INTERNATIONAL LOGISTICS & GLOBAL SCM

INTERNATIONAL LOGISTICS & GLOBAL SCM

SYLLABUS: IL & G SCMCourse Objective:To familiarise students with the Importance and understanding of Global Logistics and SCM.Unit 1: Introduction The Evolution and Role of Logistics in Business, Customer Service and Order Processing, Organization for Effective Logistics Performance, Financial Issues in Logistics Performance Unit 2: Global Logistics Global Logistics, Logistics Strategy, Logistics Information Systems, Third & Fourth Party Logistics (3 & 4PL) Unit 3: Inventory & WH Management Inventory Planning and Management, Materials Management, Procurement and Outsourcing, Warehousing and Distribution Unit 4: Transportation Management Transportation, World Class Transportation, Modes of Transportation (Road, Rail & Pipeline), Maritime Transportation, International Air Transportation Unit 5: Important Developments Green Logistics, Integrated Logistics, Applications of New Information Technologies, Organizational Structures for Global Logistics Excellence ( 45 Periods Syllabus ie Nine Periods per Unit)

GLOBALIZATION OF BUSINESSINTRODUCTION TO INTERNATIONAL LOGISTICS

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EVOLUTION & ROLE OF LGS IN BUSINESSLogistics -origin from Greek logistike means art of calculating.Adventurers & Pioneers : first international traders involved in logistics- calculated how much their boats or ships could carry, how much food to bring along, and how best to package the goods while in transit, decisions which exactly a modern logistics manager does.Modern interpretation -origin in military, describe activities related to procurement of essential supplies and ammunitions, to troops located at the front.Logistics is much broader and includes not only all the activities related to physical movements of goods, both upstream (procurement activities) & down stream (sales) activities but also management of relationships with suppliers and customers.

EVOLUTION OF LOGISTICS AND SCMThe evolution of logistics and SCM in the 1990s. Physical distribution management in the 1970s - no coordination among the various functions and each was committed to attain its own goal. Transformed into integrated logistic management in the 1980s -integration of various functions to achieve a system-wide objective. SCM further widens this scope by including the suppliers and customers into the org fold, and coord the flow of materials and information from the procurement to the consumption.Objectives of SCM : eliminate redundancies, and reduce cycle time and inventory so as to provide better customer service at lower cost. The focus has shifted from the share of the market paradigm to the share of the customer paradigm, wherein the goal is to create customer value leading to increased corporate profitability, shareholder value, and sustained competitive advantage in the long run.

EVOLUTION OF LOGISTICS AND SCM (contd)Lgs involves getting, in the right way, the right product, in the right quantity and right quality, in the right place at the right time, for the right customer at the right cost. Lgs network consists of suppliers, retailer and the users. The purpose of an integrated logistic network in a supply chain is to fulfill customer orders through providing place utility to deliver products and services to end users. The place utility is achieved by managing a number of key functions of a supply chain. The functions include:Demand managementInventory managementTransportationWarehousingOrder processingInformation ManagementLogistics is a key enabler of supply chain collaborationSCM is a cross-function approach including managing movement of raw materials into an organization, certain aspects of internal processing of materials into finished goods, and movement of finished goods out of the organization and toward the end-consumer. As organizations strive to focus on core competencies and becoming more flexible, they reduce their ownership of raw materials sources and distribution channels. These functions are increasingly being outsourced to other entities that can perform the activities better or more cost effectively. The effect is to increase the number of organizations involved in satisfying customer demand, while reducing management control of daily logistics operations. Less control and more supply chain partners led to the creation of supply chain management concepts. The purpose of SCM is to improve trust and collaboration among supply chain partners, thus improving inventory visibility and the velocity of inventory movement. There are four major decision areas in SCM:LocationProductionInventoryTransportation (distribution)And there are both strategic and operational elements in each of these decision areas.Distinguishing Logistics and SCMIn literature, logistics and SCM are often used interchangeably, though there is a subtle difference between the two. Supply Chain Management (SCM) is more strategic in nature whereas logistics is more operations-oriented. While Supply Chain Management (SCM) deals more with the linkages in the chain, contracts and relationships, supplier selection, information and financial flows besides materials flows, creating new facilities such as plants, warehouses and distribution centres, and broader issues such as society, economy, government and environment, the scope of logistics is more or less confined to the routine job of transportation and storage of goods. However, if one deeply ponders, one may realize that logistics is the core of SCM, and if logistics fails, the whole chain snaps.

Evolution Demand forecastingPurchasingRequirements planningProduction planningManufacturing inventoryWarehousingMaterials handlingIndustrial packagingFinished goods inventoryDistribution planningOrder processingTransportationCustomer serviceStrategic planningInformation technologyMarketingsales

Materials ManagementLogistics (1990)Supply Chain(2000)Physical Distribution

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LGS Council of Logistics Management defines: that part of the supply chain process that plans, implements, and controls the efficient, effective, forward and reverse flow and storage of goods, services, and related information between the point of origin and the point of consumption in order to meet customers requirement.

International Logistics: process of planning, implementing and controlling the flow and storage of goods, services and related information from a point of origin to a point of consumption located in a different country, ie right product, at right place, in right time, and in right condition.

ROLE OF LGS IN BUSINESS

Lgs adds value when inventory is correctly positioned to facilitate sales. Creating lgs value is costly as lgs expenditure typically range from 5 to 35% of sales depending upon the type of business, geographical area of operation, and weight/ value rates of products and materials. Lgs accounts for one of highest cost of doing business. So, lgs though vital to business success, is expensive.Despite cost, firms are interested in achieving logistical competency, to gain competitive advantage.Logistically sophisticated firms are highly attractive suppliers and ideal business partners. Goal of lgs is to achieve a targeted level of customer service at the lowest possible total cost, aims to service the demand created by marketing efforts.

ACTIVITY CENTERS IN LGS

Transportation (inbound, /out bound)WarehousingInventoryUnitization (packing and packaging)Material handlingCommunications.The whole activity can be divided intoInventory flowInformation flow (Paper based, electronic based)

CHARACTERISTICS OF AN ORG WITH EFFECTIVE LGS COMPETENCY

1. Alternative logistical capabilities2. Flexibility according to the need and demand3. Time based performance4. Operational control5. Postponement capabilities6. Commitment to perfect service.

CHARACTERISTICS OF AN ORG WITH EFFECTIVE LGS COMPETENCY

Logistical service is measured in terms of;1. Availability: Inventory according to customer requirement.2. Operational capability and performance: Order delivery speed, consistency accommodatingunusual and unexpected customer requests.3. Reliability of Service: Continuous improvement in service for customer delight.

COST AND VALUE MEASURES

Lgs often highest single operating expenditure for industrial manufacturer; careful managerial attention;To prevent unnecessary or excessive expenditure.To recognise the fact that any saving in the lgs adds directly to the bottom-line profits for the firm.The impact of the profit leverage afforded by logistical cost reduction can be seen by equating such savings to the amount of effort in increased sales that would required to generate the same profit. The overall objective of lgs management is to perform in the most cost effective way.

COSTS INVOLVED IN LGS OPERATION OF FIRM

1. Costs of planning and managing the logistics system.2. Transportation of supplies to the plant.3. Transportation of finished goods throughout the distribution system.4. Receiving, inspecting and putting supplies in storage.5. Maintaining inventories.6. Processing customers orders.7. Packaging.8. Maintaining warehouses.9. Providing customer service.(Difficult to see these functions as being directly responsible for generating sales but are necessary to support sales and costly to perform. Hence many management people evaluate their logistics systems according to the total logistics cost expended for any given sales revenue. This is known as total cost approach to logistics management.)

VALUE MEASURES

1. Ability to meet quoted delivery date.2. Prompt and comprehensible quotation.3. Provision of technical advice for problem solving.4. Discount structure on list prices.5. Technical after sales service.6. Ease of contact with person in authority7. Replacement guarantee.8. Wide range of services.9. Extended credit facilities10. Order cycle time11. Order cycle consistency12. Order accuracy13. Order completeness14. Order condition

INTERNATIONAL LGSDefinition:The process of planning, implementing and controlling the flow and storage of goods, services and related information from a point of origin to a point of consumption located in a different country.Components of International Lgs Mgt:Transportation.Inventory is managed differently.Insurance.Packaging.Means of Payment.Terms of Trade.Issu of Language & Culture.Specific Challenges Related to Crossing of Borders;Customs.Contracts of Sale, Distr Agreement & Other Legal Docus.

