Writekraft Research & Publications LLP

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A STUDY ON
LOGISTICS COST
MANAGEMENT IN
INLAND
CONTAINER
DEPOTS WITH
SPECIAL

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REFERENCE TO
COIMBATORE
DISTRICT

Writekraft Research & Publications LLP

(Regd. No. AAI-1261)
Corporate Office: 67, UGF, Ganges Nagar (SRGP), 365 Hairis Ganj, Tatmill Chauraha, Kanpur,
208004
Phone: 0512-2328181
Mobile: 7753818181, 9838033084
Email: info@writekraft.com
Web: www.writekraft.com
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CHAPTER I

INTRODUCTION AND DESIGN OF THE STUDY

Logistics originated from the Greek word ‘logististike’ which means ‘the

art of calculating’. In the distant past the word was used only in the military to

describe the functions involved in sourcing, procuring, transporting, storing and

making available arms, ammunition, supplies, uniforms, food, men and all other

materials required for a military campaign. Slowly over the years, the word

came into use in non-military parlance, as well denote a wide range of activities

involved in making available goods to the consumer.

The meaning of Logistics denotes the physical movement of goods and

services from the place of manufacturer to the people who really need it. In other

words, it is the moving process of supplying materials like purchasing, checking,

warehousing, storing, loading and unloading. Generally speaking, logistics does

not mean transportation alone but also it involves the value added services such

as materials handling, tracking, placement of orders, packaging, information

processes and the documentation. Logistics and Warehousing are important part

of controlling and managing flow of goods and services. This refers to not just

transportation itself, but to streamline and control the flow through the value

adding processes. Logistics industry is also closely linked to other related sectors

namely containers, Inland Container Depots, Seaports, Airports and Shipping

Writekraft Research & Publications LLP

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Corporate Office: 67, UGF, Ganges Nagar (SRGP), 365 Hairis Ganj, Tatmill Chauraha, Kanpur,
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Industry.

Writekraft Research & Publications LLP

(Regd. No. AAI-1261)
Corporate Office: 67, UGF, Ganges Nagar (SRGP), 365 Hairis Ganj, Tatmill Chauraha, Kanpur,
208004
Phone: 0512-2328181
Mobile: 7753818181, 9838033084
Email: info@writekraft.com
Web: www.writekraft.com
 The globalization of economies increased competitive pressure,

heightened customer expectations, emerging technologies and multilateralism

have had a profound effect on the way organisations conduct their business.

Organisations focuse on logistics and supply chain process integration to bring

efficiency, cost effectiveness, productivity in business process, to add value to

their customer offering and services to gain a competitive advantage1.

The efficiency and effectiveness of marketing depends upon the

management capability of logistics division in firms. In order to survive in the

present competitive markets, logistics firms are focusing on their core

competencies and adopting outsourcing as a strategic solution to improve quality

of service and reduce the cost of important as well as non core activities in an

effective way.

India is a country of over 1000 million people who should get their

requirements of food, cloth, and other necessities. This country spreads about

3.3million sq.km. area and the total length of state and national highways is

200,000km. Rural and other roads are at the least 4 times more. The total length

of railway line is 65,000km. And the length of coastal line is 6,100km. It has got

12 major and 180 minor and intermediate ports. The volume of commodities

moved amounts to 220 million tones of food grains, 350mt of coal, 100mt of

other ores and minerals, 10mt of bulk commodities which are including

fertilizer, sugar, cement, steel and several million tones of processed food items

1 V.V.Sople (2010) “Logistics outsourcing: An emerging trend”, in Logistics Management

(second edition) published by Pearson Edition p. iv (preface).

2
of mass consumption, consumer goods, consumer durables, luxury items, and

above all liquid cargo such as petroleum products, edible oil and other

chemicals.

Logistics in India

In India, logistics industry is spread over Roadways, Airways, Railways,

Seaways and Pipelines. India is known as, the land of opportunities for logistics

service providers all over the world and the Indian logistics marketing is

represent $500 billion and is growing at a rate of 7 percent annually.

FUTURE PROSPECTS FOR INDIAN LOGISTICS

INDUSTRY Indian Road Network

India has the second largest road networks of 3.3 million km and the

National Highways amounts to 2% of total road length, but this carries 40% of

goods traffic in Indi

Features of Indian Road Transport

Indian Road Network carries nearly 65% of freight and 85% of passenger

traffic and the traffic on roads is growing at the rate of 7 to 10% per annum. The

vehicle ownership is firmly in the hands of individual truck owners and about

67% of vehicle owners have fleets of less than five vehicles. The Government

also spends 12 per cent of capital and 3 per cent of total expenditure on roads.

Indian Rail Logistics

The Indian Railways boast of being the world’s second largest rail

network spread over 81,511 km and covering 6,896 stations. The tonne /

3
kilometer cost of Indian rail freight is three times more than that of China and

the freight segment accounts for roughly two thirds of railway revenue.

Railway Freight Privatisation

Due to introduction of liberalisation in Indian Railway services, Reliance

Industries, P&O Ports, APL Logistics, Maersk - Sea land, Central Warehousing

Corporation, CONCOR and Adani Logistics have shown their interests in this

sector.

Indian Ports

India has 12 major and 184 minor/intermediate ports spread across the

vast coastline of 8100 km. The 12 major ports handle about 76 per cent of the

traffic and the West Coast ports handle almost 70% of traffic.

India’s Sea Logistics

India has the largest merchant shipping fleet among the developing

countries and this was ranked l7th in the world in shipping tonnage. India has

shared its maritime transport services for 1% of world market and the container

traffic has registered an impressive growth of 15 percent over the past five years.

