MIT Center for. Transportation & Logistics. bestthing.info1x -Supply Chain & Logistics Fundamentals. Introduction to Logistics & Supply. Chain Management. PDF | 32 hours read | On Feb 1, , Andrzej Szymonik and others published Logistics and Supply Chain Management. PDF | This conceptual paper outlines the importance of integration in supply chain management (SCM) by linking the functions of logistics as it.

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A Practical Guide for the Supply Chain Management of essential health commodity supply chains by strengthening logistics management information systems. Most of my courses on supply chain management were targeted at the master and .. downloading function improvement and optimising the logistics operations. SUPPLY CHAIN MANAGEMENT/LOGISTICS. SUPPLY CHAIN MANAGEMENT. Manufacturers of: Industrial goods. Consumer goods. Retailers. Wholesalers.

Understanding and Predicting Customer Choices. Costing Theory and Processes. Benchmarking and Performance Measurement: The Role in Quality Management. Green Logistics. Public Policy and Logistics.

Retail Logistics. City Logistics and Freight Transport. Manufacturing Logistics. Maritime Logistics. Air-Freight Logistics. Bulk Commodity Logistics. Express Delivery. Hazardous Goods. Supply Chain Statistics. New Technologies in Logistics Management. Freight and Logistics Modeling. Author Index. Subject Index.

Book Series: David A. Hensher and Kenneth J. Button Subject Area: Most read Most cited Related The most popular papers from this title in the past 7 days:. History of Demand Modelling. Modeling Cost Competitiveness: The most cited papers from this title published in the last 3 years. Statistics are updated weekly using participating publisher data sourced exclusively from Crossref. Overview of Land Use Transport Models. The Four-Step Model. Activities in Space and Time.

Logistics and the Environment. Introduction to Urban Simulation: Design and Development of Operational Models. This information is subsequently shared with other systems in the operation and made available and transmittable via web browser, report or alert. Subsequently, the RFID was used to track totes used to transport parts and tools, and monitor and locate vehicles moving within the facility.

A further example arises with reusable container tracking. A leading manufacturer of residential glass uses metal racks to transport sheets of glass within the facility and for shipping to window manufacturers. The glass manufacturer has a problem maintaining visibility to the racks inasmuch as they can only account for a percentage of the racks and do not know how many reside at their manufacturing or customer locations.

This generates a problem, as individual sites may not have enough racks on hand to support customer orders, impacting the sales cycle and ultimately revenue.

Moreover, it contributes to excess inventory as more are downloadd to meet demand because of misplaced racks. To resolve the problem, RFID tags are placed on each rack and readers placed at each dock door. To conclude, active RFID see page is not a panacea for all asset types or applications.

The ideal asset management system must make use of multiple technologies, choosing the best data capture solution for each type of asset. It involves the ability to identify waste in the supply chain.

Overall it focuses on three key areas. Basically, it extends beyond the supply chain and manufacturing programme, but includes a change throughout the organisation to be logistically focused and literate. Secondly, it embraces the suppliers and customers. Thirdly, the lean principles that must be the basis of the lean supply chain: Lean supply chain management is a challenge that must be acknowledged. This is in addition to the usual company issues, such as lack of implementation know-how, resistance to change, lack of a crisis to create urgency, gaining resources and commitment and backsliding.

Areas that need to be addressed include the following: The order to delivery time is long. It is compounded when experiencing port delays and shortage of specialised containers. Accounting — does not recognise waste as lean does. Inventory represents capital tied up. Accounting systems do not recognise time, particularly in the balance sheet. Rework is not treated the same by accounting.

Organisation — supply chain management and lean are processes that cross organisation boundaries. There are many suppliers and many logistic service providers in a supply chain. Some are visible and some are less visible.

Many suppliers or logistics services do not practice a lean strategy. This involves evaluating all the ingredients of the supply chain and measuring each element against a benchmark. A key to the plan is the starting point. This features the infrastructure to support it, training, culture, quality methods, accounting systems and investment policies. It embraces six stages. This is a visual way to organise waste removal with extra time for travel or employees.

Rapid set-up — or changeover — has application in the warehouse to adjust layout for seasonal products, new products and changes in which products are fast-moving and often picked, and the complementary items that go with these fast-overs. Reducing the time can involve housekeeping and maintenance including 5 Ss , setting up smaller areas for stock-keeping units SKUs , technology such as warehouse management systems and RFID see page It can be the basis for employee training.

A way to coordinate multi-step processes for multiple products. With Kanban, small stocks of inventory are placed in dedicated locations for supply chain control. This approach runs counter to the traditional way of large distribution centres delivering truckloads of products to stores or customers. Point of sale and other technologies can be the withdrawal signal to trigger both drawing from and replenishing Kanbans. This reduces time and inventory with small batch sizes for select items.

All inventories are not treated the same way from suppliers nor with regard to warehousing. It is self-contained as to equipment and resources. The potential application, combining multi-operations into a central area, exist where warehouses carry out additional activities such as kitting or assembly. Sigma — an advanced tool that ties to quality. The focus is variation and controlling and preventing errors.