GLOBALIZATION OF BUSINESSINTRODUCTION TO INTERNATIONAL LOGISTICS & GLOBAL SCM

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GLOBAL BUSINESS STRATEGYExperience curve effectsLocation economiesAggressive pricingTo gain competitive advantageCost leadershipDifferentiationEconomies of scale in production

Thus global firms are able to;Earn greater ROI from their skills and core competenciesRealise location economies where they can perform most effectivelyRealize greater experience curve economies which reduces cost of production

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THE EXPERIENCE CURVE

Generally the production of any good or service shows the experience curve effect. Each time cumulative volume doubles, value added costs (including administration, marketing, distribution, and manufacturing) fall by a constant percentage.To express graphically, the curve is plotted with cumulative units produced on the horizontal axis and unit cost on the vertical axis. A curve showing a 15% cost reduction for every doubling of output is called an 85% experience curve, indicating that unit costs drop to 85% of their original level.

LOCATION ECONOMIESA firm will locate in an area where it reduces both its procurement costs and also the distribution costs.Procurement costs :costs associated with the transportation of the raw materials into the firm. Distribution costs :costs associated with transport costs in distributing the goods and services to the consumers.When the procurement costs are lower than the distribution costs then a firm will locate near the source of its raw materials in order to gain competitive advantage through its reduction in its cost of production.When distribution costs are lower than the procurement costs then firm will locate near the market, to gain competitive advantage.If the firm is a monopoly then the firm does not necessarily take into consideration the location.A firm will also locate near its competitors in order to reduce the cost of marketing because consumers are closer to them, the consumers will have a variety of goods and services to choose from.Therefore the firm will locate in an area where there is a possibility of reducing the price of production.

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DIFFERENTIATIONResult of efforts to make a product or brand stand out as a provider of unique value to customers in comparison with its competitors.

ECONOMIES OF SCALEIn microeconomics, economies of scale are the cost advantages that enterprises obtain due to size, output, or scale of operation, with cost per unit of output generally decreasing with increasing scale as fixed costs are spread out over more units of output.

CONCEPT OF GLOBAL LGS AND GLOBAL SUPPLY CHAINSGlobal or international sourcing- also known as outsourcing involves procurement of raw materials from foreign suppliersGlobal manufacturing - also known as focused manufacturing where few manufacturing plants are designated as the world wide suppliers

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GLOBAL COMPETITIVE STRATEGYTechnologyMarketingManufacturing and Logistics

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CHARACTERISTICS OF GLOBAL COMPETITIONCompanies seek to create standardized yet customized marketsProduct life cycles are shortening for high tech productsMore companies are utilizing outsourcing and offshore manufacturingMarketing and manufacturing activities are better coordinated in firms operating globally

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ESSENTIAL COMPONENTS FOR GL&SCMStructureOrganizational networksProcess

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KEYS TO GLOBAL LGS EXCELLENCETotal Delivered Cost ManagementGlobal Logistics Process AutomationEnd to End VisibilitySupplier Portals & ASN CapabilitiesTotal Product Identification & Regulatory ComplianceDynamic RoutingVariability ManagementIntegrated International & Domestic WorkflowIntegrated Planning & Execution PlatformFinancial Supply Chain Management

Ability to analyze and predict the total supply chain costs from the source of supply to its final point of distribution. Includes the capability to roll up both international and domestic logistics costs by product and delivery route, plus the ability to accurately calculate all the applicable duty, tariffs and other customs-related costs while factoring in any preferential trade agreements. More advanced capabilities would include ability to model and estimate inventory levels and total carrying costs.

TOTAL DELIVERED COST MANAGEMENT

In the absence of GLPA, there are many manual steps in most organizations and GLPA and execution processes is well behind most other areas of Logistics & SCM.The global logistics execution is far complex than domestic transportation, which requires dozens of links .The ultimate goal in global logistics execution: one touch information flow for all activities.

GLOBAL LOGISTICS PROCESS AUTOMATION (GLPA)

END TO END VISIBILITY

It is ability to answer very basic questions: Where is it? When will it arrive? Is the expected date different from the planned date.It is to define a schedule for all of the activities within a particular move, with configurable tolerances. If an activity /milestone is not completed within scheduled time, or no information is received when expected, an alert is sent via any of numerous mechanisms (email etc) notifying both impacted party (eg importer) and others (eg a freight forwarder) of the problem.Visibility systems should make it easy to find and drill down on information from many points of reference, such as the purchase order number, SKU, freight bill, etc.

Integration with offshore suppliers must to manage global supply chain.Ability to receive timely, accurate Advance Ship Notices (ASNs) from overseas suppliers is critical for both effective inventory planning and to streamline the inbound flow of goods.Despite process, language, and relationship barriers , web-based supplier portal technology enables integration and visibility with overseas (as well as domestic) suppliers.

SUPPLIERS PORTALS & ASN CAPABILITIES

Non compliance may lead to series of real and potential problems:Fines or other penalties for a failure to complyDelays in the movement of goods inbound and outbound from a variety of causes.Risk to the companys brands should any problem with supply chain security emerge to ensure the smooth flow of Dynamic Routing goods. Aggressive approach to security, both to improve the flow of goods in the short term as well as protecting themselves from the impact of external threats and potential problems.Technology such as RFID provide some of the answer and will increasingly do so, as track & trace and other capabilities are enabled.

REGULATORY COMPLIANCE

Development of more dynamic routing capabilities to allow most effective combination of carriers, routes and third parties such as freight forwarders that will meet delivery constraints, in a fashion more consistent with how domestic transportation is managed.With supply chain agility and risk mitigation at the top of priorities, having dynamic routing capabilities for global movements will be an increasingly common attribute of supply chain leaders.

DYNAMIC ROUTING

VARIABILITY MGTThere is a significant level of variability in international logistics moves, with a tremendous impact on inventory levels and customer service .Global logistics leaders use supply chain data and performance management systems to better understand both the level of supply variability and the root causes of that flux. Reducing the variability by even 1-2 days can drive millions of dollars in inventory savings and reduce lost sales due to stock outs.

INTEGRATED INTERNATIONAL & DOMESTIC WORKFLOWUntil recently, companies were forced to manage the combined international and subsequent domestic moves as separate processes. There has been both an organizational element to this split, as well as technology limitations. Functional boundaries within orgs, contribute to this lack of integration between international and domestic movements.Transportation Management System (TMS) Software can do plenty to overcome and improve their capabilities for domestic TMS.

Deploying technology that enables a single work space that contains both functionality and data across the full international planning and execution lifecycle.Management Data becomes real-time for scheduling, in-transit visibility and performance measures of carriers. Transportation planners shall have a full picture of the total delivered costs of the integrated domestic and international legs.This integrated workspace is anchored by the operational skill to secure and maintain the information backbone with the diverse data structures that are needed by the various global logistics processes.A globally enabled transportation management system serves as the information backbone to the organization. The powerful result: end-to-end, optimized global logistics control and cost minimization.

INTEGRATED PLG & EXECUTION PLATFORM

FINANCIAL SCM

In global logistics, financial supply chain can be much more directly linked with physical and information flows. LC, financial settlement processes and other financial related capabilities be mastered to expand network of potential trading partners on both: buy and sell sides.Employing software, international product movements can be designed to minimize tax and tariff implications and take advantage of trade preferential agreements with foreign countries. Global logistics decisions made based on greater consideration of the financial supply chain impact. Ultimately, transportation planning and execution functions are tightly linked with automated financial approval and settlement tasks.An advanced area of Financial SCM relates to development of a tax efficient supply chain.

GLOBAL VS DOMESTIC SCM:SIMILARITIES Conceptual logistics framework of linking supply sources are sameBoth involve management of movement and storage of productsInformation is vital for effective provisionBoth require functional processes of inventory management, warehousing, order processing, carrier selection, procurement and vendor paymentEconomic and safety regulations exist for transportation in both

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GLOBAL VS DOMESTIC SCM:DIFFERENCES DistanceLanguageMeaning of wordsCultural differencesCurrency exchange fluctuationsPolitical stabilityInfrastructuresEnvironmental regulationsLaws regarding labelingCustomer regulationsTransport regulationsTime consuming

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BARRIERS FOR GLOBAL SCMTariffsExchange ratesDifferences in product requirementsConsumer tastes and preferencesBusiness practicesMovement of goods across bordersTransportation services and regulationsTelecommunication systems

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THIRD PARTY LOGISTICS (3PL)

PLsFirst Party Logistics(1PL). Concerns ;Beneficial cargo owners which can be the shipper (such as a manufacturing firm delivering to customers) or The consignee (such as a retailer picking up cargo from a supplier). They dictates the origin (supply) and the destination (demand) of the cargo with distribution being an entirely internal process assumed by the firm. With globalization and the related outsourcing and off shoring of manufacturing, distribution services that used to be assumed internally tend be contracted to external service providers.Second party logistics(2pl). Concerns; The carriers that are providing a transport service over a specific segment of a transport chain. It could involve a maritime shipping company, a rail operator or a trucking company that are hired to haul cargo from an origin (eg A distribution centre) to a destination (eg A port terminal).