Port Privatisation

Port traffic grows to the level of more than 1000 Million tones by the end

of year 2011 sourced by Ministry of Shipping. Port Privatisation is picking up

momentum and USD1.39 billion worth projects approved. The major players of

Indian sea port Logistics Industry are P&O, PSA, SICAL, Maersk, CWC and the

Dubai Port Authority.

4
India’s Aviation Logistics Sector

The size of the world air cargo market is estimated to 27 million tones,

valued at $200 billion and India alone accounts for merely 3% of the global air

cargo market. As per the estimation, Indian air cargo industry is growing to be

doubled by the end of 2011.

Third Party Logistics (3PL)

Third Party Logistics implies that one company acts as an agent to look

after the logistics aspect of other company or group of companies. India’s 3PL

sector represents only 3 percent of the country’s total logistics expenses and the

Indian 3PL market is expected to grow at 20 percent per annum in the next 3 to 5

years. The practice in India reveals that warehousing and outbound

transportation, customs clearing and forwarding are the most frequent

outsourced activities. The activities such as packaging, fleet management and

consolidation have been started gaining attention for outsourcing.

Third Party Logistics (3PL) Survey in India

A survey conducted by the Transport Corporation of India (TCI) and the

Management Development Institute (MDI) shows that less than 55% of Indian

companies subscribe to 3PL. This is estimated as more than 75% at global level.

Nearly, 57% of the companies have planned to source reverses logistics in the

next five years and 54% of companies have planed to outsource the inventory

management. The freight segment accounts for roughly two thirds of railway

revenue. However, more than 50% of the companies have outsourced their

activities like transportation, warehousing, customs clearing and forwarding.

5
Growth Drivers for Logistics in India

General growth of the Indian economy and the Manufacturing industry

have seen boom for exports as well as domestic market. Expected rise in

International trade from India has been achieved and many Multi National

Companies are setting up manufacturing plant in India. For example, Nokia and

Flextronics.

Government Support

The Indian government is taking great efforts by

1. Privatising ports and airports

2. Increasing the number of gateway ports

3. Investing in highway projects

4. Streamlining customs and central excise procedures

5. Improving the rail network and

6. Implementing EDI systems

Need for Strategic Alliances and Growth Funds

Indian Logistics companies are looking for strategic alliances and funds

to improve their technology for value added services like the real time

information. Corporate field attracts more talents to build logistics infrastructure

and this really integrates services to become a multi model player.

Future Trends

The Indian logistics market is likely to grow to be doubled during the

next five years. The unorganised sector may find it difficult to exist at national

level due to its inability to keep pace with technology and customer demand.

6
Transportation costs are bound to come down in future with an improvement in

infrastructure and growth in cargo movement. The fourth party and seventh

party Logistics have taken root in India.

CHALLENGES FOR INDIAN LOGISTICS COMPANIES

The following aspects identified as major threats to the logistics firms in

India

1. Existence of Competition from Indian and Foreign logistics

companies

2. Technology to keep pace with demand for real time information

3. Corporatisation and lack of skill sets

4. Shedding local mindset and move to a global mindset

5. Integration of services and value added services

6. Funds to fuel expansion and growth

7. Inadequate infrastructure and complex tax laws

INLAND CONTAINER DEPOTS (ICDs)

Inland Container Depots (ICDs), otherwise known as ‘dry ports’, are

equipped for handling and temporary storage of containerised cargo as well as

empties. This means that hinterland customers can receive the port services more

conveniently closer to their production premises. Inland container depots are rail

linked and therefore, allow containers to be sent by rail directly to a satellite

7
terminal. Shippers and consignees would also respond to the opportunities and

benefits of containerisation.

It is a declared customs area where the export or import formalities can be

completely fulfilled. The customs officer examines the shipping bill to find the

value of cargo. ICD offers a wide range of services including stuffing and de-

stuffing of cargo with the container, storage of cargo, customs examination and

the documentation procedures. ICD containers are moved on priority basis at the

port of shipment within 24 hours from its entry.

Services Offered

1. Handling of containers from road, rail and barges to a temporary storage

area at container yard.

2. ICD permits an intermediate storage between the various transportation

modes. Some special cargo may require special types of containers that

requires additional provisions such as refrigeration services and special

areas for dangerous cargo.

3. Receipt or delivery of containers and general cargo include the activities

such as weighing, inspection of seals and damages, sticker and safety

plate control and container information control. Stuffed containers may

be received from the satellite Container Freight Stations (CFS) in ready

condition to be transported to the exit port. Shippers may also directly

bring less than container load (LCL) cargoes for the purpose of

consolidation and dispatch.

8
4. The main function of ICD is not only the storage of stuffed containers but

also the empty containers that are needed for temporary storages.

5. Other facilities include container cleaning services, pretrip trials of reefer

containers to check the function of refrigeration equipment, maintenance

and repair services for containers, container handling equipment,

refrigeration equipment, road chassis, and etc.

6. Customs clearance activities at Inland terminals could help to decrease

the dwell-time of containers in deep-sea ports. These activities include

checking of LCL cargo prior to stuffing or after stripping, checking

container seals, assessment and valuation of cargoes, perusal of container

manifests.

7. Physical distribution services can be provided economically at or close to

the ICDs. Garments can be ironed and packed, prices tagged on consumer

goods and liquids in bulk can be bottled. In short, a variety of cargo-

related services to finished goods can be placed near to the ICD itself. For

agricultural products, ICDs may provide refrigeration plants and

warehousing facilities to prepare meat, fish and vegetables for export.

