Supply chain & Logistics

Dr. Rajkumari Mittal

What is a Supply Chain?
• All stages involved, directly or indirectly, in fulfilling a customer
request
• Includes manufacturers, suppliers, transporters, warehouses,
retailers, and customers
• Within each company, the supply chain includes all functions involved
in fulfilling a customer request (product development, marketing,
operations, distribution, finance, customer service)
What is a Supply Chain?
• Customer is an integral part of the supply chain
• Includes movement of products from suppliers to
manufacturers to distributors and information, funds,
and products in both directions
• May be more accurate to use the term “supply
network” or “supply web”
• Typical supply chain stages: customers, retailers,
wholesalers/distributors, manufacturers,
component/raw material suppliers
• All stages may not be present in all supply chains (e.g.,
no retailer or distributor for Dell)
The Objective of a Supply Chain
• Maximize overall value generated

Supply Chain Surplus

= Customer Value – Supply Chain Cost
 Decision Phases in a Supply Chain

1. Supply chain strategy or design

How to structure the supply chain over the next several years
2. Supply chain planning
Decisions over the next quarter or year
3. Supply chain operation
Daily or weekly operational decisions
 Decision Phases in a Supply Chain

1. Supply chain strategy or design

How to structure the supply chain over the next several years
2. Supply chain planning
Decisions over the next quarter or year
3. Supply chain operation
Daily or weekly operational decisions
Supply Chain Strategy or Design
• Decisions about the configuration of the supply chain,
allocation of resources, and what processes each stage
will perform
• Strategic supply chain decisions
• Outsource supply chain functions
• Locations and capacities of facilities
• Products to be made or stored at various locations
• Modes of transportation
• Information systems
• Supply chain design must support strategic objectives
• Supply chain design decisions are long-term and
expensive to reverse – must take into account market
uncertainty
Supply Chain Planning
• Definition of a set of policies that govern short-term operations
• Fixed by the supply configuration from strategic phase
• Goal is to maximize supply chain surplus given established constraints
• Starts with a forecast of demand in the coming year
Supply Chain Planning
• Planning decisions:
• Which markets will be supplied from which locations
• Planned buildup of inventories
• Subcontracting
• Inventory policies
• Timing and size of market promotions
• Must consider demand uncertainty, exchange rates,
competition over the time horizon in planning
decisions
Supply Chain Operation
• Time horizon is weekly or daily
• Decisions regarding individual customer orders
• Supply chain configuration is fixed and planning
policies are defined
• Goal is to handle incoming customer orders as
effectively as possible
• Allocate orders to inventory or production, set order
due dates, generate pick lists at a warehouse, allocate
an order to a particular shipment, set delivery
schedules, place replenishment orders
• Much less uncertainty (short time horizon)
Supply Chain Macro Processes
Supply chain processes discussed in the two views can
be classified into
1. Customer Relationship Management (CRM):
all processes at the interface between the firm and its
customers
2. Internal Supply Chain Management (ISCM):
all processes that are internal to the firm
3. Supplier Relationship Management (SRM):
all processes at the interface between the firm
and its suppliers
Supply Chain Macro Processes
 SCM Definition
Material Flow

Converter
Supplier Retailer
Distributor

Source
Converter Consumers
Distributor End-User
Supplier

Value-Added Services

Funds/Demand Flow

Information Flow

Reuse/Maintenance/After Sales Service Flow

Two Other Formal Definitions
The design and management of seamless, value-added
process across organizational boundaries to meet the
real needs of the end customer
Institute for Supply Management
Managing supply and demand, sourcing raw materials
and parts, manufacturing and assembly, warehousing
and inventory tracking, order entry and order
management, distribution across all channels, and
delivery to the customer
The Supply Chain Council
1.2 The Development Chain

The enterprise development and supply chain

Global Apparel Value Chain
Tracing back the dress you are wearing
1.7 Key Issues in Supply Chain
Management
Chain Global Optimization Managing Risk and Uncertainty
Distribution Network Configuration Supply Y
Inventory Control Supply Y
Production Sourcing Supply Y
Supply Contracts Both Y Y
Distribution Strategies Supply Y Y
Strategic Partnering Development Y
Outsourcing and Offshoring Development Y
Product Design Development Y
Information Technology Supply Y Y
Customer Value Both Y Y
Smart Pricing Supply Y

TABLE 1-1: Key supply chain management issues

 1. Facilities
• The physical locations in the supply chain
network where product is stored,
Drivers of assembled, or fabricated
2. Inventory
Supply Chain • All raw materials, work in process, and
Performance finished goods within a supply chain
3. Transportation
• Moving inventory from point to point in the
supply chain
 4. Information
• Data and analysis concerning facilities,
inventory, transportation, costs, prices, and
customers throughout the supply chain
Drivers of 5. Sourcing
Supply Chain • Who will perform a particular supply chain
activity
Performance 6. Pricing
• How much a firm will charge for the goods
and services that it makes available in the
supply chain
Impact of Service Level on Revenue
Costs and Profits
Supply Chain Typology

• Order Penetration Point/ Decoupling Point

• Make to Stock
• Make to Order
• Configure to Order
• Supply Chain Focus
• Efficiency
• Responsiveness
Supply Chain Typology: Order Penetration Point/
Decoupling Point
Match Supply Chain Design with Product Category
Fun.Basic need ,low variety,low profit
 Functional Versus Innovative Products:
Differences in Demand
Aspects of demand Functional (predictable Innovative (Unpredictable
Demand) Demand)

Product Life cycle More than 2 years 3 months to 1 year

Contribution margin ( % of 5% to 20% 20% to 60%
sales price)

Product variety Low ( 10 to 20 variants per High ( often thousands of

category) variants per category)

Likely forecast error 5% to 20% 40% to 100%

Average stock-out rate 1% to 2% 10% to 40%
End-of-season mark 0% 10% to 30%
markdown
 Supply Chain Performance Measures:
SCOR Model
• Internal Facing
• Cost
• Total logistics management cost, Value-added productivity , Warranty cost
• Assets
• Cash-to-cash cycle time, Inventory days of supply, Asset turns
• Customer facing
• Reliability
• Order fulfilment performance ,Perfect order fulfilment
• Responsiveness
• Speed to provide products to the customer
• Agility
• Supply-chain response time, Production flexibility
 Illustration: Supply Chain Performance
Measures From Financial Statement: Kurlon
• Data*
• CRM=557.8, CP =670.1, CS : 102.62
• RM= 50.1,WIP=9.2, FG=86.5, INV=145.8
• AR=238.2 , AP=181.8, NS= 1122.2, DC=89.5, ICC=0.2
• Time in chain
 DRM = 5.01*365/55.78 = 33 ,DWIP = 0.92 *365/67.01 = 5 ,
 DFG = 8.65 *365/ 102.62 = 31
 Total Length of chain =33+5+31=70 days
• Supply chain inefficiency ratio:
 SCC = 89.5 + 145.8*0.2 =118.66, SCI =118.66 /1122.2=10.6
• Supply chain working capital productivity:
 SWC = 145.8+ 238.2 - 181.8 =202.2
 SWCP = 202.2/1122.2 =0.18

• * Source: Exhibit 2 and 3 Kurlon case, Assumption : ICC=0.2

Benchmarking Supply Chain Performance:
Impact of supply Chain Initiative on Business
Performance
• Cost reduction achieved by:
• Reducing Inventory, Reducing logistics expenses,
Reducing direct material expenses, Reducing indirect
material expenses
• Improved revenue and profitability by:
• Selling higher margin products, Achieving higher market
share, Reducing backorder and lost sales, Attacking new
markets, Decreasing supply time to market
• Improved Operational efficiency by:
• Reducing procurement expenses, Increasing assets
utilization, Delaying capital expenditure
• Reducing working capital by
• Reducing inventory, Reducing accounts receivables
Impact of Supply Chain on Business
Performance

Supply
Business
Chain
Performance
Performance

Supply
Chain
Initiative
Enhancing Supply Chain Performance
 Enhancing Supply Chain Performance
 Supply Chain Integration
 Toyota, Ford Motor Company (1910-1920),
 The Dubbawallas of Mumbai
 Supply Chain Optimisation
 Use of Quantitative models in supply chain design and
operations
 Supply Chain Reconfiguration
 Dell, TVS Scooty
Inventory Management: Key Decisions

• How much to order?