Statistical measurement is fundamental. It is used throughout the supply chain, not just in select activities or locations.

Sigma takes lean supply chain management to its ultimate level. Usually, there are complementary or supporting processes with lean supply chain management.

Essentially, the operation must remain seamless throughout. A strategic focus is required. Getting started with lean and sustaining it with continuous improvement is not easy. Lean takes time and years to accomplish. Often the waste has become incorporated into the daily operation company-wide and is accepted as part of doing business. In some situations there may be too much instability in a supply chain to become lean.

Planning is an essential ingredient. Lean Supply Workforce We have examined lean supply chain management see page 27 and will examine the demand-driven workforce see page , embracing the demand-driven supply network, incorporating the pull model as distinct from the push model.

We will now examine the concept of lean supply workforce. These are all interrelated.

Today it has become translated into the logistic framework and is found in the global supply chain. The next stage is to set goals, standards and adaptable precision. A useful technique is engineered labour standards developed using time studies, an established database of granular movements called master standards data, or a combination of both.

The third element is planning, scheduling and simulation. This embraces the 30 d e f g Factors and Challenges Driving Logistics and Supply Chain Management prerequisite to have in place the best practice and creation of accurate standards, which facilitate how long a given job should take or the required number of workforce to undertake a particular job. Technology is available to translate order demand data, seasonal trends, special promotions, and other demand signals into workforce plans that indicate how many people, with what skills, are required to complete the prescribed work within a given time frame such as a shift, day, week or longer period.

Quality and safety are key factors to establish best practices. This is realised through employed best-practice methodologies, training workers and supervisors how to properly use the best practices, and by removing barriers to productivity. Workers will try to cut corners to improve their productivity performance, but the cost of mistakes and accidents that ensue, including damaged inventory and equipment, injuries, penalties, returns and other customer service issues, can far outweigh the savings from productivity gains.

Educating the workforce in the logistic skills to develop best practice is a key area. This includes not only the initial course programme, but also refresher courses. Continuous training must be given by supervisors to ensure the goals are realised. Overall, the training must be professional and pragmatic and with a view to performance monitoring and coaching. The management must have regular meaningful data to measure the workforce productivity and reliability.

This involves a range of analytical tools that will identify problem areas and groups that are high or low performers. For example, it may identify areas of investment, training and changes in the workforce.

Companies focusing on the lean supply workforce strategy frequently devise incentive schemes. This requires accurate performance data. Finally, in our lean supply workforce analysis, companies frequently experience a reluctance to change, but in most situations the option does not exist if the company and its products are to remain competitive.

The driving force is often technology. This improves productivity and morale, since all workers are evaluated fairly and equitably. This reduces training cost, improves quality, and enhances customer service.

This improves customer satisfaction and loyalty. This helps management to better understand the cost to serve each customer by product or service provided. This data can be very helpful in bidding and price negotiations, as well as in determining true margin contributions by product, customer service, location or business unit. It generates a situation where workers are self-motivated and self-accountable, supervisors become coaches, and the management has a more productive workforce with higher esteem and retention qualities.

Full cognisance must be taken of logistics and the supply chain. Market Environment Today, conducting business overseas is logistically driven. The following points are relevant: Market stability and its infrastructure. Product availability and its stage of development. It is also added value in terms of its development. Countries like India see page 33 , Pakistan, China and Sri Lanka see page are moving from a low-tech to a high-tech environment in many industrial and sociably developed regions with a logistics focus and continuous investment in the logistic infrastructure.

Membership of economic or trading bloc. Excellent example found in EU — 27 Member States — good infrastructure — single market permitting distribution of goods without border controls embracing customs duty and above all, high-tech and logistically focused see page North America is likewise logistically focused see page Whether market is fully developed, underdeveloped, or developing. Fully developed Export Sales Contract i j 33 are high-tech, capital-intensive with fully trained workforce.

Conversely the less developed countries LDCs are agriculturally driven and often a commodityfocused economy with low labour costs and low levels of technology. Moreover, they rely on non-convertible currencies. Opportunity for inwards investment embracing joint venture, licensing, franchise, mergers and acquisition or industrial transplant. Market Entry Strategy Companies must have a logistic strategic focus in their decision-making process of selecting and entering a market, a series of markets, or cluster markets.

The following logistic strategic considerations are relevant: To increase production thereby lowering unit cost and permitting more competitive pricing. To increase market share and dominance. To increase general competitiveness of the company. To ensure the long-term future of the company. To develop a proactive, rather than a reactive, company, which is globally logistically focused and market research-driven, with a continuous focus on client base and marketplace environment.

To develop an international brand image. It also favours a volume market with the opportunity for more productivity and logistic development. Planning is an essential factor with well-thought-out and designed logistic systems. Overall, it embraces three basic areas.

Reliability, cost of service, value added, and performance are key areas. Cluster customer markets of similar service preferences are ideal. It is a market-driven logistics strategy. This embraces a zero failure rate. It is a challenging 34 Export Sales Contract operation that the global logistics entrepreneur must overcome.

