IL & G SCM

INTERNATIONAL LOGISTICS
& GLOBAL SCM

SYLLABUS: IL & G SCM
Course 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 BUSINESS
INTRODUCTION TO
INTERNATIONAL LOGISTICS

EVOLUTION & ROLE OF LGS IN BUSINESS
• “Logistics” -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 SCM
• The 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 management
– Inventory management
– Transportation
– Warehousing
– Order processing
– Information Management
• Logistics is a key enabler of supply chain collaboration
• SCM 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

Evolution
Demand forecasting
Purchasing
Requirements planning
Production planning
Manufacturing inventory
Warehousing
Materials handling
Industrial packaging
Finished goods inventory
Distribution planning
Order processing
Transportation
Customer service
Strategic planning
Information technology
Marketing
sales
Materials
Management
Logistics (1990)
Supply
Chain(2000)
Physical
Distribution

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 customer’s 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)
• Warehousing
• Inventory
• Unitization (packing and packaging)
• Material handling
• Communications.
The whole activity can be divided into
• Inventory flow
• Information flow (Paper based, electronic based)

CHARACTERISTICS OF AN ORG WITH
EFFECTIVE LGS COMPETENCY
1. Alternative logistical capabilities
2. Flexibility according to the need and
demand
3. Time based performance
4. Operational control
5. Postponement capabilities
6. 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
accommodating
unusual 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 authority
7. Replacement guarantee.
8. Wide range of services.
9. Extended credit facilities
10. Order cycle time
11. Order cycle consistency
12. Order accuracy
13. Order completeness
14. Order condition

INTERNATIONAL LGS
• Definition: 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 BUSINESS
INTRODUCTION TO
INTERNATIONAL LOGISTICS &
GLOBAL SCM

GLOBAL BUSINESS STRATEGY
• Experience curve effects
• Location economies
• Aggressive pricing
• To gain competitive advantage
• Cost leadership
• Differentiation
• Economies of scale in production
Thus global firms are able to;
• Earn greater ROI from their skills and core
competencies
• Realise location economies where they can perform
most effectively
• Realize greater experience curve economies which
reduces cost of production

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 ECONOMIES
• A 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.

DIFFERENTIATION
• Result 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 SCALE
In 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 CHAINS
• Global or international sourcing- also
known as outsourcing involves
procurement of raw materials from
foreign suppliers
• Global manufacturing - also known as
focused manufacturing where few
manufacturing plants are designated
as the world wide suppliers

GLOBAL COMPETITIVE STRATEGY
• Technology
• Marketing
• Manufacturing and
• Logistics

CHARACTERISTICS OF GLOBAL
COMPETITION
• Companies seek to create standardized
yet customized markets
• Product life cycles are shortening for
high tech products
• More companies are utilizing
outsourcing and offshore manufacturing
• Marketing and manufacturing activities
are better coordinated in firms operating
globally

ESSENTIAL COMPONENTS FOR GL&SCM
• Structure
• Organizational networks
• Process

KEYS TO GLOBAL LGS EXCELLENCE
• Total Delivered Cost Management
• Global Logistics Process Automation
• End to End Visibility
• Supplier Portals & ASN Capabilities
• Total Product Identification & Regulatory Compliance
• Dynamic Routing
• Variability Management
• Integrated International & Domestic Workflow
• Integrated Planning & Execution Platform
• Financial 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.
SUPPLIER’S PORTALS & ASN
CAPABILITIES

• Non compliance may lead to series of real and potential
problems:
– Fines or other penalties for a failure to comply
– Delays in the movement of goods inbound and
outbound from a variety of causes.
– Risk to the company’s 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 MGT
• There 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 WORKFLOW
• Until 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 same
• Both involve management of movement
and storage of products
• Information is vital for effective provision
• Both require functional processes of
inventory management, warehousing,
order processing, carrier selection,
procurement and vendor payment
• Economic and safety regulations exist for
transportation in both

GLOBAL VS DOMESTIC SCM:
DIFFERENCES
• Distance
• Language
• Meaning of words
• Cultural differences
• Currency exchange fluctuations
• Political stability
• Infrastructures
• Environmental regulations
• Laws regarding labeling
• Customer regulations
• Transport regulations
• Time consuming

BARRIERS FOR GLOBAL SCM
• Tariffs
• Exchange rates
• Differences in product requirements
• Consumer tastes and preferences
• Business practices
• Movement of goods across borders
• Transportation services and regulations
• Telecommunication systems

