International Logistics & Supply Chain Management

International Logistics &
Supply Chain Management

Session – 8
COURSE REVIEW AND Q & A
Chapter 1: Introduction to
Logistics and Supply Chain
Management
3. Concept of Logistics
Types of Logistics
• The common types of logistics are:
− Procurement logistics: This type of logistics aims at obtaining materials, goods or
services at the minimum cost and within the time constraints of the organisation.
− Distribution logistics: It is concerned with delivering finished goods to customers.
− Production logistics: It is concerned with maintaining the flow of value-adding
processes and eliminating non-value-adding processes from the overall production
process.
Types of Logistics
− After-sales logistics: This type of logistics deals with the supply of services and spare
parts required after the product is sold to customers.
− Disposal logistics: This type of logistics relates to the disposal of waste produced during
the operational processes of a business.
− Reverse logistics: It is concerned with activities related to the logistics of a
product/service after its sale.
− Global logistics: It governs the flow of products across international borders.
− Domestic logistics: This type of logistics deals primarily with the flow of goods within a
country (across multiple states).
Logistics Management
• Logistics management involves planning and controlling the forward and reverse flow of
goods and their storage and maintaining related information between two points, namely the
point of origin and the point of consumption.
• The key components of logistics management activities can be divided into two categories,
which are:
– Core activities: These activities take place in all supply channels and contribute mainly
to the total cost of logistics.
– Supporting activities: These activities may vary depending on the nature and type of
products/services of an organisation.
Distinguishing between Logistics
and Supply Chain Management
• Logistics focuses on the actual transportation and storage of goods and deals with inbound and
outbound freight, warehousing, delivery, coordination, transport scheduling and management
of other processes.
• SCM focuses on generating value for different entities by maintaining effective coordination
between different parties involved in a supply chain network of an organisation.
• An important point of distinction between logistics and supply chain management is that
logistics is mostly involved in developing strategies and SCM is more focused on
procurement.
International Logistics and
Supply Chain Management
• International logistics and SCM practices aim at helping an organisation in:

− Making speedy decisions regarding logistics and supply chain
− Sourcing pre-defined global processes
− Controlling operations at a global level
− Ensuring the availability of key resources
− Sharing information with vendors globally
− Analysing global contracting systems
− Procuring international support for efficient logistics and SCM activities
Chapter 2: Globalisation and
International Trade
1. Outsourcing and Offshoring as an
Emerging Trend in International
Trade
• Outsourcing refers to a process or an activity in which a company enters into an agreement

with a third party to produce goods or to provide services that the company previously used to
provide itself.
• Offshoring occurs when a company shifts the location of product manufacturing or service
delivery to another country in order to save costs related to labour as well as resources.
• Outsourcing and offshoring help emerging service market suppliers upgrade their own
capabilities.
2. Outsourcing and Offshoring as an
Emerging Trend in International
Trade
• The points would help in understanding the main differences between offshoring and
outsourcing:
− Subcontracting a process within the same country is outsourcing and not offshoring.
− A company moving an internal business unit from one country to another would be
offshoring or physical restructuring, but not outsourcing.
− A company subcontracting a business unit to a different company
in another country would be both outsourcing and offshoring.
Chapter 3: Factors and
Challenges Driving Logistics
and Supply Chain
Management
1. Factors Driving Global Supply
Chain Management
• The focus of organisations in the present business environment is on adding value to the
supply chain cycle.
• This could prove extremely challenging in the global context as compared to the local supply
chain and logistics.
• The basic requirement of the global supply chain is to offer something different from the
competitors and maintain a separate identity.
• This is required to convince customers that they have a certain added value in the market.
• This added value could be reflected in the supply chain cycle time or a reduced lean period,
etc.
Chain Management
• Broadly, a value chain can be divided into two types:

− Primary activities that are concerned with inbound and outbound logistics, operations,
marketing, sales and services.
− Secondary activities that include support services like infrastructure, human resource,
technology, procurement, product development, etc.
Chain Management
• Efficient global supply chain management contributes to value addition in four inter-related
ways which are:
Production Cost
Location
Lead Time
Control
Chain Management
• Various factors are responsible for the configuration of global supply chains. These include the
following:
Logistics Cost
Transit Time
Reliability
Supply Chain Risk

1. Customs and Global Supply Chain
Management
• Trade facilitation is of prime importance when international trade and global supply chain
management are concerned.
• The purpose of trade facilitation is to make imports/exports faster and cheaper and at the same
time ensure goods security.
• Trade facilitation helps in simplifying and coordinating trade procedures and exchange of
information and documents between supply chain partners.
• Trade facilitation is concerned with not just the physical movement of cargo but also the related
flow of information.
Management
• The World Customs Organisation (WCO) has identified a number of steps to safeguard
imports and exports from terrorist and criminal activities by developing a legal framework for
the following:
− Assess risk and controls for global trade
− Provide information regarding who is legally liable
− Request information for risk assessment
− Identify to whom such information needs to be transferred
− Assess when and how the information related to a trade has to be provided
− Recognise the facilitation that customs would offer to authorised traders
Management
• Before clearance, the imported goods need to comply with standard customs clearance
formalities.
• Importers need to obtain an Importer Export Code (IEC) number from the Directorate General
of Foreign Trade (DGFT) before filing the Bill of Entry for clearance of the imported goods.
• The Customs Electronic Data Interchange (EDI) system receives the IEC number from the
DGFT through online services.
• A Bill of Entry with details about the goods, value, quantity, exemption notification, etc. needs
to be presented.
Management
• The importer clearing the goods through the non-EDI system needs to file the Bill of Entry in
four copies:
− Original and duplicate copies for the customs
− Third copy for the importer
− Fourth copy for the bank to make remittances
• Under the EDI system, appropriate customs officers retain the original bill of entry (customs
copy) along with supporting import documents.
• Also, after suitable endorsements, the duplicate bill of entry (importer’s copy) and the
triplicate bill of entry (exchange control copy) are handed over to the authorised person.
Management
• Along with the Bill of Entry, the following documents are submitted by the importer:
− Signed invoice
− Packing list
− Bill of lading or delivery order/airway bill
− GATT valuation declaration form duly filled in
− Importer’s/CHA’s declaration
− Import licence, wherever necessary
− Letter of credit, wherever necessary
− Insurance document
1. Vendor Management
• Vendor management is a discipline used by organisations to achieve the best possible value
from vendors throughout the supply chain cycle.
• Some important aspects of vendor management in organisations are:
Selection and Evaluation
Quality Management
Risk Management
Performance Management
Chapter 4: Supply Chain
Strategies
Evolution of Manufacturing and
Production Strategies
• Manufacturing strategies evolved focusing on organisations’ ability to offer better products

