The document discusses supply chain management. It defines supply chain management as the process of delivering a product from raw material to the consumer. It notes that supply chain management includes planning, sourcing, production, delivery, and handling customer complaints. It also discusses the importance of supply chain management in improving customer satisfaction and business performance. Finally, it outlines the key components of an effective supply chain management process.

1. SUPPLY CHAIN MANAGEMENT
Prepared By
Ms. C. Ranganayaki, MBA, SLET, M.Phil.,
Assistant Professor

2. INTRODUCTION
Supply chain management includes five basic activities:
1. Planning and strategy formulation
2. Sourcing
3. Transformation process
4. Delivery
5. Handling customer complaints and excess stocks.
What is supply chain management (SCM)?
Supply chain management is the process of delivering a product from raw material to the
consumer. It includes supply planning, product planning, demand planning, sales and
operations planning, and supply management.

3. Why is supply chain management important?
Focusing supply chain management on strategic activities can have a
positive impact that resounds throughout the business. There are two
core areas:
supply chain processes and
procedures - can contribute to business results
customer happiness and Return On Investment [ROI].
• Happy customer = Happy business = Higher performance

4. Supply Chain Management Process?
The supply chain management process is composed of four main
parts:
1. Demand management
2. Supply management
3. S&OP (Sales & Operations Planning) and
4. Product portfolio management.

5. What is product portfolio management?
Product portfolio management is the process of looking at every product a
company offers to see how well it meets company goals. It's also about
envisioning future product strategies for company growth, cost savings, or other
goals.

6. A product portfolio is the collection of all the products or services offered
by a company, each with a different growth rate and market share.
A product portfolio refers to the complete list of products offered by a
company.
For example, if an entity sells laptops and smartphones, the entity's
portfolio contains laptops and smartphones.
Its elements change if the entity adds a new product or removes an existing
product in the offering.

7. SUPPLY CHAIN MANAGEMENT
• A supply chain is a global network used to deliver products and services from
raw materials to end customer through information flow, physical distribution
and cash.
• Supply chain involved all the stages directly or indirectly in fulfilling a
customer request which includes manufacturers, suppliers, transporters,
warehouses, retailers and customers.
• It is the integration of demand and supply.
• Examples of supply chain activities include farming, refining, design,
manufacturing, packaging, and transportation.

8. OBJECTIVES OF SUPPLY CHAIN MANAGEMENT
• To maximize overall value generated.
• To meet consumer demand for guaranteed delivery of high quality and low
cost with minimal lead time.
• To fulfill customer demand through efficient resources.
• To maximize efficiency of distribution side.
• Helps in better decision.

9. IMPORTANCE OF SUPPLY CHAIN MANAGEMENT
Improves Customer Services.
Customers expect to receive the correct product mix and quantity to be delivered
on time.
Products need to be on hand in the right location.
Follow up support after a sale must be done quickly.
Reduce Operating Costs.
Decreases Purchasing Cost - Decrease Production Cost - Decrease Total Supply
Chain Cost - Improves Financial Position.

10. FUNCTIONS OF SUPPLY CHAIN MANAGEMENT
• Customer Relationship Management: Consistent focus on end customer
demands to meet the increasing customer requirements and ensures a high
degree of flexibility.
• Flexibility and demand-oriented production: Continuous cost reduction
and resource optimization across all stages of the value chain.
• Synchronization of supply and demand: Increasing the adaptability and
development capability of the supply chain.

11. 7 primary functional areas
1. Purchasing,
2. Manufacturing,
3. Inventory Management,
4. Demand Planning,
5. Warehousing,
6. Transportation, and
7. Customer Service.

12. ADVANTAGES OF SUPPLY CHAIN MANAGEMENT
• Develops better customer relationship and service.
• Creates better delivery mechanisms for products and services in demand with minimum delay.
• Improvises productivity and business functions.
• Minimizes warehouse and transportation costs.
• Minimizes direct and indirect costs.
• Assists in achieving shipping of right products to the right place at the right time.
• Enhances inventory management, supporting the successful execution of just-in-time stock models.
• Assists companies in adapting to the challenges of globalization, economic upheaval, expanding consumer
expectations, and related differences.
• Assists companies in minimizing waste, driving out costs, and achieving efficiencies throughout the supply chain
process.

13. CHARACTERISTICS OF SUPPLY CHAIN MANAGEMENT
• Focuses more on the customer
• Sourcing of raw materials or finished goods from anywhere in the world
• Centralized global business
• Ability to manage information not only within a company but across industries
and enterprises.
• Responsibility of multiple flow in supply chain network both upward and
downward

14. VALUE CHAIN PERSPECTIVE
• Michael E. Porter, of Harvard Business School, introduced the concept of a
value chain in his book "Competitive Advantage: Creating and Sustaining
Superior Performance" (Free Press, 1998). "Competitive advantage cannot be
understood by looking at a firm as a whole,"
• Porter wrote. "It stems from the many discrete activities a firm performs in
designing, producing, marketing, delivering, and supporting its product."

15. • The value chain framework is made up of five primary activities --
inbound operations, operations, outbound logistics, marketing and sales,
service -- and
• four secondary activities -- procurement and purchasing, human resource
management, technological development and company infrastructure.

16. PORTER’S VALUE CHAIN

17. What Is a Value Chain?
• Value chain management is the process of organizing all of a company's activities in
order to analyze them. The goal is to establish communication between the leaders of
each stage to ensure the product is placed in the customers' hands as seamlessly as
possible.
• A value chain is a series of consecutive steps that go into the creation of a finished
product, from its initial design to its arrival at a customer's door. The chain identifies
each step in the process at which value is added, including the sourcing,
manufacturing, and marketing stages of its production.

18. Benefits of value chains
 Support decisions for various business activities.
 Diagnose points of ineffectiveness for corrective action.
 Understand linkages and dependencies between different activities and areas in the
business. For example, issues in human resources management and technology can
permeate nearly all business activities.
 Optimize activities to maximize output and minimize organizational expenses.
 Potentially create a cost advantage over competitors.
 Understand core competencies and areas of improvement.

19. SUPPLY CHAIN EFFECTIVENESS & INDIAN INFRASTRUCTURE
Following are some of its most important benefits.
1. Reduced Operational Costs
2. Higher Rate of Efficiency
3. Boosts Consumer Experience
4. Enhanced Risk Management
5. Improves Financial Performance
6. Enhanced Quality
7. Optimized Supply Chain Network
Why is it beneficial for the Indian Industry Sector?
The sustainability of companies in today’s economic environment and evolving market is dependent on
innovative and practical corporate strategy, as well as on supply chain management to a large extent.

20. FRAMEWORK FOR SUPPLY CHAIN SOLUTION

21. OUTSOURCING AND 3 PLs
OUTSOURCING
When a company uses a third party to help with various supply chain functions,
they are outsourcing logistics.
Outsourced logistics services considerably impact business performance, and
many companies see the benefits of managed transportation services, transportation
management software, and outsourced logistics.

22. Benefits of logistic outsourcing
1. Cost Savings
2. Capacity and Flexibility
3. Risk Management
4. Technology Advantages
5. Operational Control
6. Save Time by Outsourcing with a 3PL

23. What is 3PL?
Third-party logistics companies offer logistics services and support some or all
aspects of a business’s shipping operations, managing all aspects of moving goods from
manufacturers and distributors to the end customer.
A 3PL is commonly used in outsourced logistics and supply-chain management
to outsource a company’s shipping and fulfillment services, which can include:
1. Transportation 2. Warehousing 3. Materials procurement
4. Inventory management 5. Customs brokerage 6. Freight audit
7. Payment 8. Shipment tracking

24. Four Functions of 3PL Providers
1. Shipping and Receiving
2. Transportation
3. Warehousing
4. Distribution

25. Advantages of 3PL
1. Scalability
2. Time Savings and Cost Savings
3. Expansion
Disadvantages of 3PL
1. Loss of Control
2. Cost
3. Business Understanding

26. 4PLs Fourth Party Logistics
• 4PL is a model of logistics where manufacturers outsource all of the
organisation and oversight of their supply chain and logistics to one external
provider.
• This partner will be responsible for all of the supply chain management, for
assessing, designing, building, running, and measuring solutions for the
client. On behalf of the client, the single partner controls and manages the
supply chain by overseeing the combination of warehouses, shipping
companies, freight and agents.
https://www.youtube.com/watch?v=Y9gG3CTcSk4

27. ADVANTAGES
• Focus
• Relationship
• Assets

29. What are logistics information systems?
• Logistics information systems (LIS) are digital programs that are implemented
to facilitate decision-making and the management of operations such as
procurement, storage, order picking, and the shipment and transportation of goods.
• LIS is part of logistics management to manage, control and measure the logistical
activities within the organization and across the supply chain, achieving logistics
efficiency and effectiveness.
• These logistics applications ensure continuous flows of information between
companies involved in the design, manufacture, storage, and marketing of a product
or service, connecting all the organizations and supporting product traceability.

30. The role of LIS
a) LIS ensures the transformation of logistics functional operations into a process
with the goal of pursuing customer satisfaction at the lowest cost. It facilitates
planning and control of logistics activities related to order fulfilment.
b) LIS provides information on goods and tracks the delivery, by giving their
status.
c) Logistics systems depend on outside information and international standards to
comply with regulations and use laid down ways of sharing logistic information
with others.

31. Cont…
d) The manufacturers and traders monitor the actual products to know whether
they will arrive on time and in proper condition at the delivery places, and to be
able to take prompt action in case of any lapse.
e) Transporters focus on the progress and status of the means of transport. In case
of any delays or exigencies/ requirements, transporters can report these to their
customers who can consider the impact.
f) Customs authorities and those responsible for ensuring the safety and security of
goods during transportation are given details about the content of goods and their
means of transport.

32. LIS achieves the following:
a) Customer satisfaction at the lowest total cost.
b) Enables planning and control of the logistical activities related to order
fulfilment.
c) Fosters better tactical and strategic decisions for the benefit of the firm and its
customers.
d) Gives information to customers regarding product availability, order status,
and delivery schedules
e) Enables resource planning thereby reducing the requirements of inventory and
human resources.

33. f) Provides information to top management to formulate strategic decisions by
interface with marketing, financial, and manufacturing information systems.
g) Links the operations of the business, such as manufacturing and distribution,
with the supplier’s operations and the customers.
h) Facilitates ‘virtual’ inventory management or electronic inventory management
by managing dispersed inventories through information technology. Inventory
management becomes centralised and decisions on replenishment and other
quantities are taken based on a single stock.