THIRD PARTY LOGISTICS (3PL) : GENOutsourcing all or much of a companys logistics operations to a specializedcompany. The term "3PL" was first used in the early 1970s to identify intermodal marketing companies (IMCs) intransportation contracts. Till then, contracts for transportation had featured only two parties, the shipper andthe carrier. Third Party to the contractas intermediaries accepted shipments from the shippers andtendered them to the rail carriers.Services they provide aretransportation, warehousing, cross-docking, inventory management, packaging, and freight forwarding. In 2008legislation passed declaring that the legal definition of a 3PL is A person who solely receives, holds, or otherwisetransports a consumer product in the ordinary course of business but who does not take title to the product.Third-party logistics providers are:Freight forwardersCourier companiesOther companies integrating & offering subcontracted logistics and transportation services

THIRD PARTY LOGISTICS (3PL): BASICS

Out sourcing of quality logistics services fulfils two needs;Improves service levels by improving flexibility and IM.It reduces costs in various ways.3PL services can be categorized into four types;Basic servicesPhysical contract logistics servicesManagement contract logistics services.Integrated contract logisticsUse of 3PL service providers can allow a company to:Penetrate new marketsReduce the inherent financial investment risks -with owning logistics assets like trailers and WHs.Coord producers & distributors within a global approach.Access new technologies ,sophisticated WH ops ,or new delivery options.

THIRD PARTY LOGISTICS (3PL): BASICS (contd)

Risks when outsourcing lgs to a 3PL firm;Strategic Risk: Competitive advantage if dependence on internal lgs, but a 3pl service provider may offer same to competitor with the aim of covering the costs.Commercial Risk: Manufacturers reputation and future valuable orders inevitably linked to efficiency of 3PL firm.Management Risk: Costs and real level of service provided must be visible for both the producer and service provider. Benefits from using 3PL services.Lower cost.Improved expertise.Market knowledge and data access.Improved operational efficiency.Improved customer service.Ability o focus on core business.Greater flexibility.

WHEN TO OPT FOR 3PL?Whether short ,medium or long term association? Hard to quantify impact immediately. Is it simple calculation of transportation costs savings: impact goes beyond simple cost reductions?Prerequisite: explain logistics provider as what is expected out of his services. In logistics terminology it is known as Base Case (defined as the situation the company presents before the arrangement with a 3PL ,in terms of the metrics it considers relevant for its performance). Four dimensions to decide to outsource to 3PL;Company needs (is logistics a core competence ?)Tangible values( are there any measurable advantages?)Management commitmentProvider capabilities.Decision involves an overall evaluation of the entire lgs system, including inbound, in plant and outbound lgs.

4PLArrangement in which a firm contracts out (outsources) its logistical operations to two or more specialist firm (the 3PL) and hires another specialist firm (the fourth party) to coordinate the activities of the third parties.

WHAT IS 4PL?

The term 4PL was coined by the consulting group Accenture, which defined 4PL as : An integrator that assembles the resources, capabilities, and technology of its own org and other orgs to design, build and run comprehensive supply chain solutions.4PLs combine process, technology and process to design and manage customized supply chain solutions for it customers. The solutions can address part or all of the clients supply/value chain.The 4PL is a Business Process Outsourcing (BPO), provider that brings value and a reengineered approach to the customers need. A 4PL is neutral and will manage the supply chain and/or logistics process, regardless of what carriers, forwarders or warehouses are used. In addition, the 4PL can even manage 3PLs that a customer uses. This enables the customer to focus on its core functions.

CUSTOMER SERVICE (CS)

CUSTOMER SERVICE (CS) ELEMENTSPatronage : It is state of being a regular customer and CS is an important determinant .Research shows that a slip of 5% dip in CS results in a sales decrease of 20%.Segmentation: Markets can be segmented on basis of differences in CS elements.Customer Perception: It form the basis for setting customer service policies. Profit Impact: CS levels should be established taking their impact on costs and revenues. Competitive Advantage: CS it self can form a competitive advantage, differential edge and USP.Location: An important aspect in giving efficient CS, spec Customers who have adopted zero inventory approach. WH Location: Number of WHs in vicinity of lgs system is a function of the transportation cost savings. CS usually can be improved by decentralising supplier inventories to provide faster replenishment of customer inventories.

CUSTOMER SERVICE & ORDER PROCESSING(refers to a group of utilities or benefits customer expects from supplier, which in logistics terminology it is : right product at right place and in right time and also in right shapeElements of Customer Service (CS)1. Order Cycle Time: The time taken between placing the order and receipt of delivery2. Order Cycle Consistency: The extent to which order cycle time varies.3. Order Accuracy: The degree to which items shipped meet order specifications.4. Order Completeness: The extent the items ordered are totally filled when the order is assembled for shipment.5. Order Condition: Damage level at the time of receipt

CS: EXPECTED COMPLAINTS

Sale Order Service: Late shipments, errors in invoicing, breakage errors, errors in sale coding, failure to comply with special instructions, errors in name and or address, failure to notify late shipments.Traffic & Transportation: Damaged merchandise, failure of carrier to meet standard transit time, failure of carrier to notify back order failure, to follow customer routing, instructions, errors in documents, MHE unsatisfactory.WH & Packaging: Damaged merchandise delivered from field WH, incorrect order fulfilment and late receipt of order papers by HO, container problems in packaging plants.Inventory Control: Stock outs, delivery of poor merchandise, errors in product identification, delivery ofcontaminated products.

DESIGNING CS PACKAGE AS USPCompetition has shifted from price to non-price variables. Companies in order to establish themselves, look at the target market for a USP, which can be in terms of packaging or promotion. Companies develop CS as USP;Identify CS needsEstablishing relative importance of CS componentsIdentify companies position and the key components of service.Segmenting the market by service requirements.Designing the CS package.Establishing CS management and control procedures.Final step in designing CS package would be to establish quantifiable standards for monitoring the working of package.

ORDER PROCESSING Order processing is the core activity of lgs info system.Inputs of order processing system are customer orders .Out puts are range of documents and instructions which trigger WH & delivery operations necessary to fulfill orders. Common functions of order processing are:Complete order forms and check customer/ PO for error.Keep customers, manufacturing, purchase executives informed of the status of the order in process.Make the order available to sales, finance, accounting, and purchasing for extracting the necessary information from it.Coordination with the credit department on the clearance of orders from customers with doubtful credit rating.Communicate the orders to the appropriate shipping point with minimum delay.Updating inventory control records and manufacturing and purchase schedules.

ORDER PROCESSING (contd)Order Processing functions can be grouped under four basic activities;Order acquisitionOrder entryOrder document processingOrder status reporting.The speed and efficiency with which a customer order is handled, not only influences the degree of marketing success, but it can also affect the companys overall profitability.Time lag is the gap between receipt of an order and its fulfilment. This time lag necessitates that a company maintains larger inventory or faster transportation.

ORDER PROCESSING (contd)Steps in efficient execution of customer order;Order collection. Orders collected in various ways;Through sales persons from the fieldThrough pre-set formatsThrough telephoneThrough fax and e-mailStatus Reporting. If lgs system performs consistently, need of keeping others informed of status of orders will decrease. Internal Order Communication: Sales records, credit status reports, billing schedules and many other type of records derived from the order form need to be communicated with in an organization. Two types of order communication with in organization;Parallel order: companies make multiple copies of order.Sequential order : company opts for single copy moves from department to department.However there is no parallel to intranet communication.

Adherence to a pre set form in orders placement is a necessity if a mechanized order processing facility is to operate at peak efficiency

ORDER PROCESSING (contd)Credit Checking: Credit checking, should receive special attention could be made routine or complicated depending upon the attention given to it. With prompt communication between credit in charge and local sales representative the credit status of an order need not be a problem involving logistics. In order to increase the efficiency of the information system no order should officially be received unless they are credit cleared.Order Processing: Order management cycle involves various activities which take 50 to 70 % of order cycle time and include;Order preparationOrder transmittalEntryFilling

FACTORS AFFECTING ORDER PROCESSING TIME (OPT)

OPT can be reduced by focusing attention;Interaction With Consumer: Quick response to customer demand can mean difference between the consumer buying product or leaving it. Quality of interaction determines the commitment towards customers and also the satisfaction level of customers .It helps to stay in regular touch with its existing as well as potential targeted customers.Processing Priorities: An important exercise in logistical operations. Companies follow various criteria like;Relative order sizeRelative order volumeRelative order placement timeOrder placement sequenceCustomer per se

FACTORS AFFECTING OPT (contd)

Order Filling Accuracy:This parameter deals with the number of errors made in recording the order. Though some errors are anticipated their number should be strictly controlled. An error in order filling leads to wastage of time in checking and cross checking and refilling activities.Order Batching:In order to economize routing, transporting, packaging functions companies group orders together . This activity further reduces OPT. Every time an order is handled a customer is handled. Understanding this significance logisticians are using latest tools like computers in order to increase order processing efficiency.