and services than their competitors.
• From the early 1900s, for several decades, manufacturing strategies focused on high volume
production and standardised designs.
• Over time, the Japanese demonstrated that they could make products similar to those produced
by western countries but with lesser defects.
• Japanese organisations used techniques like lean manufacturing, Just-In-Time, continuous
improvement, etc. and had high quality, fast product roll-outs and lower costs.
• Current manufacturing strategies focus on skills in precision manufacturing, motivation and
in-depth knowledge of customers.
1. Logistics and Supply Chain
Strategy
• The logistics strategy helps an organisation determine the levels of service at which costs are
optimal.
• An organisation develops its logistics strategy for its different products or customers or
markets.
• An organisation needs to review certain aspects of its logistics function while developing its
logistics strategy for the warehousing, transportation, etc. of its inventory.
• The logistics and supply chain strategy of an organisation enhances its operations by offering
the best possible product or service to customers at affordable costs while maintaining high
quality.
Strategy
• Leverage: This is the balance that organisations need to maintain between cost reduction and
improvement of service levels.
• Communication: It refers to the robustness of a two-way dialogue between the organisation
and its suppliers.
• Efficiency: This relates to the operational and process efficiencies of the organisation.
• Innovation: This refers to the efforts of the organisation to innovate its products and services
during daily operations.
Strategy
• Risk management: This relates to the identification of internal and external risks while
managing the supply chain, and steps which the organisation takes to mitigate them.
• Continuous improvement: High performing organisations look at ways and techniques to
continually improve their operations. These may impact the organisation internally or may
affect its external stakeholders.
Strategy
Lean Production
• Lean production is defined as the systematic elimination of waste in the operations of an
organisation.
• This technique is derived from the Toyota Production System (TPS) and is based on the
elimination of waste, which will lead to better quality, reduced production time and lower
costs
• Lean production aims to provide the right things at the right place at the right time in the right
quantity to achieve efficient work flow, while minimising waste and retaining flexibility.
Strategy
Agile Supply Chains and Mass Customisation

• Agile manufacturing involves all aspects of an organisation including its people, processes,
structures, strategies and relationships.
• It refers to the manufacturer’s ability to quickly configure the production and resources to
adapt to the variability in demand.
• Mass customisation is the ability of the organisation to manufacture and design customised
products at an efficiency associated with mass production.
• According to this concept, individually designed products for each customer are produced,
using high degree of agility and integration of processes.
Strategy

• Mass customisation strategies are of the following types:
Pure Standardisation
Segmented Standardisation
Customised Standardisation
Tailored Customisation
Pure Customisation
• Pure standardisation: The customer does not get involved
before taking possession of the product.
• Segmented standardisation: The manufacturer designs the
product for a cluster of buyers.
• Customised standardisation: Products are made to order using
standard components.
• Tailored customisation: Products are customised at the stage of
fabrication.
• Pure customisation: Products are customised from the starting
point.
Strategy

• There are four approaches to mass customisation:
Collaborative
Adaptive
Cosmetic
Transparent
Taxonomy of Supply Chain
Strategies
• The taxonomy for a three-dimensional classification for global supply chains is suggested as
follows:
Products
Demand
Replenishment Lead Time

Critical Factors Considered in
Supply Chain Planning
• The critical factors that affect supply chain planning are:

Uncertainty
Information Technology
Supply Chain Relationships
Value Addition
Supply Chain Management (SCM) Performance
Business Management
Customer Satisfaction
Opportunities and Risk Identification

Operational and Strategic Issues
in Global Logistics
• The issues that affect the operations and strategy of global logistics are:
Complex Taxation Laws
Different Quality Standards
Different Customer Expectations
Rapid Technological Changes
Conflicts in Networking
Limitations in Infrastructure
Shortage of Talent
Logistics Outsourcing Strategy
(3PL and4PL)
• Third-party logistics, also known as 3PL, refers to the outsourcing of logistics in which a
logistic service provider single-handedly manages the entire logistical function of a retail
enterprise.
• According to this company, 4PL assembles and manages the resources, capabilities and
technology of its own organisation with those of the complementary service providers to
deliver a comprehensive supply chain solution.
• There is a very minor difference between third-party and fourth-party logistics. Many experts
think that 4PL is nothing but a new form of 3PL.
Chapter 5: International
Procurement and Sale
1. International Purchasing/
Procurement System
• International procurement is an activity that involves the purchase of goods or services from a
source located anywhere in the world.
• International procurement involves a bidding process wherein an organisation/corporate buyer
invites bids for certain goods or services from various suppliers.
• The supplier who offers goods or services at the minimum price with the required quality and
quantity within the given time frame is awarded the contract.
Procurement System
Types of Procurement
• Based on the nature of products, procurement activities are broadly divided into two
categories, which are:
Direct Procurement
Indirect Procurement
Procurement System
Advantages and Disadvantages of International Procurement

• The advantages of international procurement are:
− Goods can be procured at competitive costs.
− Skilled manpower can be sourced at low cost.
− Alternative supplier relationships can be developed.
− Supply capacity of suppliers increases.
Procurement System
Advantages and Disadvantages of International Procurement

• The disadvantages of international procurement are:
− Exposure to political and financial risks
− Risk of loss of intellectual property
− Higher monitoring costs
− International suppliers take long delivery times as compared to domestic suppliers.
Procurement System
International Procurement Process

• The procurement process is a systematic procedure that involves a number of steps which
are:
Need Recognition
Supplier
Identification
Supplier
Communication
Negotiation
Supplier Liaisoning
Logistics
Management
Procurement System
Trends in International Procurement

• Various trends in international procurement are:
Accurate Demand Forecasting
Short Product Life Cycles
More Mature Management
E-procurement
Procurement System
Trends in International Procurement

