International Logistics & Supply Chain Management

International Logistics &
Supply Chain Management

S. No Reference No Particulars Slide
From-To
1 Chapter 1 Introduction to Logistics and Supply Chain Management 5-19
2 Chapter 2 Globalisation and International Trade 20-33
3 Chapter 3 Factors and Challenges Driving Logistics and Supply 34-57

Chain Management
4 Chapter 4 Supply Chain Strategies 58-82
5 Chapter 5 International Procurement and Sale 83-117

From-To
6 Chapter 6 International Shipping – I 118-152
7 Chapter 7 International Shipping – II 153-186
8 Chapter 8 Information Technology and Information System in 187-201

Logistics Management
9 Chapter 9 International Insurance 202-234
10 Chapter 10 Prospective Growth in International Logistics and Supply Chain 235-250

Management
Course Introduction
• Logistics and supply chain management (SCM) are two important inter-related functions of an
organisation that focus on timely delivery of products to customers.
• Logistics involves planning and controlling the flow of goods till they reach the desired
destination.
• SCM is a broad concept that encompasses all activities involved in the movement of a product
from its raw stage to the final delivery to customers.
• In a nutshell, it can be said that SCM integrates and coordinates the flow of products from a
number of suppliers and distributes these products through different intermediaries.
Chapter 1: Introduction to
Logistics and Supply Chain
Management
Chapter Index

From-To
1 Learning Objectives 8
2 Topic 1 Concept of Logistics 9-12
Defining Supply Chain Management

3 Topic 2 13
Evolution of Logistics and Supply Chain

4 Topic 3 14
Management
Chapter Index

From-To
5 Topic 4 Distinguishing between Logistics and 15

International Logistics and Supply Chain

6 Topic 5 16
Management
7 Let’s Sum Up 17
• Explain the concept of logistics
• Define supply chain management
• Discuss the evolution of logistics and supply chain management
• Differentiate between logistics and supply chain management
• Explain international logistics and supply chain management
1. Concept of Logistics
• The term logistics has been derived from the Greek word logisticos, which means science of
computation.
• Now, logistics refers to the integration of handling, warehousing, transporting and controlling
of inventory.
• According to Philip Kotler, Logistics is the planning, implementing and controlling the
physical flow of materials and finished goods from the point of origin to the point of use to
meet customers’ need at a profit.
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.
Defining Supply Chain
Management
• Logistics is concerned primarily with warehousing, packaging, transportation and inventory of

goods.
• SCM relies on the network of transportation and warehousing to ensure procurement,
distribution and movement of materials up to the point of sale for reaching customers.
• The main objective of SCM includes creating a net value and synchronising demand and
supply.
• According to Stock and Lambert (2001), SCM integrates the key business processes of an
organisation from the original suppliers that provide products, services and information that
add value for customers and other stakeholders to the end users.
Evolution of Logistics and Supply
Chain Management
• With the advent of globalisation and technological advancement, the level of competition
rapidly increased and customers’ expectations frequently changed. Thus, the concept of SCM
came into the picture.
• The SCM function of an organisation is integrated with various other functions such as:
Customer Relationship Management (CRM)
Online Marketing
Strategic Relationship Management (SRM)

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
• 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
Let’s Sum Up
• Logistics can be defined as a set of activities that govern the flow of resources between its
point of origin and the destination as per customers’ requirements.
• 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.
• SCM refers to a function that governs the flow of goods and services from the point of origin
to the point of consumption including their storage.
• The main objective of SCM is creating a net value and synchronising demand and supply.
Chapter 2: Globalisation and
International Trade
Chapter Index

From-To
2 Topic 1 Effects of Globalisation on International 23-26

Trade
Outsourcing and Offshoring as an

3 Topic 2 27-28
Emerging Trend in International Trade
Directional Imbalances
4 Topic 3 29-30
5 Let’s Sum Up 31
• Discuss the effects of globalisation on international trade
• Explain the significance of outsourcing and offshoring
• Describe the concept of directional imbalance
1. Effects of Globalisation on
International Trade
• International trade refers to selling and purchasing of goods and services by organisations
across national borders.
• It helps countries find profitable markets for their goods and services.
• International trade contributes largely towards a country’s development by increasing its
income, which ultimately leads to an increase in its Gross Domestic Product (GDP).
• International trade is a major factor contributor in the economic and social upliftment of many
countries
International Trade
• International trade has two different views regarding the degree of control on trade: free trade
and protectionism.
• Free trade is a laissez-faire approach, with no restrictions on trade.
• The main idea behind the laissez-faire approach that supply and demand factors, operating on
a global scale, will ensure efficient production.
• The protectionism approach holds that for international markets to function productively,
incorporation of regulation is necessary.
• Supporters of protectionism theory believe that the inefficiencies of the market may adversely
affect the benefits of international trade, and they aim to guide the market accordingly.
International Trade
• Tremendous economic growth and internationalisation of business would not have been
possible without globalisation. This is because of the following aspects of globalisation:
− International trade: Due to globalisation, trade restrictions imposed by several countries
were relaxed to a great extent. Tariffs and non-tariff barriers in the export-import of
goods, such as ad valorem tariffs, specific tariffs, revenue tariffs, voluntary export
restraints and subsidies, were reduced by different countries to allow the movement of
goods freely across international borders.
International Trade
− Financial integration: Financial integration can be defined as the process of closely