• When to order?
• Where to hold inventory?
• When to review?
• Continuous review systems ( Fixed order quantity)
• Periodic review systems
 Drivers of Inventory
Type of Inventory Driver ( Logic)

Cycle Stock Economies of Scale

Safety Stock Uncertainty in demand & Supply

Seasonal stock Mismatch between demand and supply rate

Speculation Stock Uncertainty in price of material

Pipeline Stock Lead-time in production/transportation process

Dead Stock Judgmental error/ Change in economic or

technological environment
Inventory in Chain

• Supply chain consists of series of stock points connected

by processes ( conversion processes and transportation
processes)
• Each stock point has demand process and supply process
• Inventory at stock point : cycle stock, safety stock,
seasonal stock
• Inventory within conversion and transportation processes:
• pipeline inventory
Pipeline Inventory
• Inventory within conversion and transportation processes:
• Pipeline Inventory
• Pipeline Inventory = PLT * D
- PLT = Pipeline Lead-time; D = average demand
• Illustration :
• LT -Shipment by air = 7 days
• LT- Shipment by sea = 45 days
• Average demand = 100/day
• Pipeline Inventory ( Shipment by air) = 700 units
• Pipeline Inventory ( Shipment by Sea = 4500 units
 Inventory Management: Relevant Cost
• Ordering cost/setup cost
• Inventory carrying cost
• Cost of shortage
• Lost sales
• Backlogging cost
• Service level as proxy for cost of shortage
• Cycle Service Level
• Fill Rate
• Purchase cost ( value addition cost) of Item
• Not relevant if cost of item is not function of
order quantity (No Quantity discount case)
Cycle-stock Inventory

Fixed Order Quality Model ( Cont. Review Model)

Q=Order Quantity, Reorder point= L*d
Average cycle stock = Q/2
Optimal Order Quantity Trade-offs
Inventory Models: Cycle Stock

• __________
• Q =2AD/i C
• A = Ordering Cost / Cost of setup
• D = Annual Demand
• i = Inventory carry cost
• C = cost of item
• Q= Optimum order quantity
Optimum Order Quantity
• Daily Demand = 100
• Working days in year=300
• Ordering cost = 256 Rs.
• Cost of item = 30 Rs.
• Inventory-carrying cost = 0.2 Rs./Rs./Year
• Supplier LT = 15 Days
• Optimum order Qty. =
• _______________________
Ö (2*256*100*300/(30*0.20 ) = 1600

• Average cycle stock= 0.5* 1600 = 800 units

• Reorder point= 15*100 =1500
 Total Cost versus Q

15000
Total Cost

10000
Series1
5000
0
0 1000 2000 3000 4000
Q

Optimum order quantity=Q*= 1600

 Sensitivity Analysis
Q/Q* Q Tc
0.5 800 12000
0.75 1200 10000
0.9 1440 9653.333
1 1600 9600
1.1 1760 9643.636
1.25 2000 9840
1.5 2400 10400
1.75 2800 11142.86
2 3200 12000
Safety Stock for Target Service Level

 Cycle Service Level : Cycle Service level is the probability

that all orders will be filled from stock during the
replenishment lead time or during the reorder cycle.
This is known as cycle service level.

 Fill Rate: Fill rate is a percentage of demand filled from

stock during a given period of time, for example, a year.
Safety Stock

R= reorder point
Distribution of Demand During Lead Time

Safety Stock
Ordering Policy in Case of Demand and Supply
Uncertainty for a Target Service Level

• Order quantity = Q* = Optimum order quantity

• Reorder point= D * L + K Lead Time Demand
• K = Safety factor
• Safety stock= K Lead Time Demand
Impact of Safety Factor on
Cycle Service Level

• Safety factor (K) Service level

• 0 0.500
• 0.5 0.690
• 1.0 0.841
• 1.5 0.933
• 2.0 0.977
• 2.5 0.994
• 3.0 0.998
Impact of Service Level On Safety Stock
Safety Stock Inventory Model for a
Targeted Fill Rate
 Fill rate is the percentage of orders in a year that can be filled from stock
 For a target level of fill rate, one can calculate required quantity of safety stock
using following relationship

where FR is the fill rate, Q is the order quantity per replenishment cycle (EOQ),
σLTD is the standard deviation of demand during the lead time, and K is service
factor . E(K) is the standard loss function, that is, expected number of lost sales
when demand comes from standard normal distribution (mean =0 and standard
deviation=1 and safety stock=k) for a given value of K; E(K) can be determined
from table.
Safety Stock Inventory Model for a
Targeted Fill Rate
 Safety Stock Inventory Model for a
Targeted Fill Rate
• Calculating fill rate value for a given quantity of safety stock:
Average daily demand =100 , Q=1,600 and σLTD =513 ,
Safety Stock = 2 days of demand = 200
K=safety stock/ σLTD =200/513=0.389=0.4
K=0.4, from table value of E(k)=0.23
FR= 1-(513X0.23/1600)=0.926
It means, retailer likely to lose demand for 118 units [1,600x(1-0.926)].
• Calculating required SS to achieve target level of fill rate of 98%
value of K that will provide the required value of E(k), which results in 98
percent fill rate, that is, 0.98=1-(513xE(k)/1600)
K(=1.15) given that E(k)=0.0624.
Therefore, required safety stock=1.15x513=590 (will face stock out of 32 units)
Annual quantity short=(1-0.98)X1,600)X(300X100/1,600)=600 units
Annual stock out cost = 600x15=9,000
Safety Stock: Demand Uncertainty Only

• S.S = K Lead Time Demand

• ______
• Lead Time Demand =  L D2

• D = average Demand ,D = S.D. of Demand ,

• L = Lead-time, K = Safety Factor
Safety Stock : Demand and Supply
Uncertainty

• S.S = K Lead Time Demand

• ____________
• Lead Time Demand =  L D2 + D2 L2

• D = average Demand ,D = S.D. of Demand ,

• L = Average Lead-time, L = S.D. of Lead-time
• K = Safety Factor
Inventory Profile at Stock Point:
Cycle Stock + Safety Stock

Inventory

Average Cycle Inventory

Inventory
Safety Inventory

Time
Basic Demand and Lead-time Data

Demand Data
d1 d2 d3 d4 d 5 d 6 d7 d8 d 9 d10
Demand 115 95 150 125 28 90 93 115 93 96
Lead-time data
L1 L2 L3 L4 L5 L6 L 7 L8 L 9 L10
Lead- 12 15 4 21 18 11 12 18 19 20
time
Inventory Management
Cycle and Safety Stock
• Daily Demand: Mean = 100 , SD = 30
• Ordering cost = 256 Rs.
• Cost of item = 30 Rs.
• Inventory-carrying cost = 0.2 Rs./Rs./Year
• Supplier Performance
• Mean = 15 Days , SD = 5
• Cycle Service Level = 98%
Impact of Change in Demand and
Supply Parameters

Average Standard Average Standard Safety Safety Remark

Demand deviation lead- deviation stock stock in
of demand time of lead- - units days of
time inventory
100 30 15 5 1026 10.3 Base case