INVENTORY PLANNING & MANAGEMENT

INVENTORY

An itemizedcatalog or list oftangible goods or property or the intangible attributes or qualities.Valueofmaterialsand goodsheldby an organization; To supportproduction (raw materials, sub assemblies, WIP). For support activities (repair, maint, consumables) orFor saleorcustomer service (merchandise, finished goods, spare parts).Inventory is often the largest item in thecurrent asset category, and must be accurately counted andvaluedat the end of each accounting periodto determine a companys profit or loss.Inventory costs are constant concern of most business marketers for two reasons.They are the second largest cost in distributionThey can add as much as 40% in extra cost per year to the value of goods being stored.

ROLE OF INVENTORY IN THE SUPPLY CHAINInventory exists in the entire supply chain because of disparity between supply and demand.To increase the quantity of demand that can be satisfied by having product ready and available when customer wants it.Optimize cost by exploiting economies of scale that may exist during both production and distributionIt is spread across entire supply chain from raw materials to work in process to finished goods that supplier, manufactures, distributors, and retailers hold.Inventory is a most important source of cost in any supply chain and it has an enormous impact on responsiveness.Inventory also has a major impact on the material flow time in a supply chain.Inventory has a significant impact on throughput (is the rate at which sales occur). Littles law ; I (inventory) = D (throughput) x T (flow time)

ROLE OF INVENTORY IN COMPETITIVE STRATEGY

STRATAGEYINVENTORYTRADEOFFVery high level of responsiveness Locating large amounts of inventory close to the customerBetween the responsiven-ess ( more inventories) and efficiency (fewer inventories)Low-cost producerOptimizing inventory through centralized stocking

ROLE OF INVENTORY IN COMPETITIVE STRATEGYWhen strategy requires a very high level of responsiveness, a company can use inventory to achieve this responsiveness by locating large amounts of inventory close to the customer.A company can also use inventory to make it more efficient by optimizing inventory through centralized stocking, which would support a competitive strategy of being a low-cost producer.The trade-off implied in the inventory driver is between the responsiveness that results from more inventories and the efficiency that results from fewer inventories.

FUNCTIONS OF INVENTORY

Minimize costs at acceptable inventory levels: Small inventories result in low investments but high ordering costs. Need to identify total inventory carrying cost is bare minimum but the level of inventory does not effect production or customer base.Provide desired customer service level: Inventories enable satisfying customer demand and influences time & costs of service. Location determines time while company policies concerning EOQ, safety stocks, placement procedures and time determine cost at which customer is served.

FUNCTIONS OF INVENTORY (contd)

Couple successive operations or functions: A demand by a customer triggers a chain reaction of demand at each preceding level, i.e. manufacturing and purchasing, whereas, customer does not have time or patience to wait for chain reaction. Instant response from and cost of transport system becomes an issue.

Stabilize production and the labor force, thereby trying to reduce capital requirements: Associated to manufacturing process, though it influences the distribution function as well.

TYPES OF INVENTORY :

RAW Material InventoryWIP InventoryFinished Goods InventoryMRO Inventory

TYPES OF INVENTORY :RAW MATERIAL INVENTORY

From which the final product is made and does not include material that supports production ( indirect materials). Limited to the direct material (or) component that actually becomes a part of the final product. Raw material of one industry is usually the finished product of another, eg Steel & automobile.Some RM available seasonally, eg cotton, sugar cane etc. Certain RM are governed by govt control and quota system, like newsprint, coke etc.

TYPES OF INVENTORY :WORK-IN-PROCESS(WIP) INVENTORYMaterials that have been transformed from RM stage by some manufacturing process but are not final products.It is in-process until it is in the form that can leave the plant. WIP can be found on the conveyors, trucks, pallets, in and around the machines and in temporary areas of storage waiting to be worked upon or assembled.The reason for keeping In-Process inventory is;As liquid stock to cater for variety and shorten the manufacturing cycle.As protective buffer against production breakdowns, rejections etc.For economic lot production.

TYPES OF INVENTORY: FINISHED GOODS INVENTORY

Consists of all the stock that is ready for dispatch, eg, the bottles of beverages that are in their cartons or cases and are ready for shipment in a bottling plant are finished products. Acts as a buffer between the production and marketing department. Higher the stock of finished goods, higher the cost of inventory. If the stock level is low or nil then the customer service shall be affected, damaging the goodwill of the company and the product. Aims is to reach market by constant supply through distribution channels, which is controlled by marketing department. The stock that is to be held at the WH, with the distributors and with retailers will be different depending upon the sales rate.Reasons for holding this inventory areTo protective buffer against sales rate changes.To absorb economic production lots.To stabilize the level of production and employment when the sales is of a seasonal variety.

TYPES OF INVENTORY: MRO INVENTORIES

Maintenance, repairs & operating supplies which are consumed during the production process and generally do not form part of the product itself (e.g. oils and lubricants, machinery and plant spares, tools and fixtures, etc) are referred to as MRO inventories

REASONS FOR HOLDING INVENTORY

Catering to the needs of customer during sales fluctuations and other related problems.To provide assurance on availabilityTo store in advance expecting movement in sales.Flexible raw material scheduling.To suit variations in production schedulingTo take advantage of favourable raw material price.To manufacture material in economic run sizes.

ADVERSE EFFECTS OF INVENTORY

Prohibit meaningful feed back on quality of product service bundle. With large inventories, there is usually a long delay between creation and use of item. Large inventories hide operational problems that might be solved if they were discovered, as it provides an immediate replacement .Financial cost to carrying excessive inventory, which includes the lost opportunity to invest the money tied up in the inventory, as well as the rental cost for the spaceRisk of damage of goods held in inventory. Larger the inventory ,the more likely items are to be handled before shipment. Each time an item is handled it undergoes the risk of damage.Large inventories are associated with a risk of product obsolescence and losses due to depreciation.Tech advances and product innovations cannot be adopted while pre existing inventories appear on bal sheet.

INVENTORY COSTS

Order or Procurement CostCarrying or Holding CostStorage CostOut Of Stock CostOver Stock Cost

COSTS ASSOCIATED WITH INVENTORY (contd)Procurement Costs: Includes cost of ;Order processing through acct & purchase deptt.Placing order incl cost of transmitting order to supplier.Transportation when it is not included in purchased goods.Cost of material handling includes processing of the order at the receiving dock.Inventory Carrying Costs: Costs associated with holding the inventory for a period of time. They include;Capital costs (includes actual capital tied up in the form of inventories, Cost of acquiring that capital, Interest paid on short term capital etc).Insurance and taxation costsObsolescence and deterioration costsStorage costs

COSTS ASSOCIATED WITH INVENTORY (contd)Storage CostsGenerally applied as a percentage of the inventory value. There are situations where storage costs is not included in EOQ calculation, eg, if operation has excess storage space of which it has no other uses since reducing your inventory does not provide any actual savings in storage costs. As operation grows near a point at which there is need to expand physical operations, then start including storage in the calculation.

COSTS ASSOCIATED WITH INVENTORYOut of Stock Costs: Two main categories;Lost sales cost: Estimated on the basis of personal perceptions of the executives.Back-order costs: Tangible and simple to measure.Over Stock Costs: When company is left with some stock on hand even after demand for the product is terminated. It is proportional to the fact whether the inventory in question is static or dynamic.Static inventory: It can be replenished only once in a year. Any stock left on hand at the end of the season has a zero salvage value. If he has too much stock he has to suffer loss equal to cost of over stock.Dynamic inventory: It can be replaced through out season. So multiple orders can be placed to avoid static demand. There will be no over stock cost until last order period of the season. At this point of time any stock that left will be termed as over stock cost.

REVERSE LOGISTICS (RL)

RLRL is for all operations related to the reuse of products and materials.It is the process of moving goods from their typical final destination for the purpose of capturing value, or proper disposal.Remanufacturing and refurbishing activities also may be included in the definition of reverse logistics. RL refers to logistics activities and management skills used to reduce, manage, and dispose of waste from packaging and products.

PRIMARY REASONS FOR INSTALLING A RL SYSTEM

Return of goods for credit or return: Allow customers to return unwanted products for a refund/ exchange.Short term rental or long term lease returns: eg Return of the farm equipment rented for the day.Returns sent to manufacturer for repairs, remanufacture, or return of core portion of product: Encourage customers to return used products to obtain a financial credit. The manufacturer remanufactures and sells it, eg Automobile Alternator.