Software is a key factor in the design of the global logistic system and enables, through e-commerce, continuous communication such as RFID see page The second aspect is to continuously examine ways of reducing cost in the supply chain compatible with providing an acceptable service to the client.

This is an important area in global logistics as international transport operators are continuously remodelling their services to become more competitive in transit time. Constituents of the Export Sales Contract The formulation and execution of the export sales contract involves four elements — insurance of the goods, payment of the goods, the contract of carriage and the export sales contract.

All are interrelated and are primarily based on the global logistic operation and the related documentation. There are numerous variations to the foregoing arrangements see page 79 , which provide the logistics operator the ability to reduce cost, improve productivity and above all improve service and competiveness to the customer. Details of an export contract are given below: Short title of each party quoted in a and b. Number and quantity of goods, precisely and fully described.

The price. The currency selected must be stable and convertible see page It is important that the correct Incoterm see page 50 is used and the supply chain management keeps it under continuous review. Again, salient factor in the design of the supply chain. This is a critical area with item j and has a strong interface with international transport operation see page The period of their validity must be reconciled with the terms of payment and delivery date or shipment date or period.

This includes marking of cargo. A complex area that the logistic operator must be familiar with. This includes pre-shipment documentation see page This embraces local conditions that will vary with overseas destinations, especially customs clearance see page Both parties must ensure that a responsible person at director or managerial level signs the contract and the data should be recorded.

Obviously the terms of the export sales contract will vary by circumstance and must be driven by logistics strategy. It may feature agency involvement, after-sales activities such as the availability and supply of spares, product servicing, training, advertising and promotion cost, and so on. It may embrace outsourcing of components and thirdcountry assembly, embracing inbound and outbound movement.

Each party of the contract must retain a copy. A sound logistic management strategy is required and full use must be made of computerisation. The tactics adopted include the strategy required for continuous review in the light of changing marketing conditions. Five areas need special attention: The foregoing embraces: Business-to-Business B2B and Business-to-Consumer B2C The process of conducting business globally is electronically driven and there is no doubt it is a main driver in the globalisation of logistics.

Digital trading extends to the digital trade transport network embracing the logistics chain. It enables both the MNIs and the small and medium enterprises SMEs to operate in the same environment with similar market penetration strategies crossing international barriers and developing the B2B or B2C contact.

Hence, the exporter with a logistic focus in developing market entry strategies must have a high-tech computer resource and software to develop a viable overseas market.

A market research strategy must be adopted. During the past decade and much facilitated by e-commerce internationally, we have seen an enormous increase in the B2B and B2C sectors.

Moreover, it develops empathy between the two parties and favours strongly a logistic and computer-focused approach. The B2B e-commerce market is well established and favoured strongly by personnel designing the logistic supply chain as it eliminates the intermediary and encourages transparency. The B2C is distinguished from the B2B by the nature of the customer and how the customer uses the product.

In business marketing international customers are organisations such as businesses, government bodies and institutions such as hospitals. It is very popular in the EU market. It should be manned 24 hours per day to handle global enquiries in various time windows. The website must be targeted to focus on individual logistic markets and ideally in the language of the downloader. This was driven very much by containerisation, which has changed considerably during this year period.

The biggest changes in the logistics industry have occurred in the last 10 years. Figure 3. Integration between departments increased steadily in the following years, until in the s the two distinct functions of materials management and physical distribution became prominent.

These gradually merged into a more integrated logistics function by the early to mids. In the early s logistics costs accounted for 15 per cent of gross domestic product GDP in the US, 14 per cent in Australia and 25 per cent in Japan. Alfred J. This arose also because more regulated delivery, more rapid response of the system, and total stock, in the pipeline capital assets in transit see page 18 , is reduced by a quicker transit time.

Today, several of the top 10 3PLs are Swiss companies founded in the nineteenth century. Air freight was a fast-growing industry in the s. Emery was a leading player, but today focuses attention onto other transport modes. In the container business various subsidiaries and acquisitions over the years were consolidated at Maersk Logistics and APL Logistics in and , respectively.

Today, Maersk Line is a leading player in global logistics. Moreover, globalisation and the use of Internet technology paved the way for global sourcing, which triggered global supply chain management solutions. Johan Wanninga — Managing Director of Maersk Logistics for the UK and Ireland — has indicated that the evolution of logistics and supply chain management in the last seven years has been faster than at any time in the industry history.

Basically, because of labour costs, European and North American retailers had increasingly replaced suppliers in Southern China with those in Northern China and Vietnam the latter facilitated by WTO access. The 3PL has expanded the number of consolidation centres across China. IT developments have facilitated the merging of domestic and international supply chains, particularly where many companies treated them separately in the past.

Increased supply chain integration has been aided by the development of the 4PL. Conceived in , outside the progressive automotive industry, there were few examples of working 4PLs in the container industry. However, a much larger change has been the merger and acquisition strategy to produce substantial consolidation among some of the largest global logistics providers. This will continue as the global logistic industry becomes more competitive.