• Accurate demand forecasting: Procurement orders are processed whenever demand is
generated at the organisation’s end thereby reducing the level of inventory at both the sides -
the supplier and the organisation.
• Short product life cycles: Today, the average life of products is shorter as compared to the
products manufactured a decade ago.
• More mature management: Organisations nowadays have streamlined business processes
that help in better management.
• E-procurement: E-procurement has made it easier for the organisation to track the exact
location of shipment till it reaches the intended destination.
Procurement System
Principles and Policies of International Procurement

• Any procurement activity must be based on three principles, which are explained as follows:
− Efficiency and effectiveness: The ultimate goal of a procurement process is to ensure
that the price, quantity, quality and delivery schedule of the sourced products is as desired
by customers.
− Accountability: Both the supplier and the procurement officer from the organisation’s
side should be responsible for every action taken by them during the procurement
process.
− Transparency: The entire procurement process must be transparent so as to increase the
visibility of the process.
2. Financing Global Supply Chains
• GSCF includes the following solutions for buyers and suppliers:

− Global asset-based lending (GABL)
− Inventory financing, which enables organisations to secure finance on the basis of the
inventory they hold.
− Receivables management wherein consignments are managed by an outsourced agency.
− Payables discounting wherein payables are outsourced to a third party. A buyer having
a good credit rating gets credit at favourable finance rates.
− Insurance that mitigates risks associated with consignment.
1. Selecting International Logistics Operator
• Selection of an international logistics operator depends on several factors that may vary from
one company to another.
• Some of these factors include the organisation’s business plans and goals, expansion plans,
acquisitions, competitive strategy, external environment, etc.
• With increased global competition, an organisation must carefully choose an international
logistics provider so that shipments can be handled effectively.
• Some important points must be kept in mind while selecting a 3PL provider, which are as
follows:
− Cultural alignment: It is important to determine if a logistics provider has the same
values as the organisation.
− Infrastructure: A logistics provider must have the requisite infrastructure and resources
to meet the client’s needs.
− Expertise in IT: A logistics provider must have efficient IT facilities so that real-time
communication can take place between the client and the provider.
− Metrics: The logistics provider and the client must have well-established parameters for
performance.
− Ability to live up to its commitment: Feedback can be taken from various existing
clients of the logistics provider to ascertain its reliability and service quality.
− Price: Price charged by a logistics provider is an important determinant in its selection
as a preferred logistics partner.
− Spectrum of services: The range of services provided by the logistics provider is an
important consideration.
− Financial stability: The logistics provider must be financially stable and sustainable.
− On-time performance: The track record of the logistics partner with regard to timely
deliveries must also be considered.
• For the selection of the right logistics operator, it is important to understand the three types of
3PLs. These are:
Asset-based Providers
Management-based Providers
Integrated Providers
• Asset-based providers: These operators use their own vehicles and infrastructure like trucks,
warehouses and manpower in their operations.
• Management-based providers: These provide managerial and technical expertise, but use the
infrastructure of other organisations.
• Integrated providers: These operators supplement their services with the required
infrastructure as and when required by the client.
3PL Selection Process

For selecting a 3PL provider, the following steps need to be followed:
1. The organisation drafts a Request for Information (RFI).
2. The organisation invites quotations in the form of Request for Quotation (RFQ), which
involves receiving bids from various logistics operators.
3. Once the bids have been evaluated, the organisation often selects top three bidders for a site
visit which includes interviews with senior team members, survey of their infrastructure and
examination of their financial stability.
4. The most eligible supplier is finally shortlisted.
1. ISO Supply Chain Management Selection
• International Organization for Standardization (ISO) is an international, independent and non-

government organisation that works for developing standards in various fields internationally.
• About 162 national standard bodies are the members of ISO.
• Under the umbrella of ISO, experts in various sectors come together and share their
knowledge to develop voluntary, consensus-based and market-related international standards.
• ISO grants various types of quality certifications to organisations.
• It is considered as the benchmark for quality assurance across the world.
1. Export Sales Contract and its Constituents
• The elements that are present in all export contracts are:

− Name of the parties
− Address of the parties
− Standards and specifications in relation to the product
− Quantity of products in words and figures both
− Inspection-related details
− Total value of the contract
− Delivery terms (the location of dispatch and delivery)
− Duties, taxes and all other charges
− Shipment and transhipment details
2. Export Sales Contract and its Constituents
− Packaging and labelling requirements

− Payment terms
− Discounts and commissions
− Information related to licences or permits
− Associated risks and coverage
− The period of product guarantee
− Contract of damages to be paid to the buyer by the seller (supplier) in case of delays in
delivery
− Force majeure (excuse for non-performance of contract) conditions
− Signatures of both the parties
1. Warehousing and Materials Management
• A warehouse or stockroom is a place for the storage and handling of any type of inventory
(raw materials, work-in-progress and finished goods.
• Warehousing refers to an activity of storing inventory in a warehouse.
• The activities under warehousing include:
− Receiving goods and entering data for the same into the stock register
− Maintaining the account of finished goods, work-in-progress and raw material
− Storing goods for the required time period in good condition
− Retrieving goods as and when required
− Ensuring careful handling of goods
• There are three ways in which goods can be stored in a warehouse, which are:
Random Storage
Fixed Position
Categorised Fixed Location