34. The benefits of implementing LIS are:
a) Improvement in customer service and satisfaction.
b) Establishing communication within the logistics chain.
c) Reduction in stock levels and costs particularly of transportation and storage.
d) Synchronizing the processes of supply, production, and distribution.
e) Handling the problems caused by shortage of materials for production.
f) Improvement of delivery schedules and lessening probable orders errors.
g) Reduction of documentation required in supply chain management.

35. The main activities of LIS are:
a) Data flow from external sources.
b) Processing and storage of information within companies.
c) Transmission of data for storage and processing by the decision maker in
the form of reports.
d) Communication of customer feedback into decisions.

36. Requirements which are:
a) Organization decisions: It relates to the decisions to be made at each
level of organization
a) System requirement: After arriving at the decision on collecting
information, next requirement is identification of source of information,
the volume and quality of information. A suitable channel of
communication will have to be designed to satisfy various requirements.

37. c) Control requirements. Based on guidelines given by the management,
Logistics Information System should be able to aid in decision making,
minimizing delays, and increasing efficiency. Control is required to ensure
that no errors are made.
d) System input and output data. To satisfy the demand of a customer,
several activities are undertaken by organization which need proper
coordination. Action reports are made for the purpose of undertaking
activities based on generated information.

38. Key Components of LIS
 Logistics Information Portal - digital programs are implemented to facilitate
decision-making and the management of operations such as procurement, storage,
order picking, and the shipment and transportation of goods.
 Logistics Computing and Simulation - A simulation model of a logistics network
is developed to investigate the impact of the variabilities associated with production
schedules, customer demand, and transportation delays. It often incorporates a
geographic map of the physical relationships among plants, terminals, warehouses, and
customers.
 Decision Support System – An application used to improve a company's decision-
making capabilities. It analyzes large amounts of data and presents an organization with
the best possible options available.

39.  Database - An organized collection of structured information, or data, typically
stored electronically in a computer system. It is usually controlled by a database
management system (DBMS).
 E-Logistics and E-Commerce - Ecommerce logistics is defined as the supply
chain of a company's online customer orders being fulfilled. It involves managing
inventory, shipping, warehousing, and distribution.
 Software applications relating to Customer Relations Management (CRM),
Enterprise Resource Planning (ERP), Radio Frequency Identification (RFID) Tags,
Transport Management System (TMS), and Warehouse Management System
(WMS).

40. Emerging Technologies in Logistics and Supply Chain Management
1) Blockchain in Logistics - blockchain is a distributed ledger system shared by the
interacting parties or individual stakeholders. Its entries (in the form of blocks) are
synchronized throughout the network and cannot be altered once registered.
2) AI and ML for supply chain optimization - Machine Learning & Artificial
Intelligence technology, optimizing supply chain as well as not only cost-effective and
time-efficient, but it also plays its part in making the consumer experience more
delightful.
3) Low-to-No Asset Networks - This tech-driven approach optimizes logistics
operations with the help of networks, technical infrastructure, and automation to reach
out to buyers in an effective manner.

41. 4) IoT for tracking (Internet of Things) – It is enhancing operational efficiency,
bringing about superior transparency, and decreasing delays in transfers.
5) Augmented Reality - Augmented Reality (alongside facial-recognition
technology) is paving the way for secured deliveries within logistics operations.
6) Autonomous transport - Today, e-Vehicles such as self-driving trucks, ghost cargo
ships (autonomous ships), and drones are driving us closer to the future of logistics.

44. Evolution of Supply Chain Management
• The concept of supply chain management has its roots in the early eras of trade
and industry when producers and merchants relied on modes of transportation
including horses, carts, and ships to transfer commodities from one place to
another.

45. • Creation era - first time in 1982. The early 20th century saw the development of the assembly line.
• Integration era - with the development of electronic data interchange (EDI) systems in the 1960s and the
advent of enterprise resource planning (ERP) systems in the 1990s, with the growth of internet-based
collaborative technologies, this age has continued to advance into the twenty-first century.
• Globalization era - which may be identified by the focus on global networks of supplier connections and
the growth of supply chains over national boundaries and onto other continents. Aiming to boost their
competitive edge, provide value, and cut costs through global sourcing, defines this period.
• Specialization era (Phase I) - businesses started putting more emphasis on “core competencies” and
specialization in the 1990s. In order to develop, manufacture, distribute, promote, sell, and support a
product, the specialization model establishes production and distribution networks made of several separate
supply chains specialized to producers, suppliers, and customers
• Specialization era (PHASE II) - today, this specialization extends beyond transportation and logistics to
include aspects of supply planning, collaboration, execution, and performance management. Since its
introduction in the late 1990s, outsourced technology hosting for supply-chain solutions has become popular
in transportation and collaboration.

46. • Integration
Communications, information sharing, data analysis, and storage processes and begins at the
strategic planning stage. Examine your technological requirements and make sure the solution you
choose will provide you with the tools you need to integrate a complete supply chain solution
while being adaptable enough to develop and expand with your company.
• Operations
In order to track output and distribution patterns, your operations need an accurate, real-time
depiction of your inventory and production plans. You should also optimize your operational
procedures to provide a faster, less expensive route to fulfillment.

47. • Purchasing
The right supply chain software does a great deal in terms of sourcing products in
your supply chain and ensuring you are taking advantage of the most competitive
pricing and reliable products.
• Distribution
A part of your supply chain that can constantly be streamlined, improved, and
rectified for better customer service and lower operational costs is the transport,
delivery, and return of items. In order to have a real-time view of inventory, order
status, and stock location regardless of whether an order originated in-store or
online, your delivery and returns procedure should be centralized.

50.  The first: the transportation era (1950s)
 The second: the physical distribution (1960s)
 The third: physical supply, deregulation and logistics (1970s)
 The fourth: transportation, deregulation, physical distribution
and business logistics (1980s)
 The fifth: business logistics (1990s)
 The sixth: logistics and supply chain management (2000s)
 The seventh: supply chain digitalization (2010’s)

51. The 1950s – The Transportation Era
• Transportation was in focus.
• Several universities offered courses in the field of transportation.
• There were no computers or even pocket calculators
• There is also not much discussion (if any) about the systems approach or the
concept of total cost.
• The idea of ​​working with suppliers or customers was not a priority for most
managers at the time.
• The term logistics is mainly used in the military field.

52. The 1960s – Physical Distribution
• The National Council of Physical Distribution Management (NCPDM) was established in
1963 to represent professional logistics managers.
• This organization was renamed the Council of Logistics Management (CLM) in 1985 and
the Council of Supply Chain Management Professionals (CSCMP) in 2004. Today,
• In most cases, logistics (outbound logistics) and physical supply (inbound logistics) are seen
as two distinct functions.
• This was reflected in the two major organizations of the time. Founded in 1963, NCPDM
represents the outbound side of logistics and the National Association for Purchasing
Management (NAPM) represents the inbound side.

53. The 1970s – Physical Supply, Deregulation and Logistics
• In the early 1970s, the physical supply /material management of the input side of the
logistics system was taken over. Later, there was a movement to combine physical
distribution with physical delivery, with an emphasis on broader logistics concept.
• Transportation is emphasized as the most important function in logistics management.
• During 1970s, the transportation journal emerged as one of the leading academic journals
in the discipline of transportation and logistics.

54. The 1970s – Physical Supply, Deregulation and Logistics
• In the early 1970s, the physical supply of the logistics system was taken over.
Later in the century, there was a movement to combine physical distribution with
physical delivery, with an emphasis on broader logistics concept.
• The 1970s were a pivotal decade for the further development of the logistics
concept.
• Transportation is also most important function in logistics management.

55. The 1990s – Business Logistics
• During the period business logistics continued to be a very essential element.
• Most cost-focused companies have realized that there are opportunities for cost savings through
negotiations with carriers and the implementation of the systems approach and total cost concept.
• Many transport companies have exploited the concept of logistics, using it from a theoretical
angle, promoting the idea that they were not only transport companies, that they were logistics
carriers, or they provided logistical solutions.
• During the 1990s, the main factors affecting logistics was the rapid development in electronics
and communication technologies, such as the internet and electronic data interchange. The growth
of third-party logistics organizations, strategic alliances and partnerships has also been significant.
Companies have started to see logistics as an integral part of overall business strategy.

56. The 2000s – Logistics and Supply Chain Management
• The early years of the 21st century have seen a slow evolution from logistics to supply
chain management in academia and business.
• Supply chain management has therefore come to be seen as a chain that encompasses
the planning and management of all activities involved in sourcing and converting and
all logistics management activities.
• The transport and logistics basics textbook states: “the supply chain includes all partners
in the logistics process. The idea is to have integrated information sharing between all
trading partners (suppliers, manufacturers and customers)”.
• This assessment of logistics and supply chain management over the past few years
would not be complete without a mention of development through online and distance
education in logistics and supply chain management.
• It would be rare to find a college or university that didn’t have some sort of online
presence. Distance learning is an important part of teaching logistics. The logistics
management institute claims to be the oldest logistics distance learning school in the
world.

57. The 2010 – present – The Era of Supply Chain Digitalization
• The digitalization of the supply chain corresponds to the dematerialization of
information processing. This digitalization offers better management of data
flows as well as unparalleled reliability of information related to the supply
chain. For optimal production flow management, the digitalization of flows
(physical logistics flow or logistics just-in-time) is therefore essential.
• Nowadays, different types of businesses find themselves faced to an increased
and globalized competition. In order to remain competitive, the digitization of
the supply chain has become necessary.

59. • A fundamental truth or proposition that serves as the foundation for a system of
belief or behaviour or for a chain of reasoning.
• Intended to establish cause and effect relationship so that the findings can be
applied to such given situations frequently.

60. Principles
(1) Consideration of Unity of Objectives – For all depts
(2) Specialization - Organisation expresses the law of specialisation
(3) Co-Ordination - Must be coordinated to achieve common goals
(4) Scalar Principle - A linear flow of communication/ an unbroken chain from upper mgt to all employees.
(5) Responsibility - Each manager should have enough authority to accomplish the task
(6) efficiency - to attain objectives with the lowest possible cost- money cost as well as human cost
(7) Delegation - Decentralisation of authority
(8) Unity of Command - A person receive orders from and be responsible to only one superior
(9) Span of Control or Span of Management - The number of subordinates who report directly to a
manager or leader.
(10) Balance - Be reasonable balance in the size of various departments, between standardisation
of procedures and flexibility

61. (11) Communication - For smooth flow of information and understanding and for effective business
performance
(12) Personal Ability - Encourage management development programme and ensure optimum use of human
resources
(13) Exception Principle - Expected results or conditions are brought to the attention of a supervisor for consideration and
decision.
(14) Flexibility - It should be adaptable to changing circumstances
(15) Departmentation - The division of activities into specialised groups to attain organisational objectives
(16) Definiteness - Contribute with minimum of effort and maximum of efficiency
(17) Simplicity - As simple as possible
(18) separation of line and staff function - line function should be separated from the staff functions
(19) continuity- a continuous process
(20) leadership - the manager can most effectively lead and motivate his subordinates

62. Organization structure
An organizational structure is a system that outlines how certain activities are directed in order
to achieve the goals of an organization. These activities can include rules, roles, and responsibilities.
Organizational structure (OS) is the systematic arrangement of human resources in an
organization so as to achieve common business objectives. It outlines the roles and responsibilities of
every member of the organization so that work and information flow seamlessly, ensuring the smooth
functioning of an organization.
An OS displays how different resources of an organization come together and align with its
goals. It clearly defines the functions of employees that enable them to work harmoniously and
efficiently. This reduces wastage of resources and increases productivity. The OS of a company
establishes its workflow. Without a proper OS, there would be chaos in a business. Thus, a company
must create a centralized or decentralized OS depending on its workflow needs.