100 30 15 0 232 2.3 No supply

uncertainty,
100 0 15 5 1000 10 No demand
uncertainty
100 15 15 5 1006 10 Reduce demand
uncertainty
100 30 15 2.5 526 5.3 Reduce supply
uncertainty
100 30 7.5 5 1003 10 Reduction in
lead-time
Managing Seasonal Stock

• Capacity versus inventory tradeoff in seasonal

demand//supply situation
• Two basic approaches in aggregate planning
(Sales and operations Planning)
• Chase Option : Produce as per demand
• Level Option:
• Mix apparoches
Illustration: Managing Seasonal Stock
Q1 Q2 Q3 Q4
Demand 8000 8000 8000 12000

Level option

Production 9000 9000 9000 9000

Hiring Cost 0 0 0 0

Inv. C. Cst 3000 6000 9000 0

Chase option

Production 8000 8000 8000 12000

Hiring Cost 0 0 0 48000

Inv. C. Cst 0 0 0 0

Cost: level option= 18,000 Chase option= 48000

Centralized Versus Decentralized Systems

• Inventory
• Safety Stock
• Cycle stock
• Service Level
• Overhead Costs
• Customer Lead Time
• Transportation Cost
Centralized Versus Decentralized
Systems: Illustration
• Demand distribution at each region ( 16 regions)
• Daily Demand: Mean = 100 , SD = 30
• Ordering cost = 256 Rs.
• Cost of item = 30 Rs.
• Target Cycle Service Level = 8%
• Inventory Carrying cost = 0.2 Rs./Rs./Year
• Plant Lead time:= 15 Days ( No supply Uncertainty)
• Transportation:
• Decentralized- Rs. 1 per unit
• Centralized case: - 10% higher
 Decentralised Centralised
system –16 system –1
stock points stock point

Cycle 800 3200

stock/stock
point = Q*/2

Safety Stock 232 928

per stock point

Total Inv. in (232+800)  928+3200

units for the 16 = 4128
system = 16512

Total Inv. 16512  6 4128  6

carrying cost = 99072 = 24768

Incremental 30010016
Transportation 0.1
cost =48,000
Centralization

• Physical centralization
• Decentralized inventory & centralization of
information
• Specialization at each stock point
• Mix of Centralization & decentralization
Impact of Inventory Pooling

• Centralization of inventory
• Product substitution
• Component commonality
• Postponement
 Improving Inventory Turns
Type of Inventory Driver ( Logic) Improvement focus

Cycle Stock Economies of Scale Reduce ordering/setup cost

Safety Stock Uncertainty in demand & Supply Reduce demand & supply
uncertainty & Reduce LT, supply
chain redeisgn

Seasonal stock Mismatch between demand and supply Reduce Seasonality in demand,
rate Create flexible capacity

Speculation Stock Uncertainty in price of material Risk management

Pipeline Stock Lead-time in production/transportation Reduce Lead Time

process

Dead Stock Judgmental error/ Change in economic Anticipate changes in demand

or technological environment structure
The Extended Supply Chain: From Manufacturing
to Order Fulfillment

FIGURE 3-19: The extended supply chain: from manufacturing to order fulfillment
Supply chain & Logistics…

Transportation function Transportation cost includes

• Product movement. • Capital invested in vehicle.
• Operational cost of vehicle.
• Driver cost.
• Product storage. • Administration cost.
• Product loss/damage.
• Environment cost
Supply chain & Logistics…

Economies
Transport of distance
principle Economies
of weight
Supply chain & Logistics…
• Transport participants
Consignor/Shipper.
Consignee/Receiver/destination
Carriers/agent.
Government.
Internet.
Public.
Carriers(Public and private)
Rights of the way.
Supply chain & Logistics
• Transport regulations.
• Social regulation.(Safety of driver, working condition, handling of
hazardous material)
• Economic regulation. Carriers need to be regulated for availability,
stability and fare prices.
• Acts in India…
Supply chain & Logistics…
• Transportation modes
Rail
Highway
Water
Pipeline.
Air.
The transportation modes are classified on behalf of
Speed ,cost, availability ,dependability, capability.
 Relative Opening Characteristics by Transportation Modes:
Operating Rail Truck Water Pipeline Air Remarks
Characteristics
Speed 3 2 4 5 1 Air is the fastest
Availability 2 1 4 5 3 Road is the best since they
can drive from origin to
destination
Dependability 3 2 4 1 5 Pipeline ranks best-As the
service is continuous and
there is no stoppage due to
traffic or congestion

Capability 2 3 1 5 4 Sea is the best-Can handle all

types and size of cargo

Frequency 4 2 5 1 3 Pipeline is ranked best-As the

movement is continuous

Composite Score 14 10 18 17 16 Lowest rank is the Best-

 Cost Structure For Each Module:
Mode Fixed Costs Variable Costs
Rail High- Equipments, Terminals , Tracks ,etc Low

Road Low-Highway provided by government Medium-Fuel , Maintenance,

etc

Water Medium-Ships and Equipment Low-As capacity is huge

Pipeline Highest-Right of the way , construction, Lowest-Insignificant labour

Equipment for control station and costs
Pumping capacity

Air Low-Aircraft and cargo handling systems High- Fuel, labour, Maintenance
Supply chain & Logistics…
• Carrier selection is a two step process.
• Modal choice & Specific carrier choice.
• Carrier selection depends
upon(Reliability,Safety,Capability,Flexibility,Capacity)
• Non operating intermediaries.
• Freight forwarders,Shippers association,brokers.
Supply chain & Logistics…
 SPECIFIC COMBINATION
Piggy Back :
Piggyback transportation refers to
the transportation of goods where
one transportation unit is carried on
the back of something else.
Trailer-on-Flatcar (TOFC)
“Piggybacking” :
The goods are packed in trailers and
hauled by tractors to the railway
station. At the station, the trailers are
moved onto railway flat cars and the
transport tractors, which stay behind,
be then disconnected. At destination,
tractors again haul the trailers to the
warehouses of the consignee.
• COFC (Container-On-Flatcar): This type of
piggybacking facilitates multiple containers to be transported
on a flat cars.
Supply chain and logistics..
• Roadrailers: (For bi-modal transportation)
– These are specially designed trailers which can run on
road as well as on rails.
 ROLL-ON ROLL-OFF (RO-RO)
RORO means Roll-on/roll-off, where loaded trucks are
directly carried by railway wagons to their destination.
Ships also act as a ferry for loaded trucks. The trucks Drives
onto the ship, the ship sails to the destination Port, and
the trucks drives off the ship to deliver the goods.
 SPECIFIC COMBINATION
Fishy Back:
It is a combination of road and water transport. Fishy back/ train
ship/ containership are examples of the oldest mode of the
intermodal transport. They utilize waterways, which are one of
the least expensive methods for line- haul movement. The fishy
back, concepts load a truck trailer, railcar, or container on to
ship for transportation.