integrating the financial markets of different economies, because of which free flow of
capital and trade in financial assets becomes easy.
− Labour flow: Relaxation in cross-border regulations for the movement of human
resources increases labour flow at the global level.
− Exchange of technologies: Globalisation also facilitates the movement of new and
advanced technolo
− Employment opportunities: Due to globalisation, many companies have shown interest
in developing countries by investing large amounts of capital in them.
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 following 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.
1. Directional Imbalances
• Directional movement of traffic involved in international trade and the economic geography of
the world both play a very significant role in the overall trade costs because of the
transportation costs.
• A significant imbalance is noticed in costs with respect to the direction of shipment between
two places.
• The optimum transport cost (shipment cost) in a particular direction is a function of the
relative volume of trade in the region.
• In short, the imbalance tends to throw the trade costs off balance.
2. Directional Imbalances
• The data compiled from three different sets of international trade, which comprise bulk
volumes, show that there exists an integral relationship between trade flows, unit-specific
trade costs and aggregate income shifters.
• Hence, balances are estimated using a technique of panel co-integration.
• Results point towards a relatively inelastic demand and supply relations in the international
container shipping industry.
Let’s Sum Up
• Outsourcing refers to a process by which a firm gives a part of its work to another firm.
• 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.
• Offshoring more often than not refers primarily to the outsourcing of technical and
administrative support services.
• Directional movement of traffic involved in international trade and the economic geography
of the world both play a very significant role in the overall trade costs because of
transportation costs.
Chapter 3: Factors and
Challenges Driving Logistics
and Supply Chain
Management
Chapter Index

From-To
2 Topic 1 Factors Driving Global Supply Chain 37-42

Management
Customs and Global Supply Chain
3 Topic 2 43-47
Management
Management of Inventory in Supply

4 Topic 3 48
Chain Management
Vendor Management
5 Topic 4 49-54
6 Let’s Sum Up 55
• Discuss the factors that drive global supply chain management
• Explain the role of customs in global supply chain management
• Describe the process of managing inventory in supply chain management
• Explain vendor management, asset management, lean supply chain and lean workforce in
global 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
• Production cost: The cost of producing goods can be reduced through improved
manufacturing processes using appropriate shipment size, packaging, and inventory levels and
restructuring of the supply chain.
• Location: Supply chain management helps in better utilisation of different locations,
provides access to expanded markets and reduces the cost of distribution.
• Lead time: Supply chain management adds value by making the products available when
required and thereby reducing lead times through efficient inventory and transportation
management.
• Control: Supply chain management adds value by monitoring various stages along the
supply chain.
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

Chain Management
• Logistics costs: Supply chain functions involve a number of costs right from production till
distribution of goods.
• Transit time: This factor directly affects the inventory carrying costs and inventory cycle
time.
• Reliability: There are several supply chain management systems that put more priority on the
safe and timely arrival of cargos at the destination instead of only focusing on reducing the
transit time.
• Supply chain risk: A global supply chain system would rely on low risk routes over high risk
routes.
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
Management of Inventory in
• Inventory management is also a major focus area of global supply chain management.
• To ensure adequate customer service, supply chain managers need to maintain a certain level
of inventory of goods at all times in foreign markets.
• Inventory managers need to assess how much inventory to hold, and how to coordinate all
supply chain functions to meet consumer needs effectively.
• Some major considerations that global supply chain managers need to focus on include the
following:
− Geography and infrastructure
− Availability of skilled labour
− Tax and industry regulations
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
• Selection and evaluation: Organisations need to have a robust strategy for selection and
evaluation of vendors to ensure quality across supply chain stages.
• Quality management: Vendors contribute to almost 50 per cent of an organisation’s product
quality issues.
• Risk management: Organisations are exposed to third-party risks, which make it essential to
determine appropriate strategies and procedures for managing vendor relationships.
• Performance management: To ensure that suppliers offer the best possible value, it is of
paramount importance to have a monitoring and reviewing policy in place.
Factors Driving Development of Logistics