PRIMARY REASONS FOR INSTALLING A RL SYSTEMWarranty returns: eg TV/ Electronic is returned because of malfunction during warranty period. Reusable containers: eg Return of cola bottles to be cleaned and reused.Consignment agreement returns: eg Stereos kept in sales persons care are not sold and later returned to the owner.Units sent to organization for a product upgrade: eg Old computers sent to the manufacturer for up gradation or installation of a new device, or drive.Take backs: eg Unnecessary product packaging or pallets taken back when not needed.

FOUR STAGE PROCESS OF RECYCLING SUPPLY CHAINS

Collecting second hand or waste materials from various locations and delivering them to the entity responsible for recycling the used material.Processing recyclables to create secondary raw materials.Using the secondary raw materials to manufacture new products.Returning the products to the market place.

ORG STRUCTURE FOR RL SYSTEMRecycling process needs an effective RL system: common org structure for RL system involves four participants.CollectorsSortersProcessorsRemanufacturers.As demand for RL is getting increased more 3PL service providers are entering into the field and expanding their service offerings.

RL & RELATED AREASReturn of unsold goodsGoods may be returned for credit if they are not sold e.g., newspapers and magazines. An incentive for downstream members as risk of obsolescence is borne by upstream members.However, downstream member might exploit the situation and is able to offer high level of service without carrying the risks associated with large inventories. Reusable Packaging Systems: They require a closed loop logistics system, eg, reusable pallets, reusable milk, soda, and beer bottles, compressed gas cylinders etc.Refusal of the products in cash on delivery (COD): In e-commerce business, websites offer flexibility of COD. Sometimes customers refuse product at time of delivery, as there is no commitment to take the product. Then logistics service provider follows the process of RL on the refused cargo. Reverse Logistics for Pre Sales Demo

TRANSPORTATION

THE ROLE OF TRANSPORTATION IN SCM

Three main areas of SCM : purchasing, manufacturing and transport. End to end, it is decisions about: input materials to use, production quantities, inventory levels, distribution network configuration and transportation for both the input materials as well as for the finished products. Lgs Mgt (component of SCM) focuses on how and when to get raw materials, intermediate products, and finished goods from their respective origins to their destinations. Transportation services are the essential trait dunion between all of the elements of Supply Chain. Effective, cost efficient Lgs Mgt can be a real point of competitive differentiation. Cost efficient Lgs Mgt entails a responsive economical transportation network to implement major strategic changes to reduce costs and increase customer service levels with very little disruption to overall supply chain flow.

IMP OF TRANSPORTATION(circulatory system of entire trade across the globe)Transportation provides an opportunity for growth under competitive circumstances.Efficient transport system facilitates companies to exploit economies of scale.Facilitates deeper penetration into various markets which are far away from the point of production.More efficient and lower the transportation cost ,the lower is the selling price.

ECONOMIES OF SCALE

The reduction in long-run average and marginal costs arising from an increase in size of an operating unit (eg a factory or plant). Econ of Scale can be;internal to an org (cost reduction due to tech and mgt factor ) or external (cost reduction due to the effect of tech in an industry). In microeconomics, Economies of Scale refers to the cost advantages that an enterprise obtains due to expansion. It is a long run concept and refers to reductions in unit cost as the size of a facility and the usage levels of other inputs increase.

PRINCIPLES OF TRANSPORTATION FUNCTIONContinuous flowOptimize unit of cargoMaximum vehicle unitAdaptation of vehicle unit to volume and nature of trafficStandardizationCompatibility of unit load equipmentMinimum of dead weight to total weightMaximum utilization of capital, equipment and personnel.

TRANSPORTATION OBJECTIVESManufacturer should decide the service level that the company can offer based on the expectations of the customer.Costs incurred at which these services can be provided.Level of flexibility and control over transportation activitiesTrade off between customer service levels and costs.Selecting mode of transportationIdentify various modes of transportation available in the market.Decide on single mode of transportation or inter modal transportation.

MEASUREMENT OF EFFICIENCY OF TRANSPORT SYSTEM :TOOLS

Customer Perception Measurement: This can be measured by a simple survey on efficiency in terms of order cycle time, information, availability, quality and order fulfilment.Best Practice Bench Marking:Companies use this measure so as to evaluate their efficiency with that of market leader and its competitors. In this technique various transportation policies, processes and practices are reviewed with those of a comparable organization.Customer Satisfaction Measurement.

TRANSPORTATION DOCUMENTSBill of Lading* (BoL).Packing list.Shippers letter of instruction.Shipment of dangerous goods.Manifest.

*the action of loading a ship with cargo

TN DOCU : BILL OF LADING (BoL)BoL is a fundamental international shipping document used in ocean transportation, also referred as Ocean BoL.It is a contract of carriage used for the shipment of containers, automobiles, crates and any form of cargo that does not require the capacity of entire ship.BOL fulfills three roles in an international transaction.Contract. The shipping company agrees with the shipper (exporter /importer) to transport merchandise from one port to another for a given amount of money. It is contract of carriage.Receipt for the Goods. Shipping company acknowledging receipt of goods in good condition and everything in proper order and it accepts the responsibility of goods till it reaches port of destination (Soiled/Caused & Clean). Certificate of Title.Document based on which shipping company release goods at destination port. Company with original BoL is the one to which goods belongs to .

TN DOCU : BILL OF LADING (BoL) (contd)

BoL is issued by acarrier or itsagent, to theshipperas a contract of carriageofgoods. It is also a receipt for cargo accepted for transportation and must be presented for takingdeliveryat the destination. Among other items ofinformation, a BoL contains; ConsignorsandConsigneesname, Namesof theportsof departure and destination, Name of the vessel, Dates of departure and arrival, Itemized list of goods being transported with number of packagesand kind ofpackaging, Marks and numbers on the packages, weightand/orVolumeof the cargo, Freight Rateandamount. Itservesas aproofofownership(title) of the cargo, and may be issued either in anegotiableornon-negotiable form. In negotiable form, it is commonly used inLC transactions and may bebought, sold, ortraded; or used as securityfor borrowing money.

TN DOCU : BILL OF LADING (BoL) (contd)

Straight BoL. Wherein the name of the consignee is specified clearly.To Order BoL. Wherein the name of the consignee is left blank or the term to order is written, which means the BOL is negotiable. in other words it allows the sale of the cargo while it is at sea. Uniform BoL.The uniform BOL is a document which fulfills the same functions as an ocean BOL ,but it is used either for inland transportation between the exporters place of business and the port of departure or for land transportation between the exporter and a foreign customer. it is also a straight BoL.Intermodal BoL.In which the exporter delivers the goods to a carrier who will arrange for the transportation and delivery of the shipment until its final destination. since the shipment takes more than one mode of transportation it is known as intermodal shipment. This is also a straight BoL in most cases.Air way bill. A document that fulfills same function as an ocean BoL and applicable to air freight. It is straight BoL and non negotiable.Soiled/Caused & Clean BoL. When at the time of receiving goods shipping company observes some thing wrong in the package either in the form of rust or wet or some such problem it does not assume responsibility, in such cases it issues BOL by mentioning clearly in writing what it has observed. BOL then becomes a soiled BoL or caused BoL. When BoL is given without any comments it is known as clean BoL.

TRANSPORTATION DOCUMENTSPacking listIt detailed document provided by the exporter and accompanies the shipment. It spells out number of containers in the shipment and which merchandise is contained in each container etc.Shippers letter of instructionDelivered to the shipping company if the shipper wants specific steps taken during transport of merchandise.Shipment of dangerous goodsThere extensive number of regulations related to shipment of hazardous goods so it is always best to entrust a specialized shipper to handle the paper work.ManifestDocument created by shipping company, which lists the exact makeup of the cargo ie ownership, port of origin and destination, specific handling instructions etc.

ELECTRONIC DATA INTERCHANGE (EDI)

EDI: an alternate way to send docus overseas (not a fax or an e mail).an electronic exchange of docus, from computer to computer, following a format to which both the sending and receiving parties have agreed.Issues on EDI:The sender and recipient have to agree to a technical EDI understanding, eg, choice of a computer protocol, or the possible use of a third party intermediary to translate one electronic format into another or archive the transmissions between the parties. Such translating service providers are called value added networks. They also archive transmission taken place between two parties.Currently there are only few international agreements on EDI formats which are company, industry or country specific. UNEDI for administration, commerce, and transport has been accepted by a significant number of countries including USA.

ELECTRONIC DATA INTERCHANGE (EDI) (contd)

The second issue is the existence of a legal agreement between the parties not only the definition of responsibilities but also the timing of the contract formation, liabilities for errors in the communication, the evidentiary value of the messages whether they can be introduced in court proceedings, and other legal issues have to be addressed.The international chamber of commerce has a uniform rules of conduct for interchange of trade data by tele transmission. Several EDI associations have created their own versions, there is no agreement yet that has global acceptance and courts tend to be relying on laws designed for written documents whenever there are problems.