Birdy Back:
It is a combination of road and airways and is generally used in
International shipments Air- truck movements usually provide
service and flexibility comparable to straight motor freight.
Supply chain and logistics…
 Supply chain and logistics…

Land Bridge (TranShip):

A variant of this intermodal option is the “LAND BRIDGE”
concept, which moves containers by a combination of
sea and rail. The land bridge concept is based on the
benefit of ocean and rail combination that utilize a single
tariff, which is lower than the total cost of the separate
rates. The-goods can be transported by water
transferring the shipment to surface transport and again
finish destination will be placed on a rail car and
transported to Chennai from where it will again be
loaded on a vessel for transferring to say port Blaire.
Supply chain and logistics…
Supply chain and logistics..
Supply chain & Logistics…
• Economic drivers.
Distance,weight, density, Stowability, Handling, Liability, market.
• Cost based drivers.
Fixed ,variable, joint, common.
• Carrier pricing strategy.
Cost of service,value of service,combination
Supply chain & Logistics…
• Costs=Fix cost+ Variable cost
• Variable costs can be ( Labor, fuel, maintenance)
• Fix costs(vehicle costs, terminals, right of the way, information
system, support equipment).
• Joint cost (cabotage)
 Supply chain & Logistics…

• Common (Public)carrier :
• Most frequently employed legal category for transportation resources

• Common carrier is a firm that transports for revenue at any time & at any place within jurisdiction

• Required to published all rates charged for this service & should be similar for similar services.

• Authorised to offer transport for hire upon receiving a certificate for public convenience & need.
Supply chain & Logistics…

• PRIVATE CARRIER:

• originally consisted of transportation resources that are controlled by the firm through
ownership or lease.

• permitted to use owner operators or others outside sources of vehicles & drivers.

• restricted in that the materials being shipped must be owned by the firm & the transportation of
the materials must be incidental to the primary business of the firm.
Supply chain & Logistics…
• CONTRACT CARRIER
• Authorised the transportation of specific items over specified routes.

• Arises from contractual arrangements between two parties i.e. the shipper & the
carrier.

• Contract provides shipper with defined transportation service at agreeable price.

• Unlike common carrier they are not required to charged the same rate for equal
service.
 Supply chain & Logistics…

• EXEMPT CARRIER:

• Do not fall under the umbrella of direct regulation w.r.t. Pricing policies & operating rights

• Restricted to law of that state in which they are operated

• Transported commodities such as agriculture Products

• Exemptions may also be granted for specified areas such as within the city and commercial areas
of the activity
Supply chain and logistics…

Miscellaneous cost Toll ,octroi, etc.

 Supply chain and logistics..
• Transportation cost is the cost occurred during
transporting the freight from one place to another. The
followings are the elements of transportation costs-
1. Tariff of transportation mode: It depends on-
• Nature of the product
• Distance to be covered
• Quantity of the shipment
• Transit time
• En route handling needs
• Trade relationship
Supply chain and logistics…

2. Transit Time Cost:

• Working Capital cost
• Customer service cost

3. Obsolescence & Deterioration Cost:

- Changes in physical feature of the products resulting in value reduction,
especially perishable items like Milk, Vegetables, Fruits, Fish, Egg etc.
Supply chain and logistics…
3. Protective Packaging Cost-
• To avoid breakage and pilferage
• To avoid damage due to rain etc
• It depends on the mode of transport or multi modal needs
4. Transit Insurance Cost-
-To cover the loss during transit
5. Miscellaneous Cost-
- Toll tax, Local levy etc
Supply chain
• Types of carriers…
& Logistics…
Supply chain & Logistics…
• Carrier pricing strategy includes..
• Cost of service.
• Value of service.
• Combination.

• Rates and ratings.

• Class rates ,Commodity rates , Exception rates ,special rates
Supply chain and logistics…

Classification
of ships

Type of Type of Liability

Size of vessel Flags Conference
service vessel conventions
 Supply chain and logistics…

Types of
aircrafts

Passenger Air
Charters Combis Charters
Airplanes freighters
Supply chain & Logistics…
• Passenger Aircrafts-Designed to carry passengers on main deck and
luggage in the belly.Size of cargo is restricted.

• Combi-The craft that is designed to carry both passengers and cargo on

the main deck of the plane(front is for passengers and rear is for cargo).

• Airfrieghters:Similar to passenger plane except the roller deck in main

dck which allows the palletized or containerized cargos to be pushed in
the aircraft
Supply chain and logistics.., Transportation services

Terminal services Line haul services

Terminal functions
Reconsignment & diversion

Shipment monitoring Pooling

Shopping in transit
Loading & Unloading

Transit Privilege
Supply chain and logistics…Terminal
services
• 1.Terminal functions…
• Consolidation-Combining many less then volume shipments in on large
shipment that the carrier can transport economically.
• Breakbulk-When a consolidated shipment arrives at destination the carrier
breaks down for individuals consignees.
• Shipment service-The carrier provides the freight handling services for
consolidation and dispersion and performs the clerical,billing,routing,.
• Vehicle service-Maintains sufficient vehicle supply.
• Interchange-Freight exchange for carriers coordinating to provide through
service.
• Pickup and delivery
Supply chain and logistics
• 2. Loading and unloading-for TL and CL size shipments the shipper
loads and consignee unloads the consignment but a carrier also
performs these at an added cost.
• Demurrage and detention charges(24-48 hours).
Supply chain and logistics…
• Shipment monitoring…Carriers quote transportation rates as cents
/cwt or rs./tonne (Dharam Kanta),so that carrier realizes exact weight
to avail revenue from the shipper.
• Tracing-Carrier must know where the shipment is and when it will
reach destination.
• Expediting-Same like tracing but the objective is to get the shipment
at destination faster then normal.
Supply chain and logistics..Line haul services
• Line haul services allows the logistic manager to implement changes in the original
shipping order and realize savings in transportation costs.
• Reconsignment and diversion-Change the consignee or destination with the consignor
paying through rate from source to destination.
• Reconsignment-Allows the shipper to change the consignee after shipment reached
original destination.
• Diversion-Implements the same when the shipment is enroute before it reaches its
original destination.
• Pooling-Combining LCL/LTL shipments into CL or TL shipments.
• Stopping in transit-Allows the shipper to complete load or partially unload the freight.
• Transit privilege-Permits the shipper to stop the shipment in transit to perform some
function that physically changes the products characteristics.
Supply chain and logistics. Documents of
transport
• Export documents…..
• Export declaration-A document which the shipper provides to
department of commerce with information that shipments nature
and value.
• Export license-General & validated license.
• Certificate of end of use
• Export taxes.
• Export quotas(Limit by the exporting country’s govt. to export a
certain quantity of a commodity.
Import documents..
• Certificate of origin.(consignors location)Exporters chamber of commerce.
• Certificate of manufacture.
• Certificate of inspection./PSI(Indonesia,Thailand-Societe generale de surveillanve)
• Certificate of certification.(as per manufacturing standard of importing country)
• Phyto sanitary certification.(agri standards of importing country)
• Import license.By the govt.of importing country-Pro-forma invoice
• Consular invoice(Commercial invoice provided by the importing country and visa-
ed by consulate in exporters country)
• Certificate of insurance(Provided by the insurance company of exporter declaring
that commodity is insured)
Transportation documents
• Bill of lading-A generic term describes a document which carrier gives to the
shipper/consignor. Ocean bill of lading,Airwaybill
• BOL fills three roles..
• Contract between shipping company and shipper.
• Receipt for the goods condition by the shipping company.
• Certificate of title to the shipping company.
• Straight bill of lading and negotiable bill of lading
• Soiled Bill of lading & Clean Bill of lading.
• Packing list(Detail of what is there in consignment)
• Shippers letter of instruction.(specific steps taken by the shipper).
• Manifest(Internal document to the shipping company)
Insurance documents
• Average-Loss incurred on an ocean voyage by a cargo owner.
• Barratry-Act of willful misconduct by the captain or crew of ship
which causes damage to the ship.
• Peril-The event that brings a loss like fire,collision,flood.
• Jettison-Throwing overboard part of the cargo of a ship(aircraft) to
save the ship, remainder cargos ,and crew members.
• Hazard-A situation which increases the probability of peril.
• Risk-The chance or the probability of loss.
Incoterms and their classification

• The Incoterms first set out in 1936 were subsequently revised in 1953, 1967,
1980, 1990 and 2000. However earlier references to unpublished Incoterms
dates backs as early as 1923 in USA. They were six in numbers.
• ICC (International Chamber of Commerce) Official Rules for the Interpretation
of Trade terms.
• Purpose is to provide a set of international rules for the interpretation of the
most commonly used trade terms.
• There are 11 categories of Incoterms 2010 describing where costs & risks lie
between seller and buyer.
• International Commercial Terms (INCOTERMS) are also referred as shipping
terms, delivery terms; Infoterms or sometimes as trade terms.
Incoterms 2010 vs 2020 ?