64. Factors influencing Organisational Structure
1. Strategy - strategies to diversify product lines or markets require decentralized transition as
decision-making is done at wider level and strategies for organizations working in stable
environment. Where managers do not diversify their operations, require a centralized
organization.
2. Technology - the technology for manufacturing goods and services also affects the organization
structure. In case of mass production technology, mechanistic organization structure is more
appropriate, while in case of continuous production or small scale production technology, the
appropriate from is organic structure. This is because mass production technologies involve
standardization and specialization of work activities and continuous or unit production
technologies require low levels of standardization and specialization.

65. 3. People - organization structure defines work, groups it into departments and appoints people to run those
departments. People at different jobs must possess the skill, knowledge and efficiency to accomplish the
related tasks.
4. Tasks - activities performed by people who transform organizational plans into reality are known as tasks
5. Informal organization - informal organizations are and outgrowth of formal organizations. Social and
cultural values, religious beliefs and personal likes and dislikes of members which form informal groups
cannot be overlooked by management.
6. Environment: Organization structure cannot ignore the effects of environment. Organizations must adapt to
the environment, respond to incremental opportunities and satisfy various external parties such as customers,
suppliers, layout unions etc. In case of stable environment where people perform routine and specialized jobs,
which do not change frequently, a closed or mechanistic organization structure is appropriate.

66. 7. Size:
A group known as Aston group conducted research on firms of different sizes and concluded that as
firms increase in size, the need for job specialization, standardization and decentralization also
increases and organizations are structured accordingly.
8. Managerial perceptions:
Organizations where top managers perceive their subordinated as active, dynamic and talented
entrepreneurs, prefer organic form of structure, if they hold negative opinion about their subordinates,
they prefer mechanistic organization structure.

67. What is Purchasing?
Purchasing is the organized acquisition of goods and services on behalf of the buying entity. Purchasing
activities are needed to ensure that needed items are obtained in a timely manner and at a reasonable cost.
Types of purchasing
• Direct - direct purchasing involves buying raw materials, parts or finished goods that will be used in the production
process. This type of procurement is usually done by manufacturing firms who need specific items to create their
products.
• Indirect - indirect purchasing involves buying goods and services required for running a company’s operations but not
directly related to production. Examples include office supplies, maintenance equipment and IT software.
• Services purchasing - services purchasing is when companies outsource certain tasks such as marketing, legal work or
accounting instead of hiring full-time employees. This type of procurement can help businesses save on costs while
still getting expert services. It refers to the acquisition of any non-tangible goods or professional assistance / consulting
and legal services

68. Methods of Purchasing
• By requirement - purchase the goods you need, when you need them, and in the
required quantity
• Market purchasing - may buy extra now, while it’s cheaper
• Speculative purchasing - purchase at a lower price now, with the idea of being able
to sell them at a higher price later
• Purchasing for a certain future period - Assess your requirements based on past
experience
• Contract purchasing - The delivery of the goods may take place in the future, but the
price and other terms are fixed when the contract is signed

69. • Scheduled purchasing - must have an accurate production schedule so that you can
properly estimate your future material needs
• Group purchasing small items - place an order with the vendor for all the items. You add
a percentage of profit to the dealer’s cost to get an agreeable purchase price
• Co-operative purchasing - may pool requirements and join together to place bulk orders
with vendors

70. 3 types of purchasing models
• Centralized purchasing
• Decentralized purchasing
• Center-led or hybrid purchasing

71. Material outsourcing
Outsourcing is a business practice in which a company hires a third
party to perform tasks, handle operations or provide services for the
company.
Why is outsourcing important?
Outsourcing allows you the time and resources necessary for
focusing on other aspects of the company, while still providing customers
with high quality service they expect from their favorite brands.

72. Advantages of outsourcing
• Improved focus on core business activities.
• Increased efficiency.
• Controlled costs.
• Increased reach.
• Greater competitive advantage.
• Offshore outsourcing issues.

73. Disadvantages of outsourcing
• Loss of control.
• Negative impact on staff.
• Data protection and confidentiality risks.
• Lack of consistency.
• Financial and reputation risks.
• Less flexibility.

74. What are the different types of outsourcing?
• Process-specific outsourcing - can reduce costs, increase efficiency, and free up resources for other
areas of the business. Ex: deloitte’s 2022 outsourcing survey, 52% of executives outsource business
functions, including human resources (57% outsource)
• Professional outsourcing - hires an expert or specialist to handle a task or project
• Logistics outsourcing - hiring an external provider to manage and coordinate the transportation,
warehousing, and distribution of goods
• Operational outsourcing - delegating certain operations in your company & want to reduce the
workload on internal staff or expand into new services
• Manufacturing outsourcing - hiring a manufacturer to produce products for your business instead of
making them in-house
• Project outsourcing - hires a services provider to complete a specific project
• Multi-sourcing - contracts with more than one service provider for a project

75. Outsourcing refers to contracting out specific business processes to a third-
party or specialized service provider, i.e., An individual or company. Companies
select external resources to perform tasks, services, or projects that they had
previously handled on their own.
Professional outsourcing is the practice of contracting to individual
specialists or professionals to handle multiple, small tasks without the intention of
outsourcing an entire function. Another term for professional outsourcing is body
shopping.

76. Outsourcing logistics is when a company uses an external provider (aka a
third-party) to handle various supply chain functions. These can include a mix of
shipping, storing, packing and/or delivering a company's physical goods, from raw
materials all the way to the finished product.
Outsource manufacturing is the process of hiring people outside of your
company to assemble parts of, or to build an entire product. The main reason why
companies across the globe choose to outsource their manufacturing needs is due
to the cut in labor costs.

77. Project outsourcing is the ideal outsourcing model for businesses that are
focused on delivering the desired output no matter what is takes to get the job
done.
Multi sourcing (multi-sourcing) is an approach to outsourcing in which it
operations and technology infrastructure are contracted to a number of vendors,
usually in combination with some internally provided elements of information
technology.

78. Just In Time
JIT is attributed to the Japanese automaker Toyota motor corporation.
Executives at Toyota in the 1970s reasoned that the company could adapt more quickly and
efficiently to changes in trends or demands for model changes if it did not keep any more
inventory in-store than was immediately needed.
What is just-in-time (JIT)?
The just-in-time (JIT) inventory system is a management strategy that aligns
raw-material orders from suppliers directly with production schedules. Companies employ
this inventory strategy to increase efficiency and decrease waste by receiving goods only as
they need them for the production process, which reduces inventory costs. This method
requires producers to forecast demand accurately.

79. • The just-in-time (JIT) inventory system minimizes inventory and increases
efficiency. JIT production systems cut inventory costs because manufacturers
receive materials and parts as needed for production and do not have to pay
storage costs. Manufacturers are also not left with unwanted inventory if an order
is cancelled or not fulfilled.

80.  The just-in-time (JIT) inventory system is a management strategy that minimizes inventory
and increases efficiency.
 Just-in-time manufacturing is also known as the Toyota production system (TPS) because the
car manufacturer Toyota adopted the system in the 1970s.
 Kanban is a scheduling system often used in conjunction with JIT to avoid overcapacity of
work in process.
 The success of the JIT production process relies on steady production, high-quality
workmanship, no machine breakdowns, and reliable suppliers.
• The terms short-cycle manufacturing, used by Motorola, and continuous-flow manufacturing,
used by IBM, are synonymous with the JIT system.

82. main advantages of JIT
• Preventing over-production
• Minimizing waiting times and transport costs
• Saving resources by streamlining your production systems
• Reducing the capital you have tied up in stock
• Dispensing with the need for inventory operations
• Decreasing product defects

83. disadvantages of JIT
• Risk of running out of stock
• Lack of control over time frame:
• More planning required

84. JIT Purchasing
• JIT purchasing is referred to the procedure of buying, involving determining the material
requirement, selecting the suppliers, agreement on price, delivery, and other terms and
conditions.
• There are some basic principles / elements / prerequisites of jit purchasing being
implemented by many industries across the world, such as the us, the uk, germany, italy
and korea, etc. In their purchasing, production and marketing departments.
1. Elimination of waste 2. Respect for people
3. Total quality control 4. A stable schedule
5. Work with suppliers

85. JIT purchasing
• JIT purchasing means providing materials to the production facility just as they
are required for use. It goes against most of the traditional ideas held by
manufacturing, purchasing, and materials management. JIT purchasing is
integral and is typically incorporated when describing JIT management
practices.

86. JIT Purchasing

87. Elements of JIT purchasing
• Continuous improvement: JIT purchasing is a continuous improvement process that requires
ongoing monitoring and refinement to optimize inventory levels and reduce costs.
• Demand forecasting: JIT purchasing requires accurate demand forecasting to ensure that suppliers
can deliver materials in a timely manner.
• Small lot sizes: JIT purchasing involves ordering small quantities of materials on a frequent basis.
This helps reduce inventory levels and improve cash flow.
• Quick delivery: JIT purchasing relies on suppliers being able to deliver materials quickly in case of
unexpected demand.
• Kanban system: the kanban system is a key element of JIT purchasing. It involves using visual
cues, such as cards or boards, to signal when materials need to be replenished.

88. Negotiating for Success
Excellent negotiation skills not only influence the outcome of individual transactions, but
also relationships with suppliers and overall success. One common misconception of negotiation
is that one party has to win, while the other party loses. This idea is inconsistent with the meaning
of negotiation. A commonly agreed upon definition of negotiation is a process of compromise by
which the needs of different parties are managed.
In the supply chain environment, negotiating often involves the cost of an item, arrival
time, and quality standards. When everyone works to leave the bargaining table happy, the
affected parties have more positive attitudes and contractual obligations are more likely to be
followed. When negotiating with suppliers, more is at stake than just price. Knowing the other
variables in a deal and prioritizing them makes negotiating easier.