PLs
• First 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) : GEN
• Outsourcing all or much of a company’s logistics operations to
a specialized company.
• The term "3PL" was first used in the early 1970s to identify
intermodal marketing companies (IMCs) in transportation
contracts. Till then, contracts for transportation had featured
only two parties, the shipper and the carrier.
• Third Party to the contract—as intermediaries accepted
shipments from the shippers and tendered them to the rail
carriers.
• Services they provide are transportation, warehousing,
cross-docking, inventory management, packaging, and freight
forwarding.
• In 2008 legislation passed declaring that the legal definition of
a 3PL is “A person who solely receives, holds, or
otherwise transports a consumer product in the ordinary
course of business but who does not take title to the product.”
• Third-party logistics providers are:
– Freight forwarders
– Courier companies
– Other 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 services
• Physical contract logistics services
• Management contract logistics services.
• Integrated contract logistics
Use of 3PL service providers can allow a company to:
• Penetrate new markets
• Reduce 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 commitment
– Provider capabilities.
• Decision involves an overall evaluation of the entire lgs
system, including inbound, in plant and outbound lgs.

4PL
• Arrangement 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.”
• 4PL’s 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 client’s supply/value chain.
• The 4PL is a Business Process Outsourcing (BPO),
provider that brings value and a reengineered approach
to the customer’s 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) ELEMENTS
• Patronage : 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 shape
Elements of Customer Service (CS)
1. Order Cycle Time: The time taken between placing
the order and receipt of delivery
2. 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 of
• contaminated products.

DESIGNING CS PACKAGE AS USP
• Competition 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 needs
– Establishing relative importance of CS components
– Identify 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 acquisition
– Order entry
– Order document processing
– Order 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 company’s 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.
•

Steps in efficient execution of customer order;
• Order collection. Orders collected in various ways;
– Through sales persons from the field
– Through pre-set formats
– Through telephone
– Through fax and e-mail
• Status 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

• 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 preparation
• Order transmittal
• Entry
• Filling

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 size
– Relative order volume
– Relative order placement time
– Order placement sequence
– Customer 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 itemized catalog or list of tangible goods or property or
the intangible attributes or qualities.
• Value of materials and goods held by an organization;
– To support production (raw materials, sub assemblies, WIP).
– For support activities (repair, maint, consumables) or
– For sale or customer service (merchandise, finished goods,
spare parts).
• Inventory is often the largest item in the current asset
category, and must be accurately counted and valued at
the end of each accounting period to determine a
company’s profit or loss.
• Inventory costs are constant concern of most business
marketers for two reasons.
– They are the second largest cost in distribution
– They can add as much as 40% in extra cost per year to
the value of goods being stored.

ROLE OF INVENTORY IN THE SUPPLY CHAIN
• Inventory 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 distribution
• It 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). Little’s law ;
I (inventory) = D (throughput) x T (flow time)

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 Inventory
• WIP Inventory
• Finished Goods Inventory
• MRO Inventory

REASONS FOR HOLDING INVENTORY
• Catering to the needs of customer during
sales fluctuations and other related
problems.
• To provide assurance on availability
• To store in advance expecting movement in
sales.
• Flexible raw material scheduling.
• To suit variations in production scheduling
• To 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 space
• Risk 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 Cost
– Carrying or Holding Cost
– Storage Cost
– Out Of Stock Cost
– Over 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 costs
• Obsolescence and deterioration costs
• Storage costs

COSTS ASSOCIATED WITH INVENTORY (contd)
Storage Costs
• Generally 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 INVENTORY
Out 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.

RL
• RL 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 SYSTEM
• Warranty 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 SYSTEM
• Recycling process needs an effective RL
system: common org structure for RL system
involves four participants.
– Collectors
– Sorters
– Processors
– Remanufacturers.
• As demand for RL is getting increased more 3PL
service providers are entering into the field and
expanding their service offerings.

RL & RELATED AREAS
• Return of unsold goods
– Goods 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

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 d’union
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 FUNCTION
• Continuous flow
• Optimize unit of cargo
• Maximum vehicle unit
• Adaptation of vehicle unit to volume and
nature of traffic
• Standardization
• Compatibility of unit load equipment
• Minimum of dead weight to total weight
• Maximum utilization of capital, equipment
and personnel.

TRANSPORTATION OBJECTIVES
• Manufacturer 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
activities
• Trade off between customer service levels and costs.
• Selecting mode of transportation
– Identify 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 DOCUMENTS
• Bill of Lading* (BoL).
• Packing list.
• Shipper’s 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 a carrier or its agent, to the shipper as a
contract of carriage of goods. It is also a receipt for cargo
accepted for transportation and must be presented for
taking delivery at the destination.
• Among other items of information, a BoL contains;
– Consignor’s and Consignee’s name,
– Names of the ports of departure and destination,
– Name of the vessel,
– Dates of departure and arrival,
– Itemized list of goods being transported with number of
packages and kind of packaging,
– Marks and numbers on the packages,
– weight and/or Volume of the cargo,
– Freight Rate and amount.
• It serves as a proof of ownership (title) of the cargo, and may
be issued either in a negotiable or non-negotiable form. In
negotiable form, it is commonly used in LC transactions and
may be bought, sold, or traded; or used as security for
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 DOCUMENTS
Packing list
• It 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.
Shipper’s letter of instruction
• Delivered to the shipping company if the shipper wants
specific steps taken during transport of merchandise.
Shipment of dangerous goods
• There 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.
Manifest
• Document 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.