• An important factor that has driven the development of logistics is the advancement made in
information technology that has revolutionised the way of communication and data
transmission.
• The second major factor that has led to the development of logistics is globalisation of
markets. Global supply chain infrastructure and the business environment have led to the
expansion of foreign markets.
• Another important factor that drives the development of logistics is the shortening of product
lifecycle. This is mainly due to the rise of fashion conscious international customers and
technological developments.
Asset Management in Supply Chain Management

• Asset management in supply chain activities is related to the minimisation of costs and risks
that come in the way of the desired performance expected of an organisation’s assets.
• One of the major roles of asset management in supply chain management is to reduce the cost
of assets through the entire useful period considering various risks and changing business
trends objectively during decision-making.
• Asset management allows supply chain managers to assess the need for and performance of
assets at different time frames and demand levels.
Lean Supply Chain Management

• Lean supply chain management is an approach based on continuous improvement of supply
chain functions by focusing on the elimination of non-value-added activities or “waste” from
the viewpoint of the customer.
• Some common areas where organisations can identify waste areas are:
Procurement
Manufacturing
Warehousing
Transportation
Lean Supply Workforce

• There are seven principles of achieving a lean workforce to enable organisations to avoid
waste and offer value to their customers. These are:
Best Practices
Goals, Standards and Adaptable Precision
Planning, Scheduling and Simulation
Productive vs. Non-productive Time
Quality and Safety
Training and Coaching
Metrics-driven Enterprise
Let’s Sum Up
• An efficient global supply chain management contributes to value addition in four inter-
related ways—production costs, location, lead time and control.
• 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, cheaper and at the same
time ensure goods security.
• The customs is one of the main agencies responsible for collecting taxes/tariffs, monitoring
goods movement in and out of a country.
• Inventory managers need to assess how much inventory to hold, and how to coordinate all
supply chain functions to meet consumer needs effectively.
Chapter 4: Supply Chain
Strategies
Chapter Index

From-To
2 Topic 1 Evolution of Manufacturing and Production 62

Strategies
3 Topic 2 Logistics and Supply Chain Strategy 63-75
4 Topic 3 Taxonomy of Supply Chain Strategies 76
5 Topic 4 Critical Factors Considered in Supply Chain 77

Planning
Chapter Index

From-To
6 Topic 5 Operational and Strategic Issues in Global Logistics 78
7 Topic 6 Logistics Outsourcing Strategy (3PL and 4PL) 79
8 Let’s Sum Up 80
• Describe the evolution of manufacturing and production strategies
• Discuss the logistics and supply chain strategy
• Describe the taxonomy of supply chain strategies
• Explain the critical factors considered in supply chain planning
• Describe the operational and strategic issues in global logistics
• Discuss the logistics outsourcing strategy (3PL and 4PL)
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
• The supply chain strategy comprises the following elements that deliver high value to the
organisation:
Leverage
Communication
Efficiency
Innovation
Risk Management
Continuous Improvement
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
Lean Production
• Lean production uses certain tools such as:
− Single-Minute Exchange of Die (SMED)
− Value Stream Mapping
− 5-S
− Kanban (Pull system)
− Poka-Yoke (Error-proofing)
− Total Productive Maintenance (TPM)
− Control Charts
− Just-in-Time (JIT)
Strategy
Lean Production
• In lean production waste is considered to be of three types – muda, mura and muri.
• Muda deals with the variation in output and in-operation wastes. The various types of muda
are:
− Transport of products/items which are not required for immediate processing
− Excess inventory
• Mura defines how the work design is executed and work imbalances are avoided.
• Muri occurs from mura, and it relates to the removal of excess waste from the process.
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
Strategy

• There are four approaches to mass customisation:
Collaborative
Adaptive
Cosmetic
Transparent
Strategy
Just-In-Time (JIT)
• The Just-in-Time (JIT) is used by organisations to reduce flow times in production and
response times from the supplier to the customer.
• Some methodologies followed in JIT are as follows:
− Housekeeping by organising the workspace
− Doing it right the first time to eliminate defects
− Reducing set-up times to make the changeover more flexible
− Uniform loading in the plant to balance the line loading
− Skill building by multi-skilling the workers
Strategy
Just-In-Time (JIT)
• Some benefits of JIT are as follows:
− Improvement in the flow of goods from warehouse to shop floor
− Reduced inventory
− Minimised setup time, thereby reducing manufacturing time
− More efficient utilisation of workers
− Better relationships with vendors
− Minimised storage space requirement
− Wastage elimination
Strategy
Just-In-Time (JIT)
• Some disadvantages of JIT are as follows:
− More challenges in production due to zero tolerance for mistakes
− Greater reliance on vendors
− Probability of occurrence of machine idling due to absence of buffer work-in-progress
inventory
− Unexpected peaks in demand can affect the supply chain due to excess stock of
finished goods
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.
Let’s Sum Up
• Lean production is defined as the systematic elimination of waste in the operations of an