89. Other items to consider are:
• Delivery time/schedule/frequency
• Payment terms
• Warranties, merchandise return policy

90. • Common mistakes
the ideal negotiation results in a win-win situation for both parties. To accomplish this, both parties
need to enter discussions with a clear goal. Some common mistakes in negotiation are:
• No bottom line
it is necessary to have a clear idea of priorities: what is necessary to have, what would be nice to have,
and what you do not care about at all. Additionally, it is important to know what your party’s deal-
breakers are. The negotiations will be better focused when parties organize this in advance.
• Setting low goals
by asking for more than you expect, you may end up happier with the results.
• Negotiating against yourself
wait after making an offer. The other side should counteroffer before you start trying to modify your
offer.
• Not hearing all demands before beginning to compromise
by waiting until the end, negotiators can choose which demands are best for compromise. If you
choose to compromise throughout, the other party may continue to ask for more

91. Procurement Outsourcing
• Procurement outsourcing is the transfer of specified key.
• Procurement activities relating to sourcing and supplier management to a
third party.
• Businesses will sometimes do this to reduce costs or, often in the case of
procurement, to add specialist skill sets to their procurement department.

102. Outsourcing
Outsourcing is a common practice of contracting out business functions and processes to third-
party providers. The benefits of outsourcing can be substantial - from cost savings and efficiency gains to
greater competitive advantage.
Outsourcing is about creating a successful partnership. Choosing a company to outsource to is
very different from choosing an ordinary supplier. You're embarking on a long-term, contractual
relationship, so take time to carefully examine potential service providers.
On the other hand, loss of control over the outsourced function is often a potential business risk.
You should consider carefully the pros and cons of outsourcing before deciding to contract out any
activities or business operations.

103. Outsourcing
Advantages of outsourcing
 Improved focus on core business activities
 Increased efficiency
 Controlled costs
 Increased reach
 Greater competitive advantage

104. Disadvantages of outsourcing
Outsourcing involves handing over direct control over a business
function or process to a third party. As such, it comes with certain risks.
For example, when outsourcing, you may experience problems with:
 service delivery - which may fall behind time or below expectation
 confidentiality and security - which may be at risk
 lack of flexibility - contract could prove too rigid to accommodate change
 management difficulties - changes at the outsourcing company could lead to
friction
 instability - the outsourcing company could go out of business

105. Offshore outsourcing issues
Offshore outsourcing, although potentially more cost-effective, may
present additional challenges such as hidden costs of provider selection or
handover, severance and costs related to layoffs of local employees who will
not be relocated internationally, etc. Even simply managing the offshore
relationship can prove challenging due to time zones, different languages or
cultural preferences.

106. Outsourcing: seven top tips
Outsourcing is when you contract out a business function to a third party over a long period
of time. Outsourcing can bring a lot of benefits to your business and help you focus on core activities.
However, there are risks to giving up direct control.
Follow these top tips for successful outsourcing.
• Prepare carefully
Take your time making decisions and make sure you are clear about the terms on which you
and the supplier are working together. See outsourcing considerations.
• Invest time and effort into your relationship
Good relationship management calls for constant communication and flexibility. Make the
most of online project management and collaboration tools to help you stay on top of projects and in
control of the company. Remember that although the supplier takes responsibility for the process, you
still need to actively manage the relationship. Nominate a member of staff to take responsibility for
liaison.

107. • Communicate internally
It's equally important to establish effective and regular communication within your
business. Staff may have particular concerns about their own jobs, so keep them informed. If staff
are being transferred to the outsourcing provider under the arrangement, as sometimes happens,
you will need to consider the relevant employment law.
• Commit long term
You are likely to get the best results if you can stay with your supplier for several years.
Switching suppliers can be disruptive, so it pays to commit to building a long-term relationship
from the outset.
• Be flexible
You may need to renegotiate the contract before the end of the term. A flexible contract
benefits both parties, allowing the supplier to innovate and you to react to changing
circumstances.

108. • Measure success
There should be financial benefits, but other reasons for outsourcing are harder to
quantify. These could include improving customer service, reducing errors or increasing speed
to market. Include these factors in your assessment and consider how you'll measure them.
• Plan a clear exit strategy
The relationship might end prematurely or may simply have run its course. Either
way, make sure that your service level agreement contains a clear exit strategy. It should detail
how the outsourced functions should be brought back in-house. It should clarify who owns
what assets and specify when compensation is due, and how much.

109. What is a Make-or-Buy Decision?
A make-or-buy decision refers to an act of using cost-benefit to make a
strategic choice between manufacturing a product in-house or purchasing from
an external supplier. It arises when a producing company faces a diminishing
capacity, experiences problems with the current suppliers, or sees changing
demand.

111. Benefits of a Make-or-Buy Decision
1. Lower costs and higher capital investments
One of the most notable advantages that a company enjoys when embracing a make-or-
buy decision approach is that it can lower costs and increase capital investments, regardless of
whether it decides to make materials in-house or subcontract from an external vendor.
2. Source of competitive advantage
A rigorous make-or-buy analysis can also act as a source of competitive advantage. For
example, a company can increase the value it delivers to customers and shareholders from its core
service and skills. It can also stay flexible by adopting a make-or-buy decision approach.

112. Factors Favouring a “Make” Decision
• Costs Concerns
• A Desire to Manufacture
• Untrustworthy/ Unreliable/
Absence/shortage of Suppliers
• Quality Control Requirements
• Emotional Motives
• Transportation Costs
 Intellectual property concerns
 Reduction of shipping and transportation
costs
 For maintaining a backup source
 Environmental reasons
 Political reasons

113. Factors Favouring a “Buy” Decision
• Lack of Skills
• Financial Considerations
• Lack of Facilities
• Lack of expertise
• Insufficient or no manufacturing
capacity at the buyer’s end
• Risking the sourcing
• Low-volume requirements
• Procurement and inventory
considerations
• Product or service not essential to the
firm’s strategy
• Preference of Brand

114. Advantages of Make-or-Buy Decision Analysis
• Saves Costs
• Access to New Resources
• Helps in Strategic Planning
• Unnecessary Mistakes are Avoided

115. Electronic Data Interchange EDI
Electronic Data Interchange (EDI) is the electronic transmission of data between your
company and the businesses/trading partners with whom you are working. An agreed-upon data
structure is used to transfer data from one computer to another without human involvement.
What is EDI?
EDI, which stands for electronic data interchange, is the intercompany communication of
business documents in a standard format. The simple definition of EDI is a standard electronic format
that replaces paper-based documents such as purchase orders or invoices. By automating paper-based
transactions, organizations can save time and eliminate costly errors caused by manual processing.

116. The Role of EDI in Freight and Logistics
Some of the world's biggest logistics firms, including
DHL - DHL is an American-founded German logistics company providing courier, package
delivery and express mail service, delivering over 1.8 billion parcels per year.,
UPS - United Parcel Service is an American multinational shipping & receiving and supply
chain management company founded in 1907,
FedEx - FedEx Corporation, formerly Federal Express Corporation and later FDX
Corporation, is an American multinational conglomerate holding company focused on transportation, e-
commerce and business services based in Memphis, Tennessee, and Maersk Line, harness EDI to
unlock benefits like:

117. Cont.…
• Faster, streamlined communications - EDI helps logistics companies communicate
with their trading partners in real-time. Instead of relying on faxes or phone calls, firms
can use EDI to send and receive messages instantly within and beyond their walls.
• Lower operating costs - EDI helps logistics companies save money by reducing the
data management expenses associated with paperwork. Instead of relying on data
clerks and postal services, transporters can use EDI to communicate cost-effectively
through the Internet.
 Reduced document processing errors - EDI helps logistics companies reduce errors
associated with manual processing. Instead of asking staff to process and reconcile
documents manually, firms can use EDI for automated tracking and tracing of
transactions at every stage in the supply chain.

118. • Better utilization of human resources - EDI helps logistics companies increase
productivity by freeing staff time spent on document processing. Rather than assigning
employees to do repetitive activities like preparing purchase orders and invoices and
correcting errors, companies can automate the tasks with EDI, leaving more staff free
to focus on other value-adding projects.
• Increased transaction security - EDI helps logistics companies protect their data by
avoiding the risk of unauthorized access via Internet-connected computers. EDI is
regarded as a more secure option than traditional e-commerce transactions, which
typically require the use of credit cards and logins, and passwords.

119. Benefits of EDI in the Logistics Industry
1. Reduction in errors
2. Increased customer satisfaction
3. Less manual work
4. Improved stock management
5. Cutting costs – apply some techniques to reduce the relevant cost
6. Significant return on investment (ROI)

120. There are five key business benefits that EDI technology delivers through
automation and B2B integration:
 EDI technology saves time and money through automation of a process previously manually
executed with paper documents.
 EDI solutions improve efficiency and productivity because more business documents are
shared and processed in less time with greater accuracy.
 EDI data transfer reduces errors through rigid standardization, which helps to ensure
information and data are correctly formatted before they enter business processes or
applications.
 EDI integration improves traceability and reporting because electronic documents can be
integrated with a range of IT systems to support data collection, visibility and analysis.
 EDI automation supports positive customer experiences by enabling efficient transaction
execution and prompt, reliable product and service delivery.

121. What Are Barcodes?
• Barcodes are machine-readable codes represented visually as numbers and parallel
lines. When scanned by the laser beam of a barcode scanner, these symbols
produce a unique digital code.
• Barcodes are affixed to and associated with products to identify and distinguish
them.
• Barcodes are used in POS systems, warehouses, inventory management systems,
or any other database that necessitates inventory data collection and storage.

122. Barcodes offer many significant benefits to businesses, which is why this
70-year old technology hasn’t changed much.
1. Barcodes are a proven and universal technology.
2. Barcodes mitigate error.
3. Barcodes are inexpensive and discrete.

123. How to Implement a Barcode Scanning System?
Here’s the step-by-step process for how to do it...
1. Figure out the problem you’re trying to solve.
2. Conduct an audit.
3. Distinguish your products.
4. Set up your infrastructure.
5. Print and label your inventory.

126.  Quiet zone: The empty, white space on the edges of a barcode is the “quiet zone,” and is
necessary for the scanner to read the label.
 Number system digit: The first digit represents the product category on UPC codes. For
example, retail products often start with 0 or 1, pharmaceuticals with 3 and coupons with
5.
 Manufacturer code: The first group of characters after that initial number usually
identify the manufacturer. GS1, a global standards organization that regulates UPCs,
assigns each manufacturer a unique code.
 Product code: The next set of characters identify the specific product and are created by
the manufacturer.
 Check digit: The check digit confirms the accuracy of the data tied to that barcode and
flags any potential errors.

