A Case Study On:

Utilisation Of Container Movement-IRC:

Import To Export

A report submitted in partial fulfilment of “MASTER OF BUSINESS ADMINISTRATION”.

SUBMITTED BY: SUBMITTED TO:

CHAHAT(MBA-L&SCM) Dr. Sandhir Sharma
ROLL NO- 1820983512 (DEAN- Chitkara Business School)
 Introduction
The container help reduce the global supply chain cost; however, the management of container
inventory has become a serious concern with its gradual increase in volume over the past decades.
Worldwide, empty containers account for approximately 20% of container flows at sea. Container
inventory imbalances can primarily be attributed to global trade imbalances. Therefore, the core issue
in the industry is the identification of the best method to minimize the idle time of containers, thus
optimizing their utilization that will reduce supply chain cost substantially.
Shipping is a business that grew up with the world economy,exploring and exploiting the ebb and
flow of trade. Cross-border transportation is an engine to promote the foreign trade. The system, that
proved its potential as an increasingly efficient and swift method of transport, led to greatly reduced
transport costs, and supported a vast increase in international trade. It is needless to mention that the
carrier actions, and their reactions to various market conditions particularly the demand for shipping
have direct impact to supply chains. Some serious and recurring issues produce a degree of
uncertainty which impact supply chain processes.

Global container inventory imbalance& Poor Utilisation of containermovement are such

problems that is part and partial of container shipping. This problem therefore needs closer look due
to the ever increasing volumes of container shipping business. A considerable amount of investments
have been made in purchasing containers and vessels and building port infrastructures. Container
ports provide the primary interface where physical exchange between buyers and sellers of
containerized shipping capacity can be consolidated and realized. Containers are usually supplied to
exporters for stuffing of cargo at respective ports by the agents of carriers (Some exporters have their
own container fleet for private use and this study does not consider their practices). The containers
have a useful life of about 12 to 15 years and the standard 20 foot container costs about $2,000 to
manufacture while 40 footer costs about $3,000. Therefore, a twenty foot container costs $1.71 per
cubic feet to manufacture while a forty foot container costs $0.80, which underlines the preference for
larger volumes as a more effective usage of assets. However, the life expectancy of a container
depends on many factors, but it is approximately 8 years and it frequently needed repairs.
Efficient and effective management of empty containers and empty container repositioning is an
important issue in the IRC liner shipping industry. The growing imbalance of containers globally
creates a substantial additional expenses as well as environmental issues. The consequences of the
container fleet imbalance are ultimately borne by Exporters, Importers, Consumers, Traders and even
other players in the cargo supply chain of international trade inadvertently. Leading carriers have
already implemented Container Imbalance Surcharge adding a direct cost to the consumer. Maersk
Line, (2013) advised their customers that the Equipment Imbalance Surcharge was implemented due
to an increasingly severe equipment imbalance at Toronto container yards, leading to significantly
higher empty repositioning costs. Therefore finding a solution to mitigate such impact would benefit
primary shippers, consignees and shipping lines and then countries, regions and whole world at macro
level There are no commonly accepted standard container inventory management (CIM) strategies
adopted by carriers. The respective container controllers of carriers take CIM decisions based on their
individual skills and competencies in managing the inventories. This is a serious concern for the
industry because the industry hardly gets any learning curve advantage through the current CIM
practices. Therefore, a problem exists at present as to what factors that influence the CIM strategies
adopted by carriers.
Background
The focus on services and its importance is increasing day by day in this competitive era. Service
providers are now venturing out of the way to transform themselves into different services and as a
result, users are getting value added services, which is an integral part of service industries. Container
Corporation of India Ltd (CONCOR) has set up various ICDs and providing the “Dry Port” facilities
to the International and Domestic trade. Shipping Lines, Freight Forwarders, Custom House Agents
and Surveyors etc are playing vital role in the working of CONCOR. These agencies are providing
specialized services to their customers and infrastructure provided by CONCOR is a platform for their
business. The concept of integration of services has brought to the competitive and just – in – time
deliveries of consignments. The dependability on individual service industries is minimized despite of
their efficient style of working.

There are various option are available for the users supported by various factors for the development
of an efficient logistics services which includes transport infrastructure, simplified/streamlined
documentation, liability regimes, industry standards and their network.
Role Of Shipping Lines:

Shipping Lines are playing an important role in Multi-modalism by providing containers for domestic
and International trade in the form of ‘Cabotage’ movement (Cabotage: Carriage of domestic cargo in
international containers). In globalization, shipping industry is shrinking the world. It is bringing
countries and population close together and making them more independent. It is also providing easy
access to markets abroad. The most pressing issue for shipping lines are the business demand of
finding a path to sustainable profitability, satisfying customer needs, planning for the huge capital
investments necessary to keep up with the global trade, determining the most effective use of
information technology to improve business efficiency and customer satisfaction. Efficiency and
customer satisfaction is most complicated and difficult task, which is to be one’s priority. In
international business, shipping lines have made shipment more competitive, which enabled the
importers/exporters to enter into the global market. Shipping Lines have succeeded in quietly
becoming one of the most important foundations of global trading.