organisation.
• 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 from a supply chain perspective involves collaborative efforts with
suppliers, warehousing personnel, manufacturers, distribution centre members and other
participants of the supply chain.
• The Just-in-Time (JIT) is used by organisations to reduce flow times in production and
response times from the supplier to the customer.
Chapter 5: International
Procurement and Sale
Chapter Index

From-To
2 Topic 1 International Purchasing/Procurement System 87-94
3 Topic 2 Financing Global Supply Chains 95-97
4 Topic 3 Selecting International Logistics Operator 98-105
5 Topic 4 Contract Logistics 106

Chapter Index

From-To
6 Topic 5 ISO Supply Chain Management Selection 107-108
7 Topic 6 Export Sales Contract and its Constituents 109-110
8 Topic 7 Warehousing and Materials Management 111-114
9 Let’s Sum Up 115

• Explain the concept of international purchasing/procurement system
• Discuss how an international logistics operator is selected
• Describe contract logistics
• Explain ISO supply chain management selection
• Describe export sales contract and its constituents
• Explain the contract of warehousing and materials management
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.
1. Financing Global Supply Chains
• A global supply chain is an interconnected network of organisations that produce and

distribute goods from the point of origin to the desired destination at the international level.
• Global Supply Chain Finance (GSCF) also known as supplier finance or reverse factoring,
involves a set of solutions that help organisations optimise cash flow by extending payment
terms with their suppliers and also provide an option for large-scale suppliers to get paid early.
• In this case, the working capital of the organisation (buyer) is optimised and additional
operating cash flow is generated by the supplier, thereby reducing risk across the supply chain.
• 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.
• Broadly, there are three forms of the Supply Chain Finance (SCF) structure, which are as
follows:
− Bank proprietary: This kind of structure exists where the technology platform, services
and credit is provided by a large commercial bank.
− Buyer managed: This kind of structure exists when the buyer owns and manages the
finance programme, supplier on boarding and liquidity itself.
− Multi-bank: This kind of structure exists when independent third-party supply chain
finance providers offer multi-bank platforms.
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.
Developing a Successful 3PL Relationship

• There should be a congenial relationship between the client organisation and the 3PL.
• This not only reduces costs of both the entities but also improves their efficiencies.
• The essentials for a successful relationship between a 3PL and the client organisation are:
− A person who will be the point of contact for both parties should be identified.
− Both the parties must be respectful towards each other.
− Transactions between the two parties should be transparent.
− Communication between the client organisation and the 3PL should take place on a
regular basis.
− Returns (consignments) need to be tracked and examined regularly to understand if
something needs to be corrected in the supply chain.
− Measures of success should be reviewed periodically.
− The client organisation should align the interests of the 3PL with its own goals.
− The client organisation must help the 3PL to understand its constraints and the business
environment.
Contract Logistics
• Contract logistics refers to the management and control of a logistics system by a third party
as per the terms and conditions of a contract.
• A contract is signed between organisation and the third party for a specific period of time
usually for one or more years.
• Third-party contract logistics organisations offer a combination of logistics services such as
supply chain planning and designing, warehousing, transport scheduling, order processing,
payment collection, inventory management, customer support and so on.
• Contract logistics service providers first need to have in-depth knowledge of the client
organisation’s requirements before actually entering into a contract.
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.
2. ISO Supply Chain Management Selection
• In the field of supply chain management, ISO also develops several standards.
• Some organisations hire or outsource their supply chain functions only to ISO-certified
suppliers.
• ISO issues certifications that encompass specifications related to production process,
transportation systems, warehousing, recycling, packaging, environmental concerns and so on.
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.
Let’s Sum Up
• Procurement is an activity that involves purchasing goods and services from an

individual/company supplier. This term is specifically used in the context of corporate buyers
who require buying products in large quantities.
• Any procurement activity must be based on three principles: Efficiency and effectiveness,
Accountability and Transparency.
• A global supply chain is an interconnected network of organisations that produce and
distribute goods from the point of origin to the desired destination at the international level.
• Logistics refers to the management of goods from the time they are picked up from their
source (point of origin) till the time they are received at their intended destination (point of
consumption).
Shipping- I
Chapter Index