127. Business Benefits of Barcodes
 Accuracy
 Real-time data
 Reduced training
 Inventory control
 Low cost

128. Types of Barcodes
• Linear/1D
Linear, or 1D, barcodes are what most people visualize when they picture a barcode -
black vertical bars with numbers below them. This is what most stores put on their products.
Linear barcodes contain numbers, letters and symbols, which tie the code to a set of
information in a database with details like product name, type, size and color. A 1D barcode
must be linked to a database to function properly. Linear barcodes are often used on
consumer goods, loyalty cards, shipping labels and books.

129. Linear or 1D barcodes, like the UPC code commonly found on
consumer goods, use a series of variable-width lines and spaces to
encode data — what most people probably think of when they hear
“barcode.” Linear barcodes hold just a few dozen characters, and
generally get physically longer as more data is added. Because of
this, users typically limit their barcodes to 8-15 characters

130. Barcode scanners read 1D barcodes horizontally. 1D laser barcode
scanners are the most commonly used scanners, and typically come in a “gun”
model. These scanners do not need to be in direct contact with the 1D barcode
to work properly, but typically need to be within a range of 4 to 24 inches to
scan.
1D barcodes are dependent on database connectivity to be meaningful. If
you scan a UPC code, for instance, the characters in the barcode have to relate
to an item in a pricing database to be useful. These barcode systems are a
necessity for large retailers, and can help increase inventory accuracy and save
time.

131. Matrix/2D
Matrix or 2D barcodes can store additional information, including quantity,
images and website URLs. A 2D barcode can render this information without any
connection to a database. Common uses of 2D barcodes are QR codes, which may direct
users to a specific website or act as digital boarding passes. They have also become
increasingly common in high-value manufacturing environments that require detailed
tracking of parts and products, like medical equipment and pharmaceuticals.

132. 2D barcodes, like Data Matrix, QR Code or PDF417, use patterns of
squares, hexagons, dots, and other shapes to encode data. Because of
their structure, 2D barcodes can hold more data than 1D codes (up to
2000 characters), while still appearing physically smaller. The data is
encoded based on both the vertical and horizontal arrangement of the
pattern, thus it is read in two dimensions.

133. A 2D barcode scanner doesn’t just encode alphanumeric information. These
codes can also contain images, website addresses, voice, and other types of binary
data. That means you can make use of the information whether you are connected
to a database or not. A large amount of information can travel with an item labeled
with a 2D barcode scanner.
2D barcode scanners are typically used to read 2D barcodes, although some
2D barcodes, like the commonly-recognized QR code, can be read with certain
smartphone apps. 2D barcode scanners can read from over 3 feet away and are
available in the common “gun” style, as well as cordless, countertop, and mounted
styles. Some 2D barcode scanners are also compatible with 1D barcodes, giving
the user more flexibility in how they are used.

134. What is barcode scanning in logistics?
In logistics and shipping, barcode labels are used to capture detailed order and
delivery information that can be quickly scanned by a barcode reader as the shipment
moves through the order-to-delivery process.
What is barcode scanning in supply chain management?
Barcode technology is primarily used to locate and monitor individual products.
Some of the most frequent uses within the supply chain include the following: Product
tracking. Barcodes help track the location of specific products with the same SKU s (Stock
Keeping Units) or UPCs(Universal Product Codes). Intake and distribution.

135. How many types of barcodes are there?
Barcodes are available in two different types:
•Linear barcodes and
•Two-dimensional matrix barcodes
.

136. 5 benefits
1. Less human error
When your employees use barcodes as identification numbers to process product data, it’s
more accurate than manually entering data. From there, it minimizes human error.
2. Real-time data processing
Barcode has the speed of processing information and data immediately. It tells you real-time
inventory levels and sales for each product in your retail store. Due to the breakneck
processing speed, you get information on inventory levels and available sales in real time
from barcode components.
3. Affordable deployment cost
It’s swift and straightforward to generate barcode numbers for all your products in stores and
warehouses. Additionally, retailers can anticipate post-implementation savings with
improved transaction speed, the accuracy of sales data, and improved inventory.

137. 4. Better inventory management
Retailers benefit from improved accuracy and real-time data of barcode numbers.
As a result, you can count cycles faster and estimate inventory turnover more
accurately. Hence, you can keep less inventory and know when to restock.
5. Reduced training requirements
Your employees can easily use barcode scanners without training or complicated
processes. They only need to point and click to identify and extract product
information. In addition, employees will have to learn and keep a lot fewer thanks
to barcodes.

138. Types of barcode scanners
• Pen barcode readers
• Laser barcode scanners
• Charge Coupled Device (CCD) barcode scanners
• Imager/Camera-based barcode scanner

139. Strategic Alliance
It is an arrangement between two companies that have decided to share
resources to undertake a specific, mutually beneficial project. This agreement could
help a company develop a more effective process.
It is kept formal in relationship between two or more organisation to achieve
some beneficial goals through business by supply chain. Here organisations also
work on their desired needs. Some of the Strategic alliance resources are:
1) Products 2) Distribution channels 3) Manufacturing capability
4) Project funding 5) Capital equipment 6) Knowledge
7) Expertise or intellectual property

141. Framework for Strategic Alliance

142. This alliance is actually a collaboration of firms to work together to form a
greater effect than before. There are some reasons which can improve the performance
which are :
 Decision making is done by the consideration of other party.
 Easy coordination between the parties by their managers with the trust. This result in
better operational implementation and scheme valuation.
 It will lead to redundancy due increase in supply chain productivity.
 This ensures proper sharing of sales and production information, hence helping in
coordinate production and distribution decisions.

143. A typical strategic alliance formation consists of some steps which are:
 Strategy Development: development involves feasibility of alliance, objectives and
goals, decisions, focus on critical issues, technology and people with their challenges
and resources.
 Partner Assessment: In this assessment partner’s strength, potential, developing
managing styles, preparing criteria for partner selection and understanding their
motives for joining alliances.
 Contract Negotiation: It is the development of realistic objectives among the group
and forming the high calibre or developing synergy. Consideration on security of
information, termination clauses, and penalties for poor performance is formulated.

144.  Alliance Operation: it is linking of budgets and resources to fulfil the strategic
priorities, measuring the performance etc.
 Alliance Termination: It is the winding down of partnership due to failure or
not meeting the clauses decided before.

145. TYPES OF STRATEGIC ALLIANCES
 Joint venture:
In this type of alliance two or more firms create legally independent
company to develop competitive advantage.
 Equity Strategic Alliance:
There is sharing of different percentages of the company.
 Non-equity Strategic Alliance:
It is alliance on a contractual- relationship to share the unique
resources.
 Global Strategic Alliances:
It is formed between a company and foreign company.

146. Advantages of Strategic Alliance
 Each partner can concentrate on different stages of the supply
 Developing competences and learning from the partners
 Suitability and protection of resources is maintained
 Developing low cost models hence financial benefit.

147. Advantages of strategic alliances
 Sharing resources and expertise. A strategic alliance should combine the best both
companies have to offer. This can be a deeper understanding of the product, sales, or
marketing knowledge, or even just more hands on deck to increase speed to market.
 New-market penetration. In some cases, a strategic alliance gives access to new
markets with a solution that wouldn’t have been possible for either company on their
own. For instance, companies going global often work with a trusted local partner to
get an advantage in an emerging market.
 Expanded production. When it comes to manufacturing and distributing products,
strategic alliances allow partners to increase their capabilities and scale quickly to
meet demand.

148.  Drive innovation. With the right alliance, partners can outpace the competition with new
solutions that are a complete package for their customers. These alliances are creative and
revolutionary and change the market landscape in a dramatic way.
Strategic alliances allow partners to scale quickly, build innovative solutions for their
customers, enter new markets, and pool valuable expertise and resources.
Disadvantages of strategic alliances
Loss of control. In an alliance, both organizations must cede some control over how their
business is run and perceived. A strategic alliance requires honesty and transparency, but
that trust isn’t built overnight. Without significant buy-in from both parties, an alliance may
suffer.
Increased liability. In a joint venture or equity strategic alliance, both companies are on the
hook for the outcome. If something happens to stall production or create unhappy
customers, both partners are at risk for the loss in reputation.

149. Designing a relationship with Cooperation and Trust
Main steps for this are:
 Assessing the value of the relationship
 Identifying operational roles and decision rights for each party
 Creating effective contracts
 Designing effective conflict resolution mechanism

150. What is strategic alliance partnership?
Strategic alliances link the key capabilities of two or more organizations. The
result is that all parties benefit from the partnership by trading things like skills,
technologies, and products. Essentially, these alliances are partnerships that companies use
to solve a mutual problem, while they remain independent.
What is building strategic partnership?
Building strategic partnerships allows teams and individuals in companies to share
resources and the knowledge they have with each other. Learnings from one company
shared with another can be extremely beneficial for you to test and apply for your
business.

151. What are the 4 stages of building a strategic partnership?
Let's consider the 4 Stages of Partner Development: Advise, Acclimate
(adapt), Activate, and Accelerate (hurry). The following graphic outlines activities
and outcomes that should be pursued and measured for each partner development
stage.
What is the importance of building strategic partnerships?
Strategic Partnerships provide a competitive edge to businesses. Strategic
partnerships will have a mutual promise of working for the betterment of each
other. When there is a genuine effort made to help each other in the business, it can
help to come over particular weaknesses and be pioneers in the specific field.

152. 16 ideas for developing strategic partnerships
• Make your pitch hyper-targeted
• Look for overlapping core values
• Establish criteria where both parties can win
• Be confident
• Conduct a partnership audit
• Look for the right team at the right level
• Show your product in action
• Take your time
• Build a personal brand on social media
• Identify your business goals
• Ask for an introduction
• Know your target's other strategic
partnerships
• Find businesses with similar clients
• Start with "what's in it for them?"
• Demonstrate value immediately
• Give more than they ask for

153. Partnership Defined
Partnership is a voluntary collaborative agreement between two or more parties in
which all participants agree to work together to achieve a common purpose or undertake a
specific task and to share risks, responsibilities, resources, competencies and benefits.
Partnerships increase your lease of knowledge, expertise, and resources available to
make better products and reach a greater audience. All of these put together along with 360-
degree feedback can skyrocket your business to great heights. The right business partnership
will enhance the ethos of your firm.

154. The 4Ps of a Successful Partnership
① Purpose
② Perception
③ Process
④ Progress

155. How to Create a Business Partnership
1) Approach the prospective business
2) identify the mutual need of the partnership
3) develop the agreement
Building Strong Partnerships
1. Communication
2. Be Proactive & Be Real
3. Stay Consistent & Follow Through
4. Honesty is the Best Policy
5. Put in the Effort

156. What is a third party partnership?
Definition:
Relationships with external entities. External entities may include, for example,
service providers, vendors, supply-side partners, demand-side partners, alliances,
consortiums, and investors, and may include both contractual and non-contractual
parties.