However, SCM currently takes place to a very limited degree. Currently SCM is practised as logistics and not the broad, theoretical scope envisioned for it. The RFID may prove a vehicle for accelerating change plus rapid expansion of containerisation. Currently as demonstrated in Figure 3.

Over the years the supply chain is expected to become a distinct department with responsibility for downloading, production and logistics. By , 80 per cent of the goods in the world — according to consultant McKinsey and Company, will be manufactured in a country from where they are consumed, compared with 20 per cent now.

The current objective of minimising supply chain cost will increasingly be replaced by one in which revenues are enhanced to Figure 3. Stanley E. Fawcett and Gregory M. Ronald H. Overall, revenue refers to the expenses incurred in the supply chain processes and assets to the investment made in facilities and equipment to support the supply chain process. Likewise, increased opportunities will exist for logistic service providers, 3PLs and 4PLs, as the rapid evaluation continues, aided substantially by global container logistic growth and associated infrastructure.

Modern Logistics Concepts Global logistics is a fast-moving market and it is very much consumer-driven. Areas on which to focus are given below: Perfecting the consumer experience through innovation. In the retail management to have an adaptive inventory and workforce management that automatically responds to consumer demand in real time.

This embraces optimised scheduling and budget management, facilitates learning, synchronises merchandising, controls assets and adjusts promotion forecasts. Distribution management ideology requires a system that will react quickly and seamlessly to changing markets. The starting point Export Sales Contract 41 is the consumer. Hitherto, the producers could drive the supply chain.

Today it features raw materials, company producer, producer warehouse, retail warehouse and retail outlet. Additionally, the retail store produces the forecast, which is passed down the supply chain from retail distribution centre to manufacturer distribution centre, to manufacturer plant and to raw material supplier.

Logistics and Supply Chain Management, 4th Edition

An example is global sourcing whereby food products were despatched only in season when they were harvested. This enhances market penetration and general competitiveness; More cross-docking. This embraces the movement of the goods from one transport unit to another, obviating any warehouse storage cost, thereby accelerating transit time.

A key factor is forwarding planning and transparency in the supply chain. Usually a good infrastructure presents continuous scope for cross-docking, whereby customs clearance can be undertaken at consumer premises, whereas with an LDC, it tends to be centred at the port and not inland at the downloader premises see page A daily delivery service.

This is more practicable in developed countries with a developed logistic culture and more intense competition.

In analysing the foregoing a number of areas arise. This features, especially, agents in customs procedures, transport operators, transhipment, quality control and government intervention. A growth area is security see page Additionally, it yields shorter cycles embracing quicker response rate and less risk of asset obsolescence. Finally, it adopts greater synchronisation throughout the chain.

This entails the interface of the workforce, inventory and transportation with the business process integration and retail supply chain manufacturing. The global logistic supply chain is very much engaged in customs. Customs planning is a key area see page It also features synchronisation with trading partner, and as a mobile resource enterprise, asset tracking.

The latter can embrace sourcing a third country favourable tax regime — a situation whereby the logistic operator must consult a proven tax expert. Taxation is an area the supply chain manager must keep under continuous review in a global changing market, much of which is initiated by national government to raise more revenue and protect home industries and trade balances.

Transport management systems are a key area in the development of supply chain evolution. The role of the basic logistic team includes: The logistics department tends to exhibit both on integrated and process orientation.

A cost analysis resource is also important for implementing a cost minimisation strategy. An important area is the development of strategic partnerships with external transportation providers 3PL — see page 40 , focused on long-term commitments, open transport communications and information sharing, and the sharing of risks and rewards. Study Figure 3. This is moving towards, as in Figure 3.

This will drive globalisation and increase the role of 3PLs and particularly 4PLs. Today the shift is towards production in Eastern Europe — Poland now has six major assembly plants — and the emergence of large-scale assembly in China are two examples of this charge. This has presented a challenge, especially to the 4PLs.

These include other big name car manufacturers and tier-one supplier Delphi in Turkey. It also operates dedicated two-way shuttles between Toyota plants in France and the UK. NYK is one of the biggest single industry sectors in the UK.

It provides external logistics for several UK-based manufacturers including Aston Martin, Land Rover, Toyota and Jaguar, as well as international plant logistics. NYK also runs cross-dock operations in Germany, France and the Czech Republic, and also picks up from car plants in the latter two countries. The 4PLs have a challenging task and it is paramount they understand their role in the supply chain.

It embraces the need to understand detail such as their bills of material and the overall way of working to be able to 44 Export Sales Contract collaborate not only with the manufacturer, but also their suppliers and other third-party operators. Car manufacturers impose many constraints, one of which is to place limits on the number of vehicles on site.

Control of the inventory is the key factor. With carmakers always keeping cost under tight control, planning logistics networks so that cross-dock or stockholding points are in exactly the right place can be critical.

NYK have engaged packing engineers to look at the design of trays and boxes as to whether to go for collapsible units or cheap-type solutions. Hence the 3PLs employ not only logistic specialists, but also with car manufacturing experience.