• There are various types of warehouses such as:
Commercial Warehouse
Transit Warehouse
Government Warehouse
Open Storage
Bonded Warehouse
• Commercial warehouse: It is normally in a building or any other facility that might be owned
by an organisation or taken on rent.
• Transit warehouse: This warehouse stores goods for a temporary period.
• Government warehouses: These are owned by a government and are normally located at
ports.
• Open storage: It refers to a space that is open or a space over which there is no constructed
building. In this warehouse, goods are exposed to environmental factors such as rain, pests,
etc.
• Bonded warehouse: This refers to a type of warehouse in which bonded goods are stored.
Shipping- I
2. Concept of International
Transport
• Once the transportation mode is decided, the shipper has to decide on the type of carrier.
Different types of carriers are:
Types of Carriers
Common
Contract Carriers Private Carriers Public Carriers
Carriers
Transport
• Contract carriers: These are public carriers available on a contract to companies, namely
chartered plane or ship.
• Common carriers: These carriers have specific routes which are served on a regular basis,
through railways, airlines, etc.
• Private carriers: A company can choose to operate their own transport if it has regular and
large amount of goods to be sent.
• Public carriers: These are companies which offer transport on hire basis. The shipper may
hire them as per the requirement.
Transport
Freighting
• Transporting goods in bulk by truck, train, ship, or aircraft is called freighting.
• It is the activity involving transportation of goods by carriers, directly from the dispatcher to
the recipient, without any previous consolidation, without halting on the dock and without any
interruption in loading.
Transport
Objectives of Transportation
• The objectives of transportation are:
Costs
Customer Service
Industry Awareness
Continuous Improvement
Transport
Objectives of Transportation
• Costs: Reduction in cost of transportation and warehousing materials adds to the bottom-line
and maximises the profit from an operation.
• Customer service: In order to provide customers with exceptional service, companies aim to
manage their logistics requirements in an efficient manner. .
• Industry awareness: A logistics company aims to build its reputation in the market. Better the
reputation, better the advantage over competitors.
• Continuous improvement: A logistics company aims to continuously improve the quality of
its transportation service through regular customer interaction and feedback.
1. Role of Transportation
in Logistics
• Transportation plays a vital role in the logistics chain and is involved at each stage, that is,
from product manufacturing to final delivery at the appropriate location.
• Efficient transportation helps in minimising inventory costs, better warehouse management,
etc.
• Effective transportation also plays an important role in the globalisation of products and this is
done by enabling transportation of products from countries with cheap labour such as India
and China.
• This not only contributes to the economies of these countries but also establishes a channel of
product flow.
2. Role of Transportation
in Logistics
• Both the carrier and the shipper have to take certain decisions regarding the effective
functioning of the transportation system.
• One of the crucial factors is associated with cost such as the carrier may require incurring a
fixed operating cost in situations where access to an operating facility is needed.
• The two most essential factors which need to be optimised are transportation expenses and
customer responsiveness.
1. Transportation Modes
• The various transportation modes are:
Air
Rail
Road
Water
International Ocean Transportation

• Some major types of containers are:
Dry Storage Container
Flat Rack Container
Open Top Container
Tunnel Container
Open Side Storage Container
Refrigerated ISO Container
Insulated or Thermal Container
Tanks
Car Carriers
International Air Transportation

• This mode of transportation depends on speed, cost and location of the market. Air
transportation is preferred for small goods, which is time-critical.
• Air transport is constrained with lift capacity (load constraints) like ships and availability of
aircraft.
• Air transport does not favour any particular commodity’s domination. Most of the air cargo is
handled on instances of emergency rather than routine.
International Land and Multi-modal Transportation

• International land transportation is best suited for handling both small and large shipments
from short and long distances.
• Both road and rail transport modes come under this category.
• Companies use road or rail transport modes according to their requirements such as bulk
goods are transported via railways and can reach their destination in a very short period of
time.
• For short-distance shipment, trucks or cars are used as the forms of road transport.
International Land and Multi-modal Transportation

− Optimum utilisation of each mode: In multimodal transport, advantages of each
transportation mode, such as flexibility of road haulage, large capacity of railways and
low costs of water transport can be combined in the best possible manner.
− Less investment on working capital: Multimodal transport provides faster transit
times, which helps in maintaining lesser inventory for companies. It allows less
investment in working capital.
− Maximum utilisation of resources: Distance between the origin and the destination is
reduced through multimodal transport. So companies can operate from coastal regions
and use the land resources optimally.
1. Concept of Container Yards (CYS),
Inland Container Depots (ICDS)
and Container Freight Stations
(CFS)
• Cargo containers require a facility to be trans-shipped between different transport vehicles for
further transportation. Such facilities are often termed as container terminals, yards, depots,
stations, etc.
• Maritime container terminals are usually a part of larger ports and are situated around major
harbours.
• Container Yards (CYs) denote a place or facility within a port or terminal, which is used for
handling and storing containers before or after they are loaded or offloaded from a ship. These
facilities are placed either within a port or inland.
2. Concept of Container Yards (CYS),
Inland Container Depots (ICDS)
and Container Freight Stations
(CFS)
• Inland Container Depots (ICDs) are also called ‘dry ports’. These depots are usually situated
at inland points, far from sea ports. ICDs are independent units of customs and have unique
designator station codes.
• Container Freight Station (CFS) is usually a fixed port or container terminal area, with one or
more warehouses and uncovered storage facilities where cargo is loaded or unloaded from
containers. Thus, CFS is used for temporarily storing cargoes in the sheds or warehouses.
1. Chartering
• Chartering is a rental agreement, wherein a charterer agrees to hire a ship or aircraft from its
owner to transport cargo.
• Normally, it is the charterer who owns cargo, which needs to be exported to some other part of
the world.
• In case of not owning a ship for transporting cargo, the cargo owner may require hiring a ship
or aircraft to move the cargo for him/her.
• The process of hiring a ship or aircraft for shipment purpose is termed as chartering and the
cargo owner who hires a ship or aircraft is called charterer.
3. Chartering
• Charters can be of different types such as:

Voyage Charter
Contract of Affreightment
Time Charter
Trip Time Charter
Bareboat Charter or Demise Charter
Slot Chartering
Dry Bulk and Tanker Chartering

• Voyage Charter: This is one of the simplest types of charter or contract under which a ship is hired to
transport only a particular type of cargo, such as wheat or coal between the loading and discharge ports.
• Contract of Affreightment: This is also an appropriate chartering option for a charterer who has a large
quantity of cargo to be shipped on time and thereby involves
many voyages.
• Time Charter: It is another common form of contract wherein the ship-owner operates his/her ship as per the
instructions by the charterer.
• Trip Time Charter: Trip time charter is a type of contract made for a short duration of time and for a specific
route only (unlike time charter where the charterer is free to select the route and ports of call).
• Bareboat Charter or Demise Charter: It is a long-term contract wherein the ship owner hands over the
operation of the ship to the charterer to use it for an agreed period.
• Slot Chartering: Slot chartering is a term used in container shipping. The chartering party hires an agreed
number of ‘slots’ from the container ship operator. The slot hire agreement may or may not be for a fixed
voyage but is for a specific route.
• Dry Bulk and Tanker Chartering: This type of chartering uses any one of techniques like voyage, time or
contract of affreightment to transport bulk cargoes such as crude oil, food grains etc. This type of chartering is
done through ship brokers, a specialised kind of service.
Shipping-II
1. International Commercial
Documents
• Export/import documents are the core of all international trade transactions. These documents
offer the following benefits:
− Provide international traders with a record of accounts.
− Offer shippers and logistics providers instructions on how to deal with freight
information.
− Provide banks with instructions and accounting tools to collect dues.
Documents
• The main commercial documents related to international trade are:
Invoices
Export Documents
Import Documents
Transport Documents
Documents
Invoices
• An invoice is a document that provides information about the terms and conditions of a sales
transaction. Different types of invoices are used in international trade which are:
Commercial Invoice
Pro Forma Invoice
Consular Invoice
Specialised Commercial Invoice