• Incoterms are the most ‘commonly accepted terms’ ( not legislation) of sale
in international business
• Incoterms have been adopted by most countries; however India is not the
signatory country so far; but Incoterms are popular in India and are widely
used and if once incorporated into sales contract; have arbitrary & quasi
judicial sanction.
• Defines the responsibilities and risks between exporter & Importer in an
International Sales Transaction.
• To help parties to avoid misunderstandings, with all the waste of time and
money that this entails
• They are used as part of the overall sales agreement.
Relevance of Inco 2010 adopted by India

• Determining Price of the goods (what is included)

• Inspection of the goods – obligations and limitations:
• Delivery periods, conditions (contract of carriage?!);
• Where exactly the goods to be delivered to the Buyer;
• Transfer of risk (Insurance?);
• Who will be responsible for export clearance and who for import
clearance and the cost (duty, VAT);
• Who will pay what in relation to the delivery of goods;
• What documents must be surrendered by the Seller.
Inco– 2010 classification

Incoterms are divided into four (4) categories:

• “E” term – Seller makes the goods available to the buyer at the seller’s premises or
other place named by the seller.

• “F” terms – Seller is responsible to deliver the goods to the export shipment point
and carrier designated by the buyer

• “C” terms – Seller is responsible for contracting carriage of goods to the place of
destination, but does not assume risk of loss or damage to goods, or additional costs
due to events occurring after shipment

• “D” terms – Seller is responsible for all costs and risks associated with delivering
goods to the named place in the country of destination
The four group structure of Incoterms
Group E Departure
EXW Ex Works (… named place)

Group F Main carriage unpaid

FCA Free Carrier (…named place)
FAS Free alongside Ship (…named port of shipment)
FOB Free On Board (…named port of shipment)

Group C Main Carriage Paid

CFR Cost and Freight (…named port of destination)
CIF Cost Insurance and Freight (…named port of destination)
CPT Carriage Paid To (…named place of destination)
CIP Carriage Insurance Paid To (…named place of destination)

Group D Delivered
DAT Delivered at Terminal (….named port or place of destination)
DAP Delivered at Place (…..named place of destination)
DDP Delivered Duty Paid (…named place of destination)
Exclusive Inco for water mode
Sea and inland waterway transport only
• FAS – Free Alongside Ship
• FOB – Free Onboard
• CFR – Cost and Freight
• CIF – Cost, Insurance, and Freight
Terms of trade-incoterms
• Incoterms-An international commerce term which the exporter and
importer agree to use in a given transaction like

• Which tasks and payments will be performed by the importer

• Which tasks and payments will be performed by the exporter.
• When the ownership will be transferred/jurisdiction.
Incoterm strategy….
• Is constrained by the
• Type of product.
• Type of mode of shipment.
• Trust placed by either of the parties.
• Ability to perform the tasks by either of the parties.
Incoterms…
• EXW(EX-works-any merchandise shipped through any means of transport)
• FCA(Free carrier-any merchandise any means but through multi modal
transportation without being handled due to containerization).
• FAS(Free along side ship-used for the merchandise specially designed
through ocean transportation).
• FOB(Free on board/freight on board-till placed on board).
• CFR(Cost and freight)-specifically designed for ocean
transportation.exporter is responsible till goods placed on ship but
exporter prepays the ocean freight.
• CIF(Cost ,Insurance & freight)exporter pays insurance also.
Incoterms
• CPT(carriage paid to-like CFR but not through ocean or shipped by sea
but without handing over the ships rail(ROROFF).
• CIP(Carriage and insurance paid to)like CIF.
• Delivered EX-ships(DES)-Bulk shipment of commodities where parties
wish to have the importer to pay for unloading the ship.
• Delivered Ex quay(DEQ)-Exporter pay for unloading the ship.
Why logistics is a trade?
• Understanding the field of international trade logistics require
integrated efforts to know the all elements of international logistics
system trade supply chain, which include tangible elements like
inventory management, packing & packaging, freight determination
and forwarding, choice of mode of transportation, storage &
warehousing and material handling on the one hand and
understanding of intangible elements such as customer service,
decision support system, information system and IT applications etc
on the other.
• The word ‘Logistics’ has originated from a French word ‘Loger’ which
means “art of transporting”.
Why logistics is a process?
“the inward logistics of inputs, raw material other utilities and services
start from the base level of ‘generation of the demand’, where such
inputs are processed using money, machine, material and men and
ends with movement of such produced goods through the ‘process of
purchase’ by buyers or ‘supply of material by the vendor’ right through
to ‘final acceptance’ by end consumers or users with enhanced and
extended customer services and concludes with ‘payments to the
supplier’ including the reverse logistics if any and the whole process is
to be considered as “one whole activity” with each stage having an
impact on price, cost and quality of internationally traded goods or
services”.
The transformation process through logistics?
• Inputs
• Inputs • Efficient- goods
• Natural • Material Handling and services
• Financial • Order Processing management

Output
Process
• Human • Packaging and • Time and place
• Informational Packing utility
resources • Traffic & • Assets creation
Transportation and maintenance
• Procurements • Cutting edge in
• Customer Service distribution of
goods
• Demand
Forecasting
• Distribution and
Communication
• Inventory Control
• Warehousing
Traditional approach
• Purchase
• Control
• Produce
• Sale
• Distribute
60’s view
• Material Management
• Manufacturing Management
• Distribution Management
Evolved approach
The formal international trade logistics

Inbound Logistics Process Logistics Outbound Logistics

Combination of 7 Rs
• Right product
• Right place
• Right price
• Right quantity
• +
• Right time
• Right condition
• Right Promotion
Front end(Marketing) + Backend(SCM &
Logistics)
• Product, Price, Place, and promotion(Marketing)