1. Strength:
Following can be the strength of shipping lines in domestic & international business.
• Shipping Lines has no barriers to enter in the domestic & international market.
• Shipping Lines can afford a large number of carriers to shipper an array of competitive services.
• Shipping Lines can be innovative and can invest in building an international transportation
infrastructure to carry global trade.
• Shipping Lines provide efficient, low cost services to importers/exporters.
• Shipping Lines provides sufficient capacity to handle the demand of the trade including peak
season also.

2. Working Flow Chart of Shipping Lines:

Shipping lines are working in an organized way so the procedural aspects are most important.
Given below is the flow chart of working of shipping lines, First of all, flow chart for import is
given below:
2.1 Import:
Intimation of vessel schedule to port authority

Obtain Vessel Discharge Certificate

Filing of Import General Manifest (IGM)

Filing of Sub Marine Trans-shipment Permit (SMTP)

Booking of Containers for their Final Destination (i.e. for ICDs/CFS)

Transportation of Containers through CONCOR / CWC / Pvt. Transporters

Collection of Bill of Lading along with Inland Haulage Charges (IHC)

Releasing Examination Order for examination of goods

Issue of Delivery Order for final delivery of goods

Called for Empty containers back or market it for Export purpose.

 Flow chart for export working of shipping lines has been given below:

2.2 Export:
Freight Negotiation

Shipment schedule

Release Order for Container Stuffing

Export General Manifest (EGM)

Mate Receipt

Bill of Lading

Collection of Payment

Shipped on Board
3. Problems:
Following problems may be faced by shipping lines in domestic & international trade,
• Shipping Lines suffer from congestions and inefficiency of container terminal and sea port.
• Restricted sectoral services can be the obstacles in business development of shipping lines.
• Non-availability of empty containers restricts shipping lines to match the business demand.
• Lack of match for exports against import generated containers can be the major problem for
shipping lines.
• Efficient utilization of containers in dwell time is the major challenge to shipping lines to compete.

The modern system of international exchange and specialization in sea transport has made possible by
shipping industry which has regularized the shipment/vessel schedule to make international trade
more effective. The ability to maintain regular schedules enabling merchants business to become less
speculative and more a matter of supply and demand. The most significant factor in the development
of international trade was the cheapening of ocean transport largely by economy in PROPULSION.
Modern equipments and their technical improvements in machinery and fuel are continually making
minimum transit at economical cost and increased space available for cargo. The competitive cost of
sea transport is permitting raw materials and foodstuffs of relatively low value to enter international
trade. Modern communications infrastructure also made it possible to put ships to better use.

4. Steps to be taken into consideration for organizing shipping industry:

The following points must be considered when evaluating suitability of logistics mode (s) for an
international consignment:
a) Nature of the commodity, its dimensions/weight and whether any special facilities are required
during transit, like Livestock requires special facilities, Gold requires special security/strong room
and Meat requires refrigeration.
b) Degree of packaging and costs thereof. Air freight and containerization require less packaging.
c) Packaging to aid cargo handling. Palletized cargo facilitates handling by fork-lifts, light weight
cartons are ideal for containers. Odd-sized cases may require special facilities.
d) Any statutory obligations imposed relative to the transit.
e) Dangerous cargo. Regulations are stringent regarding its packaging, storage, and mixture with
other cargoes during storage.
f) Terms of export contract. It may stipulate carriage by a particular line etc.
g) Suitability of available logistics services. Restrictions of container weight – capacity etc.,
special container requirements.
Role of Freight Forwarder:

A freight forwarder (hereinafter called FORWARDER) is one who undertakes as a licensed Customs
house agent, customs clearance and forwarding of goods on behalf of his customer, including if
necessary, procurement and coordination of one or more modes of transport. He may also
undertake to perform other functions connected with the main contract such as warehousing
(including storage in transit) groupage or consolidation, packing, documentation, weighing and
measurement of cargo, container leasing, insurance, foreign exchange transaction etc.