Documents
Invoices
• Commercial invoice: A commercial invoice is a formal demand note for the payment charged by
the exporter of goods to the importer under a sales contract.
• Pro Forma invoice: The pro forma invoice bears information for the buyer’s benefit regarding
the type and quantities of goods, value of these goods, and specifications such as weight and size.
• Consular invoice: A consular invoice is a document requested by certain countries bearing

information about the shipment such as consignor and consignee details, description of goods
value, etc.
• Specialised commercial invoice: There are certain countries that lay emphasis on receiving all
invoices, printed in a standard format which are usually easily available from specialised printers
of international stationery.
Documents
Export Documents
• The government of a country requires certain documents prior to the Some of the common
export documents required by the government export of goods are:
Export License
Shipper’s Export
Documents
Export Documents Declaration
Certificates of End-
Use
Export Taxes
Export
Export Quotas
Packing List
Documents
Export Documents
• Export license: An export license is a document that is required to get permission to carry out
an export transaction.
• Shipper’s export declaration: A shipper’s export declaration is a statement made to the
customs director at the entry/exit port bearing information about the particulars of the
shipment, such as the type of goods, final destination, importing country, etc.
• Certificates of end-use: A certificate of end-use is an export document used for international
trade transactions including sale of arms, weapons and ammunition needed to certify that the
importer is the final recipient of the materials and does not intend to transfer the items to a
different party.
Documents
Export Documents
• Export taxes: Export taxes are levied on products being exported out of the country and on
services offered to non-residents by residents of a country.
• Export quotas: In some countries, the government imposes restriction on the amount or
number of goods or services exported within a given time period. This is referred to as export
quotas for goods.
• Packing list: The packing list contains details about the packing information of the goods
shipped from export ports. It is prepared by the exporter of goods.
Documents
Import Documents
• Several documents are required by countries in which the shipped goods are being imported.
The purpose of these documents is as follows:
− Ensuring that inferior goods are not imported
− Determining precise tariff classification
− Determining the exact value of imported goods
− Safeguarding importers from fraud
− Restricting the import of goods not permitted by the government
Documents
Import Documents
Certificate of Origin
Certificate of
Manufacture
Certificate of
Inspection
Documents
Import Documents
Certificate of
Certification
Phytosanitary
Import
Certificate
Certificate of Testing
Import License
Certificate of
Insurance
Documents
Import Documents
• Certificate of origin: This certificate is required to declare the place of manufacture of the
imported goods along with details about the nature, quantity and value of imported goods. The
main objective of the certificate of origin is to ensure that goods in a particular shipment are
completely obtained, produced, manufactured, or processed in a particular country.
• Certificate of manufacture: This certificate is quite similar to the certificate of origin.
However, the only difference between the two is that the certificate of manufacture attests to
the location of manufacture of the exported cargo.
Documents
Import Documents
• Certificate of inspection: In a sales contract between a buyer and a seller, they agree that on
the quality of the goods and on their arrival, it is ascertained whether the goods meet the
quality standards or not. If however, a dispute arises then an independent party or government
employee is appointed for inspection of goods on arrival and to certify that the goods meet the
agreed standards. This document is referred to as the ‘certificate of inspection’.
• Certificate of certification: An importer requires a certificate of certification to ensure that
the goods received meet the technical standards. It is generally prepared by an independent
organisation or a representative of the trade association.
Documents
Import Documents
• Phytosanitary certificate: This certificate is required for international consignments of plants
or plant materials being imported into a country.
• Certificate of testing: The certificate of testing states that the imported goods conform to the
international/national technical standards of quality, safety and specifications.
• Import license: This is an import document issued by the trade and export licence department
of a country and serves the purpose of authorising the import of certain controlled goods.
• Certificate of insurance: A certificate of insurance bears complete details of the insurance
coverage related to the import goods.
Documents
Transport Documents
• The purpose of transport documents in international trade transactions is to monitor the
movement of merchandise as it is transferred from one party to another while being
transported. The main transport documents are:
Bill of Lading
Airway Bill
Documents
Transport Documents
Charter Parties
Shipper’s Letter of
Instruction
Transport
Shipment of
Dangerous Goods
Manifest
Packing List
Documents
Transport Documents
• Bill of lading: A bill of lading is a contract between a goods transporter and a shipper for the
hauling of goods for delivery. It is a receipt issued by a carrier to a shipper that the goods have
been received and serves as an evidence of the title to the goods to avoid any future dispute.
• Airway bill: The airway bill is a transportation document required for the shipment of cargo
by air. It serves as a goods delivery receipt and specifies the terms and conditions of the
carriage. However, it is not a title document and does not act as a negotiable instrument.
Documents
Transport Documents
• Charter parties: This is a transport document and acts an a contract between the ship-owner
to lease and the charterer to hire a vessel on the terms and conditions put forward by the
charter party.
• Shipper’s letter of instruction: The shipper’s letter of instruction is a transport document
issued by the exporter to the forwarding agent. This document mentions shipping instructions
for air or inland shipment.
• Shipments of dangerous goods: Export goods shipped via air and categorised as dangerous
goods need to bear a ‘shipper’s declaration for dangerous goods’ document. This document is
needed by the International Air Transport Association (IATA).
Documents
Transport Documents
• Manifest: Manifest is a transport document that acts as a tally sheet for delivered goods. It
provides details of all bills of lading issued by a carrier for a specific shipment in a specific
vessel.
• Packing list: The packing list, also referred to as the packing note, provides information about
the goods that need to be included in a specific shipment and the contents in each package or
container to ease the task of unpacking and warehousing of the cargo after delivery. If a
certain package or container needs to be obtained, it could easily be determined using the
packing list.
1. Export Packaging
• When goods are moved overseas, exporters need to follow the specified guidelines for their
packaging, labelling, documentation and insurance. Exporters must consider the following
points before exporting the cargo:
− The goods should be packed correctly to maintain them in good condition until delivery.
− The goods need to have correct labels to ensure proper handling and delivery to the right
party.
− The documents should be precise and complete to avoid customs clearance delays.
2. Export Packaging
• Exporters must ensure the following about their packaging:

− Ensuring that goods are packed in strong containers and sealed properly
− Providing adequate bracing to the containers irrespective of the size and evenly
distributing the weight of goods
− Keeping goods in pallets or containers as and when required
− Ensuring that the packaging is made of moisture-resistant material
− Avoiding labelling directly on the packages to prevent pilferage
− Keeping in mind the specifications about the packaging of hazardous materials
3. Export Packaging
• The three most common mediums for shipping export goods are:
Ocean Transport
Air Transport
Road and Rail Transport

4. Export Packaging
Ocean Transport
• Ocean transport service providers offer a global network of cargo shipments to suit any
shipment size to any destination in the world.
• The common transport mediums used for ocean cargo include the Full Container Load (FCL)
cargo, Less-than-Container-Load (LCL) cargo, and occasionally the break bulk cargo.
• In case an exporter needs to accommodate the entire shipment in one load, he/she uses a Full
Container Load (FCL) to ship the cargo.
• A less-than-container-load (LCL) cargo is used in cases where the exporter does not have
sufficient goods to fill a full container cargo.
5. Export Packaging
Air Transport
• In air transport of export cargo, goods are loaded and carried through different pallets and
containers, referred to as Unit Load Devices (ULD).
• These ULDs have different specifications for height, length and width, which make them
suitable or unsuitable for carrying a particular cargo.
6. Export Packaging
Road and Rail Transport

• Road transport of cargo is generally carried out in trucks. Truckers either operate
independently or in association with a trucking company to transport goods via roads. They
may also operate through freight carriers or shipping agents.
• Rail transport is essential for promoting trade. It is one of the cheapest forms of transport.
Therefore, it enhances the global competitiveness of an economy.
8. Export Packaging
Hazardous Cargo
• Hazardous goods include items that pose threat to health, safety and property.
• Based on the specific risk factors, these hazardous goods are divided into the following three
packing groups:
− Packing Group I: Great Danger
− Packing Group II: Medium Danger
− Packing Group III: Minor Danger
• Exporters of these goods have the responsibility to declare the hazardous cargo by filling the
‘Shipper’s Declaration of Dangerous Goods’ form.
9. Export Packaging
Refrigerated Goods
• Refrigerated goods include items that need to be shipped maintaining a particular temperature
to prevent any change in their size, freshness, firmness, texture, colour, flavour, or chemical
composition during transit.
• Exporters use special refrigeration services to transport such goods to the final destination.
Two main factors that could impact the temperature of these goods during transit are as
follows:
− External temperature to which containers are exposed to during loading/unloading
− The temperature of the goods prior to loading
1. Customs Clearance Process
• Customs clearance is the process of getting imported/exported goods cleared at the customs
office so that they could enter or leave the country.
• This process ends with a document granted by the customs to the shipper of goods, which
states that customs duty has been paid and the goods are verified to be shipped to their
destinations.
• The process takes place in the customs department, which is the government authority entitled
to implement the import/export policies, collect customs duties, and facilitate the
transportation of people, goods and cargo in and out of a country.
3. Customs Clearance Process
• Two simple ways by which importers/exporters can ease the customs clearance procedure for
their shipments are:
− Loading the shipping container with diligence: Inappropriate loading of cargo may
lead to prolonged assessment and examination of the cargo. This may lead to undesirable
delays which can cost the traders especially if the items are perishable.
− Providing precise and detailed information to the customs broker/freight forwarder:
Providing correct and complete details as specified by the customs in the documents is
important for a smooth customs clearance. Traders should provide complete details of the
business, inventories or itemised lists of shipments, and value of goods to the customs.
Chapter 8: Information
Technology and Information
System in Logistics
Management
1. Application of IT in Logistics
Electronic Data Interchange (EDI)

• EDI or Electronic Data Interchange has been established as a standard form of communication
between business partners on pre-determined electronic formats that bring about exchange of
documents from one computer to another. The EDI methodology has several benefits because
of the following reasons:
− It has high data processing speed.
− It is paperless.
− It is virtually error free.
− It helps in updating information easily.
− It has replaced traditional methods like phone, fax, mail etc.
Intranet/Extranet
• Intranet: The intranet provides access to data within the organisation. The data is, however,
well-guarded and only authorised personnel within the organisation can access the data.
• Extranet: An extranet refers to a private network that employs a public telecommunication
system as well as Internet technology in order to provide secure access to pertinent
information about a business with customers, vendors, other businesses, partners as well as
suppliers.
Bluetooth
• Bluetooth is a technology that utilises wireless communications system which is meant to
supplant the cables that are used to connect various kinds of devices from headsets to medical
equipment to mobile phones.
• Manufacturers of wireless devices have explicit instructions for accessing Bluetooth which
can be converted into the following steps:
1. Turn on and enable the Bluetooth device
2. Nearby devices can easily pick up the signal therefore safeguards should be exercised
3. Identification of a device to prevent misuse of data especially when other compatible
equipment is present
Radio Frequency Identification (RFID)

• Radio-Frequency Identification (RFID) refers to the transfer of data wirelessly by using
electromagnetic fields for the purpose of automatic identification and tracking of tags that
have been attached to goods.
• It comprises tiny electronic instruments such as a chip or an antenna.
• A RFID device is not required to be placed in a precise manner corresponding to the scanner
since the RFID instrument can operate within a few feet of the scanner.
Information System and Bull
Whip Effect
• The Bull Whip or Whiplash Effect refers to large and sudden swings in the demand and
supply of products that occur as a result of some unrelated, small and also unplanned variation
in consumer demand.
• The causes that lead to the Bull Whip effect are:
− Delivery delays: It refers to lead time which means the gap of time that occurs when an
order is placed and when it is subsequently delivered.
− Order batching: It occurs when a large number of orders are piled up by an organisation
before properly processing them in order to save costs.
− Shortage gaming: The Bull Whip effect is also caused by shortage gaming which occurs
when customers purchase in excess when there is a shortage in supply of goods.
Security Issues in Global
Supply Chain
• The provision of security and a secured process of the global supply chain would help protect
the lives of people across the world and contribute to the stability of an economy.
• It was realised that there was a need for global intervention to secure the supply chain. In
order to ensure this, one of the major decisions made by global decision makers was the
establishment of the Customs Trade Partnership against Terrorism (C-TPAT).
• C-TPAT is an initiative of the United States Customs and Border Protection (CBP). This
initiative is supported by the Department of Homeland Security.
Insurance
2. Insurable Interest
• The essentials of insurable interest are as follows:

− An asset, interest or liability capable of being insured
− The asset, interest or liability must be the subject matter of insurance.