Clubbed with

• Logistics, Ware-housing, Inventory, Lot quantity, and Information

processing
Need of international trade logistics?
• Generation of Demand
• Reduced Cost of Doing Business/Ease of doing business
• Tapping International Clientele
• Ensuring Rapid Economic Growth(Contribution in GDP)
• Facilitates Bridging Gap between Demand and Supplies
• Strategic Infrastructure for Global Integration
• Global Outlook Of Indian Industry(Millets)
• Access To Sophisticated Trade Logistics Processes and Capabilities
• Ensuring Critical Supplies on Time(Fedex/International)
Role of ICDS/CFS
• ICDs/CFSs are located away from a gateway port, providing facilities for overseas
trade.
• ICDs/CFSs are located in close vicinity of a production centre or place of
consumption in the country hinterland, having rail and road linkages to gateway
ports.
• ICDs/CFSs are common user facilities, meant for handling and temporary storage
of importable or exportable cargo, stuffed or unstuffed containers for clearance by
customs for home consumption, warehousing, and onward transit to other
locations.
• ICDs are larger and virtually dry ports but CFSs are generally on off-dock facility
close to the gateway port, which is established so as to decongest gateway ports
by shifting cargo and customs-related activities outside the port to these CFSs.
ICD/CFs
• ICDs are focal points of the country’s trade as they receive stuff ed containers
from the satellite CFS in ready condition to be transported to the sea ports for
exports.
• The custom clearance procedure at ICDs/CFSs enables exporters and importers to
complete customs clearance formalities with ease and in reduced cost and time.
• In order to establish India as centre for global trade, free trade and warehousing
zones are set up and are governed by SEZ Rules 2006.
• The criteria and procedure for setting up ICDs/CFSs are framed by the Ministry of
Commerce and Industry, Government of India.
• There have been regional imbalances in setting up of dry ports as majority of
them are located in Southern and Western India. East and Central India does not
have many dry ports mainly due to low industrial and economic activity.
ICD….
• A common user facility with public authority status equipped with
fixed installations and offering services for handling and temporary
storage of import/export laden and empty containers carried under
customs control and with Customs and other agencies competent to
clear goods for home use, warehousing, temporary admissions, re-
export, temporary storage for onward transit and outright export.
Transhipment of cargo can also take place from such stations.”
The act of ICD conceptualisation
• Customs Act 1962 has made a distinction between ICD and CFS
whereby it define the ICD as “the places which alone shall be inland
container depots for the unloading of imported goods and the loading
of export goods or any class of such goods” and remained silent on
appointment of Container Freight Stations thus concluding that “all
containers terminal facilities in the hinterland would be designated as
ICDs” Ibid vide Section 7 (aa) of Customs Act 1962 and inserted by
Finance Act No. 11 of 1983, w.e.f. 13th. May, 1983.
Characteristics of ICDs/CFs
• ICDs/CFSs are located away from a gateway port, providing facilities for overseas trade. ICDs/CFSs are located
in close vicinity of production center or place of consumption in country hinterland having rail & road
linkages to gateway ports.
• ICDs/CFSs are common user facility meant for handling and temporary storage of importable/exportable
cargo, stuffed/unstuffed containers for clearance by Customs for home consumption, warehousing, onward
transit to other locations.
• ICD are larger and virtually dry ports but CFS are generally on off-dock facility close to gateway port which is
established so as to decongest gateway port by shifting cargo and customs-related activities outside the port
to these Container Freight Stations (CFS).
• In India, there are almost 40 dry ports (ICDs/CFSs) in close vicinity of gateway ports and in total there are 140
dry ports spread in country industrial hubs.
• Popularization of containerized trade (the box: 20’*8’*8.5’) has transformed international trade and has
helped reduce the transit time.
• Dry port compensates the disadvantages of having industrial hubs in country industrial hubs. ICDs/CFSs have
gained increased demand in view of clustering of economic activities at Special Economic Zones at various
locations in the country.
Specific functions of ICDs
• Concentration points for long distance cargoes and its unitization.
• Customs clearance facility available near the centers of production and
consumption.
• Issuance of through bill of lading by shipping lines, hereby resuming
full liability of shipments.
• No Customs required at gateway ports
Specific functions of CFS
• Reduced overall level of empty container movement.
• Competitive transport cost and reduced inventory cost.
• Increased trade flows and provides services as a transit facility.
• Reduced level of demurrage and pilferage.
Major ICDs and CFS in India
Few facts about ICDs
• Delhi has the largest ICD in India, namely ICD Tughlakabad. There
are no ICDs in the northern-most state of Jammu & Kashmir and there
is only one ICD at Amingaon, Assam which caters to the entire north-
east.
Indian Infrastructure & Acts
• India’s Transport Sector
Road Infrastructure In India
Railway Infrastructure In India
Inland Water Transport Infrastructure In India
Pipelines Infrastructure In India
Shipping And Port Infrastructure In India
Civil Aviation Infrastructure In India
Indian Road insrastructure
Packing and Packaging
• Packing: The fifth P of marketing… Mc Carthy!!

• Packing and packaging.. Adds values and protect from in

transportation hazard.
• In today’s globalized world, sales are also dependent on good packing
and packaging to a certain extent. Extra efforts in designing a
compatible packing and packaging symbolize how effectively the
business is organized to cater to the varied needs of consumers in
global markets.
Packing

• Export packing refers to an essential component of a product as it

helps in delivering the product to consumers in a protective yet stylish
manner.
• Due to long distances involved in international transportation, the
packing material should not only be resistant to transport hazards,
but should be compatible with goods and be environmentally friendly.
• One should also consider the point of choosing a right packing
material as it entails cost not only in terms of material cost but in
freight cost as well.
Packing Vs Packaging
• Packing can be defined as “process of preparing items and equipment
which not only facilitates the transportation and storage of goods but
it also embraces preservation, identification and packaging of
products in international logistics operations.

• Sir Kotler says….

• Phillip Kotler, the well-known marketing guru, defines packaging as
“all the activities of designing and producing the container for a
product”.
• https://youtu.be/9YvdUZraRQk
Packing vs Packaging ?
• Packaging refers to the way products are kept inside a carton
or any other box either individually or in sets using wrapping
material to protect products from any damage during
shipping or transportation. Thus packaging transforms
product or products into something that is seen by the end
consumer or receiver.
• Packing on the other hand refers to wrapping of single
objects into a casing so that they look beautiful to
consumers and arrive safely and securely in malls from
where they are purchased.
Packing Vs Packaging
• Packing is mainly done in….
1. Wooden boxes
2. Fibre or corrugated board boxes
3. Steel drums
• Packaging is done in….
1. Polythene bags
2. Box made of card paper or cardboard
3. Box made of fiber board/plastic/acrylic sheets
4. Tin-box
Functions of export packaging
• Protection
• Storage, loading, stowage, and transport
• Sales and distribution
• Promotion and customer information
• Guarantee and reusability
Damages in international trade are
• Physical hazards
• Environmental hazards
• Biological Hazard
hazards
What a packing list should contain
• Name & add. Of exporter and importer/representatives/brokers
• Information like box, crate, paper bag, corrugated bag etc.
• Detailed and specific information about each box and total weight.
• Commercial information like BOL, shipping mode…
• Precautions to be taken to protect the cargo
• Regulatory information
Hazards in packaging
• Shock during transportation
• Changes in atmospheric pressure..(Air )
• Atmospheric pollution
• Moisture, dampness, water spillage
• Oxidation to goods(?)
• Electrostatic discharge during transit.(?)
• Compression from top load
• Extreme hot or cold(?)
Factors of material cost in packaging
• Storage space of package
• Ease and cost of handling of loaded vs empty package
• Operational cost (?)
• Chances /probability of loss and damage to package
• Effect of package on sales
• Insurance cost
• Cost of obsolescence and repeated use.
• Cushioning material(airbag, rubberized, bubble sheet, thermocol?)
Labelling and marking in Int. trade
• Labelling has been defined as the “display of information about a
product on its container, packaging, or the product itself and Labelling
must provide the full extent of information of relevant safety and
shipping law for any types of consumer and industrial products.”
• Markings, in international trade logistics is … process of putting
address, number of packages, etc., on packets.
• Marking on export consignments help in easy identification of cargo
to its handlers during the transportation of goods from the exporter’s
country to the importer’s country.
Labelling….must be done to

• Promote transparency
• Thought leadership ?
• Increased sales
• Good trade /public relations
• Ease of handling during transit and trading
A label of Int. trade must contain
• Details of Exporter & Importer
• Nutrient, ingredient, percentage information
• Consumption, storage, usage information
• Date of Manufacturing, expiry,, product name , its variants?
• Country of manufacturing
• Size, weight, lot number etc.
Points to note for Int. trade
• Label boxes and containers with required information
• Avoid Information Cluttering
• Avoid Using Old Labels
• Clear and Permanent Labelling
• Label At Least Three Side Of Carton Or Container
• Use Internationally Accepted Appealing Symbols
Labelling symbols….
 Labelling precaution for colours…in In t. Trade