Indian ICDs perform many of the possible functions outlined above.

These include stuffing, destuffing, locking, sealing, providing trailers chassis,

railway flats, repairs, handling equipment, storage, facilities for reefer, customs

examination, processing of customs documents, issuance of combined transport

documents by carriers and etc.

9
 ICD is declared as customs area for the purpose of import and export but

only limited facilities of noting of shipping bills, valuation and examination of

export cargo are afforded at ICD. Exports however, are deemed to be effected

from the Gateway port only. Within 24 hours of landing, the containers

consigned to the ICDs are dispatched by rail. At the ports, ICD completion and

transhipment containers are moved on priority basis. Similarly, stuffed

containers on completion of customs formalities at the ICD are dispatched to the

terminal port within 24 hours. The railways provide the transport link between

the ICDs and the gateway ports.

PROFILE OF INLAND CONTAINER DEPOTS

In Coimbatore District, there are three ICDs as follows:

i. Container Corporation of India (CONCOR) Irugur,

ii. Chettinad Logistics Pvt. Ltd., (CLPL), Thudiyalur and

iii. Central Warehousing Corporation (CWC), Singanallur.

i. CONTAINER CORPORATION OF INDIA (CONCOR),IRRUGUR.

CONCOR flags off box train service from ICD to various sea ports.

The train with 62 loaded TEUs was flagged off on its first operation. CONCOR

officials expect to move at the least 1,500 TEUs every month to Cochin Port. At

present, the movement has been tentatively fixed for weekly once.

Officials said that CONCOR has the necessary infrastructure for

international transhipment in the middle of this year. It has rail connectivity to

10
the Major Ports of Cochin, Tuticorin and Chennai and this provides a cheaper,

safe and faster mode of transportation. Other facilities at the ICD include

sufficient heavy-duty trailers for road movement and warehouse space of 20,000

sq. ft. to store exports and imports of FCL and LCL cargoes. A newly

constructed warehouse of 30,000 sq. ft. adequately meets the needs of domestic

customers. Sufficient area is al so available in the ICD for expansion to increase

the warehouse capacity and stacking area as per expected demand. Advanced

handling machinery such as reach stacker soon be introduced to meet the

increased demand.

The CONCOR is situated on the L&T Bypass Road, opposite the IOC

Terminal. It has the location advantage of being easily accessible to NH47 and

NH67 connecting to and from Cochin, Tuticorin and Chennai Ports.

(ii) CHETTINAD LOGISTICS P.LTD(CLPL), Thudialur.

The CLPL Logistics Pvt. Ltd., Lorry Division was incorporated in

December 1999 within the CLPL Group and commenced its operations in April

2000. Their main focus is to provide a vital Logistics and Infrastructure support

to Business. The rapid growth in both Import and Export cargoes to and from

Southern India has provided the base for its expansion in the Group which

covers the efficient movement of both Raw Materials and Finished products

internationally.

11
 The CLPL Logistics took over all the activities of CLPL Ship

Management Services to further streamline operations involved in ship

management and operations; for both Coastal and foreign flag vessels in 2003.

The transport operations covering over 300 trailers, trucks and tippers have been

consolidated under the Truck Division in 2004.

CLPL Logistics has been licensed by Government of India to set up and

run a new Inland Container Depot (ICD)/ Container Freight Station at

Coimbatore in 2004.

(iii) CENTRAL WAREHOUSING CORPORATION (CWC).

In India, a premier Warehousing Agency was establishment in the year

1957 to provide logistics support to the agricultural sector. This is one of the

biggest public warehouse operators in our country which offers the logistics

services to a diverse group of clients.

Warehouse activities of CWC includes warehousing of food grains,

industrial commodities, Custom bonded warehousing services, Container freight

stations, Inland clearance depots and Air cargo complexes. Apart from storage

and handling services, this also offers services in the area of clearing and

forwarding, handling and transportation, procurement and distribution,

disinfestations services, fumigation services and other ancillary activities. CWC

also offers consultancy services and training for the construction of warehousing

infrastructure to different agencies.

12
COSTS OF ICD SHIPMENT

It is very important to ascertain the actual logistics costs incurred in ICD

process as well as transportation. Then only, they can find out the ways and

means determine the optimal logistics cost that leads success of any

organization.

Maritime Container Rates (Freights)

Freight rate is a charge collected by a transport organization for their

rendered services. Generally, the Maritime Container rates are fixed by different

firms based on the type of container, space occupied by the cargo, origin and

destination of the merchandise. In the case of LCL, rates are calculated on

weight or Cubic Measurement Basis whichever may be it produces the greater

revenue. The freight rates are largely determined by the external forces of

demand and supply for transportation. The aggregate supply of shipping or liner

services are directly related to the size of the merchandise fleet in sea-worthy

condition over a particular period of time. Individual commodity freight rate is

applicable to a containerised cargo if it is the case of Less than Full Container

Load (LCL) shipments. If the shipment of cargo is sufficient for a full container

load (FCL), the freight rate will be relatively less. However, the shipping

company or liners are using a published tariff rates. Special rates of freight may

be agreed only in the case that enters into long-term agreements with a

conference. The Maritime container rate is very competitive and it constitutes a

substantial volume of deep sea world general merchandise cargo.