From-To
2 Topic 1 Concept of International Transport 122-127
3 Topic 2 Role of Transportation in Logistics 128-129
4 Topic 3 Transportation Modes 130-140
5 Topic 4 Concept of Container Yards (CYs), Inland 141-142

Container Depots (ICDs) and
Container Freight Stations (CFS)
Chapter Index

From-To
6 Topic 5 Chartering 143-145
7 Topic 6 Transportation Selection Decision 146-148
8 Topic 7 Transportation Cost 149

• Explain the concept of international transport
• Discuss the role of transportation in logistics
• Describe the various transportation modes
• Explain the concept of Container Yards (CYs), Inland Container Depots (ICDs) and Container
Freight Stations (CFS)
• Discuss chartering
• Explain the transportation selection decision
• Describe transportation cost
1. Concept of International
Transport
• International shipping or transport is defined as the transport of goods from one country to
another through various modes, such as rail, road, air, water.
• The mode of transport is selected by companies depending on the distance, cost, feasibility
and time.
• International transportation is more complicated, involving different modes of transportation,
carriers, transportation documents and higher transit times.
• Companies must consider a viable service which provides lesser transit time at a lower cost.
• The cost includes service cost, chargeable weight (minimum weight), loading and unloading,
packing (if required), and insurance against damage during transit, and any additional services
availed.
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
• Air: Transportation by air is the fastest but costliest way to transport cargo. If the cargo has to
be delivered in a shortest possible time, this is the best option. Air cargo carriers offer two
types of services, namely direct and indirect. Direct carriers can deliver the cargo overnight,
but at a premium cost, than indirect ones. Indirect carriers transport cargo around the world in
3–7 days, depending on the frequency of service to a destination, at a cheaper price.
• Rail: This mode of transportation is considered advantageous because through rail transport
large quantities of goods can be transported at a time from one place to another over long
distances. One of the major classes of goods that are transported consists of agricultural
products.
• Road: Trucks are the most important medium of road transport through highways.
Transportation through highways is very flexible. The ability to tailor the service to a specific
type of traffic is an added advantage for the shippers. Although the public pays for the
construction and maintenance of highways, a major portion of the revenue used to rebuild and
modify roads comes from motor carriers, which is paid in the form of road taxes.
• Water: The goods that are transported through water mainly consist of coal, petroleum, grains
and cereals and iron ore. Water transport is slow and it is highly affected by extreme weather
conditions especially during monsoon and winter. Hence, the organisations that depend on
water transport are required to maintain large quantities of inventories at their disposal to
tackle unpredictable problems caused by extreme weather conditions.
International Ocean Transportation

• Companies avail various types of shipping services as part of their international ocean
transport. The two main types of shipping services are:
Types of Shipping
Service
Linear Service Tramp Service

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.

• Multimodal transportation is beneficial in terms of increasing flexibility and reducing cost of
logistics to shippers. Some benefits of multi modal transportation are:
− Single window contact: The shipper has to rely only on a single service provider, that is,
the multimodal operator.
− Reduced documentation and formalities: One contract can be negotiated with the
Multimodal Transport Operator (MTO). Single contract facilitates uniform liability
regime.

− 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.
2. Chartering
• Chartering is required under one of the three conditions:

− When goods are needed to be shipped immediately and using a scheduled ship or airline
could delay the shipment.
− When the shipment is too large or heavy to be loaded onto a scheduled ship or aircraft. In
such cases, haulers do not have much option rather than chartering a carrier, large enough
to accommodate the load.
− The merchandise is needed at a location where regular shipping/airline service is not
available.
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