157. Who are third parties in business?
A third party can be defined as any entity or individual that a company does business
with.
1. Contractors
2. Freelancers
3. Vendors
4. DCOs or data centres outsourcing
5. Consultants
6. Customers or clients

158. Third-Party Partnership Evaluation
1. Review of contracted responsibilities
2. Benefits of partnership
3. Communication
4. Resources
5. Value
6. Areas of Growth
7. Partnership Goals

159. What is a retailer supplier partnership?
Retailer-Supplier Partnership (RSP)
It ensures that the retailer and the supplier are on the same page and in
accordance with the needs of the customers. However, the vendors have to acquire
important skills like forecasting, inventory control, and retail management for this
partnership to be successful.
Three types 1. Quick response,
2. Continuous replenishments and
3. Vendor - Managed Inventory (VMI).

162. SUPPLY CHAIN STRATEGY
A supply chain strategy is a formal approach to managing the
network between an organization and its suppliers.
A supply chain manager usually develops this strategy with the
primary goal of maximizing value across all stages of the production
cycle.

163. What is Supply Chain Strategy?
A supply chain strategy is the overarching plan that an organization
uses to manage the flow of goods and services, from sourcing raw materials
to delivering products to customers.
It outlines the key processes, technologies, and partnerships that the
organization will use to optimize the efficiency and effectiveness of its
supply chain.

164. COMPONENTS
• Sourcing: Identifying and selecting suppliers, as well as managing the relationships with
them to ensure that they can meet the organization’s needs in terms of quality, cost, and
delivery.
• Logistics: Managing the movement of goods and materials through the supply chain,
from the point of origin to the point of consumption. This can include transportation,
warehousing, and inventory management.
• Production: This includes the processes and technologies that are used to turn raw
materials into finished goods. It can also include managing the flow of goods through the
organization’s own production facilities.

165. • Distribution: Getting the finished goods to the customers. It can include managing
the organization’s own distribution centres, as well as working with third-party
logistics providers (3PLs) and other partners to deliver products to customers.
• Customer service: Managing the relationship with customers, including taking
orders, providing after-sales service, and handling returns and complaints.

166. Why Is Supply Chain Strategy Important?
• To have in an organization’s short- and long-term business plan.
• To maintain customer satisfaction.
• Without an integrated and agile supply chain management strategy, the supply chain can
quickly negatively impact your business’s bottom line.
• Adopting the right supply chain planning strategy can help you to reduce costs, improve
customer service, and support your business goals.
• It can also help you understand your historical data, know where your inventory is, and
adapt to changing demand.

167. What to Consider When Developing Your Supply Chain Strategy
There are five key capabilities to consider that will help give you an inclusive view of your end-
to-end network when beginning to develop your supply chain strategy:
• Supply Sense: What’s possible in your supply chain
• Supply Response: Operations that make things happen, such as manufacturing and asset
management
• Deciding and Committing: Orchestrating/ Decide your end-to-end capabilities
• Demand Sense: Learning, knowing and monitoring what your customers want
• Demand Response: Order fulfillment processes that help give customers what they want

168. Where Can You Optimize Your Supply Chain Strategy?
Supply Chain Network Design
Supply chain network design, also known as strategic planning, uses
simulation tools to replicate a company’s inbound and outbound transactional data.
This type of supply chain network strategy is used to understand the cost and time it
will take to deliver goods to the market.
Demand Planning
Meeting service requirements and sales targets requires you to consistently
offer the right product, through the right channel, at the right time, place and price. To
do so, you need to have the right demand forecast planning tools at your disposal.

169. Inventory Optimization
Proper inventory management helps you determine the best product position in
your network to maintain service levels while reducing overall holding costs. This helps
you to understand your cost of inventory relative to the sales of your product. Inventory
optimization, or product flow optimization, also helps your business by
 Improving inventory turns
 Reducing capital risks
 Reducing distribution centre storage requirements

170. • Sales and Operations Planning
Sales and operations planning is the process by which a business achieves long-term
synchronization across every stage of the supply chain. Through careful planning and
execution, businesses should be able to align objectives across departments while matching
consumer demand with supply from manufacturers.
• Workforce Management
Labour accounts for some of the most significant portions of operational costs in any
organization. Organizations can help to optimize their workforce operations by implementing
Lean processes, new labour management systems, engineering or creating labour standards or
training their workforce.

171. HOW TO MEASURE SUPPLY CHAIN PERFORMANCE?
1. Inventory Investment
2. Inventory Efficiency
3. On-Time Supplier Delivery
4. Forecasting Accuracy
5. Lead Time
6. Unplanned Orders
7. Schedule Changes
8. Overdue Backlog
9. Material Availability
10. Excess & Obsolete Inventory
11. Customer Service Targets
12. Perfect Order
13. Gross Profit Margin
14. Asset Efficiency
15. Return on Assets (ROA)
16. Gross Margin Return on Investment (GMROI)

172. SCM - Performance Measures
Supply chain performance measures can broadly be classified into two categories −
 Qualitative measures − For example, customer satisfaction and product quality.
 Quantitative measures − For example, order-to-delivery lead time, supply chain
response time, flexibility, resource utilization & delivery performance.
1. Non-financial measures – a) Cycle Time
b) Customer Service Level
c) Inventory Levels
d) Resource Utilization

173. 2. Financial measures - a) Cost of raw materials.
b) Revenue from goods sold.
c) Activity-based costs like the material handling, manufacturing, assembling
rates etc.
d) Inventory holding costs.
e) Transportation costs.
f) Cost of expired perishable goods.
g) Penalties for incorrectly filled or late orders delivered to customers.
h) Credits for incorrectly filled or late deliveries from suppliers.
i) Cost of goods returned by customers.
j) Credits for goods returned to suppliers.

174. BENCHMARKING
Benchmarking is a process of measuring the performance of a company's
products, services, or processes against those of another business considered to be the
best in the industry, aka “best in class.” The point of benchmarking is to identify internal
opportunities for improvement.
Benchmarking is the practice of comparing business processes and performance
metrics to industry bests and best practices from other companies. Dimensions typically
measured are quality, time and cost.

176. There are four main types of benchmarking
1. Performance benchmarking involves gathering and comparing quantitative data
(i.e., measures or key performance indicators). Performance benchmarking is usually the
first step organizations take to identify performance gaps.
• What you need: Standard measures and/or KPIs and a means of extracting, collecting,
and analyzing that data.
• What you get: Data that informs decision making. This form of benchmarking is
usually the first step organizations take to identify performance gaps.

177. 2. Practice benchmarking involves gathering and comparing qualitative information about how an
activity is conducted through people, processes, and technology.
• What you need: A standard approach to gather and compare qualitative information such as process
mapping.
• What you get: Insight into where and how performance gaps occur and best practices that the
organization can apply to other areas.
3. Internal benchmarking compares metrics (performance benchmarking) and/or practices (practice
benchmarking) from different units, product lines, departments, programs, geographies, etc., within the
organization.
• What you need: At least two areas within the organization that have shared metrics and/or practices.
• What you get: Internal benchmarking is a good starting point to understand the current standard of
business performance. Sustained internal benchmarking applies mainly to large organizations where
certain areas of the business are more efficient than others.

178. 4. External benchmarking compares metrics and/or practices of one organization to one or
many others.
• What you need: For custom benchmarking, you need one or more organizations to agree to
participate. You may also need a third party to facilitate data collection. This approach can be
highly valuable but often requires significant time and effort. That’s why organizations engage
with groups like APQC, which offers more than 3,300 measures you can use to compare
performance to organizations worldwide and in nearly every industry.

179. Benefits of benchmarking in business
• Keep improving internal operations
• Understand what’s working and what isn’t
• Adopt or improve upon competitors’ practices
• Reduce costs by increasing efficiency
• Focus on practices and offerings that promote customer satisfaction and
loyalty

180. Why is benchmarking important?
 Improve processes and procedures.
 Gauge the effectiveness of past performance.
 Give you a better idea of how the competition operates, which will help you to
identify best practices to increase performance.
 Increase efficiency and lower costs, making your business more profitable.
 Improve quality and customer satisfaction.

181. 8 steps in the benchmarking process
1. Select a subject to benchmark
2. Decide which organizations or companies you want to benchmark
3. Document your current processes
4. Collect and analyze data
5. Measure your performance against the data you’ve collected
6. Create a plan
7. Implement the changes
8. Repeat the process

182. Customer Service & Cost Trade
• Customer service involves all the activities that a business undertakes to ensure that its customers
are satisfied with the products or services they receive. These activities include everything from
answering customer inquiries to providing technical support and handling customer complaints.
• Costs, on the other hand, are the expenses that a business incurs in delivering customer service.
These costs can include salaries, training, technology, infrastructure, and more.
• The challenge for businesses is to find the right balance between delivering high-quality customer
service and managing the costs associated with that service. Providing excellent customer service
can lead to increased customer loyalty, repeat business, and positive word-of-mouth marketing.
However, delivering that service can be expensive and can negatively impact a business’s bottom
line if not managed carefully.

183. UNIT
V

184. EXIM
Export refers to a product or service produced in one country but sold to a
buyer abroad. Exports are one of the oldest forms of economic transfer and occur on
a large scale between nations.
Exports are goods and services that are produced in one country and sold to
buyers in another. Exports, along with imports, make up international trade. Instead
of confining itself within its geographical borders, countries often intentionally seek
external markets around the world for commerce, allowing greater revenue and
transactional opportunities.

185. Exporting
Pros
 Often allows for greater economic activity leading to higher revenue
 May result in production efficiencies due to scaling manufacturing
 May result in greater innovation and R&D through working with foreign partners
 May reduce operational risk in some areas as revenue streams become more diversified
Cons
 May result in high transportation charges
 May not be achievable by smaller entities due to lack of knowledge and resources
 May result in currency exchange risk due to devaluating currencies
 May increase operational risk in some areas due to unknown political or geographical risks

186. Export Procedure
In general, an export procedure initiates with the willingness to send the goods and services to other foreign
nations at some price, these procedures of export are stated below:
Step 1: Receipt Order
The Indian exporter will receive the order either directly from the importer or through the indent houses.
Step 2: Obtaining License and Quota
After receiving the order from the importer, the Indian exporter is required to obtain an export license from the
Government of India, for this the exporter needs to apply to the Export Trade Control Authority and get a valid
license for this.
Step 3: Letter of Credit
The exporter then asks the importer for the letter of credit, if the importer does not send the letter of credit
along with the order.
Step 4: Fixing the Exchange Rate
The rate at which the home currency can be exchanged with the foreign currency is then fixed. The foreign
exchange rate fluctuates from time to time so they need to fix the rate of exchange.