• The black colour is believed to have negative impact on the customers in markets like Singapore, Malaysia,
Libya, Japan, Middle East, Greece, Argentina and some countries in Latin America. Hence such a colour should
be avoided in labelling the product for sales in these markets.
• Yellow is associated with illness in South Korea, and certain shades of yellow are reserved for the royal families
to wear in Malaysia.
• In Italy, the purple colour has negative impact on the minds of customers while Italians prefer colours with
soft tones as it channelized positive energy as per their thinking
• Red is a positive colour in Denmark, but represents witchcraft and death in many African countries.
• The green colour is preferred and welcomed among Muslims and countries with Muslims population except
Malaysia which has over 67% Muslim population but has a cultural distaste with green.
• Japanese prefer the combinations of red & white and gold & silver.
• People in Peru, Surinam, Hong Kong, Korea, Taiwan, Greece and Malaysia have positive opinions about the
bright colours.
• Colour saffron is preferred among Hindus and Sikhs as it is associated with their religion.
• Colour white is distasted upon by people in China, Taiwan, South Korea and North Korea but white and blue
are preferred in the Czech Republic and Denmark.
• Colour red is perceived to have negative impact on the minds of customers in many Africa countries as they
associate it with evil forces.
Labelling precaution for numbers
• 4 & 9 are unfavourable in Japan
• 13 is not preferred in most of the world,
• 17 in Italy and 7 is bad luck in Kenya but preferred in Czech Republic
• 10 is bad luck in korea
• Even numbers are preferred in hongkong, Taiwan, korea while 1,3,5,8
are positive in Japan
• Triangular shapes are not preferred in Korea, Taiwan while Middle
East prefers round and square shapes
Labelling precautions of various types,eco,
religious, etc…….
Marking…
• International Air Transporters association(IATA)
• FIATA(International federation of freight forwarders association..

Require marking for ( Mainly)

• Shipper (Exporter's) Mark
• Importer's mark as mentioned in Letter of Credit
• Destination
• Order No.
• Destination and Port of Entry
Secondary requirements of marking
• Country of origin
• Port of shipment and place of dispatch
• Gross/Net Weight-Tare Weight
• Handling instructions including symbols
Marking precautions
• Old marks should be completely erased / obliterated from the boxes,
containers and reusable packing material.
• Black pigment type ink should be used in marking the consignments.
• Markings on Export Consignments should be neat and legible, printed or
stencilled in letters of adequate size as per shipping documents such as Bill of
Lading, Cargo Manifest, Commercial Invoice or buyers marking instruction list.
• Marking should be water proof, weather proof, smear proof and permanent
and should have a moisture detection devices or marking outside the packet,
carton or container.
• If stencils are used for marking the export consignment, shipper should ensure
that letters and figures do not lead to any confusion with repeat use of same.
Handling marks….
Fake bodies and authorised units ?
Information to process..
• Information processing in international trade logistics refers to any
business-related information which is required by exporters and
importers.
• Source of Information can be both formal and informal.
• Traders also scan both physical & virtual information to plan &
implement logistics decisions.
Information processing challenges
• Identification of Opportunities
• Dealing with Information Asymmetry
• Dealing with Clutter of information
• Absorbing Rapid Technological Changes
• Developing Active Information Networks at Various Levels
• Trade and logistics managers should ensure that information is precise,
up-to-date, comparable, continuous, accessible, and complete to deal
with the potential challenges that may firm’s way in international trade
operations.
• Trade and logistics managers should ensure that information is worth
using in order to overcome those challenges in international trade
logistics.
• They should also ensure that information is easily retrievable and
deliverable-from physical to virtual information bases so that it can help
the firm’s managers to make real time decisions without any hiccup and
dependency on others.
Export order management
• Exporter has to carefully examine the contents of the export order otherwise he
may have to face problems while settling payments with buyers.
• Buyers may raise issues such as
• quality,
• product specifications,
• tariff preference,
• issues related to packing labelling & marking,
• each party liability vis a vis risk premiums and
• freight payments etc
Few common errors……
• Importer has sent order for supply of goat meat but received supplies of lamb meat.
• Importer has sent order for men trousers but received supplies of woman trousers.
• Importer has sent quotation for supply of P-3 computers and has received supplies of P-4
computers.
• Exporter fails to follow the homologation requirements for a truck supply order to Afghanistan
and suppliers truck with right hand steering however, left hand steering trucks are used in
Afghanistan.
• Exporter fails to take congizance of the fact the it is mandatory to provides drug usage
instructions in arabic in gulf countries.
• Exporter used plastic for packing of goods destined to Germany which were charged for green
dot license at the times of import clearance by German customs.
Other common mistakes/noon compliance are
• Exporter should comply with product specifications vis a vis quality,
sizes, packing, labelling and marking etc.

Different Halal Symbols, different packaging, shape, and size symbols

 Inspection before exporting ?
• Pre-shipment Inspection: exporter should also properly scrutinize the
export inspection requirements as Government of India through Export
(Quality Control & Pre-Shipment Inspection) Act 1963 has made the
inspection of certain goods mandatory for all export shipments.
Additionally, buyer can also request for export goods inspection even if it
is not mandated under Export (Quality Control & Pre-Shipment Inspection)
Act

Special Packaging, Labelling & Marking: Exporter shall also scrutinize

export order for any kinds of special packaging request from an importer.
Scrutiny of export order
• Payment terms?
• Various payments terms in international trade are Payment in
advance, Letter of Credit. Documents Against Payments, Documents
against Acceptance and open Account.
• For examining L/C, Exporter should check Whether letter of credit is
opened by importer bank. Is it confirmed by the Indian Bank? Is it
available in India or at any other location? Exporters shall also check
the credit worthiness of the bank through Banker’s almanac.
• Exporter has to look whether the credit validity period is sufficient for
the collection of all relevant documents. If no so; it is advisable to get
it extended in the beginning itself.
• What are exchange control regulations of buyer country? It is possible
that buyer may be interested to make payments but due to importers
country balance of payments problems, exporter may not receive
payments in freely convertible currency as per Indian regulations.
Other conditions like
• Choice of delivery date
• Part or partial shipment
• Condition vis- a vis choice of loading and shipment port
• Condition vs a vis transport route
• Condition vis a vis destination port and unloading.
Other concernes?
• Marine Insurance: Exporter should scrutinize issues pertaining to
shipping terms and responsibility of availing insurance cover for the
goods.

• Documents: Exporter should scrutinize the details of export

documents and ensure whether he will be able to fulfil these
documentary requirements or not.
Other concerns ?
• Logistics team of an internationally engaged firm should track all
information from its logistics information system and should book the
shipping space in advance. It should take all necessary steps to get the
space booked with a shipping company from the named port of
shipments.
• If exporter himself is the manufacturer, he should update the
information on logistics information system by clearly mentioning the
delivery schedule and other terms and conditions of export order.
Concept of Container
• The International Organization for Standardization (ISO) defined
a freight container as “Container is an article or transport
equipment,
• Of a permanent character and accordingly strong enough to be suitable
for repeated use,
• Specially designed to facilitate the carriage of goods by one or more
modes of transport, without intermediate reloading,
• Fitted with devices permitting its ready handling, particularly its
transfer from one mode of transport to another,
• So designed as to be easy to fill and empty:
• Having a definite internal volume as prescribed by ISO.
Containerization Versus Packaging: What is Better
Factor Case for Container Case for Cargo Packing
Costs of Cost of material handling through container is less LCL cargo can be unitized or palletized as a
Handling than cargo packing in case of break bulk cargo. single unit thus there will lower freight
Containerized cargo also attracts lower freight and rates, reduced cargo handling and saving in
material handling rates due to lesser times of shipping cost in comparison to
handling of consolidated cargo. containerized cargo.

