-paid value at the port of entry in the Netherlands; if excise taxes or other charges (excluding VAT) are applicable, the amount levied also is included. The VAT rate is the same for both domestic and imported goods Import Regulations of the Netherlands on Plant Health Phytosanitary import requirements of the Netherlands are directly based on the plant health regime of the European Community and its Member States. The purpose of these requirements is to prevent the introduction and spread of (quarantine) pests and diseases within the European Union. Points of entry All points of entry of the Netherlands can be used for the import of plants or plant products for which a phytosanitary certificate is required. The following main points of entry are in use in the Netherlands: * The Airport of Amsterdam Schiphol * The Airport of Rotterdam * The Airport of Maastricht List of importers and Approved places of inspection Upon entry all regulated objects are subject to inspections by the Netherlands Plant Protection Service. Inspections are carried out at an approved place of inspection. In the Netherlands most of these inspections are carried out at the place of destination, such as a place of production, approved by the Netherlands Plant Protection Service, in line with Council Directive 2000/29/EC. Import Declaration Form (IDF) An IDF must be applied for and obtained from the Kenya Revenue Authority for any Commercial Importation. The Importer is responsible for applying for the IDF but may consult us for purposes of Customs Classifications which form the backbone of the information drawn from the Pro-Forma Invoice. The IDF Fee is 2. 75% of the CIF Value of the goods. A minimum payment of Ksh. 5000/= is payable for the IDF to be issued, while the difference if any, will be paid alongside the Import Taxes. Quality Inspection The Kenya Bureau of Standards has appointed two agents namely INTERTEK and SGS for the Pre export Verification of Conformity inspection of the commodities listed on the Guidelines referred bellow. These agents will issue to the Shipper/Supplier a Certificate of Conformity and the Test Results. An IDF will be required before any Inspection can be performed Customs Import Entry The following documents are required for Customs Import Entry Purposes 1. Original Commercial Invoice 2. Packing List 3. Original Bills of Lading – Two Original 4. Original Certificate of Conformity 5. Original Test Result/Report/Analysis 6. Original Certificate of Origin for Preferential Trade Area Partners e. g. COMESA. 7. Import Declaration Form and the Receipt 8. Insurance Debit Note 9. Importers Declaration(C52) Special Permits/Certificates Certain types of Importations are subject to control measures and therefore Permits must be obtained from the concerned authorities such as: * Department of Agriculture (KEPHIS) Plants Importations Permit * Fumigation Certificates The role of the exporters Exporters play an important role in the flower supply chain. They have to perform several functions, and if they are unable to, these functions act as barriers to entry. According to Dolan et al. (1999), exporters have to ensure consistency of quality, reliability of supply and the perseverance of the products. Therefore, they have to help manage the production and processing systems to ensure quality, install control mechanisms to ensure reliability of supply and monitor the use of chemicals to ensure perseverance. Exporters also have to make sure that post-harvest care is done properly so that the products have a longer shelf life. The retail sector demands flexibility and reliability in the supply, and so logistics and transport are two of the most important aspects in this chain (the products only have a short period in which they can be marketed). The exporters, so as to be able to react quickly to orders, have installed a Just-in-Time (JlT) management system. This system reduces time between harvesting, packing and delivery. Efficient logistics depend on the quick exchange of information and knowledge between the participants in the global competitive chain. Integrating the participants in the chain electronically could accomplish this. Thus, the flow of the products throughout the chain could be traced. Exporters have to secure air cargo space to be able to transport the products rapidly in a reliable manner. Large exporters are able to pre-book airfreight services because they have the resources and volumes required. Small exporters, however, have to compete with passengers for air space, which can only be arranged just before departure. Exporters need to constantly develop new products and diversify the existing ones. By working closely with the importers, this could be achieved. Once they develop new products and innovative packaging, they reduce the risk of being substituted by the supermarkets. Exporters are also dependent on importers for market information about the changes in consumer preferences, as well as for technical information. With this information the exporter is able to ensure that the product mix and product packaging adhere to the customer preferences. | | | | | | | | | | | | | | Distribution and Transportation ProcessA proper management of the logistics system, that is, the unique combination of packaging, handling, storage and transportation, will ensure that the product is imported and made available to the consumer at the right time and place and in the right condition. International logistics allows country’s to export products in which they have a completive advantage and import products that are either unavailable at home or produced at a lower cost overseas. Natural resource advantages and low-cost labour has enabled countries like Kenya to export flowers to places like the UK by airfreight where in turn the products are distributed nationwide by air, water or by truck. (Seyoum)Flowers take a number of routes to the consumer, depending on where they are grown and how they are to be sold. Some growers cut and pack flowers at their nurseries, sending them directly out to the consumer by mail order. Some flowers are sent to packing companies, who grade the flowers and arrange them in bunches for sale to supermarkets or to deliver by mail order. Some flowers are graded and sleeved by the growers and sold at wholesale flower markets; the wholesalers then sell them on to florists who condition and arrange the flowers for the consumer. Africa is currently responsible for 95% of Dutch rose imports. Our import roses are primarily from Kenya and Ethiopia. The import roses include many different flower types, with a relatively long shelf-life. We have recently begun offering boxed import roses. The advantage of boxed import roses is that the roses from Kenya and Ethiopia can be directly resold to Dutch exporters. The accelerated process gets the roses to the Dutch market two days earlier than those imported in water. Furthermore, we offer boxed import roses at even better prices. Thanks to the extensive purchasing organisation and partnerships with various growers, we are able to offer (almost) all import roses on a daily basis. Even the cultivars that are not auctioned are available from us. We are therefore able to offer you a total package of import roses. Billions of flowers and plants are distributed through the wholesale markets in Holland each year. The flowers are shipped fresh daily to florists, achieving a reliable rate of safe delivery. Most shipping goes by high speed trains. The rest reach their destination by air. Specialized packaging and handling help make the worldwide trade possible. Buyers can make Dutch flower market purchases live from anywhere in the world and have delivery usually within 24 to 48 hours. Most Dutch flowers are sold to European countries, but the eastern United States and the Chicago area are sizable importers as well. (Unknown)Some flowers are sent packed flat in boxes. This enables large amounts of flowers to be packed in small spaces like aircraft holds. Other flowers cannot survive for long periods out of water such as orchids and water lilies. These are either sent with their own sealed water container (called picks) on each stem end for more expensive or tropical flowers or are transported in buckets of water. The latter method extends the life of flowers and reduces labor time as flowers are ready for sale, but obviously also reduces the amount of flowers that can be transported as they are much heavier than dry-packed flowers and hence air transportation charges are higher. (Unknown)The Cool ChainRoses are perishable goods and therefore require a little bit of extra care and attention when they are being exported or transported. Though we might not consider flowers and plants to be perishable in the same way that food stuffs are, we know that cut flowers will continue to bloom but storing them in very low temperatures will slow down their physiological development significantly, which prolongs their life and keeps them fresher for longer. With the exception of tropical breeds, cut flowers and plants should be cooled rapidly to temperatures of around 33-35 F throughout their travelling time. Truck transport of flowers can be a preferable method because temp