187. Step 5: Foreign Exchange Formalities
As per the Foreign Exchange Regulation Act of India (FERA), every exporter of the goods is required to
furnish a declaration in the form prescribed in a manner in the Act.
Step 6: Preparation for Executing the Order
The exporter should make the required arrangements to execute the order:
Step 7: Formalities by a Forwarding Agent
Then the formalities are to be performed by the agent which includes obtaining a permit from the
customs department, preparing the shipping bill, paying the dues after disclosing the required details of
the product being exported.
Step 8: Bill of Lading
The Indian exporter of the goods presents the receipt copy to the shipping company and issues the Bill of
Lading.

188. Step 9: Shipment Advice to the Importer
The Indian exporter sends shipment advice to the importer of the goods to inform him about the shipment of the
goods.
Step 10: Presentation of Documents to the Bank
The Indian exporter needs to confirm that he possesses all the necessary shipping documents.
Step 11: The Realization of Export Proceeds
The exporter of the goods needs to comply with banking formalities after submission of the bill of exchange.

189. Export contract
The export contract is used for the international sale of certain products
(industrial supplies, raw materials, manufactured goods), which are projected
for resale, where the buyer is a trader, importer, distributor or wholesaler that
will sell the products to another company or merchant.
Though it is common practice to export products based a proforma
invoice or quotation received from exporters, it is a safe practice to use written
and legal export contracts.

190. Some of the essential elements of an export contract are:
 Products, standards and specifications.
 Units of measure in both figures and words.
 Total value - The total contract value in words and figures, and in a
specific currency.
 Terms of delivery - Delivery terms, based on the Incoterms.
 Terms of payment - Amount, mode and currency.
 Documentary requirements - Documents needed for international trade
transactions.

191.  Delay in delivery - Damages due to the importer from the exporter in the event of
late delivery owing to reasons other that force majeure.
 A contract should provide for the insurance of goods against loss, damage or
destruction during transportation.
 Force major - Provisions in the contract defining circumstances that would relieve
partners of their liability for non-performance of the contract.
 Applicable law - The law of the country that is to govern the contract.
 Arbitration clause to facilitate amicable and quick settlement of disputes or
differences that may arise between the parties.

192. The law relating to this export contract
• The law concerning export tends to relate to the goods being shipped (customs
and duties) rather than the sales agreement. This export contract is common law,
which has two benefits.
• Firstly, you are free to choose the deal you like. The export agreement follows
the basic law of contract covering: price, offer, acceptance, delivery, shipping,
acceptance of goods, complaints, and returns. You can vary the terms of any of
these to suit you or your customer.
• Secondly, common law is used across the Commonwealth and understood in
nearly all countries. As drawn, this export contract leaves the supplier to cover
statutory requirements at home and the customer to cover them at his end.

193. When to use this export agreement
• Suitable for exporting to any country, particularly the Commonwealth, the USA and
the EU
• Suitable for any types of goods.
(But note that the export or import of many classes of goods are specifically regulated
in many countries. We have not taken account of regulations affecting a particular type
of goods.)
• Suitable regardless of how the goods will be transported

194.  Price
 Acceptance
 Payment, including by letter of credit
 Transportation: choose from a well
explained and full Incoterm list
 Delivery;
 Risk and retention of title
 Compliance with local standards
 Inspection
 Liability for defects or goods not ordered
 Intellectual property rights
 Confidentiality
 Limitation of liability
 Dispute resolution
 Uncontrollable events
 Other miscellaneous points to protect the
supplier’s interests
Export contract features and contents

195. Processing of an Export Order & Entering in to Export Contract
The immediate task of the exporter is to acknowledge the export order which
is different from its acceptance. Then he should proceed to examine the export order
carefully in respect of item, specification, pre-shipment inspection, payment
conditions, special packaging labelling and marketing requirements, shipping and
delivery date, marine insurance, documentation, arbitration, applicable laws and
jurisdiction, etc. The exporter purchase order should be examined carefully and its
contents scrutinized in terms of the Proforma invoice / contract sent to the foreign
buyer, on the following aspects…

196. Export Procedure and Documentation
Step 1: Receive an Inquiry
The first step in the shipping documentation process is when someone urges
Step 2: Screen the Potential Buyer and Country
After you receive the inquiry from the buyer, the process is to check their
with them.
Step 3: Provide a Proforma Invoice
After screening the buyer, we need to provide the proforma invoice for the
Step 4: Finalize the Sale
The buyer will either reject or accept your proposal thus finalizing the sale.

197. Step 5: Prepare the Goods and the Shipping Documents
Commercial Invoice, Packing List, Certificate of Origin, Shipper's Letter of
Instruction, Bills of Lading all need to be prepared
Step 6: Run a Restricted Party Screening
Again, the process needs to be run, before the goods ship for export.
Step 7: Miscellaneous Forms and Ship Your Goods
There may be other documents that need to be prepared before exporting the goods.

198. Commonly used export documents are:
• Pro Forma Invoice- The document provides a description of the products, such as Price, quantity, weight,
kind, and so on, and is a statement by the seller to provide the customer with the products and services at the
given date and price.
• Commercial Invoice- The commercial invoice is a legal document that is exchanged between the seller and
the buyer that clearly outlines the items being sold as well as the price the customer is to pay.
• Packing List- This list includes the invoice number, seller, buyer, shipper, carrier, date of shipping, mode of
transport, itemized quantity, description, package type, package quantity, total net, and gross weight (in
kilograms), packaging markings, and measurements.
• Air Waybill- An air waybill is a document that accompanies goods carried by an international air carrier.
The paperwork contains complete information about the package and enables tracking.
• Export Licenses- A government document that allows the transfer of specified commodities in precise
quantities to a specific destination for a defined end-use is known as an export license.

199. Export is a very wide concept with a lot of
preparations which is required by an exporter
before starting the export business.
• Establishing an Organization
• Opening a Bank Account
• Obtaining Permanent Account Number
(PAN)
• Obtaining Importer-Exporter Code (IEC)
Number
• Registration cum membership certificate
(RCMC)
• Selection of product
• Selection of Markets
• Finding Buyers
• Sampling
• Pricing/ Costing
• Negotiation with Buyers
• Covering Risks through Export Credit
Guarantee Corporation of India Ltd.
(ECGC)
Formalities of Registration and Export Documentation

200. Preparation for Executing an Order
The exporter must make the following arrangements in order to carry out the order:
 Marking and packaging of products to be exported in accordance with the
importer's standards.
 Obtaining an inspection certificate from the Export Inspection Agency after
scheduling a pre-shipment inspection.
 Getting an insurance policy from the Export Credit Guarantee Corporation (ECGC)
to safeguard against credit risks.
 Obtaining the necessary marine insurance coverage.
 Appoint a forwarding agent, often known as a custom house agent, to handle
customs and other related issues.

201. Formalities by a Forwarding Agent
The agent must complete the following formalities:
 The forwarding agency must first get permission from the customs authority before
exporting the items.
 To the shipping business, agents must provide all needed data about the products to be
shipped, such as kind, amount, and weight.
 A shipment bill/ order must be prepared by the forwarding agent.
 The forwarding agency is responsible for duplicating the port challans and paying the
fees.
 The loading of the products on the ship is the responsibility of the ship's captain. The
loading must be done in the presence of customs authorities and on the basis of the
shipping order.
 When the cargo is loaded into the ship, the ship’s master provides a receipt for them.

202. Foreign Exchange Formalities
Under exchange control laws, an Indian exporter must comply with specific
foreign exchange procedures. Every exporter of products is obliged under the Foreign
Exchange Regulation Act of India (FERA) to provide a declaration in the form provided in a
way.
• According to the declaration:
 The foreign exchange gained by the exporter on exports must be disposed of in the manner
and within the timeframe stipulated by the RBI.
 Authorized foreign exchange dealers are needed to handle shipping documentation and
discussions.
 Only permitted methods will be used to collect payment for the products shipped.
 Surrender the foreign exchange to approved dealers through the exchange control
authority.

203. What is Import Procedure?
The purchase of goods from a foreign country is referred to as import trade.
The Import procedure varies by country, depending on the country’s import and
customs policies, as well as other statutory requirements.
Import procedures are the procedures for import and export activities that
include ensuring licencing and compliance prior to shipping goods, arranging for
transport and warehousing after goods are unloaded, and obtaining customs
clearance and paying taxes prior to the release of goods.

205. Steps in Import procedure
1. Trade Enquiry
The importing company should first gather information about the countries
and companies that export the given product. The importer is able to collect such data from
trade directories and/or trade associations as well as organisations. After identifying the
countries and firms that export the product, the importing firm contacts the export firms by
using a trade enquiry to learn about their export prices and terms of export.
A trade enquiry is a written request from an importing firm to an exporter for
information on the price and various terms and conditions under which the latter is willing to
export goods. The importer will receive a quotation from the exporter in response to this
inquiry. The quotation includes information about the goods available, such as their quality
and price, as well as the terms and conditions of the sale.

206. 2. Procurement of Import Licence
Certain goods can be imported freely, while others require licencing. The importer
must consult the current Export-Import (EXIM) policy to determine whether the goods he or
she intends to import require import licencing. If goods can only be imported with a licence,
the importer must obtain an import licence. Every importer (and exporter) in India must
register with the Directorate General Foreign Trade (DGFT) or Regional Import Export
Licensing Authority and obtain an Import Export Code (IEC) number. This number is
required on the majority of import documents.
The Imports and Exports (Control) Act of 1947 governs the import trade in India.
Without a valid import licence, a person or company cannot import goods into India. The
Indian government declares its import policy in the Import Trade Control Policy Book, also
known as the Red Book. Every importer must first determine whether or not he can import
the goods he desires, as well as how much of a particular class of goods he can import
during the time period covered by the relevant Red Book.

207. 3. Obtaining Foreign Exchange
The supplier in an import transaction requests payment in a foreign currency
because they are based overseas. Indian currency must be converted into foreign
currency in order to make a payment in another currency. The Reserve Bank of
India’s Exchange Control Department oversees all foreign exchange transactions in
India (RBI).
Every importer is required by the current regulations to obtain the approval of
foreign currency. The importer must submit an application to a bank that the RBI has
authorised to issue foreign currency in order to receive such a sanction. In
accordance with the Exchange Control Act’s guidelines, the application must be
submitted in the prescribed format and include an import licence.