1. Transport Selection Decision
• One of the most important supply chain decisions of a firm is the selection of the transport
mode. This selection involves the following two steps:
1. Choice of a transport mode
2. Selection of a specific carrier from within the selected mode
• The selection of a transport mode and a specific carrier affects not only the company’s
transportation cost but also other related supply chain costs and demand for the shipper’s
products.
• In addition, the quality of service (such as speed and reliability) that the mode and selected
carrier provide influences the supply chain costs and product demand.
• While selecting a carrier, exporters must keep in mind the following points:
− The cheapest carrier may not necessarily guarantee the cheapest landed cost.
− For finalising one carrier, multiple carrier choices should be considered.
− As service capabilities of different carriers vary, it is very important to check the service
delivery of each carrier.
− Critically evaluate the trade-off costs and all the costs and risks involved in selecting a
particular carrier.
− It provides the best service at least cost and involves the least risk.
Transportation Selection
• The factors that are considered while making the transportation selection decision are:
− Expected transit time taken by the carrier and reliability of the carrier.
− Choosing a highly dependable carrier can be a source of competitive advantage.
− A dependable carrier ideally lowers customers’ inventory costs.
− Cost of shipping
− The carrier must be available and accessible when required.
− The carrier must ensure high level of security in its operations.
Transportation Cost
• The cost or expenses involved in moving products or merchandise from one location to
another is known as transportation cost.
• Whenever a manufacturer wants to move goods from factory to the distributors, or when the
distributor wants to move goods to retailers, a cost is incurred for such movement of goods.
This cost is called transportation cost.
• Transportation costs in international trade are determined by various factors such as distance
between the country of origin and the destination country, geography, infrastructure quality,
level of technology and trade facilitation measures, cost of fuel internationally and the mode
of transport and the transport technology involved.
Let’s Sum Up
• International shipping or transport is defined as the transport of goods from one country to
another through various modes such as rail, road, air, water.
• Efficient transportation helps in minimising inventory costs, better warehouse management,
etc.
• Air, rail, road and water are the main modes of transportation.
• The two types of shipping services are liner and tramp.
• Dry storage containers, flat rack containers, open top containers, etc. are the various types of
containers.
• Selection of the type of transport involves two-steps: choice of a transport mode and selection
of a specific carrier from within the selected mode.
Shipping-II
Chapter Index

From-To
2 Topic 1 International Commercial Documents 156-171
Export Packaging
3 Topic 2 172-180
Customs Clearance Process

4 Topic 3 181-183
Let’s Sum Up
5 184
• Describe the various international commercial documents
• Discuss the packaging requirements for the export of goods
• Explain the customs clearance process
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:
Expert 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.
7. Export Packaging
Security
• Exporters need to take certain steps to reduce the incidence of theft of their valuable goods in
transit. Some of these steps are:
− Preparing the shipment documentation in a generic manner following the regulations.
− Making use of coded information rather than giving a specific description of the goods.
− Arranging for prompt customs clearance.
− Avoiding the consolidation of goods with those of other shippers.
− Restricting the access of people to sensitive shipment data.
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.
• The authority and area of operations of the customs department involve the following:
− The customs department has offices at all ports including air, water and road to authorise
the movement of people, goods and cargo in and out of a country.
− Customs officers have the right to make arrests, confiscate goods, etc. in case there are
diversions from the approved policies.
• Countries involved in international trade publish their foreign trade policies every year to
specify the terms and conditions under which goods and services can be exported or imported.
• The customs departments of these countries are responsible to implement the specifications of
the foreign trade policies.
• 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.
Let’s Sum Up
• The main commercial documents related to international trade are invoices, export documents,
import documents and transport documents.
• An invoice is a document that provides information about the terms and conditions of a sales
transaction.
• Different types of invoices in international trade are: commercial invoice, pro forma invoice,
consular invoice and specialised commercial invoice.
• The purpose of export documents is to maintain precise data on all goods exported from the
country.
• The major export documents are export licence, shipper’s export declaration, certificates of
end-use, export taxes, export quotas and packing list.
Chapter 8: Information
Technology and Information
System in Logistics
Management
Chapter Index

From-To
2 Topic 1 Objectives of Information Technology in Logistics 191

Management
3 Topic 2 Application of IT in Logistics 192-195
4 Topic 3 Information Systems in Logistics Management 196

Chapter Index

From-To
5 Topic 4 Information System and Bull Whip Effect 197
6 Topic 5 Security Issues in Global Supply Chain 198

• Discuss the objectives of information technology in logistics management
• Describe different applications of IT in logistics
• Explain information systems in logistics management
• Describe information system and bull whip effect
• Discuss security issues in global supply chain
Objectives of Information Technology in Logistics
Management
• Information technology in its simplistic form is the processing of data through a computer.
• Logistics management is an element of supply chain management that is involved in planning
and controlling the efficient movement of goods and services from the point of manufacturing
to the point of delivery to consumers.
• The objectives of the information and technology being utilised in the logistics management
are:
− Efficient and effective management of data units
− Promotion of advanced data inputs for the logistics systems
− Assessment of data needs and fulfilling them
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 Systems in Logistics
Management
• An information system refers to a combined set of elements for collecting, storing and
processing data and distributing information, knowledge and digital products.
• The objective of the Logistics Management Information System (LMIS) is to collect, process
and report data.
• The overall aim is to provide timely and accurately procured appropriate data to the decision
makers.
• LMIS can be either manual or paper based, partly computerised or even completely
computerised.
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.
Let’s Sum Up
• Data warehousing can be defined as the process that relates to the centralised management and
retrieval of large magnitudes of data.
• A data mart acts as a point of access to data warehouse and it is used for distribution of data
to the users.
• E-commerce is referred to as the purchase or sale of various products and services via the
electronic mode like the one provided by the Internet.
• WAP can be said to be the set of rules which govern the transmitting and receiving ability
concerning data being processed by computer applications or through a wireless device like
the mobile phone.
• The Global Positioning System (GPS) is a satellite-based navigation system which is made up
of a network comprising 24 satellites.
Insurance
Chapter Index