Agility and precision are also vital with the mega-multinational automotive industry, which commands not only large transport networks, but skilled personnel — often multilingual ones. IT input is essential, embracing customer IT networks. Automotive is the fastest growing industry and logistics is a major part of the operation. Menlo is best known for its involvement in the Vector joint venture 4PL operation with General Motors, and sits above their supply chain with a view to identifying areas where it can be improved.

A feature of the long-established car manufacturing industry in North America and Europe is the sprawling empire spread over several continents, often with IT systems that do not always connect properly to each other, or with third-party suppliers.

The major reason why Japanese manufacturers have been so successful is that they were able to start with a clean sheet in the s and adopt lean manufacturing and logistics principles from the start.

So far, GM has been the only major motor manufacturer to outsource its strategic supply chain management in this manner. Vector strategy in supply chain management does focus on resource planning systems.

There is now a vogue for sequencing centres, usually located close to the point of manufacture, where materials can be called up in a sequenced manner, which may involve sequencing deliveries right to the line-side. Most motor manufacturers will generally go to more than one logistic company. Overall, it is a very big industry and currently it accounts for 6 per cent of total cost and a large assignment for one logistic operator. However, 3PLs and 4PLs are becoming larger as they undergo merger and acquisition or form operating alliances to widen their global base and become more competitive through economies of scale.

A recent 3PL example of how the car industry is responding to the global environment arose with BMW, which has now contracted DHL for the entire part load volume to all its production sites in Europe. Modern car carriers have a capacity of up to 7, car equivalent units CEUs , embracing 13 decks. In , 10 million cars were distributed by sea and by Chinese car production will reach 9 million.

Useful Sources of Information Alan E. Livingstone Alan E. It is an area that must be fully understood by the logistics operator engaged in the international supply chain. Contract of Affreightment: Terms of Delivery — Incoterms The basis of a price quotation depends on the correct interpretation of the delivery trade terms. The export marketing manager will, through experience, accumulate information that will enable him or her to quote accurately. It is important to bear in mind each delivery trade term quoted embraces three basic elements: The international consignment delivery terms embrace many factors including, in particular, insurance, air or sea freight plus surface transport costs, customs duty, port of disbursements, product cost, packing costs, etc.

Moreover, the importance of executing the cargo delivery in accordance with the prescribed terms cannot be overstressed and this involves a disciplined process of progressing the export sales contract order dealt with in Chapter There must be no ambiguity in the interpretation by either party of the delivery terms quoted, particularly in the area of cost and liabilities.

If such problems arise, much goodwill is lost and the exporter could lose the prospect of a repeat order in a competitive market. Moreover, costly litigation could arise. It is essential, therefore, that the exporter seller and the importer downloader agree to the terms of delivery and their interpretation.

Such a situation could be overcome by quoting the provisions of Incoterms , dealt with in the latter part of this section. It must be borne in mind that special provisions in individual export sales contracts will override anything provided in Incoterms The need for every global logistics operator to have a thorough knowledge of Incoterms cannot be overstressed, and likewise the sales and marketing personnel who negotiate the export sales contract terms on behalf of the seller.

The booklet Incoterms , No. An international trade deal can involve up to four contracts and the exporter seller must have a broad understanding of each of them. The four contracts are: See ICC booklet No. There are three main areas of uncertainty in international trade contracts and their interpretation: The latter point can involve costly litigation and loss of much goodwill when a dispute over the interpretation of such terms arises.

Hence study ICC booklet No. The role of Incoterms , adopted in 96 countries, is to give the business person a set of international rules for the interpretation of the more commonly used terms such as FOB free on board , CIF cost insurance freight and EXW Ex-works in foreign trade contracts.

Such a range of terms enables the business person to decide which is the most suitable for their needs, knowing that the interpretation of such terms will not vary by individual country. It must be recognised, however, that it is not always possible to give a precise interpretation. In such situations, one must rely on the custom of the trade or port. Business persons are advised to use terms that are subject to varying interpretation as little as possible and to rely on the well-established internationally accepted terms.

To avoid any misunderstandings or disputes the parties to the contract are well advised to keep trading customs of individual countries in mind when negotiating their export sales contract. However, parties to the contract may use Incoterms as the general basis of their contract, but may specify variations of them or additions to them relevant to the particular trade or circumstances. An example is the CIF plus war risk insurance. The seller would base his or her quotation accordingly.

Special provisions in the individual contract between the parties will override anything in the Incoterms provisions.

An important point to bear in mind is the need for caution in the variation, for example, of CFR cost and freight , CIF cost insurance freight or DDP delivered duty paid: It is essential that any such variation be explicitly stated in the contract to ensure each party to the contract is aware of its obligations and acts accordingly.

A summary of the 13 terms are given below see, also, Figure 4. CFR Cost and Freight. Figure 4. F Term — requires the seller to deliver the goods for carriage as instructed by the downloader. C Term — requires the seller to contract for carriage on usual terms at his own expense. D Term — requires the seller to be responsible for the arrival of the goods at the agreed place or point of destination at the border and within the country of import.