TRANSPORTATION

MODES OF TRANSPORTATIONLand.RoadRailAir.Aircraft.Helicopter.Pilotless Aerial Vehicles.Waterway.Ship.Barges.Powered Boats.

INTERNATIONAL OCEAN TRANSPORTATION

TWO TYPES OF SHIPS : LINER AND TRAMP

Liner Ships (akin to Bus Service)a. Liner ships undertake regular voyages.b. They follow a pre established schedule.c. They call on pre- determined ports.d. The scheduled trip could be between point to point or RTW (round the world)e. They are either east bond or west bound passing through panama canal or Suez canal.f. Type of vessel also depending upon the specific cargo it carries in a particular route.g. Ships are also classified by their size which is expressed in tons.Tramp Ships (akin to hired taxi service)a. Operates depending on requirement and dynamics of the market.b. They do not operate on a regular schedule.c. It moves wherever company using vessel wants the cargo delivered.d. They usually carry only one type of cargo at a time for one exporter or importer.

SHIP SIZE CATEGORIESPanamax Ship : That can travel through the locks of panama canal.It can have up to 75K tons of DWT .Its outside dimensions allow just to fit into the locks of the canal. The largest ship to cross panama canal is 730 feet long and 100 feet wide. All the ships that are built larger than this size are called post- Panamax ships.Suez-max ships: Generally ships sized at approx 1,50K DWT , and which are of the max size that can be fit through Suez canal.Cape size ships: Large dry bulk carriers of a capacity greater than 80K DWT.Very large crude carrier: An oil tanker up to 3,00K tons DWT. That means the size of the ship will be 1150 feet long,180 feet wide. Ultra Large Crude Carrier: An oil tanker of more than 3,00 K DWT. One of the largest ULCC is 1360 feet long, 207 feet wide, and a draft of 115 feet ie a surface of 2.5 hectares and an area of 6.5 acres.

THE PANAM CANAL The Panam Canal is a 77km ship canal in Panama.It connects the Atlantic Ocean (via the Caribbean Sea) to the Pacific Ocean. The canal cuts across the Isthmus of Panama and is a key conduit for international maritime trade. There are locks at each end to lift ships up to Gatun Lake, an artificial lake created to reduce the amount of excavation work required for the canal, 26 M above sea level. The current locks are 33.5 metres wide. A third, wider lane of locks is currently under construction and is due to open in 2016.

THE SUEZ CANAL The Suez Canal is an artificial sea level waterway in Egypt, connecting the Mediterranean Sea to the Red Sea through the Isthmus of Suez, and separates the African continent from Asia. It was officially opened on November 17, 1869. The canal allows ships to travel between Europe and South Asia without navigating around Africa, thereby reducing the sea voyage distance by about 7,000 KM .It extends from the northern terminus of Port Said to the southern terminus of Port Tewfik at the city of Suez. Its length is 193.30km including its northern and southern access channels. In 2012, 17,225 vessels traversed the canal (47 per day).It contains no locks system, with seawater flowing freely through it.

TONNAGEDead weight tonnage or DWTDWT is the total capacity of the ship ie the max wt of the cargo that a vessel can carry.It can be expressed in long tons (2.240 lbs)or metric tons (2240.6lbs).It is the measurement used by the companies in shipping the cargo and often referred as tonnage.Measured using the weight of the difference in water displacement when the ship is empty and when it is fully loaded to its max.DWT includes the bunker (fuel) and stores (supplies).

TONNAGERegistered tonnageIt is total volume capacity expressed in hundreds of cubic feet.It only measures the capacity of the ship below the deck and does not include the cargo carried on above the deck. Used to determine tax liability of ship owner to the country in which the ship is registered or to the authorities of the ports it visits or to the authorities of the canals it uses.Net registered tonnage is Regd Tonnage less volume occupied by engine room, crew, and other space necessary for goods/ op.Displacement Tonnage: It is the total weight of the ship, when fully loaded, measured by the weight of the volume of water it displaces.Light Tonnage: It is the weight of the ship measured when the vessel is empty, measured by the weight of the volume of water it displaces. Draft means when the ship is fully loaded how deep the ship sits in the water.

THE PLIMSOLL LINEIt is a reference mark located on a ships hull that indicates the max depth to which the vessel may be safely immersed when loaded with cargo. This depth varies with a ships dimensions, type of cargo, time of year, and the water densities encountered in port and at sea. Once these factors have been accounted for, a ships captain can determine the appropriate Plimsoll line needed for the voyage ;TF = Tropical Fresh WaterT = TropicalF = Fresh Water (is the line where in ship will sit lower in fresh water than it would in salt water with the same quantity of cargo)S = Summer (DWT is generally determined at summer line) W = WinterWNA = Winter North AtlanticLR = Letters indicating the registration authority (circle with the line through it indicates whether or not cargo is loaded evenly)

PLIMSOLL LINES

TYPES OF VESSELS : CONTAINER SHIPSContainer ships (also known as Box Ships)60% of global trade only through containers, growing @ 9% py.Generally they take up schedule voyage.Carry up to 6600 TEUs (twenty equivalent units).They can offload their cargo or boxes either through cranes from the port or through on board cranesPlans afoot to have container ships which carry up to 18K TEUs limiting visit to very selected ports in future, leading to another classification of mother & feeder vesselsContainers can be stacked under as well as on deck.Latest in container trade is the concept of introducing fast ships which carry 1500 TEUs at one stretch across atlantic ocean in 3.5 days.

TWENTY-FOOT EQUIVALENT UNIT (TEU)It is an inexact unit of cargo capacity often used to describe the capacity of container ships and container terminals. It is based on the volume of a 20-foot-long (6.1m) intermodal container, a standard-sized metal box which can be easily transferred between different modes of transportation, such as ships, trains and trucks.The container is defined by its length though there is a lack of standardisation in regard to height, ranging between 4feet 3inches (1.30m) and 9feet 6inches (2.90m), with the most common height being 8feet 6inches (2.59m).

CONTAINER SHIP

TYPES OF VESSELS : ROLL ON ROLL OFF (RORO) SHIPSTo accommodate self propelled cargo such as trucks, automobiles, or cargo that could be wheeled into ship .They are essentially floating, parking garages .They can have a portion of the hull which can be opened and acts as a ramp on which vehicles can be driven before being parked on the many decks on the ship and secured with chains.It has an advantage that it need not have to use additional equipment to carry loads and heavier loads also can be propelled on their own. Some RORO ships have even movable and adjustable decks.However RORO requires the services of stevedores a lot to load and unload the cargo which is costing a lot to the exporters/ importers.

ROLL ON ROLL OFF SHIP

TYPES OF VESSELS : BREAK BULK SHIPSMulti purpose ships and can transport shipments of unusual sizes, unitized in pallets, bags, or in crates. Because of its nature each cargo has to be handled separately. So loading and unloading, both on board and on quay including crane operators make cost of break bulk cargo as labour intensive activity. Careful planning and problem solving attempts to load and unload cargo is must incl requirement of different MHE for different cargo.

As containerisation is increasing the importance of break bulk cargo is coming down drastically.

TYPES OF VESSELS : COMBINATION SHIPSUltimate multipurpose ships which were designed to handle varieties of cargo of different loads in a single voyage. It has several holds in which bulk cargo (eg grain) can be placedThe same holds can also be used to keep break bulk cargo of different dimensions, machinery, and some times even containers.

It has a teen dock which is below the main dock, which accommodates smaller break bulk and vehicles loaded through RORO.

TYPES OF VESSELS : LIGHTER ABOARD SHIP (LASH)

Similar to a container ship, it carries standardized units of cargo.Units of cargo are much larger , with a capacity of 385 MT of DWT. Since these units can also float they are also known as LASH barges, dimensions 18 (L)x 9 (W) x 3 (D) meters.Each barge is covered with a hatch cover and is water tight. The capacity of a average LASH ship is about 80 barges and is known as LASH mothership. Advantage for these ships is the floating barges. Shipper can load these barges in to the ship along with his cargo with the help of cranes even when the ship is at anchor that is without having to be docked, spec useful when the port does not have facility to dock the ship and when waters are shallow the barges can be taken near to ship because of their floating nature and can be loaded onto ships.

TYPES OF VESSELS : CRUDE & DRY BULK CARRIERSCrude CarriersShips dedicated to transport of petro products (refined/unrefined). Largest ships in the world are crude carriers Ships designed to carry one petro product called product carriers. Types;Crude carriers upto 80K DWT are known as aframax.Crude carriers up to 300 K DWT are known as VLCC. Crude carriers beyond this tonnage are known as ULCC. VLCC and ULCC normally do not enter a port but stay at anchor outside of the port in deep waters.The oil cargo of the large crude carrier is then transferred in to smaller crude carriers that then transport it and unload it into the port. This process is called lightering.Dry-bulk CarriersThey operate on the same basis as oil tankers. They carry agri products such as cereals and other products like coal, ore, iron etc. They have several holds in their hull in which non unitized cargo is placed. These vessels are smaller in size and carry around 10K DWT.