MODES OF TRANSPORTATION
• Land.
– Road
– Rail
• Air.
– 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 CATEGORIES
• Panamax 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 PANAMÁ CANAL
• The Panamá Canal is a 77 km 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 193.30 km 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.

TONNAGE
Dead weight tonnage or DWT
• DWT 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).

TONNAGE
• Registered tonnage
– It 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 LINE
• It is a reference mark located on a ship’s hull that indicates
the max depth to which the vessel may be safely immersed
when loaded with cargo.
• This depth varies with a ship’s 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 ship’s captain
can determine the appropriate Plimsoll line needed for the
voyage ;
– TF = Tropical Fresh Water
– T = Tropical
– F = 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 = Winter
– WNA = Winter North Atlantic
– LR = Letters indicating the registration authority (circle with the
line through it indicates whether or not cargo is loaded evenly)

TYPES OF VESSELS : CONTAINER SHIPS
Container 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 cranes
• Plans 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
vessels
• Containers 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.

TYPES OF VESSELS : ROLL ON ROLL OFF (RORO) SHIPS
• To 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.

TYPES OF VESSELS : BREAK BULK SHIPS
• Multi 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 SHIPS
• Ultimate 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
placed
• The 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 CARRIERS
Crude Carriers
• Ships 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 Carriers
• They 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 CARRIERS
• Another 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.

CHARTERING
• Charterer. 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’ agent
• Cost 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 PLANES
• Carry 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 & CHARTERES
Air Freighters
• Most 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.
Charters
• The 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 Tonners
– 6.5 Tonners
– Single axle trailers
– Double axle trailers
– Flat track trailer
– Semi bed trailer
– Containerized trailer
• Trucking is dominated by domestic rules & regulations,
which influence the way the industry is organized and
can create a havoc in company’s 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 equipments
– The number of consecutive hours a driver can drive etc.

RD TN
Challenges
• Trucking is dominated by domestic rules & regulations, which
can create a havoc in company’s 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 equipments
– The 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 Advantage
• Flexibility,
• 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 lines
• They 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.
Barges
• River barges are commonly used to carry cargo.
• A significant source of tn in certain routes/ seaport.
Hovercrafts
• Commercial 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 firm’s 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 GUIDELINES
1. 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 adaptability
– Experts understand problems more clearly and adapt
themselves to changing conditions more quickly.
– They discover new ways of doing things.

OBJECTIVES OF ORGANIZATION STRUCTURE
• Conflict resolution
• Need for controlling the rising costs
• Identification 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 JIT
• customers receive shipments in accordance with their
needs, but the supplier continues manufacturing large
quantities and supplies customers from stock
Organized JIT
• Customers co - operate by making the project
economically acceptable by sharing transport costs,
packaging costs, and simplified order management.
Integral or total JIT
• Extends 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 functions
• Production 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
function
• Methods 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 products
• Convergence of market demand through centralized
manufacturing.
• Removal of trade barriers
• Manufacturers aiming for economies of scale
• Specialized support available in the market. (3PL,Piggy
back)
• Integration of the supply chain
• Greater demand on suppliers
• Changing practices in logistics
• Improved communication among customers
• Improved communication in business
• Saturation 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 agents
• The intermediaries and distances involved make relations
with customers more difficult and remote.
• Communication is difficult across cultures.
• Terms of trade may vary and unfamiliar
• Financial arrangements can be less certain
• Documentation is more complicated.
• Physical barriers such as border controls
• Technical barriers such as safety standards
• Fiscal barriers such as different rates of VAT and excise.
• Political and legal problems
• Expropriation problems

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
version—Incoterms 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.

Four Groups of Incoterms
Less
Control
More
Control1) “E” group
2) “F” group
3) “C” group
4) “D” group
Seller Buyer
More
Control
Less
Control
6

INCOTERMS 2010
• The “E”-term wherein the seller’s 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 documents
• For 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” terms
– Main Carriage contracted by seller
– Seller responsible for goods until delivered (“arrived”) to specified
location on the buyer’s side.

Any Mode Terms
• EXW
• FCA
• CIP and CPT
• DAP, DAT and DDP
8
Sea and Inland Waterway
Transport Terms
• FAS
• FOB
• CFR
• CIF
9

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 TN
FAS – 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

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