From-To
2 Topic 1 Insurable Interest 206-207
3 Topic 2 Risk Management 208-213
4 Topic 3 Perils of Sea and Air Shipments 214-217
5 Topic 4 Marine Insurance Policies 218-223

Chapter Index

From-To
6 Topic 5 Coverage under Marine Cargo 224

Insurance Policy
7 Topic 6 Elements of an Air Freight Policy 225-227
8 Topic 7 Commercial Credit Insurance 228-231

• Describe the concept of insurable interest
• Discuss various approaches to risk management
• Describe different kinds of perils involved in sea and air shipments
• Explain various types of marine insurance policies
• Discuss different coverages under marine cargo insurance policy
• Describe the elements of an air freight policy
• Explain the concept of commercial credit insurance
1. Insurable Interest
• Insurance means the assurance of financial aid when there is any contingency.
• It is a promise made by the insurance service provider to provide cover to an individual
against loss in exchange of a premium.
• The principle of insurable interest implies that an individual getting insured must have an
insurable interest in the subject matter of insurance.
• An insurable interest shall arise when an individual obtains some type of financial benefit
from the preservation of the object to be insured, or will sustain pecuniary loss from its
destruction or damage in the event of a catastrophe.
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.
1. Risk Management
• Risk management is a process of recognising that a risk exists, assessing its timeliness and
impact and conceptualising ways to counter it.
• Usually, risk management is associated with managing risks arising due to natural disasters
and unforeseen events or accidents.
• The objective of risk management is to make any risk, whether man-made or natural,
acceptable within limits and ensure achievement of business goals.
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.
• In case of damage or loss of insured goods, the following measures need to be taken:
− Prevent additional loss or minimise loss.
− Intimate the insurance company or agent and provide it with detailed information.
− Organise a joint ship survey in case of damage to goods while in port or on ship.
− Make a complaint to the carrier.

− Submit insurance policy certificate with invoice and other documents such as Bill of
Lading, Packing List, Correspondence with the carrier, any other relevant document, etc.
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
Protection and Indemnity

• Protection and Indemnity insurance, also known as P&I, offers insurance cover to companies
and entities, including owners of ships, tugs, barges, yachts; vessel operators and charterers of
ships.
• The liabilities, expenses and costs covered by P&I insurance are:
− Physical injury, death and sickness of the ship crew, its passengers and other staff
− Damage, destruction or shortage of cargo
− Removal of ship wreckage

− Application of fines and penalties
− Indiscipline and insubordination among crew
Coverage under Marine Cargo Insurance Policy
• Marine cargo insurance policy includes the following clauses:
Perils Clause
Average Clause
Additional Coverage Clause

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
• 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.
• The key elements that make any airfreight policy successful and effective in covering damages
and loss of cargo during the air transit are:
− All air carriers should secure their cargo.
− All air carriers need to recognise the screening process.
− Detailed guidelines for screening standard and equipment should be followed.

− All air cargo carriers need to have a structured supply chain management process.
− The security for the entire supply chain needs to be formalised.

− Specific measures for cargo flights need to be in place.
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

• The typical characteristics of the commercial credit insurance are:

− The credit limit is established based on the identified customer’s financial practices and
payment history
− The insuring agency may also specify the credit limit for specified customers
− There are certain deductibles such as annual charges, per loss or any other
− Certain exclusions are also mentioned in the policy
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
Risks Involved
• Risk management alternatives are based on the awareness of a particular risk. Various
dimensions for understanding the risk management alternatives are:
Risk Transfer
Risk Retention
Risk Reduction
Risk Avoidance
Let’s Sum Up
• The principle of insurable interest implies that an individual getting insured must have an
insurable interest in the subject matter of insurance.
• The objective of risk management is to make any risk, whether it is man-made or natural,
acceptable within limits and ensure achievement of business goals.
• The marine insurance policy aims at protecting the goods against damage or loss during transit
by offering them financial security.
• An effective marine cargo insurance policy should aim at providing insurance cover to
maximum perils.
• Air freight insurance policy is a type of insurance that provides coverage for damage or loss
of goods, which are transported by air.
Chapter 10: Prospective
Growth in International
Logistics and Supply Chain
Management
Chapter Index