13
Containerised Shipment

Generally, shipments are classified into bulk shipment and small cargo

shipment. Bulk cargo shipments are further divided into Liquid cargo bulk and

the dry bulk cargo. Liquid bulk includes chemicals, edible oil and dry bulk cargo

includes iron, ore, food grain, fertilizer and etc., Small shipment is further

divided into Containerised shipments and non-containerised shipments (break

bulk or general cargo).

Movement of containerised shipment

Containers are moved by carrier from ICD to gateway port; serve the

advantages like no traffic congestion in quick transit and lower freight rates.

Above all, ICD containers are exempted from octroi and other formalities.

The followings are the steps involved in the movement of stuffed cargo by road

from Inland Container Depot (ICD)2.

1. Transfer of cargo into truck

2. Storage of cargo in truck

3. Road (truck) journey

4. Breaking out of cargo from truck

5. Transfer of cargo from truck to storage point

6. Unpacking for customs examination

7. Repackaging for customs examination

8. Consolidation of cargo according to destination

2 Mr.Manoj Aglaw, “Export Transport Logistics Cost”, World Wide Web.

14
 9. Stuffing of cargo in the container

10. Locking and sealing of container

11. Loading of container on truck

12. Transportation of loaded container to container yard in port

13. Unloading of container in container yard in port

14. Stacking of container tin container yard in port

15. Loading of container on truck to move container alongside ship

16. Truck journey from container yard to alongside ship

17. Loading of container from truck to cellular hold of ship

18. Sea voyage

INCOTERM

A freight rate is determined with a reference to the INCOTERM

(International Commercial Term) 2000 in the export contract. The INCOTERM

serves the purpose of listing all the obligations of both the parties to the contract.

INCOTERM in international trade contract affirms the respective

responsibilities of exporter as well as the importer. This term defines the

responsibilities of each party in arranging for the movement of cargo from one

country to another3.

3 D.C.Kapoor “Inco terms” in Export Management published by Vikas

Publishing House pvt. Ltd., p.363, 2009.

15
The following INCOTERMS are associated with the international trade:

i. FOB (Free On Board): It is the responsibility of seller to board the cargo

in the vessel at the post of departure.

ii. FAS (Free alongside Ship): It is the responsibility of seller to place the

cargo nearby the ship at the port of departure.

iii. CFR (Cost and Freight): the seller bears the costs and freights.

iv. CIF (Cost, Insurance and Freight): the seller bears the cost of insurance

and freight on behalf of overseas buyers.

v. EXW (Ex-works): The sellers’ responsibility is discharged at the factory

itself.

vi. DDU (Delivery Duty Unpaid)

vii. DDP (Delivery Duty Paid)

viii. DAF (Delivered at Frontier): It is the duty of seller to deliver the cargo up

to the end of country’s border limit.

Terminal Handling Cost

After the goods are stuffed in to the container for the extent of full

capacity, the container is sealed to move from ICD to the port of departure for

the shipment. In the mean time, he fulfils all the documentation formalities.

When the stuffed container enters the sea port, port authority permits to keep

them in container yard to load on board the ship. For providing such services,

the port authority collects cost commonly known as ‘Terminal Handling Cost

(THC)’. Normally, the THC is quoted based on TEU (Twenty Equivalent Units).

The rates are different according to the size of container and the types or

16
nature of cargo. The following are THC for a normal container at any port of the

country.

1. From truck to Container Yard = Rate / TEU

2. From rail flat wagon to Container Yard = Rate / TEU

3. From CFS to Container Yard = Rate / TEU

4. From Container Yard to Ship = Rate / TEU

Normal practice is that shipping line or vessel agent or cargo agent pays

THC to port authority and subsequently they recover from the concerned party

(exporter or importer).

Ocean Freight

Liner conference is a meeting of member companies of shipping

association companies periodically. The purpose of conducting such meeting is

to fix the sailing route schedule as well as fixing the shipping freight rates. As

per the recommendations of rate committee the freight rates are followed by the

association members of shipping companies association.

a) For LCL Shipment

For heavy cargo = Rate/TONNE

For voluminous cargo = Rate/CBM

b) For FCL Shipment = Rate/TEU

Generally, the Ocean Freight rates are fixed based on the weight or per

Cubic Meter (CBM) or per Twenty Equivalent Unit (TEU) basis. Apart from the

usual expenses borne by the shipping liners, the above are some extra

expenditures or losses which are beyond control. In such cases, the shipping line

17
collects surcost on and above the basic ocean freight. These surcost are

computed as under:

i) Currency Adjustment Factor (CAF) + or –x% of BOF (Basic Freight

Rate)

ii) Bunker Adjustment Factor (BAF) + y% of BOF

iii) Port Congestion Surcharge = Fixed Amount / TEU

iv) War Risk Premium = Fixed Amount/TEU

When a ship crosses nation’s boundaries, particularly in the war-prone

zone, the insurance company collects an additional premium from the shipping

liners. In such cases, the shipping company may incorporate the war risk

premium with the usual freight rates. This additional premium is an additional

expenditure to the shipper and in order to recover the additional expenditure,

shipping company impose surcharge by adding some per cent of BOF (Basic

Freight) or fixed amount per TEU (Twenty Equivalent Unit) to BOF.

LOGISTICS SERVICE PROVIDERS

Freight Forwarder

Freight forwarder is a person who collects shipments from a number of

exporters or sellers and consolidates them into larger shipments to lead

economies of scale. A freight forwarder often also deals with route selection,

price negotiation, documentation of distribution, and he can as a distribution

agent for a manufacturing or merchandise exporter. A freight forwarder can

18
negotiate the cheaper rates of transportation than the individual businesses and

can play his role pre-book space to ensure a more rapid delivery schedule.