TYPES OF VESSELS : GAS CARRIERSAnother important bulk trade is transportation of LNG and LPG. These carriers have a distinctive shape and hold several spheres of compressed gases, only part of which are visible above main deck. The LNG and LPG trades tend to be slightly different than the average bulk transport, as they are used in a particular trade for long periods of time on long term contracts called time charter parties and therefore nearly have a sailing schedule.

CHARTERINGCharterer.A merchant who wants to ship bulk quantities and would charter or hire a tramp ship. Special Agencies Related to Chartering. To survey the market, negotiate the rate, and to conclude the dealing; ship owner employ ship broker. charterer employ charterers agentCost of Chartering .Depends on supply and demand position because of free competition in the market.Types of Chartering.Time Charter:The ship is chartered as a functioning operating unit for a period of time, to transport cargo wherever the charterer wishes.Voyage Charter: To carry cargo on specified voyage between places.Demise (or bare bottom) Charter : A preferred option of owners, wherein the ship is chartered as a hull .The charterer will have to equip the ship with personnel, fuel, and other necessities and operate the ship. This charter is usually for a longer period, say for about five years or more.

CHARTERING (contd):NON VESSEL - OPERATING COMMON CARRIERS (NVOCC)

Another type of shipping company where in they do not own and operate ships. NVOCC operate by purchasing space on a ship on a given voyage and by selling this space to companies that need to ship cargo. The shipping line gets paid for the space - and weight - whether or not the NVOCC fills its allocation.NVOCC only makes money by reselling the space at a higher rate than the one at which it is purchased.(similarly these consolidators purchase block of seats in on an airplane and resell them to individuals, generally through discount travel agencies)

INTERNATIONAL AIR TRANSPORTATION

Gen Classification:Passenger planes that carry cargo and exclusive cargo planes. Regular cargo planes versus chartered cargo planes.

PASSENGER PLANESCarry the cargo generally under the belly (hence known as belly cargo), in addition to passengers on main deck.Most of this cargo is loose (not palletized). This cargo is usually extremely urgent, consisting of machines or parts, necessary for repair of a critical piece of equipment, or small shipments of fresh produce etc. Biggest hurdle is the max size the shipment could be: as size of hold varies depending upon the plane used.Second constraint is that many items are not allowed in passenger planes, even if acceptable for air transport. Another alternative is OBC (on board courier) : fastest way of carrying cargo to get anywhere and is a service used for carrying sensitive parts and documents.

COMBIS

Combis are passenger planes designed to carry freight on the main deck as well as in the belly hold. The main deck is split in the middle of with the front portion reserved for passengers and aft for freight.Some air crafts are designed in such a way that this partition is mobile depending upon seasonal fluctuations. For shippers, combis present an advantage in that size limitations faced in passenger crafts will not be there. The main deck has a greater weight capacity. It can accommodate palletized and containerized cargo. More over the cargo can be secured on to the plane with slings to prevent damage caused by movement within the plane.

AIR FREIGHTERS & CHARTERESAir FreightersMost air freighters are liners ie operate on a regular schedule. The freighter is equipped with a roller deck (main deck equipped with rollers) which allows palletized or container cargo to be pushed in to craft, either through oversize side door or through the nose of air plane. Cargo once inside can be secured through hooks and slings.ChartersThe goods that are very urgent and the parts that are essential for assembly line and that are to be there JIT required to be transported by small air crafts.When goods cannot be transported by available cargo planes because of non fitment and if they are too heavy or too large, shipper will charter a heavy lift cargo plane.When goods need to be delivered to a location where regular air service is not available.

INTERNATIONAL LAND TRANSPORTATION

Standard trucks (of varieties operating internationally)include:9 Tonners6.5 TonnersSingle axle trailersDouble axle trailersFlat track trailerSemi bed trailerContainerized trailerTrucking is dominated by domestic rules & regulations, which influence the way the industry is organized and can create a havoc in companys ability to ship goods JIT or for a shipper to reach port before sailing. ;Limitations on number of axles and weight it can carry per axle, On its length and width, Requirements regarding its mandatory equipmentsThe number of consecutive hours a driver can drive etc.

RD TNChallengesTrucking is dominated by domestic rules & regulations, which can create a havoc in companys ability to ship goods JIT or for a shipper to reach port before sailing. ;Limitations on number of axles and weight it can carry per axle, On its length and width, Requirements regarding its mandatory equipmentsThe number of consecutive hours a driver can drive etc. Infrastructure bottle necks like load limits, height limits, speed limits, road conditions which hinder the smooth transportation of goods and have an impact on packing.The high tolls collected on some high ways lure truckers to drive on secondary by lanes. sudden and unexpected eruption of social unrest.Major AdvantageFlexibility, Fast turn around, Less risk with more penetrative power into the market.

RAIL TN

Rail traditionally had three business activities;Carrying bulk freight including, coal, ore, iron, grains, oils etc.Break bulk freight placed in boxes, palletized or in simple package.Automobiles, placed on flat track racks.Containerized cargo also is transported through railways.Main Advantage: carrying large quantities, over long distances very economically.Rail road documents are honored by banks and are negotiable instruments.Sizable insurance costs can be saved as railways claim settlement machinery is efficient.

ALT MEANS OF TN WORLD WIDE

Pipe linesThey carry a substantial quantity of Petroleum, Oil & Natural Gas and Water.Many of these pipe lines are international.An alternative to ships/ road transport in those areas where it is dangerous to navigate. Pipe line can also be used to transport in the form of slurry a mix of water and ore/ pulverized coal. BargesRiver barges are commonly used to carry cargo. A significant source of tn in certain routes/ seaport.HovercraftsCommercial hovercrafts operate daily, mostly as ferry services on small bodies of water .They carry their share of trucks on such trips. Used on a charter basis for cargo to be shipped to remote areas where roads are non existent or barges cannot go.Useful in eco sensitive areas.

Barges: A barge is a flat-bottomed boat, built mainly for river and canal transport of heavy goods and being extensively used as connect between Port and Vessel at High Seas. Some barges are not self-propelled and need to be towed or pushed by towboats.

Hovercraft (air-cushion vehicle or ACV) is capable of travelling over land, water, mud or ice and other surfaces. Hovercraft are hybrid vessels operated by a pilot as an aircraft rather than a captain as a marine vessel.Hovercraft use blowers to produce a large volume of air below hull that is slightly above atmospheric pressure. The pressure difference between higher pressure air below hull and lower pressure ambient air above it produces lift, which causes the hull to float above the running surface. For stability reasons, air is typically blown through slots or holes around the outside of a disk- or oval-shaped platform, giving most hovercraft a characteristic rounded-rectangle shape. Typically this cushion is contained within a flexible "skirt", which allows the vehicle to travel over small obstructions without damage.

ORG STRUCTURES FOR GLOBAL LGS EXCELLENCE

ORG STRUCTURES (OS) FOR GLOBAL LGS EXCELLENCE

OS helps in creation, implementation, and evaluation of plans. A firms OS could be formal or informal or both- it defines the functional relationships in an org.OS gives a concrete shape to the org; pattern in which various parts are interrelated or interconnected. OS prescribes the relationship among various positions and activities and indicates org hierarchy and authority structure and shows its reporting relationships.OS provides the stability, and continuity that allows the org to survive the changes in the internal and external environment surrounding the org.

ORG STRUCTURES: ACCOMPLISHMENT OF FOUR BASIC FUNCTIONS

Dividing work into manageable sections.Grouping / segmenting work into logical and efficient segments.Proper distribution of power and authority to fulfill responsibility efficiently.Establishing efficient means of communication so as to increase coordination and cooperation interactively.

GENESIS OF LGS ORG STRUCTURES

Traditional logistical org: supply and distribution activities scattered through out structure overlapping of activities to conflicts in org impossible to hold a specific individual responsible for specific cost elements like tpt, WH or inventory functional head found an excuse for passing the buck.

BEST STRUCTURES: THREE GUIDELINES1.Centralization extent to which decisions are shared;Leads to increased efficiency through capacity for decision making in planning, coord and control of activities.Concerns logistics as a coord and planning function in manufacturing and transport.2.Formalization represents degree to which activities and relation ships are governed by rules, SOPs and contracts.Allows for increased efficiency by formalizing repetitive and reoccurring actions and transactions thus minimizing the cost for a given service. Done by introducing improvised, standardized information and communicative system. 3. Specialization/Differentiation leads to greater adaptabilityExperts understand problems more clearly and adapt themselves to changing conditions more quickly. They discover new ways of doing things.

OBJECTIVES OF ORGANIZATION STRUCTURE

Conflict resolutionNeed for controlling the rising costsIdentification of cost reduction opportunities.Complex activity for competitive advantage.