From-To
2 Topic 1 Future Growth of Global Supply Chain Management 238-241

and Logistics
3 Topic 2 Constraints of Global Supply Chain Management and 242-244

Logistics
4 Topic 3 Future Strategic Focus: Global Supply Chain 245-247

Management and Logistics
5 Let’s Sum up 248

 Explain the reason for the growth of global supply chain management and logistics
 Discuss the constraints of global supply chain management and logistics
 Describe the significance of strategic focus in global supply chain management and logistics
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
Logistics
• Geopolitical risks: These refer to the risks that occur when the foreign policy of a country
unduly influences or upsets the political and social stability of another country or region at
domestic level.
• Climate change: A global supply chain provider usually has to deal with the changes in the
climates of the various countries it works with.
• Price level: The price level of products and services depends upon several factors such as
demand and supply forces. Even the same goods can be transacted at different price levels in
two different countries.
Logistics
• Buffer stock: Every organisation maintains a reserve of certain commodities to offset price
fluctuations. This reserve is known as buffer stock. It is seen as a constraint for a service
provider to calculate the right quantum of the buffer stock as to how much needs to be kept so
that the excess of it does not affect the profit margin.
• Legal framework: A supply chain service provider needs to adhere to the different laws of
different countries, i.e., all the formalities needed to be finished before and after entering into
a contract or market.
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
Let’s Sum Up
• Logistics providers and manufacturers are always on the lookout to find innovative ways to
improve their service and efficiency.
• A supply chain is expected to meet the requirements of customers at multiple locations,
through multiple channels, using multiple transport modes and within different timeframes.
• There is a need to make the entire supply chain visible to enable a planning that is driven by
demand.
• The constraints faced by the global supply chain management and logistics include
geopolitical risks, climate changes, price levels, buffer stocks, lack of information across
boundaries and legal frameworks.

International Logistics & Supply Chain Management

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International Logistics &

Supply Chain Management

1 Chapter 1 Introduction to Logistics and Supply Chain Management 5-19

2 Chapter 2 Globalisation and International Trade 20-33

3 Chapter 3 Factors and Challenges Driving Logistics and Supply 34-57

4 Chapter 4 Supply Chain Strategies 58-82

5 Chapter 5 International Procurement and Sale 83-117

6 Chapter 6 International Shipping – I 118-152

7 Chapter 7 International Shipping – II 153-186

8 Chapter 8 Information Technology and Information System in 187-201

9 Chapter 9 International Insurance 202-234

10 Chapter 10 Prospective Growth in International Logistics and Supply Chain 235-250

S. No Reference No Particulars Slide

2 Topic 1 Concept of Logistics 9-12

Defining Supply Chain Management

Evolution of Logistics and Supply Chain

S. No Reference No Particulars Slide

5 Topic 4 Distinguishing between Logistics and 15

International Logistics and Supply Chain

• Logistics is concerned primarily with warehousing, packaging, transportation and inventory of

Customer Relationship Management (CRM)

Strategic Relationship Management (SRM)

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

S. No Reference No Particulars Slide

2 Topic 1 Effects of Globalisation on International 23-26

Outsourcing and Offshoring as an

− Financial integration: Financial integration can be defined as the process of closely

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

S. No Reference No Particulars Slide

2 Topic 1 Factors Driving Global Supply Chain 37-42

Management of Inventory in Supply

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

Supply Chain Risk

Selection and Evaluation

Factors Driving Development of Logistics

Asset Management in Supply Chain Management

Lean Supply Chain Management

Lean Supply Workforce

Goals, Standards and Adaptable Precision

Planning, Scheduling and Simulation

Productive vs. Non-productive Time

Quality and Safety

Training and Coaching

S. No Reference No Particulars Slide

2 Topic 1 Evolution of Manufacturing and Production 62

3 Topic 2 Logistics and Supply Chain Strategy 63-75

4 Topic 3 Taxonomy of Supply Chain Strategies 76

5 Topic 4 Critical Factors Considered in Supply Chain 77

S. No Reference No Particulars Slide

6 Topic 5 Operational and Strategic Issues in Global Logistics 78

7 Topic 6 Logistics Outsourcing Strategy (3PL and 4PL) 79

• 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

− Improvement in the flow of goods from warehouse to shop floor

− Minimised setup time, thereby reducing manufacturing time

− More efficient utilisation of workers

− Better relationships with vendors

− Minimised storage space requirement

Replenishment Lead Time

• The critical factors that affect supply chain planning are:

Supply Chain Relationships