Freight forwarding is a service used by companies that deals the import

and export. While the freight forwarder does not actually move the freight itself,

it acts as an intermediary between the client and various transportation services.

Sending products from one international destination to the other it can involves a

multitude of carriers, requirements and legalities. A freight forwarding service

handles the considerable logistics of this task for the client, relieving what would

otherwise be a formidable burden.

Freight forwarding services guarantee that products can get the proper

destination by an agreed upon date, and in good condition. The freight

forwarding service utilises establishment relationships with carriers of all kinds,

from air freighters and trucking companies, to rail freighters and ocean liners.

Freight forwarding services negotiate the best possible price to move the product

along the most economical route by working out various bids and choosing the

one that best balances speed, cost and reliability.

1. The transportation of goods from one place to another over short or long

distance is a fundamental activity in Logistics and that requires a large

number of documents in international cross border transportation.

2. The freight forwarder ensures the receipt of goods from exporters, filling

appropriate documents and delivery of goods at the point of destinations

in the specified time. He is not only acting as an agent but also as the

adviser for exports.

19
3. The freight forwarder is a party who ensures the internationally traded

cargo movement from the point of origin to the point of destination at the

right place, at the right time, in good order and condition and at the most

economic cost.

Steamer Agent

Steamer agent is a person who undertakes the work of the followings

either directly or indirectly;

i. To perform any service in connection with the ship’s husbandry or

dispatch including the rendering of administrative work related thereto; or

ii. To book, advertise or canvas for cargo on behalf of a shipping line or

iii. To provide container feeder services for or on behalf of a shipping line.

Cargo Consolidator

He receives the cargo from the customer and issues shipping bill to the

customer besides he collects freight from the customer if it’s a “paid shipping

bill”. He collects the taxes from customer and he gets the cargo stuffed near the

berth for loading and arranges for loading of cargo when the ship arrives on the

berth.

He prepares a list of consignments which are to be exported and

handovers a copy to the captain of the ship and gives a copy to customer.

Shipping Agent

Shipping agent is a person who is engaged in providing services

concerned with the import and export operations in any form to any person

including a consignment agent either directly or indirectly.

20
A shipping agent normally performs the following activities.

i. Receiving the goods from the factory premises of the principal or his

agents

ii. Warehousing these goods

iii. Receiving dispatch orders from the principal of the Cargo

iv. Arranging dispatch of goods as per the directions of the principal by

engaging transport on his own or through the authorised transporters of

the principal

v. Maintaining records of the receipt and dispatch of goods and make the

stock available at the warehouses.

EXPORT PROCEDURES

Export shipment involves a number of documents that are mainly

required by the customs or port authorities. The format of these documents is

common in all the export shipments except a few. This kind of difference may

be in respect of port or mode of carriers4.

The main purpose of documentation is to provide the specific and

complete description of the goods, so that they can be correctly assessed for the

calculation of import duty. The documentation plays a vital role in logistics

arrangements, in payment and credit procedures, and relation to cargo insurance

and claims.

4 D.C.Kapoor “Export documentation framework” in Export Management

published by Vikas Housing Pvt. Ltd., NewDelhi.p.460. 2009.

21
 Once the goods are ready for export, the exporter has to prepare and

execute various documents at different stages of goods till the shipment/ delivery

of goods. These documents are very important for two reasons.

1. They show the title of goods and evidence for shipment of cargo

2. To obtain the payment

The following procedures must be followed when an exporter exports his

goods and receives an order. These procedures often involve a good deal of

documentation and the documentation is one of the major relationship between

trading in domestic country and trading with a foreign country.

Major Export Documents

A number of documents must be accompanied with each export shipment.

If the documents are not filled correctly, the importer cannot clear or obtain the

goods from the port of arrival.

1. Export License

2. Letter of Credit

3. Certificate of Origin

4. Bill of Lading/Combined Transport Document

5. Shipping Bill

6. Mate’s receipt

7. Proforma Invoice

8. Commercial Invoice

9. Consular Invoice

10. Packing List

22
 11. GR Form (Exchange Control)

12. Insurance premium payment certificate

13. ARE1 Form

14. Certificate of inspection

15. Certificate of health or sanitary certificate

16. Registration cum membership certificate.

1. Export license

For any export, an exporter is required to obtain the license from Director

General of Foreign Trade (DGFT).

2. Letter of credit

Letter of credit is an important export document and on request of the

importer, the importer’s bank is opening a letter of credit on behalf of his client

or customer. It is nothing but a guarantee given by the importer’s bank to the

exporter.

Certificate of Origin

Certificate of origin shows the ‘origin of cargo’ which is issued by the

chamber of commerce. A signed statement certifying the country of origin of the

goods being sold is sometimes required by regulation in the buyer’s country.

This document may be as simple as a certificate of signed by the seller as well.

Bill of lading or combined transport document

It is a document issued by Transport Company which is treated as an

acknowledgement for receipt of the goods.

23
Shipping Bill

Shipping bill is a main document record by the customs authority for

allowing shipment. There are four types of shipping bills as follows:

1. Export duty shipping bill

2. Free duty shipping bill

3. Duty drawback shipping bill

4. Re-export of imported goods shipping bill

Mate’s Receipt

It is issued by the chief of the vessel after the cargo is loaded into the ship

which contains the name of the shipper, place of receipt, voyage number, port of

loading, port of discharge, container number, description of goods, gross weight

and other details.

Proforma Invoice

The word “proforma” gives the right meaning that, this is not the actual

invoice and it is similar to commercial invoice which contains the same items of

commercial invoice respectively.