Centralized Org the activities are performed at corporate facility, managed by a single department to exploit economies of scale in their functions like transportation, storage etc.Decentralized Org both authority and decisions are dispersed throughout lower levels. This system is characterized as offering diverse set of products to heterogeneous market place. It is more responsive to local manufacturing and market needs.Operation based Org its activities are spread under various other functions such as production, marketing and finance.Strategy based Org various activities are grouped under one head and view its functions as a strategic fit in to the overall objectives.

IMPACT OF JIT SYSTEMS ON ORG: BUYER SUPPLIER RELATIONSHIP.

Apparent JITcustomers receive shipments in accordance with their needs, but the supplier continues manufacturing large quantities and supplies customers from stockOrganized JITCustomers co - operate by making the project economically acceptable by sharing transport costs, packaging costs, and simplified order management. Integral or total JITExtends the JIT approach to the customer, there by spreading the total burden of the change in keeping with the new form of exchange between buyer and supplier.JIT is characterized by the need for far reaching cooperation between customer and supplier. The coordination requires an increase in the frequency of communications and a broadening of inter organizational links.

DIFFICULTIES RELATED TO SETTING UP GLOBAL ORG

Splitting up of logistics missions between BU and the logistics functionsProduction and sales decisions taken by BU have great consequences for logistics: need for dynamic interaction between BU and top logistics managers.Sourcing of material in a piecemeal fashion at different BU based on production and cost criteria, lead to even more pressing need for grouping together the sourcing to bring it under the responsibility of a centralized logistic functionMethods to share benefits between BU and centralized logistics management for logistics services.Transparent Cost monitoring tools should be provided to the BU to give correct estimates.Specific clarity wrt taking responsibility of the deliveries: Timeliness, Condition, and the Customer Satisfaction.

FACTORS THAT ENCOURAGE INTERNATIONAL TRADE

Growing demand in new markets.Demand for foreign productsConvergence of market demand through centralized manufacturing.Removal of trade barriersManufacturers aiming for economies of scaleSpecialized support available in the market. (3PL,Piggy back)Integration of the supply chainGreater demand on suppliersChanging practices in logisticsImproved communication among customersImproved communication in businessSaturation in home market

DEVELOPMENT OF GLOBAL TRADE :INTERNATIONAL TREATIES AND KEY INTERNATIONAL ORG

The Bretton Woods Conf (1944) led to the creation of two international infrastructures which facilitated world trade; Stable currency exchange rates were introduced and international payment system was established by IMF (1945). Decisions taken in GATT through multiple negotiation periods led to decrease of duty rate from 40% in 1947 to on an average of 4% in 2000.WTO (1995) replaced GATT and is essentially in charge of enforcing free trade.The treaty of Rome (1957) led to the creation of EU.Other common markets are emerging in the same line.The Euro, European currency was introduced in 1999 and put to circulation from 2002.International trade has grown nearly 2100% from 1950 till 2000 and more than 200% from 1980 till 2000. Worlds total international trade as per 2003 figure;Merchandise:$14500 billion(US).Services :$3500 billion (US).

PROBLEMS ENCOUNTERED IN INT LGS

Cost and difficulties of transport because of larger orders.International markets are highly erratic, with large variations in demand.Most org have less experience with international lgs, so they are working in areas where they have less expertise.There are more intermediaries such as freight forwarders and customs agentsThe intermediaries and distances involved make relations with customers more difficult and remote.Communication is difficult across cultures.Terms of trade may vary and unfamiliarFinancial arrangements can be less certainDocumentation is more complicated.Physical barriers such as border controlsTechnical barriers such as safety standardsFiscal barriers such as different rates of VAT and excise.Political and legal problemsExpropriation problems

INCOTERMS

INCOTERMS (INTERNATIONAL COMMERCIAL TERMS)

Incoterms rules began development in 1921 with forming of the idea by International Chamber of Commerce (ICC). First published in 1936, periodically updated, eighth versionIncoterms 2010, published on 01 Jan 2011. "Incoterms" is a registered trademark of the ICC.These rules are a series of pre-defined three-letter trade terms related to common sales practices.Intended primarily to clearly communicate tasks, costs & risks associated with tn and delivery of goods. Widely used in international commercial transactions.Accepted by governments, legal authorities and practitioners worldwide for the interpretation of most commonly used terms in international trade.

INCOTERMS 2010The E-term wherein the sellers obligation is at its minimum.The F (FCA, FAS & FOB) terms require the seller to deliver goods for carriage as instructed by the buyer.Main Carriage contracted by buyer.Less work for seller, but less control over documentsFor documentary payment terms.Compliance Documentation required.The C (CFR, CIF, CPT & CIP) terms require the seller to contract for carriage at his expense to a specified point.Most advantageous for seller.Main Carriage contracted by seller.Most control over documents.More work for exporter than F Terms.Buyers are responsible for the goods during the main carriage even though the seller has made the arrangements for main carriage.The D (DAT, DAP & DDP) - are Arrival termsMain Carriage contracted by sellerSeller responsible for goods until delivered (arrived) to specified location on the buyers side.

INCOTERMS 2010: SEVEN RULES FOR ANY MODE(S) OF TRANSPORT

EXW Ex Works (named place of delivery)The seller makes the goods available at its premises. Places the max obligation on the buyer and min on the seller. Seller delivers when goods placed at disposal of buyer. The EXW term is often used when making an initial quotation for the sale of goods without any costs included. EXW means that a seller has the goods ready for collection at his premises (works, factory, warehouse, plant) on the date agreed upon. The buyer pays all transportation costs and also bears the risks for bringing the goods to their final destination. The seller doesn't load the goods on collecting vehicles and doesn't clear them for export. If the seller does load the good, he does so at buyer's risk and cost

INCOTERMS 2010: SEVEN RULES FOR ANY MODE(S) OF TRANSPORT (contd)

FCA Free Carrier (named place of delivery)The seller hands over the goods, cleared for export, into the disposal of the first carrier (named by the buyer) at the named place. The seller pays for carriage to the named point of delivery.Risk passes when the goods are handed over to the first carrier.CPT - Carriage Paid To (named place of destination)The seller pays for carriage. Risk transfers to buyer upon handing goods over to the first carrier.CIP Carriage and Insurance Paid to (named place of destination)The containerized transport/multimodal equivalent of CIF. Seller pays for carriage and insurance to named destination point.Risk passes when the goods are handed over to the first carrier.

INCOTERMS 2010: SEVEN RULES FOR ANY MODE(S) OF TRANSPORT (contd)

DAT Delivered at Terminal (named terminal at port or place of destination)Seller pays for carriage to the terminal, except for costs related to import clearance, and assumes all risks up to the point that the goods are unloaded at the terminal DAP Delivered at Place (named place of destination)Seller pays for carriage to the named place, except for costs related to import clearance, and assumes all risks prior to the point that the goods are ready for unloading by the buyer.DDP Delivered Duty Paid (named place of destination)Seller is responsible for delivering the goods to the named place in the country of the buyer, and pays all costs in bringing the goods to the destination including import duties and taxes. This term places the maximum obligations on the seller and minimum obligations on the buyer.Rules for Sea and Inland Waterway Transport

INCOTERMS 2010: FOUR TERMS EXCLUSIVE TO WATER TNFAS Free Alongside Ship (named port of shipment)Seller must place the goods alongside ship at named port. The seller must clear the goods for export. Suitable only for maritime transport but NOT for multimodal sea transport in containers. This term is typically used for heavy-lift or bulk cargo.

FOB Free on Board (named port of shipment)The seller must load the goods on board the vessel nominated by the buyer.Cost and risk are divided when the goods are actually on board of the vessel.The seller must clear the goods for export. The term is applicable for maritime and IWT only but NOT for multimodal sea transport in containers. Buyer must instruct the seller the details of the vessel and port where goods are to be loaded, and there is no reference to, or provision for, the use of a carrier or forwarder. FCA should be used for container shipments.

INCOTERMS 2010: FOUR TERMS EXCLSIVE TO WATER TN (contd)CFR Cost and Freight (named port of destination)Seller must pay the costs and freight to bring the goods to the port of destination. However, risk is transferred to the buyer once the goods are loaded on the vessel (this rule is new!). Maritime transport only and Insurance for the goods is NOT included. CIF Cost, Insurance and Freight (named port of destination)Exactly the same as CFR except that the seller must in addition procure and pay for the insurance. Maritime transport only

Four Groups of Incoterms LessControl MoreControl1) E group

2) F group

3) C group

4) D group

SellerBuyer MoreControl LessControl6

Any Mode TermsEXWFCACIP and CPT DAP, DAT and DDP8

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Sea and Inland Waterway Transport TermsFASFOBCFRCIF9

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