− The insured must have a valid and legal relationship with the subject matter of insurance.
− The individual should benefit from the well-being of the subject matter and should be
interested in its upkeep.
− Damage to the subject matter may result in a pecuniary loss to the insured.
2. Risk Management
• Some of the characteristics of risk management are as follows:

− Risk management is a continuous process.
− It is especially undertaken for pure loss circumstances.

− It has to be followed in a step-by-step procedure.
− The potential loss should be measurable.

− Historical data of the event should be available.
− The proposer should have insurable interest in the event.

3. Risk Management
• The main objectives of risk management are:
Identifying Risks
Measuring Risks
Managing Risks
4. Risk Management
Risk Retention
• Not transferring or sharing the risk is called retention of risk.
• Risk retention is a type of self-insurance practised by organisations that feel that the cost of
retaining the risk will be more economical than transferring it to an insurance agency.
• This may be due to the low probability of the actual occurrence of the risky incident or due to
the low significance of the loss in case the risky incident occurs.
• This is deliberated acceptance of any loss, which may occur due to a risky situation.
5. Risk Management
Risk Transfer
• Risk transfer is a concept that involves shifting a risk from one party to another as a result of a
contract.
• Thus, it would be appropriate to say that risk transfer is a strategy of controlling and managing
risks.
• Risk transfer allocates and distributes the risk among designated parties equitably, if it is
strategised and implemented efficiently.
• Risk transfer is subject to the abilities of the involved parties to control and insure against the
risk.
6. Risk Management
Mixed Approach
• Mixed approach is used when an organisation retains some portion of the risk and transfers the
rest. This decision is made after considering the following factors:
− The maximum amount of exposure that the organisation is ready to take: This is
based on the deductible that is calculated on a per claim basis. The insurance company
pays for the losses that are greater than the deductible.
− The types of risks that the organisation is ready to take: The organisation may choose
to insure against the coverage mentioned in policies. Other risks such as leakage,
breakage, etc., which are not mentioned in the policy, are covered by the organisation.
1. Perils of Sea and Air Shipments
• The business of marine insurance was started to safeguard sea-going/water-borne vessels and
cargo carried therein from the perils of the sea.
• The goods that move from one place to another through the sea are referred to as marine
cargo.
• Marine cargo insurance is referred to as the insurance cover of damage or loss of goods while
in transit across the sea. It is a type of property insurance.
• Perils refer to the causal factors that lead to the occurrence of certain events that pose risk to
the businesses. The various types of perils are:
Maritime Perils
Extraneous Perils
War Perils
Strike Perils
• There are a variety of threats associated with the sea travel and transportation of goods by sea.
Perils related to sea are:
− Sinking into the sea for any reason, including capsising
− Damage to the ship or its destruction due to fire
− Outbreak of war
− Throwing the goods overboard or jettisoning them
− Having the goods washed overboard or into the sea

− Attacking and capturing the ship by pirates for ransom
− Stealing of cargo by thieves
− Collision with another sea craft

• Apart from sea, perils related to air shipment also exist. The important perils related to air
shipment are:
− In the airplane, the cargo is subjected to the change in sudden weather conditions.
− The cargo may break as the airline may take major bumps while landing.
− The cargo may also break when it is being transported from the warehouse to the
airport. Furthermore, there are chances of theft.
1. Marine Insurance Policies
• Marine insurance mainly covers the loss or damage to ships, cargo, terminals and any
transport or cargo used for transferring, or keeping, products between the points of origin and
final destination.
• Any kind of damage or destruction to the goods or loss of goods in transit, transported through
either sea, rail or air mode, is covered by marine insurance policies.
• This insurance covers the goods whether they are transported by sea, air, road or by rail.
Marine Cargo Insurance

• Marine cargo insurance covers damage to goods or loss of goods in transit by either land, air
or sea.
• It can be defined as insurance that insures cargo while in transit against loss or damage arising
from perils associated with the navigation of sea or air and the subsequent land and inland.
• There are many types of marine cargo insurance policies, which cover various forms of
transportation. These are:
− Open policy: This policy is issued to provide cover to raw material, semi-finished and
finished products moving from one location to another.
Marine Cargo Insurance

− Open cover: This is not really a policy but an agreement wherein the insurer takes on the
insurance of all shipments for a particular period of time, say a year. The terms are
defined in advance.
− Annual Turn-Over Policy (ATOP): It insures finished, semi-finished goods as well as
raw materials in transit.
− Specific voyage: This policy covers specific individual cargos till their destination
points.
− Annual policy: This is a type of policy that is provided when the goods are not under a
contract of purchase or sale.
Hull Insurance
• Hull insurance is an insurance policy that insures the physical aspects of the a covering the
hull, railings and other physical features of the ship including its machinery and equipment.
• Hull insurance is of two types:
Brown Water
Blue Water
1. Elements of an Air Freight Policy
• Air freight insurance is a type of insurance that provides coverage for damage or loss of
goods, which are transported by air.
• Air cargo involves a complex network of information and physical product movement. This
sector has three main areas: the physical movement, forwarding services and integration
services described as:
Physical Movement
Forwarding Services
Integration Services
2. Elements of an Air Freight Policy
• The main aspects behind the transportation of cargo through the air transit are:
− Air cargo flows in one direction unlike passengers’ plane. This is apparent in the Asia-
North America routes.
− Routes are unimportant. Timely delivery of cargo is important.
− Air cargo allows for overnight delivery.

− Air freight is usually combined with other forms of transportation.
− Air freight services are used by importers and exporters.