The seller must bear all the risk and cost in bringing the goods thereto. Incoterms can be divided into recommended usages by modes of transport as under: The seller must ensure the correct terms are used.

Consider a containerised contract applying FOB or CFR where the risk transfers from seller to downloader on loading onboard ship. On delivery damage is discovered. It is impossible to show where damage arose — before or after shipment. In analysing each term the seller and downloader should identify the following aspects: The use of bills of lading is now becoming less common in the liner trade and is being replaced by non-negotiable documents such as sea waybills, liner waybills, freight receipts and combined or multi-modal transport documents see page Today the transmission of such documents is electronic see pages and Factors Determining Choice of Incoterms Personnel involved in negotiating the sales contract have a wide choice in selecting the cargo delivery term most acceptable to the sale.

The prime consideration is to ensure that each party to the contract is clearly aware of their obligation to ensure the consignment is despatched without impeding the transit arrangements. The following factors are relevant in the evaluation of the choice of the cargo delivery term. The seller has the opportunity of controlling the transit arrangements together with cost when concluding the arrangement, and funds them directly with the carrier.

This saves hard currency and develops their shipping and airline companies.

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In some circumstances neither the downloader nor the seller has any choice to make. Conversely, with regard to item 2 the downloader may wish to take charge of the transit arrangement and cost when concluding the arrangements and selects the carrier and Constituents of the Export Sales Contract Continued 51 funds them directly with the transport operator s. Overall, the most decisive factors in determining the most acceptable Incoterms are experience of the trading market and the development of a good business relationship between seller and downloader on a long-term basis.

Overall, there are three areas: Also, the a b c d e f g h the Incoterms have tended to focus on the tangibles in the contract of sale and not the intangibles as found in computer software; Incoterms embrace the contract of sale and relations between the downloader and seller. The revision has endeavoured to improve upon the drafting and presentation of the Incoterms in order to facilitate their practical implementation.

The introduction of the euro currency, currently among the 13 EU States, removed any currency risk variation within trading partners operative in the Euro-zone. It can be exercised by three methods: International supply chain managers are advised to consult their bank for guidance. Consequently, they trade in a convertible currency such as US dollars, yen, euro, Swiss franc, sterling, etc. Credit Terms A further factor is the granting of credit.

The granting of credit terms, which are growing longer as downloader pressure increases, means that the exporter is without his or her money for longer periods of time.

The supply chain is longer, contracts are more complex and payment arrangements more complex. Much of the risk can be insured against see page 46 or mitigated through the payments system UCP see page It provides reassurance to both the importer and exporter. Over 5, individual comments were considered before a consensus text was reached. It also includes Version 1. Details are given below: The international supply chain manager 3PLs and 4PLs must be familiar with the UCP and the following publications are strongly recommended: Many of the publications are available in several languages and are available from ICC National Committees, which exist in over 80 countries.

Details are available on www.

Publications are available in both traditional and electronic formats from the ICC Business Bookstore at www.

The ICC is based in Paris and was founded in Today, it groups thousands of member companies and associations from over countries. Its objective is to promote trade and investment across frontiers and help business operations meet the challenges and opportunities of globalisation.

Market Development Strategy with Global Logistics Focus Global logistics today is providing the right product at the right place at the right cost at the right time. The fusion of all these elements is a complex and demanding task and the importance of the logistics role cannot be overstressed. This is more so as globalisation continues to grow and the role of the 3PL and 4PL take the lead on a more vigorous scale.

Developing overseas markets is a key factor in the global logistics operation. This is especially so today as the supply chain becomes longer and the customer requires a wider choice of higher quality and price-sensitive products; moreover, taste, style and technology changes, which reinforces the need to have a high turnover of stock and keep obsolescence risk at a minimum level. The method of exporting may be chosen for a particular reason and in a particular circumstance. The logistic operator must be aware of the rationale of the decision and the circumstance in which the decision was made.

There are two methods of exporting — indirect and direct.


Indirect is the process of selling goods overseas through a third party, thereby relinquishing control of the selling process of the goods. This has the advantage to the exporter of obviating any need to have an extensive internationally focused organisation, because usually no contact is made with the overseas downloader.

Direct exporting is the process whereby the exporter becomes fully involved on a proactive basis. This generates a proactive situation compared with indirect exporting, which is reactive. Examples of direct exporting include agents, distributors, joint ventures, licensing, consortia, franchising, free trade zones, government procurement, leasing, strategic alliances, mergers and acquisitions, management contracts and wholly owned subsidiaries.

Business to business B2B and business to consumer B2C see page 36 feature in this direct exporting category.

The global logistics operator has a distinctive role in the development of the rationalisation process. The global logistic operator must be conversant with the enormous increase in the B2B and B2C business, much facilitated by e-commerce international. Moreover, it develops empathy between the two parties and favours strongly a logistic- and computerfocused approach.

It is a low-cost method of exporting and avoids multiple copies of catalogues. The B2C is distinguished from the B2B by the nature of the customer and how that customer uses the product. In business marketing, international customers are organisations such as businesses, government bodies and institutions such as hospitals.