Commercial Invoice

Normally an export’s invoice would include:

1. Seller’s name and address

2. Buyer’s name and address

3. Issue date

4. Invoice number

5. Shipping marks and numbers

24
 6. Term of sale ex: FOB

7. Shipping information

8. Info required by Letter of credit

9. Country of origin

10. Letter of credit number

11. Merchandise description

Consular Invoice

For exchange control and balance of payments, some countries do not

allow the import of merchandise unless accompanied by a certificate issued by

the one of its officials in the exporter’s country. These certificates make

evidence that the shipment meets certain statutory or other regulations of the

importing country. A visaed invoice is an original or a copy of an invoice which

has been originally signed by a consulate official.

Packing List

Mirrors of the merchandise covered by the invoice, the packing list omit

prices, but itemise the merchandise by the number of cartons, packages and etc.

GR (Guaranteed Receipt) form for exchange control

GR / SOFTEX are prescribed by RBI under FEMA. These forms are used

where the shipping bills are processed manually in customs house. SDF

(Statutory declaration form) is to be used where shipping bill processed

electronically in customs house.

25
Insurance Premium Payment Certificate

Every export sale should be covered by insurance and the coverage is

depended on the INCOTERM used in the export contract.

ARE-1 Form

If the goods cleared by the manufacturer for export, the goods are

accompanied with ARE-1. This form should be submitted to customs authority

and the the customs officer certifies that the goods are under this form have

indeed been exported. This form has then to be submitted to maritime

commissioner for obtaining “proof of export”.

Certificate of Inspection

An independent firm would usually conduct the inspection to ensure that

the merchandise confirms to the buyer’s criteria. Inspection certificates should

be based on quantifiable criteria. When the Letter of credit is accepted as the

method of payment, the criteria should be specifically spelled out in the letter of

credit.

Certificate of Health

Numerous foreign governments and buyers require a “photo” for fresh

plants and plant products. This certificate states that the product has been

inspected and is free of harmful pests and plant diseases. They are issued by the

USDA animal and plant health inspection service.

RCMC (Registration cum Membership Certificate)

The following export promotion councils have been setup to promote and

develop exports.

26
 1. Engineering Export Promotion Council

2. Apparel Export Promotion Council

The exporter has to become a member of the concerned export promotion

council and obtain RCMC.

SCOPE OF THE STUDY

Cost indicators are popular performance indicators though the

measurement methodology has not been standardized. Moreover, there is no

guideline regarding which indicator to use when measuring the efficiency or

productivity of individual logistics activities.

Nowadays, the firms are well aware of their sufficient resources that can

develop and sustain large-scale operation and distribution. The main focus of the

present study is to ascertain the components of logistics cost incurred in the ICD

shipments and to find out the ways and means to determine the optimal logistics

cost for different sizes of containers. This type of analytical study on costs will

enable the logistics service providers to develop a standard logistics model, route

charts, optimal cost plans and to evolve suitable logistics costing practices.

STATEMENT OF THE PROBLEM

A continuous trend of recession around the world created a greater

pressure for cost reduction to maintain at the least nominal profit margins. In this

27
competitive world, there is an emerging need, to examine the various logistics

costs to lead overall economic competitiveness in the trade.

The previous research studies might not have made a detailed analysis in

this direction and an attempt in this direction has been made in this study.

Therefore, the focus needs to fall not only on cost minimisation, but also relying

upon logistical costs specifically within the total supply chain. This is an area

that has not received much attention in the previous research and therefore, it has

a larger opportunity for cost optimisation. This study is not only concerned with

various costs associated in the shipment of cargo but also concerned with the

total cost of shipment in all the three ICDs in Coimbatore District namely,

CONCOR, CWC and CLPL.

TESTING OF HYPOTHESIS

The following null hypotheses are framed in this research study.

1. There is no significant difference in cost of logistics components

among the ICDs to loading ports.

2. There is no significant relationship between profile of respondents and

the total logistics cost that involved in the shipment of cargo between

ICDs and loading ports.

3. There is no difference in the level of satisfaction of logistics service

providers with the facilities available at different ICDs and loading

ports.

28
OBJECTIVES OF THE STUDY

1. To study the existing procedures involved in the shipment of cargo from

Inland Container Depots.

2. To ascertain the cost of logistics components in the shipment of cargo

from Inland Container Depots.

3. To analyse the relationship between four aspects of the respondent’s

profile and the overall logistics costs from ICDs to select loading ports.

4. To measure the levels of satisfaction and to cull out the various problems

encountered by logistics service providers on Inland Container Depots

and selected loading ports.

5. To suggest suitable recommendations for overcoming the issues on

logistics service providers

PERIOD OF THE STUDY

In this research study, the data collected from the respondents who are

directly associated with the problem have been analysed during the period from

May 2010 to July 2011.

METHODOLOGY

Survey method was adopted to collect the data from the respondents.

Both the primary and secondary data were elicited through structured

questionnaire. The likert’s scale was used in questionnaire with symmetric

nature. This scale captures the intensity of the respondent’s feelings based on

29
strongly disagree, disagree, neither agree nor disagree, agree and strongly agree.

Secondary data were also obtained from websites and ICD tariff leafs.

The total population of logistics service providers using ICDs regularly is

about 420 in selected Coimbatore district. A random sampling technique was

adopted in selecting the respondents. There are three ICDs situated in

Coimbatore district and 70 respondents were selected from each ICD and the

total respondents selected for the study is 210(i.e, 50 percent).