Safety to the Containerization is must for international Cargo such as machine, generators etc are
Cargo transportation as crates and packages can get strong enough to withstand the physical
damaged. Cargo packing is also exposed to hazards and can be palletized for
potentially high level of physical damages, pilferage international transportation without
and other losses in comparison to containers. containerization.

Environment Containers protect environment as cargo can be de- One can transport the cargo without
stuffed at destination and container can be reused containers in cases where there is no need
without posing any environmental hazards. of packing or it is reusable or recyclable.

Creation of Containers has to be handled at various stages of Packing material is required again and
Employment logistics operations such as loading, unloading, again for internationally traded goods as
stuffing & destuffing, re-working, distribution of original packing ends with the life of
cargo, redelivery or repositioning etc thus creating products. There is lot of job creation in case
jobs at all levels of handling in logistics operations. of cargo packing as well.

Temporary Containers are strong enough to act as temporary There is case of cargo packing for cargo
Storage storage facilities in international logistics. Container which is strong enough to withstand the
Facilities also protect the cargo from rain, winters, sunlight various physical hazards associated with
and also from any risks of theft or damage. international logistics and are not prone to
pilferage, thefts and other losses.
Container sizes
• 20 feet
• 40 feet
• 45 feet
• 48 feet
• 53 feet
• 58 feet
Benefits of containerization

• Increase in Logistical Efficiency

• Permits Door To Door Services
• Reduced Risks of Cargo Thefts, Pilferages and Damages
• Lower Packing Needs
• Quicker Transit Times
• Increasing Trade Volumes Generate Greater Economies of Scale
Draw backs of containerization
• Highly Capital Intensive
• Additional Fuel Costs
• Containers Associated Hazards
• Additional Cost on Reverse Logistics of Empty Containers
• Loss at Sea
• Unsuitability for Logistical Operations
Numbering and marking of containers

• For example, Container no. is AACU3070079 whereby:

• AAC : 3 Alphabets are Owner’s Code
•U : 1 alphabet is the the type of
container
• 307007 : 6 digits are the serial no. of
container
•9 :Last digit 9 is the check digit
Containers classification

• Classification On The Basis Of Use Of Raw Material

• Classification On The Basis Of Size and Building Structure
• Classification of Containers On The Basis Of Their Use
• The General Cargo Container
• The Thermal Container
• Special Containers
• Classification On The Basis Of Cargo
 Various Types of Thermal Containers in Use in
Trade Logistics
Type of Thermal Cargo Suitability Features of Container
Container

Refrigerated (or For cooled foodstuffs, Reefer container has insulated walls, doors, roof, and
Reefer) meat, ovum or ova, fish, floor which control the range of temperature loss or gain.
Container vegetables, fruits, Reefer container again may be of two types such as
human blood, medicines Controlled Atmosphere Reefer and Modified Atmosphere
and stem cells etc Reefer containers.

Insulated For fruit, vegetables etc Cooling is ensured in the Box with the dry ice which is
containers used as the cooling medium. Insulated containers do not
use any device for cooling purposes.
Ventilated Used for cargo such as Ventilated containers use to have small venting holes on
container fruits or vegetables both sides of containers which allows the passage of air.
which need ventilation Venting of air is necessary in long transit for
during transit in order commodities like tea, coffee, etc. such venting of air allow
to preserve the quality the cargo to lose moisture otherwise it may “sweat” if
of life. carried in closed box type containers and may lose the
taste as well as value.
 Various Sub Categories of Special
Containers
Bulk • Bulk containers are desinged mainly for transport and carriage of dry bulk
Container cargo like iron ore, other mineral, food grains, coal etc

• Ventilated containers have full length ventilation galleries and are used for
Ventilated cargo which require cosntant ventilation for maintenence of product quality
Container such as coffee.

Half- • Half-height open top container are suitable for carriage of heavy density
Height cargoes such as steel coil, pipes, tubes and strips, zinc bars etc.
Open Top

Tank • Tank containers are generally used for carriage of a chemicals and liquids
Container such as oil & lubricants and ediable oils.

Open • Open sided container are designed mainly to accommodate specific type of
Sided cargo like plywood, perishable commodities and livestock.
Container
Various Sub Categories of Container on the
Basis of Nature of Cargo
• Flat container are also known as "flat rack" and are the one with flat base only. They are
Flat used for cumbersome, multi-dimensional and odd sized cargo and weight is put on to
Container these types of containers and lashed with sling & straps with the container

Bulk • Bulk containers are the one which are fitted with manholes so as to facilitate the loading
Container of bulk cargo through gravity.

Garment • These are also known as Hanger’s containers and are fitted with hangers which help in
Container stuffing a large number of garments in hangers into the containers.

Liquid • Liquid containers are generally made of stainless steel so as to provide protection to
Container liquids from accidents etc and have manholes for loading and unloading of liquid cargo.

• Gas containers are similar to liquid containers and are made of thick stainless steel. They
Gas have required mechnical equipments, fixtures and fittings for pumping in and emptying
Container the liquid gas into/from the containers.

Bin • Bin containers do not have doors and are prominently used for heavy dense cargoes such
Containers as nut & bolts, harware and other industrail inputs.
Liner Shipping Defined
• “Liner shipping service, in international logistics operations,
refers to fleet of ships, under common ownership or
management of one company, which provides a fixed schedule
of shipping services at regular intervals between named ports.
The services of such liner are that of “general carriers” and can
be for all kinds of cargo i.e. containerized, break-bulk, bulk,
liquid or dry between the named ports of calls of a liner
shipping company. The beauty of liner shipping services is that
it has a fixed itinerary, regular service on the pre-decided
dates, and a commitment to accept the cargo from shippers
and to sail for onward voyage on the promised and pre-
intimated dates. Liner shipping company is committed to sail
whether it get cargo on port of call or not on the date fixed by
a published schedule by itself”.
Types of Liners
• Passengers Liners
• Cargo Liners
Global Nature of Liner Industry

• Worldwide Port Development

• Regionalization of Trade
• Infrastructure Development in Asia, Africa & Latin
America
• The Future Of Liner Shipping Alliances
• The Impact of Information Technology
• Improving Supply Conditions with Hub-And-Spoke
Networks
 List of Top Five Exporter and Importer of
Containerized Cargo in World Economy
RANK EXPORTE 2010 RANK IMPORTE 2010
R TEUS R TEUS
(MILLION (MILLIO
S) NS)
1 China 31.3 1 United 17.6
States
2 United 11.2 2 China 12.0
States
3 Japan 5.7 3 Japan 6.1

4 South 5.2 4 South 4.5

Korea Korea
5 Taiwan, 3.4 5 Germany 2.8
China
Designing a Liner Service Schedule

• Planning Service Frequency of Liners

• Planning Fleet Size, Vessel Size and Fleet Mix in Liner Operations
• Planning the Exact Number of Port of Calls in Liner Operations
Causes of Concentration in Liner Shipping

Causes of Concentration in
Liner Shipping

Fast Changing Increased Enhanced

Economic Technological Governmental
Background Innovation Facilitation
Conference Lines Freighting Principles

Overall Fixed Costs

Value of Service or Overheads
Principles Principle
in
Voyage Specific
Conference Cost of Service Principle Fixed Costs
s Freights
Rates What “the Traffic Can
Bear" Principle Voyage Specific
Variable Costs
Key Principles of Liner Freighting

• Cost of Service Principle

• Value of Service Principle
• “What the Traffic Can Bear” Principle
Rebate System in Conferences

Deferred Rebate System

Rebate
System in Dual Rebate System
Conferences
Immediate Rebate System