Freight forwarders are organizing, supporting, facilitating, planning and managing international and
global logistics services. Services of freight forwarders span the entire logistics system. They are
specialized in some of the core aspect of the international business and plays vital role in entire
logistics system with global network and provides combined services e.g. import/export
documentation, customs clearance, sea transport, ship agency, air transport, road or rail transport
or warehousing. The role of freight forwarder is expanding as the technique of movement of goods.
Now a day, freight forwarders are well organized and providing the hurdleless services to the
Exporters/Importers for the compliance of formalities involved in the movement of goods. They also
render the services for collecting the revenue and remitting to the treasury of the government. Safe
and timely delivery of the goods at the correct destination is the ultimate objective of any trading
and that is all the more true in foreign trade. These agents play the major role in this operation and
the volume of foreign trade is not small at all, if taken on a global level and the credit should be
given to these agents for rendering their specialized services to the exporters/importers.

Scope:
In International trade, freight forwarders are rendering services to exporters/importers and perform
procedural and documentary formalities. The Freight Forwarders are provided following services to
their clients,

1) Exports:

a) Select suitable mode of transport

b) Slot booking in the Vessel

c) Container Booking at Competitive rates

d) Insurance arrangement.

e) Cargo Consolidation

f) Weighment and measurement services

g) Payment of freight and other relevant charges

h) Arranging transport of containers/goods to the port.

i) Custom clearance

j) Documentation formalities

k) Monitoring shipment and follow up with other agencies

l) Arranging “Shipped on Board” bill of lading.

m) Assisting exporters for Export promotion schemes and claims

2) Imports:

a) Monitoring import movement & ETA (Expected Time of Arrival) etc on behalf of importers

b) Checking of Non – negotiable documents in advance to avoid delays in clearance.

c) Co-ordination with shipping lines and port authorities.

d) Payment of Inland Haulage Charges to Shipping Lines, if required.

e) Arranging custom clearance under different schemes.

f) Follow ups with different agencies.

g) Payment of duties

h) Delivery of custom cleared goods.

An importer should approach the selection of the right freight forwarder in much the same manner
as he selects the right supplier of his goods or a lawyer. The selection process should ensure the
competence and integrity of the candidates. Goods of considerable value as well as their controlling
documents are entrusted to the freight forwarder. Since the importer will often seek the forwarding
agent's advice and counsel on how best to protect or advance his interest, the relationship must be
built on trust and confidence
Role of Custom House Agent:

"Customs House Agent" means a person licensed under the Customs House Agents Licensing rules
1960 as amended from time to time, to act as agents for the transaction of any business relating to the
entrance or clearance of any vessel or the import or export of goods or baggage in any Custom House"
Section 146 of the Customs Act 1962 provides that Customs House Agents should take a licence for
working as a CHA in any part of India. The Customs House Agents Licensing Rules 1960 also
regulate the working of the CHAs in India. Section 146 of the Custom Act is the enabling provision,
which allows agents of importers and exporters to act on behalf of importers and exporters. This is
necessitated by the highly involved and technical nature of the work to be done in connection with
clearance of imports into and exports out of country. The importers and exporters themselves may
have neither time nor the requisite knowledge on their own. Therefore, agents are allowed to act on
their behalf.

Functions of CHA:
1. Preparation of various kinds of bill of entry and shipping bill.
2. Arrival entry and clearance of vessels.
3. Tariff classification and rates of duty.
4. Determination of value for assessment.
5. Conversion of currency.
6. Nature and description of documents to be filed with various kinds of bills of entry and shipping
bill.
7. Procedures for assessment and payment of duty.
8. Examination of merchandise at the Customs stations.
9. Provisions of the Trade and Merchandise Marks Act,1958.
10. Prohibitions on imports and exports.
11.Bonding procedure and clearance from bond.
12.Re-importation and conditions for free re-entry.
13.Drawback.
14.Offences under the Act.
15. Provisions of allied Acts including Customs Tariff Act1975, Foreign Trade (Development and
Regulation) Act 1992,Foreign Exchange Regulation Act,1973, Indian Explosives Act 1884, Arms Act
1959, Opium Act 1878, Drugs and Cosmetics Act 1940, Destructive Insects and Pests Acts 1914,
Dangerous Drugs Act 1930 in so far as they relate to the clearance of the goods through Customs.
16.Refund procedures, appeals and revision petitions.
 Key Problems

 Poor Utilisation of containermovement:

The conventional approach of shipping involves four parameters:
1. Shipper/Customer
2. Agent
3. Shipping Yard
4. Container Company/Terminal/IRC

The movement of container is described as follows:

YARD

CONTAINER COMPANY -IRC

CONTAINER TOWARDS

MOVEMENT CLIENT FOR

TO YARD EXPORT

IMPORT

AGENT

CLIENT
The Client approaches an agent for its operation(import/export). The Agent arranges for a deal with
container company-IRC to which both client and company must comply. Now, the IRC is entitled to
allot a number of containers as asked by client. The phase of container movement starts here.
1. After the import and destuffing process at client side, the freed container is directed to
container yard.
2. Now, when all the containers have reached to container yard, they are now scheduled and
redirected towards client’s side.
3. When all containers reach client side, they are now stuffed for export.
These three phases of container movement showcases the poor utilisation of container movement
which affects:

 Cost:

Container Costs Percentage share of Total Cost

Capital 32

Repair And Refurbishment 25

Imbalance 22

Clearing And Maintenance 11

Insurance 10

Different repositioning policy may incur significantly different operational cost. This includes
Port Handling Costs (PHC), Slot fee for the sea passage, land transport costs, ground rent and
handing costs at CFS etc. In addition to those direct costs, the cost of wear and tear and
cleaning etc. are also to be considered. It is needless to say that these costs would
eventually result in higher transport charges to shippers and consignees thus high
commodity prices owing to the additional costs that will be incorporated in the freight rates
by CSL.
From the phases of container movement, the phase when the container after destuffing, moves to
the container yard and stays there for the time till all the containers reach the yard requires a lot of
transportation charges from client side to yard and vice versa. Also, rental costs adds up for the time
container stays in the yard.

This makes it clear that the IRC conventional movement of container is not cost-effective and can be
optimized to reduce costing.

If these facts are considered and a rough figure can be calculated regarding costing of container at
various phases

Costing Of Container
Transportation to/from client Container Management
Transport costs to/from yard Yard Rentals

9%

10%

23% 59%

It accounts up to 19% of the total cost i.e. This percentage is mere a waste and certain measures can
be taken to optimize and reduce this costing.
 Alternatives
The problems discussed in the problem section may be resolved using certain alternative:

 Efficient utilisation of container movement

The conventional container movement of IRC accounts up to 19% of extra costing which
doesn’t add up towards business.
Instead of routing the containers towards the container yard after import(destuffing) at client’s
side, the current container can directly be stuffed for the export process. This management
can be done by an efficient container allocation mechanism which should be adopted by IRC.
This alternative may save up to 19% of the total cost, which includes:
o Transportation charges form client’s site to container yard.
o Rentals and other charges at container yard.
o Transportation charges from yard to the client’s site.

CONTAINER COMPANY-IRC

YARD

X X

X X

X X
AGENT
X
IMPORT CLIENT EXPORT
The proposed alternative will not comply with empty container movement (as above in the diagram)
and reducing the costing to a substantial amount.
 Challenges Faced& Proposed Solution

 PROBLEM 1: Inventory Availability On Time:

Though the proposed alternative reduces the cost up to a substantial amount. There are still
some factors which may still incur some non-avoidable interrupts. A container may be
available to the shipper client on time, but it is not certain that the inventory would be
available all the time for stuffing which can be dependent upon several factors such as:
 Technical issues at client site.
 Miscommunication.
 Buffer non-availability.
 Ensure availability of inventory information on all channel and services.
 Anytime, anywhere access to inventory without overloading the system or
record.
 Window-in-time consistency for highly available services.

Solution
 Proper Inventory management system which may include fast, indexed reads,
local reads, horizontal scaling, in-Place updates.
  PROBLEM 2: Unstable Staff:
As deals among shipper (client) and IRC is to be maintained by MOU. Unstable staff where
the assigned person/s is/are not permanent can be a drawback. This may cause some
problems:
 Increase the overhead as each staff re-assemble, staff is to be trained against
the whole working procedure again.
 Training and theses involvements could cost either side in dollars.

Solution:
Person assigned on either side should be permanent.So, there must be a bunch of people
among both sides which should work for their counter-parts at-least as long as MOU retains.
 Client-Shipper IRCContainer MOU Dedicated people for
dedicated contract

Conclusion
IRC Container shipping lines needs to develop a proper CIM system to bridge the industry gap. Apart
from the direct cost of empty container repositions it also increases the carbon footprint through
excessive transport. If carriers prioritise this as a pressing issue and reduce the ever increasing cost of
empty reposition through effective and efficient CIM system, it will bring immense benefit to
respective carriers initially and then to the domestic market and finally to the global shipping
community. It subsequently help reduce environmental hazard due to empty container logistics issues.
Shipping is a derived demand of international trading; therefore these benefits will ultimately help
reduce the consumer prices of the world. Thus, carriers have a social responsibility towards reducing
the empty container reposition through an effective CIM system.

References
1. www.wikipedia.com
2. http://www.irclindia.com/
3. https://in.linkedin.com/company/irc-supply-chain-solutions-ltd
4. “International Trade Inter-Modalism”www.msc.com