− A freight broker helps to access a wide array of transportation specialists to fine-tune
logistics and lower the shipping costs.
− Growth in air cargo plays a significant role in global trade.
− Terrorism poses a major threat to air cargo.
1. Commercial Credit Insurance
• Commercial credit insurance provides insurance to an organisation against any loss or a

default payment for inadequate services or bad debts.
• This insurance ensures that a certain percent of the invoice is reimbursed to the buyer of the
insurance, which is unpaid due to:
− Insolvency or bankruptcy of the customer
− Default in payment or inability of customer to pay due to financial troubles
− Cancellation of the purchase contract by the customer
− Refusal to take delivery of the products by the buyer

3. Commercial Credit Insurance
Risks Involved
• Risks involved in selling commercial credit insurance are:
− Bankruptcy of the customer during the manufacturing or preparation of the product
− Financial troubles faced by the customer and thus default in payment

− Cancellation of contract by the customer
− Refusal by the customer to take the delivery of the goods

− Political risks such as war or rebellion in the country of the customer
− Laws of the country/state in which the customer is located

− Miscommunication or misunderstanding with the customs department
Chapter 10: Prospective
Growth in International
Logistics and Supply Chain
Management
1. Future Growth of Global Supply Chain Management and
Logistics
• The reasons for the growing global supply chain management and logistics are:
− Enhanced pace of globalisation: With the passage of time, big organisations realised the
fact that they needed to capture the overseas market to compete for a long-term position.
− Improved application of information technology: With the advent of Internet and
information technology, organisations are able to find solutions for maintaining a
seamless flow of information across departments as well as the customer base, which
helps in timely planning and executing operations.
− Enhanced pattern of partnerships/strategic alliances: Logistics providers and
manufacturers are always on the lookout to find innovative ways to improve their service
and efficiency.
Logistics
− Increased complexity: The complexity levels of supply chain management would only
increase with time.
− Increased flexibility: A supply chain is expected to meet the requirements of customers
at multiple locations, through multiple channels, using multiple transport modes and
within different time frames.
− More demand for transparency: There is a need to make the entire supply chain visible
to enable planning that is driven by demand. Transparency enables prompt responses to
any changes at any point in the supply chain, be it supply, demand or capacity.
Logistics
• Simultaneous growth and changes in the global supply chain management will result in many
benefits from the perspectives of the buyer, such as:
− Anytime buying
− Anywhere buying
− Facilitation of sales by using social media such as WhatsApp, Facebook, etc.
− Facilitation of sales by using mobile applications such as Amazon, Flipkart, Snapdeal,
etc.
− Usage of cloud computing
− Online shopping
Logistics
• The benefits derivable from the global supply chain are:

− Global compilation of data
− Cloud-based networking
− Ability to track huge volumes of shipments of big, small and micro sizes
− Increased transactions between business entities
− Enhanced data analytics to arrive at demand forecasting
− Improved and easier connectivity between suppliers and buyers
1. Constraints of Global Supply Chain Management and
Logistics
• The constraints faced by the global supply chain management and logistics are:
Geopolitical Risks
Climate Change
Price Level
Buffer Stock
Legal Framework
1. Future Strategic Focus: Global Supply Chain Management
and Logistics
• An organisation developing its supply chain should consider the fact that the strategies made
by it should be effective enough to meet its long-term objectives.
• In order to succeed as a global supply chain management company, the strategic focus of the
company should be on:
− Winning trust as a reliable supply chain manager
− Committing itself to strong security processes
− Having best-in-class operations
− Being flexible in adapting to various cultural and economic norms across the world
and Logistics
• The aforementioned features can be added to an organisation coming with supply chain and
logistics facilities to the global level by finding and implementing the following ways:
− Knowledge sharing
− Modular learning
− Strategies and tactics formulation
− Innovation and new initiatives
− Collaboration for solutions
− Discovering new opportunities
and Logistics
• Strategic focus while making future policies is followed by several benefits such as:
− Enhancement in the economies of scale by entering into collaborations with different
supply chain service providers across the globe
− Improved flow of information resulting in timely decision making at centralised and
decentralised levels
− Increased speed of responses by coordinating efforts in various units located across the
globe
− Reduction in turnaround time by adopting emerging technologies
− Balance of manpower costs by investing in the countries having comparatively lower
manpower costs

International Logistics & Supply Chain Management

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International Logistics &

Supply Chain Management

• International logistics and SCM practices aim at helping an organisation in:

• Outsourcing refers to a process or an activity in which a company enters into an agreement

• Broadly, a value chain can be divided into two types:

Supply Chain Risk

Selection and Evaluation

• Manufacturing strategies evolved focusing on organisations’ ability to offer better products

Agile Supply Chains and Mass Customisation

Agile Supply Chains and Mass Customisation

Agile Supply Chains and Mass Customisation

Replenishment Lead Time

• The critical factors that affect supply chain planning are:

Supply Chain Relationships

Supply Chain Management (SCM) Performance

Opportunities and Risk Identification

Complex Taxation Laws

Different Quality Standards

Different Customer Expectations

Rapid Technological Changes

Advantages and Disadvantages of International Procurement

Advantages and Disadvantages of International Procurement

International Procurement Process

Trends in International Procurement

Accurate Demand Forecasting

Short Product Life Cycles

More Mature Management

Trends in International Procurement

Principles and Policies of International Procurement

• GSCF includes the following solutions for buyers and suppliers:

3PL Selection Process

• International Organization for Standardization (ISO) is an international, independent and non-

• The elements that are present in all export contracts are:

− Packaging and labelling requirements

Categorised Fixed Location

• There are various types of warehouses such as:

• The various transportation modes are:

International Ocean Transportation

Dry Storage Container

Flat Rack Container

Open Top Container

Open Side Storage Container

Refrigerated ISO Container

Insulated or Thermal Container

International Air Transportation

International Land and Multi-modal Transportation

International Land and Multi-modal Transportation

• Charters can be of different types such as:

Trip Time Charter

Bareboat Charter or Demise Charter

Dry Bulk and Tanker Chartering

• The main commercial documents related to international trade are:

Pro Forma Invoice

Specialised Commercial Invoice

• Consular invoice: A consular invoice is a document requested by certain countries bearing

• Exporters must ensure the following about their packaging:

Road and Rail Transport

Road and Rail Transport

Electronic Data Interchange (EDI)

− Having the goods washed overboard or into the sea

− Air cargo allows for overnight delivery.

− Air freight services are used by importers and exporters.

− Refusal to take delivery of the products by the buyer

− Financial troubles faced by the customer and thus default in payment

− Refusal by the customer to take the delivery of the goods

− Laws of the country/state in which the customer is located