TOOLS OF ANALYSIS

In order to summarise the costs involved in the shipment of cargo from

ICDs to the sea ports, the minimum value, maximum value, mean, standards of

deviation and coefficient of variation of the various costs for different sizes of

containers are furnished in the tables. Analysis of Variances (ANOVA) was also

performed in order to compare the costs involved from the three ICDs to sea port

for different sizes of containers and the ‘F’ values and their significances are

also furnished in each tables.

LIMITATIONS OF THE STUDY

1. This study focuses only on quantitative rather than a qualitative analysis.

2. Accuracy of the cost details given by the logistics service providers has

not been checked.

3. These cost analysis were worked out based on the data pertaining to the

study period and these may be varied in future.

30
4. As for as the size and volume of cargo is concerned, this study deals with

only FCL and no analysis have been made pertaining to LCL.

CHAPTER SCHEME

1. The first chapter deals with the introduction and design of the study,

profile of Inland Container Depots and also covers procedures involved in

export.

2. The related review of literature and other references have been discussed

in this second chapter

3. The third chapter provides with the appraisal on cost of logistics

components involved in shipment of cargo.

4. The fourth chapter elicits with a relationship analysis between the

profile of respondents and the total logistics costs involved in the

shipment of cargo.

5. The fifth chapter reveals about the various levels of satisfaction and the

problems faced by logistics providers in Inland Container Depots and

loading ports.

6. The sixth chapter concludes with the findings and suggestions for the

improvement of logistics service providers.

 CHAPTER VI

SUMMARY OF FINDINGS, SUGGESTIONS AND CONCLUSION.

The earlier chapter has covered the analysis on finding the relationship

between profiles of the respondents and the total logistics cost aroused in the

shipment of cargo from the point of ICDs to the point of loading ports. The

current chapter sums up the summary of findings and suitable suggestions to

overcome the problems of logistics service providers.

FINDINGS

LOGISTICS COST ANALYSIS

7. The mean transportation cost involved in the shipment of cargo from

CWC to Cochin port is lesser among the ICDs in Coimbatore and this is

estimated to A10835 for 20 Ft.Containers. Whereas, the same is lesser in

the shipment of cargo from CWC to Cochin port and this is estimated as

A14032 and A14078 for 40 Ft and 40 Ft. HC Containers respectively.

8. The shipment of cargo from CWC to Chennai port involved lesser cost of

handling and this is estimated as A89 for 20 Ft. Containers. Whereas, the

handling cost are lesser in the shipment of cargo from CONCOR to

Cochin port for 40 Ft.and40 Ft.HC containers and the cost is estimated as

A716 and A992 respectively.

9. The lesser packing cost A127 is involved in the shipment of cargo for 20

Ft. containers from CONCOR to Cochin port. For 40 Ft.and40 Ft.HC

220
 containers, the packing cost is lesser when the shipment is done from CWC

to Cochin port and the cost is accounted A200 and 238 respectively.

8. The lesser incidental cost involved in the shipment of cargo from CWC to

Cochin port for all the sizes of containers and this is estimated as A372,

A531 and A548 for 20 Ft, 40 Ft and 40 Ft. HC Containers respectively.

9. The stuffing cost in the shipment of cargo from CONCOR to Chennai

port involved lesser cost A1330, A1517 and A1791 for 20 Ft. 40 Ft. and

40Ft. HC Containers respectively.

10. The consolidation cost in the shipment of cargo from CLPL to Chennai

port involved lesser cost A104, A90 and A116 for 20 Ft. 40 Ft. and 40Ft.

HC Containers respectively.

11. The lashing material cost in the shipment of cargo from CONCOR to

Chennai port involved lesser cost A807, A902 and A1626 for 20 Ft. 40 Ft.

and 40Ft. HC Containers respectively.

12. The lashing labour cost on the shipment of cargo from CONCOR to

Chennai port involves lesser cost A807, A902 and A1626 among the

ICDs in Coimbatore for 20 Ft. 40 Ft. and 40 Ft. HC Containers.

13. The lashing labour cost in the shipment of cargo from CONCOR to

Chennai port involved lesser cost A312 for 20 Ft.Containers. The lashing

labour cost in the shipment of cargo from CONCOR to Tuticorin port

involved lesser cost A444 for 40 Ft.Containers and the same is lesser in

221
 the shipment of cargo from CLPL to Chennai port involved A532 for 40

Ft. HC Containers.

TOTAL LOGISTICS COST ANALYSIS

4. Post graduate respondents are identified as cost leaders in the shipment of

cargo from Coimbatore to sea ports. The ideal route for the economic

shipment of cargo is CONCOR to Cochin port and this is accounted for

A21156, A27177 and A29215 for 20 Ft. 40 Ft. and 40 Ft. HC Containers

respectively.

5. The pre 1980 establishment firms are having the cost advantages over the

others. The ideal route to lead the lesser total logistics cost A20881 for 20

Ft. containers. But in the case of 40 Ft. and 40 Ft. HC containers,

CONCOR to Cochin is the ideal route that leads economy in terms of

total logistics cost. They involve A26458 and A28078 for 40 Ft. and 40Ft.

HC respectively.

6. The steamer agents are identified as cost leaders in the shipment of 20 Ft.

containers and the cost is estimated to A23556. But in the case of 40 Ft.

and 40 Ft. HC containers, the cargo consolidators are the cost leaders and

the ideal economic route is identified as CONCOR to Cochin port. The

cost involved in this shipment of cargo is A23548 and A29396

respectively.