It is very popular in the EU single market. The logistics operator, both for B2B and B2C, must maintain and develop a good website and have well-trained and professional personnel handling enquiries. It must be serviced 24 hours daily to handle global enquiries in various time zones. The website must be targeted to focus on individual markets and in the language of the downloader.

Unilever focus on benchmarking and encourage more dialogue from the 3PLs to understand the business and develop best practice. In the selection process key questions include: How can they add value to the business and not follow a route of reporting problems rather than develop an innovative culture of solving them through consultation?

The key to 3PLs and 4PLs is to understand fully the business in which they operate, and how best they can improve it, embracing all elements of the supply chain and in particular those in which they are engaged with their client — the shipper. Reliability focused on port delay bottlenecks, both for inbound and outbound cargoes. A possible solution is to divert sailings — but often impracticable — or examine a hub port with a feeder service. The major trade is Asia to Europe. Potential improvements in reliability in key services embrace supply Constituents of the Export Sales Contract Continued 57 chain visibility, documentation and exception reporting, plus how shippers can better utilise 3PLs and carriers and provide value-added services.

In this regard shippers favoured outsourcing the whole supply chain under a 4PL scenario.

Supply-chain management

Exception reporting also was mentioned where agreed milestones had not been achieved. Major improvements were being realised with RFID see page developments on an individual container basis as well as collaborate projects between 3PLs and major shippers through an IT-based system. A footwear company entrusted NYK Logistics with an all-embracing logistic operation, including download order management. A US-based shipper of healthcare products measured port to port, port to door, or shipper to door transit times as an important gauge of reliability and a useful tool for managing issues.

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Other improvements sought were IT track and trace systems. A German chemicals and pharmaceutical shipper indicated managing their own operations is a competitive advantage with cost savings and ultimate selling prices. The company undertakes regular benchmarking to ensure the 3PLs maintain high-quality standards and realise competitive rates. Such international sourcing is desirable to enable the company to be managed in a competitive manner and operate successfully in a global market.

Overall, the decision is tied to the product life cycle; it may be a price factor, quality, technology, availability, innovation, standards, design or fashion. Moreover, it embraces the complexities of multiple outsourcing, which often involves inbound and outbound logistics.

This embraces the process of component suppliers — inbound — providing the goods for assembly in the outsourced assembly plant for distribution globally in the outbound logistics operation. Overall, the whole international supply chain needs to be managed and continuously improved.

Moreover, a strategic focus is needed with adequate planning. The international downloading strategy interrelated with the global supply chain embraces the following methodology: Some importers, to avoid any import duty until the goods are withdrawn from the premises, arrange for the 4PL to place them in an FTZ see page 83 or bonded warehouse see page Also, maintaining liaison with the issuing bank regarding payment arrangements and loan provision. Global supply chain strategic management embraces a range of items that we will now examine.

Outsourcing enables the company to take advantage of the latest technology and cost advantage, thereby adding value to the product. Small family businesses tend to be reluctant to outsource their production until a new generation of management is installed or competition outmanoeuvres them.

Product design embraces a range of considerations as emphasised when negotiating the contract. Benchmarking see page 90 and best practices provide a marked comparison between the developed world and developing countries.

The foregoing list requires a strategic analysis in the company corporate strategic objectives, which will embrace several countries in the supply chain network. The marketing department is often faced with a near supply source with a sophisticated supply chain or a distant market involving extended lead times — longer supply chain times, but lower overall cost. It embraces managing the mobile asset see page 18 — global supply chain.

It may be an airport, seaport, railway, hospital, new town, highway, and so on. This involves a project team, which includes downloaders for each sector. It features design formulation, product testing and market evaluation. Overall, much of the work is subcontracted. The logistic supply chain operation is very complex with extensive planning of a sequential nature and coordination by the project team.

The key factor in the supply chain is reliability and transparency. Computer technology plays a major role in the project management. The strategic responsibility rests with the operations departments, which focus on the supply chain infrastructure item iii. This embraces not only the environment route followed by the global supply chain passing through numerous countries, but access and exit points.

It embraces: IT and transparency throughout the supply chain are key factors. The situation in the global supply market is more complex, particularly with the short product life cycle in fastmoving products. The need to dispose of the existing stock prior to the arrival of the new model requires good planning technique to discount old stock and build up new supplies of the new model.

Moreover, it involves extensive marketing, a product launch plan, adequate new stock and a good backup service including after-sales. In the event, it is likely other shippers have container tank cargo. Planning and investments were required both in New Zealand and the European seaports, and the ongoing distribution by container to the food chain distribution cold storage warehouse. A similar criterion applies from South Africa, involving citrus fruit being shipped in containers rather than in purpose-built fruit carriers.

The radical change from bulk shipments to containerised movement yielded the following in terms of the global food chain management: It demonstrates the global logistics role in the need to focus on the much-improved global supply chain management. Overall, it places the overproduction risk with the supplier and avoids the downloader having to dispose of surplus food supplies.

