MANAGING INTERNATIONAL AND DOMESTIC TRANSPORTATION

National Association of Purchasing Management May 2, 2000 Presented by: Elena M. Johnson Global Logistics Manager - QMS, Inc.

Managing International and Domestic Transportation

I I I I I

International Transportation Logistics

Part A
(Page 1 - 8)

International Vs. Domestic Freight Terms Part B

(Page 9 - 20)

Domestic Base Transport Elements Summary Food for Thought

Part C (Page 21 - 28) Part D

(Page 29 - 32 )

Part E
(Page 33 - 35)
NAPM May 2, 2000 Presented by: Elena M. Johnson

International Transportation Logistic - Part A

I. II. Management Process Elements Order & Product Flow

III. Documentation IV. Custom Clearance V. Cost Control VI. Measurement

Page 1

NAPM May 2, 2000 Presented by: Elena M. Johnson

International Transportation Logistic

Management Process Elements
Origins & Distribu tion Points
Tr an s. Sv c.
ua lit y

Op La tim n i Co de ze st d

o Inf on ati rm

nt me ip qu E

Customs Clearance
uct rod ent P m Pa y

International Logistics Management

Q

Svc. Provider
Svc . Co ntra ct
Co nt ro l
NAPM May 2, 2000 Presented by: Elena M. Johnson

Tr an si tT im e Car Insu go ranc e

ency t./Ag Gov lations u Reg liance p Com

Page 2

International Transportation Logistic

Order & Product Flow (Export)
Ex-Factory Financial Docs. Presented Shipper loads container YES P.O. Placed Acceptances Obtained Manufacturing Warehouse FCL ? NO Loose Cargo moves to CFS Cargo Rcvd. @ CFS for consol Container prepared for loading Container delv. to cy ready for loading

FOB/FCA Port

Booking Buyer Open L/C YES L/C NO Export Documentation

Financial Document Presented

Opening Bank Confirms L/C to Beneficiarys

Customs Export Clearance

Could also be FCA pt.

Sellers accept L/C Conditions Page 3

Cargo Cleared For Shipment

NAPM May 2, 2000 Presented by: Elena M. Johnson

International Transportation Logistic

Order & Product Flow (Import)
Customs Cleared or I.T.

Port of Discharge

Container moved

Vessel Clearance

Devanning Station

NO

YES Container loaded FCL to rail to truck

Transports to destination

Containers delivers to CY Customs & Carrier released Delivers to Bonded Warehouse

Container delivers to Consignee

Final deliver

Customs Clearance Stationed For re-loading

Re-load to rail or truck

Transports to break point

Off load & re-route

Reloads for delivery to Consignee

Final deliver

Page 4

may or may not

NAPM May 2, 2000 Presented by: Elena M. Johnson

International Transportation Logistic

Documentation
I I I I I I I I

Purchase order Sales acceptance Banking Letter of Credit (when applicable) Legalization (when applicable) Transportation Customs Delivery instruction Financial
NAPM May 2, 2000 Presented by: Elena M. Johnson

Page 5

International Transportation Logistic

Customs Clearance
I I I I I I I I I I I I

Page 6

Bond Power of Attorney Filing When & Where Classification Declared Value Duty & Taxes Liquidation Reporting to other Agencies Cargo Release (Customs & Carrier) Other - Broker Filing Fees Local Delivery Liability - Information NAPM Record Keeping May 2, 2000 Duty Presented by: Elena M. Johnson

International Transportation Logistic

Cost Control
I I I I I

Freight Terms (INCO Terms) Origin Selection Carrier/Forwarder Selection Consolidation Integrated Transportation Alternative to all Air Use Volume to Reduce Transportation Cost

I I

Target Optimum Service Levels Tariff Classification

- Transportation - Customs

Other Legal Duty Reduction Applications Negotiate

(Rates, Dim. Weight Factor, and Currency Exchange Factor)
NAPM May 2, 2000 Presented by: Elena M. Johnson

Page 7

International Transportation Logistic

Measurement
I I I I I

Container Usage and Utilization Transit Cost Overall Service/Route Industry Bench Mark

Page 8

NAPM May 2, 2000 Presented by: Elena M. Johnson

International vs Domestic Freight Terms - Part B

Understanding Risk of Loss:
THREE ARTICLES TO AID IN UNDERSTANDING THE TERMINOLOGY AND COMPARISON BETWEEN INTERNATIONAL INCOTERMS AND DOMESTIC UCC

I. EXHIBIT A
Definition of Incoterms

II. EXHIBIT B
Breaking the Global Trade Code (Incoterms vs UCC)

III.EXHIBIT C
Guide to Terms of Sale - Who bears the responsibility in the Domestic arena using the UCC Terms
Page 9 NAPM May 2, 2000 Presented by: Elena M. Johnson

International vs Domestic Freight Terms

Exhibit A
Definition of Incoterms

Page 10

NAPM May 2, 2000 Presented by: Elena M. Johnson

International vs Domestic Freight Terms

Exhibit B
Breaking the Global Trade Code (INCOTERMS vs UCC)

Page 14

NAPM May 2, 2000 Presented by: Elena M. Johnson

International vs Domestic Freight Terms

Exhibit C
Guide to Terms of Sale - Who bears the responsibility in the Domestic Arena using the UCC terms

Page 19

NAPM May 2, 2000 Presented by: Elena M. Johnson

Domestic Base Transport Elements - Part C

Purchase Terms Controlling Transport

I. II. III. IV.

Freight Terms (INCO or UCC) Ship To/From Ship Via Carrier Contract Terms/Conditions
NAPM May 2, 2000 Presented by: Elena M. Johnson