7. It is found that the people holding more than 8 years of experience are

able to minimize the total logistics cost for all the sizes of containers. The

222
 minimum total logistics cost involved in the shipment of cargo is A22346,

A25057 and A30459 for 20 Ft, 40 Ft and 40 Ft. HC. Containers

respectively.

SATISFACTION LEVEL OF LOGISTICS SERVICE PROVIDERS

8. The satisfaction score of CONCOR on the factors such as distance, time,

availability of equipments and efficiency in quick transaction are higher

for the shipment to Cochin port than other sea ports. Cooperation of

officials at port and Port cost are higher in the shipment of cargo to

Tuticorin port and Cost and Tariff at port is higher in the shipment of

cargo to Chennai port than other ports.

9. The satisfaction score on CLPL on the factor Port charge is high in the

shipment of cargo to Cochin port. The satisfaction score on distance,

availability of equipments at port and Cooperation of officials at port are

high in the shipment of cargo to Tuticorin port. However, the score on

Time, Cost, efficiency of quick transaction and Traffic at port are high in

the shipment of cargo to Chennai port than other ports.

10. The satisfaction score of CWC on the factors such as distance and tariff

rates at port are higher in the shipment of cargo to Cochin port. The time,

efficiency in quick transaction and Port cost are higher in the shipment of

cargo to Tuticorin port. The availability of equipments for handling of

cargo or containers at port is higher in the shipment of cargo to Chennai

port than the other ports.

223
PROBLEMS FACED BY LOGISTICS SERVICE PROVIDERS

ii Among the seven problems in CONCOR, Lack of connectivity between

road and rail has secured higher mean score and stood at the top and this

is followed by High tariff rates has secured and stood at the second place.

Lack of supports from Custom officers has secured next higher mean

score and stood at the third place.

iii Among the seven attributes in CLPL, Lack of connectivity between road

and rail has secured higher mean score and stood at the top and this was

followed by inadequate space in ICD has secured next higher mean score

and stood at the second. Lack of co-operation of officials has secured next

higher mean score and stood at the third place.

iv Among the seven attributes in CWC, lack of aassistance in getting duty

draw back facilities has secured the higher mean score and stood at the

top and this was followed by Lack of supports from Custom officers. This

was secured the next higher mean score and stood at the second. Lack of

co-operation of officials has secured next higher mean score and this is in

third place.

SUGGESTIONS FOR FURTHER IMPROVEMENTS.

ii. As the transport cost is the major part of total logistics cost, the logistics

firms may prefer CWC as the shipment point and Cochin port as the

loading port. Because the transportation cost form the major part of the

total logistics cost.

224
(iii) In order to lead the overall cost economy, the logistics service providers

may choose CWC as the shipment point and Cochin as the loading point

for all the sizes of containers.

(iv) The logistics firms may recruit post graduate employees for various

logistics divisions to lead the overall logistics cost advantages. Because

they are identified as cost leaders.

(v) The old logistics firms are better in controlling over the total logistics

cost. The other firms which are post 2000 may consider the aspects of old

logistics firms to bring down and be competitive logistics cost.

(vi) The logistics firms may give priority to the experience holders rather than

the fresher or less experience holders. Because the experience holders are

identified as cost leaders.

(vii) The management of Tuticorin and Chennai ports have to reduce the

traffic problem. At the same time, Cochin port has to reduce the port cost

and the cooperation of officials are still to be enhanced.

(viii) The CONCOR has to increase the space of ICD in accordance to the

increase of volume of shipments and customs officials cooperation should

be enhance.

(ix) The Chettinad Logistics P.Ltd.(CLPL) has to improve the facilities of

getting duty draw back to the logistics service providers and also the

cooperation of customs officials are to be improved.

(x) The Central Warehouse Corporation (CWC) may increase the space of

ICD and also the customs officials cooperation is to be enhanced.

225
(iv) The Tuticorin port management may redress the traffic problem and the

support of customs officials are to be enhanced.

(v) The Chennai port management has to increase the number of berths and

materials handling equipments.

(vi) The Cochin port management may improve the materials handling

equipments and number of berths.

SCOPE FOR FURTHER STUDIES

The present research has not included the total logistics costs from

various ICDs of the country to the sea ports. The future researcher may consider

to focus on calculation of logistics cost for Less Than Container load (LCL) at

either Per tone or Cubic Meter and the shipment of cargo from the factory

premises to the door step of overseas buyer.

CONCLUSION

Logistics costs are important factors that affect the competitiveness of

firms and the firms may enhance its market competitiveness by reducing

logistics costs. A profound knowledge of the logistics concepts and cost analysis

are important for day to day life and there is no doubt that this will save the

firms better from the financial risks. Therefore, it is the tool analysis for the cost

analysis of logistics management and thus, firms must develop suitable cost

policies in the light of their business risks.

 Logistics cost analysis is the key to manage for the cost effective logistics

functions. It is important that the management may consider the total of different

logistics costs. Control measures should be instituted to minimize the total costs

of logistics rather than to minimize the cost of each component. So, it is

imperative for the firms may have to consider the total logistics cost rather than

individual components.

It could be concluded that an optimized allocation of cargo from the

various ICDs in Coimbatore district to different loading ports will definitely lead

any logistics firm in to increased profitability of the firm. The logistics firm may

select CWC as the point of shipment and Cochin port as the point of loading to

minimize the overall logistics costs. It may be a worthy consideration for the

logistics firms to recruit personnel with post graduate qualifications and great

experience in this field which would help them to save over there logistics

expense.
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