208. • The exchange bank endorses and forwards the applications to the Reserve Bank of India’s
Exchange Control Department. The Reserve Bank of India sanctions the release of foreign
exchange after scrutinising the application on basis of the Government of India’s exchange
policy in effect at the time of application. The importer obtains the necessary foreign
exchange from the relevant exchange bank. It should be noted that, whereas import licences,
which are issued for a specific period of time, the exchange is only released for a specific
transaction. Most restrictions have been lifted as the rupee has become convertible on a
current account as the economy has liberalised.

209. 4. Placing Order or Indent
The importer places an import order or indents with the exporter for the supply of the
specified products after obtaining the import licence. The import order includes details about the
cost, size, grade, and quality of the goods ordered, as well as packing, shipping, ports of
departure and arrival, delivery schedule, insurance, and payment method instructions. In order
to avoid any ambiguity and subsequent conflict between the importer and exporter, the import
order should be carefully drafted.
It contains the importer’s instructions regarding the quantity and quality of goods
required, the method of forwarding them, nature of packing, mode of payment and price, and so
on. Indentations are typically prepared in duplicate or triplicate. Indent types include open
indent, closed indent, and confirmatory indent. Because all of the necessary particulars of
goods, price, and so on are not mentioned in the indent, the exporter is free to complete the
formalities at his own end. On the other hand, a closed indent is one that clearly states the full
particulars of the goods, price, brand, packing, shipping, insurance, and so on. A confirmatory
indent is one in which an order is placed subject to the importer’s agent’s confirmation.

210. 5. Obtaining a Letter of Credit
If a letter of credit is the preferred method of payment between the importer
and the overseas supplier, the importer must obtain one from its bank and send it to
the supplier. A letter of credit, as previously mentioned, is a guarantee made by the
bank of the importer that it will honour payment of export bills to the bank of the
exporter up to a certain amount.
A letter of credit (L/C) is an undertaking by its issuer (usually the importer’s
bank) that bills of exchange drawn by the foreign dealer on the importer will be
honoured on presentation up to a specified amount.

211. 6. Arrangement of Finance
Prior to the arrival of the goods at the port, the importer should make
arrangements to pay the exporter. To avoid grossly overpaying demurrages (fines) on
imported goods that are lying uncleared at the port due to lack of payments, advanced
planning for financing imports is required.
7. Advice for Shipment Receipt
The international supplier sends the importer the shipment advice after loading
the goods onto the ship. Information regarding the shipment of goods is included in
shipment advice. The shipment advice includes information such as the invoice number,
bill of lading/airways bill number and date, vessel name with date, port of export,
description of goods and quantity, and date of vessel sailing.

212. 8. Retirement of Documents
After the goods have been shipped, the overseas supplier gathers the required paperwork in
accordance with the contract and letter of credit terms and gives it to their banker for negotiation
with the importer in the manner indicated in the letter of credit. A bill of exchange, commercial
invoice, bill of lading or airline bill, packing list, certificate of origin, marine insurance policy, etc.
are generally included in a set of documents. Retirement of import documents refers to the
acceptance of a bill of exchange for the purpose of receiving delivery of the documents. When
retirement is finished, the bank will give the importer the import documents.
9. Goods Arrival
The international supplier ships the goods in accordance with the agreement. The person in
charge of the carrier, whether it be a ship or an airline, notifies the person in charge at the dock or
the airport of the arrival of goods in the importing country. The import general manifest document is
presented by him. The specific details of the imported goods are listed in an import general manifest
document. It is a document that the unloading of cargo is based.

213. 10. Custom Clearance
After they cross Indian borders, all imported goods are required to go through
customs clearance. A number of formalities must be completed in the somewhat time-
consuming process of customs clearance. It is suggested that importers appoint C&F
agents who are familiar with such formalities and play a crucial role in getting the
goods cleared through customs.
The importer must first obtain a delivery order also called an endorsement for
delivery. The importer normally gets the endorsement on the back of the bill of lading
when the ship docks at the port. The relevant shipping company provides this
endorsement. In some cases, the shipping company issues a delivery order rather than
approving the invoice. The importer has the right to accept delivery of the goods
under this order. Of course, before taking possession of the goods, the importer must
first pay the freight charges (if the exporter has not already done so).

214. Legal Dimensions of import Procedure
(a) Finalization of the Terms of Contract
The import contract should be carefully and comprehensively drafted incorporating
therein precise terms as well as all relevant conditions of the trade deal. There should not be any
ambiguity regarding the exact specifications of the goods and terms of the purchase including
import price, mode of payment, type of packaging, port of shipment, delivery schedule, licence
and permits, discounts and commission, insurance, arbitration, etc.
(b) Mode of Pricing and INCO TERMS
While finalizing terms of import contract, the importer should, inter-alia, be fully
conversant with the mode of pricing and the manner of payment for the imports. As regards mode
of pricing, the overseas supplier should quote the terms prevailing in international tr. International
Chamber of Commerce, Paris, has given detailed of a few standard terms popularly known as
‘INCO TERMS'. These terms have almost universal acceptance.

215. (c) Mode of Settlement of Payment
There are mainly three modes of settling international transactions depending upon the
creditworthiness of the importer or exporter, demand for the commodity in the international
market, exchange control regulations prevailing in the importer or exporter countries and other
relevant factors:
 Advance Payment.
 Payment or Acceptance against Documentary Collections.
 Payment under Letter of Credit.
(d) Obtaining IEC Number
In India, it is obligatory for every importer and exporter to register themselves with the
Director General of Foreign Trade (DGFT) and obtain Import-Export Code Number (IEC No.).
The application form for obtaining IEC number should be accompanied by a fee of Rs. 250 and
two copies of passport size photographs of the applicant duly attested by the banker of the
applicant and other relevant documents.

216. (e) Obtaining Import License
If the item to be imported falls in the prohibited list, then such item cannot be imported at all.
However, if it falls in restricted list then the necessary clearance must be obtained from appropriate
licensing authority. Similarly, if it is subject to the canalisation through State Trading Enterprises
(STEs), then the necessary formalities are to be completed pertaining to the same.
(f) Obtaining Foreign Exchange
In India, all foreign exchange transactions are regulated by the Exchange Control Department
of the Reserve Bank of India (RBI). Therefore, every importer is required to make an application to
the Reserve Bank of India (RBI) for getting sanction for making overseas payments. The Exchange
Control Department scrutinizes the application and if satisfied, sanctions necessary foreign exchange
for the import transaction.
(g) Arranging Finance for Import
It is advisable that the financial planning for imports should be done in advance in order to
avoid huge demurrages on the imported goods lying uncleared for want of payment. Banks normally
do not extend any fund based assistance to importers. However, they enable industrial units and others
to have access to imported inputs and machinery by establishing letters of credit in favour of the
overseas suppliers.

217. (h) Obtaining Import L/C Limit
Import L/C (Commitment of the Lender) limits are sanctioned by the banks on submission
of complete loan proposal as in the case of other types of credit facilities. This requires advance
financial planning so as to retire import bills under L/C on time. Any delay in retirement of bills not
only strains the relations of the importer with his bank but also results in additional costs by way of
extra commission, penal interest, demurrage charges, etc.
(i) Dispatching Letter of Credit
If the term of payment agreed between the importer and the overseas supplier is a letter of
credit then the importer should obtain the letter of credit from his bank and forward it to the
overseas supplier well within the time agreed for the same. The importer must see to it that the letter
of credit has been prepared in the strict conformity of the import contract entered between them.

218. Custom Clearance of Imported Goods
Introduction
All goods imported into India have to pass through the procedure of
customs for proper examination, appraisal, assessment and evaluation. This helps the
custom authorities to charge the proper tax and also check the goods against the illegal
import. Also it is important to note that no import is allowed in India if the importer
doesn’t have the IEC number issued by the DFGT. There is no requirement of IEC
number if the goods are imported for the personal use.

219. Bill of Entry
A Bill of Entry also known as Shipment Bill is a statement of the nature and value of
goods to be imported or exported, prepared by the shipper and presented to a customhouse. The
importer clearing the goods for domestic consumption has to file bill of entry in four copies;
original and duplicate are meant for customs, third copy for the importer and the fourth copy is
meant for the bank for making remittances.
If the goods are cleared through the EDI system, no formal Bill of Entry is filed as it is
generated in the computer system, but the importer is required to file a cargo declaration having
prescribed particulars required for processing of the entry for customs clearance.

220.  Signed invoice
 Packing list
 Bill of Lading or Delivery Order/Airway
Bill
 GATT (General Agreement on Tariffs
and Trade) declaration form duly filled in
 Importers/ CHA’s declaration
 License wherever necessary
 Letter of Credit/Bank Draft/wherever
necessary
 Insurance document
 Import license
 Industrial License, if required
 Test report in case of chemicals
 Ad-hoc exemption order
 DEEC Book/DEPB in original
 Catalogue, Technical write up, Literature in
case of machineries, spares or chemicals as
may be applicable
 Separately split up value of spares,
components machineries
 Certificate of Origin, if preferential rate of
duty is claimed
 No Commission declaration
In the non-EDI system along with the bill of entry filed by the importer or his representative the following documents are
also generally required:-

221. • Amendment of Bill of Entry
Whenever mistakes are noticed after submission of documents, amendments to the bill of
entry is carried out with the approval of Deputy/Assistant Commissioner.
• Green Channel facility
Some major importers have been given the green channel clearance facility. It means
clearance of goods is done without routine examination of the goods. They have to make a
declaration in the declaration form at the time of filing of bill of entry. The appraisement is
done as per normal procedure except that there would be no physical examination of the
goods.
• Payment of Duty
Import duty may be paid in the designated banks or through TR-6 challans. Different
Custom Houses have authorised different banks for payment of duty and is necessary to
check the name of the bank and the branch before depositing the duty.

222. • Prior Entry for Shipping Bill or Bill of Entry
For faster clearance of the goods, provision has been made in section 46 of the Act, to allow filing
of bill of entry prior to arrival of goods. This bill of entry is valid if vessel/aircraft carrying the
goods arrive within 30 days from the date of presentation of bill of entry.
• Specialized Schemes
Import of goods under specialized scheme such as DEEC and EOU etc is required to execute bonds
with the custom authorities. In case failure of bond, importer is required to pay the duty liveable on
those goods. The amount of bond would be equal to the amount of duty livable on the imported
goods. The bank guarantee is also required along with the bond. However, the amount of bank
guarantee depends upon the status of the importer like Super Star Trading House/Trading House
etc.
• Bill of Entry for Bond/Warehousing
A separate form of bill of entry is used for clearance of goods for warehousing. Assessment of this
bill of entry is done in the same manner as the normal bill of entry and then the duty payable is
determined.

223. Exchange control provisions