Page 21

Domestic Base Transport Elements

Freight Terms (INCO or UCC) Reference Exhibit A - C in Section International vs Domestic Freight Terms

Page 22

NAPM May 2, 2000 Presented by: Elena M. Johnson

Domestic Base Transport Elements

Ship to/From

Ship to Information:
I I

Delivery physical address County (if necessary), zip code and contact name and phone no. (if appointment is required) Inside deliveries Delivery appointment required (typically no cost) No account could turn into loss of discount or C.O.D.
NAPM May 2, 2000 Presented by: Elena M. Johnson

Problem Avoidance:
I I I

Page 23

Domestic Base Transport Elements

Ship to/From (contd)

Ship From:
I

Select closest supplier location when possible, consider:

I I I I I I

Availability Distance (origin point to destination point) Beyond point pick-up locations & carrier cut off Speed Written routing instructions to suppliers Consolidating
NAPM May 2, 2000 Presented by: Elena M. Johnson

Page 24

Domestic Base Transport Elements

Ship Via
This is where you communicate your carrier/mode selection to your supplier.
I I

If collect, identify the carrier (or) condensed routing. If pre-paid, identify the mode.

It is recommended for collect shipments that you include a condensed routing in your purchase order remarks unless order is carrier specific: When ground and shipment is < X pounds use _____ carrier > X pounds use _____ carrier When air and shipment is < X pounds use _____ carrier > X pounds use _____ carrier
NAPM May 2, 2000 Presented by: Elena M. Johnson

Page 25

Domestic Base Transport Elements

Ship Via

(contd)

Your carrier selection is based on, and impacts, the following:

I I I I I I I

Who has control/risk of loss or damage Who pays/bears the cost Ship to/From When required vs. when available (Speed) Shipment weight & volume Carriers terminal locations Transportation budget

Freight term (INCO/UCC) Freight term (INCO/UCC) Freight cost Freight cost Freight cost Limitations Limitations
NAPM May 2, 2000 Presented by: Elena M. Johnson

Page 26

Domestic Base Transport Elements

Carrier Contract Terms/Conditions
Analyze Your Carrier:
I I I I I

Financial Strength & Stability Presence Importance of the account to the carrier Service performance (transit, tracking, shortage/losses, billing accuracy, responsiveness) Integrated Service ( If important to your business)
NAPM May 2, 2000 Presented by: Elena M. Johnson

Page 27

Domestic Base Transport Elements

Carrier Contract Terms/Conditions
Negotiate: Pricing I Discounts (volume & timely payment) I Accessorial fees I Special handling equipment I Freight payment terms (net 30 days vs. 15 days) I Dimensional weight factor I Spot quote for large or oversize shipments
I
(contd)

Measure & Report

Page 28

NAPM May 2, 2000 Presented by: Elena M. Johnson

Summary - Part D

I. II.

Buyers Role to Minimize / Avoid Excess Cost Measure, Seek & Report

Page 29

NAPM May 2, 2000 Presented by: Elena M. Johnson

Summary
Buyers Role to Minimize / Avoid Excess Cost:
I Understand

your freight terms (INCO/UCC) I Know the transport requirement of the order and provide written routing instructions I Request consolidation of shipments (reduce frequency and increase volume whenever possible) I Know your transportation professionals and use them I Consider alternatives to all air
I Set

up annual bond with Surety Company on imports

Page 30

NAPM May 2, 2000 Presented by: Elena M. Johnson

SUMMARY
Buyers Role to Minimize / Avoid Excess Cost: ... (contd)
I I I

Consolidate International L.O. C. whenever possible Consolidate customs entry whenever possible.

Use your suppliers knowledge I Seek help with:

I I I I I I
Page 31

Overweight/oversize shipments Transport cost large % of order value (consolidate) Critical Deliveries Complex international distribution International expedites (air or deferred) Tariff classifications

NAPM May 2, 2000 Presented by: Elena M. Johnson

Summary
Measure, Seek & Report:
I I I

Service performance Valuable trade information Other value-add services/support from your service provider resources (logistics, information systems, etc.)

Page 32

NAPM May 2, 2000 Presented by: Elena M. Johnson

Food for Thought - Part E

I. II.

When All Else Is Equal Popular Misconceptions To Avoid

Page 33

NAPM May 2, 2000 Presented by: Elena M. Johnson

Food for Thought

When all else is equal:
I I I I I I I I

The further away, the longer the transit time The further away, the higher the cost The faster the transit time, the higher the cost The bigger (but Normal) the shipment, the lower the cost per shipping unit The lower the value of goods, the lower the rate The higher the density of goods (as shipped), the lower the rate The more fragile the goods, the higher the rate The further beyond Normal, the more rapid the cost increase
NAPM May 2, 2000 Presented by: Elena M. Johnson

Page 34

Food for Thought

Popular Misconceptions to Avoid:
I I I I I I I I

Air is always faster than truck Air is always more costly than truck Rail is always less costly than truck Exclusive use truck is always fastest All rates of similar service are the same Consolidating shipments loses time All two-carrier routes are slower than all single carrier routes The higher the cost, the faster the service
Avoid the use of Exclusive - Dedicated - Hot Shot These are Expensive Terms without often Improving Service

Page 35

NAPM May 2, 2000 Presented by: Elena M. Johnson