Personnel must be committed to improve the value-added performance and integrate with all the sectors throughout the chain. Overall, the personnel must be forward-thinking and work within the supply chain infrastructure. Good multifunctional personnel who understand the progressive environment of global supply chain management are essential.

It is further facilitated by the 13 Member States in the Eurozone, operating with a common currency — the euro. Hence the need for a central decision-making structure for logistics is established.

This embraces adding value to the product such as oriental furniture being imported into the Rotterdam Distriparks. To analyse the foregoing it is important to recognise the following: Hence, communication between the downloader and seller today relies on excellent communication systems, not only for the online accessibility of discrete information, but also for direct global communication using video clip messages, and online visual conferencing aided by increasingly sophisticated web cameras and mobile phone technology.

It encourages the downloader, in particular, to source overseas by easing market entry, access, and communication. Overall a well-thought-out plan involving an input from all parties is desirable. A key factor of international downloading entrepreneurial skills is contract negotiation.

Moreover, the terms of the contract and monitoring its performance are key areas in global supply chain management. We will now examine the key ingredients for the logistics operator to focus on in contract negotiation. Technical aspects — of products are a priority in product choice, both in consumer and industrial sectors. Product testing at the time of shipment and following arrival are key audit strategies in supply chain management. The pre-shipment inspection see page should be adopted.

Legalisation is tending to increase as more countries achieve developed status. Health and safety form part of the legal environment.

Careful customs planning is an area where import duty can be reduced to ensure the correct Harmonized System code is used. This is an area where the logistics operator and supply chain manager must give special attention, especially to reduce cost. The patents limit market penetration, and it is important that the appropriate patent registration has been granted.

Transportation — the international downloader must be very familiar with the transport arrangements on routing, transit time, freight, insurance, packaging, stowage areas, together with any constraints. Moreover, the supply chain manager should continuously focus on improving the utilisation of the cubic capacity of the container, thereby — through the reduction of broken stowage — increasing, for example, by up to 5 per cent the number of units shipped at no extra freight cost. Product standardisation.

Logistics operators must be aware that markets are becoming more homogenous — more common consumer requirements — and more globalised, which through increased competition is driven by lower unit cost and ultimately a reduced product range with emphasis on standardisation and the evolution of the global core product, which can be customised locally for individual markets.

Product formulation. The process of downloading services overseas or outsourcing remains a growth market and is examined on pages —2. Product sourcing may be at international, regional or global level. It requires in-depth analysis and focus on the contract formulation. Choosing an acceptable overseas market is a crucial decision to be taken by the procurement executive.

Location is a key factor, especially in the country infrastructure and computerised literate market. Risk assessment should be undertaken. This embraces production capacity, professional skilled labour resources, high-tech equipment, delivery timescale, transportation arrangements, total quality management, accreditation, product quality, compliance with national and international standards, any comparison with previous downloaders and compliance with an international logistic plan, the method of payment see page 52 and Incoterms used see page A critical aspect in downloading overseas is to visit the overseas market to identify or audit potential sellers.

A strategic focus is required, incorporating a plan and stated objectives. Focus must be on culture, management commitment and an acceptable international logistics approach involving 3PLs and 4PLs. This relates to the electronic transmission of all documents and data between various elements of the international supply chain.

In September , Bolero International devised and launched a new service — bolero-net. It involves an open commercial module, a unique legal framework and complete security.

Overall, it enables an international business to reduce operating costs while also raising the quality of its operations. Overall, the downloader must work towards an objective and the negotiation route to that objective will vary by product, service and country. The logistics operator must become closely involved and eliminate intermediaries where possible.

The transport will feature one of the following: Costing the constituents. Study the ICC publication on documentary credits UCP , documentary bills collection UCP and other options embracing open account, bill of exchange and advance payment. Tender receipts, analysis, evaluation and acceptance. These require close examination, especially any variations from the tender and constraints. Quality procedures. Dispute procedures. These feature arbitration and conciliation. The ICC issue guidelines and procedures.

Finally one must consider security, which is examined in Chapter 9.Their design, layout, often favours a labour-intensive operation and out-of-date transport resource. Most motor manufacturers will generally go to more than one logistic company. While ROSCA is an improved measure, estimating revenue effects remains difficult and is a topic for much needed research.

The booklet Incoterms , No. Inventory Management. Whilst inventory costs will vary by industry and by company, it will be suggested in Chapter 3 that the true cost of carrying inventory is rarely less than 25 per cent per year of its value. Temporary importation — gives relief from duty for goods imported for a given period of time — maximum 24 hours — and re-exported in the same country.

Endeavour to reduce the time from the need for inventory until it is sold. Coordination and collaboration, along with trust, are the most important elements to realizing boundary-spanning opportunities.

CMR convention governing the international carriage of goods by road signed in Geneva in and enacted into law in the UK by the Carriage of Goods by Road Act see page

KIETH from Lake Charles
Feel free to read my other posts. I have always been a very creative person and find it relaxing to indulge in atlatl. I fancy reading novels readily.