haider role of logistics
TRANSCRIPT
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A PROJECT REPORT ON
ROLE OF LOGISTICS ININTERNATIONAL BUSINESS
UNDER THE GUIDANCE OF
MR. M. ALTAF KHAN
SUBMITTED BY:
HAIDER ALIROLL NO. 07-MIB-14 MIB: SEM. III (2007-2009)
DEPARTMENT OF COMMERCE & BUSINESS STUDIES
JAMIA MILLIA ISLAMIA, NEW DELHI 110 025
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A CKNOWLEDGEMENT
First of my sincere thanks goes to all people helped me in making the practical
any way how, directly or indirectly. I would like to thank T.M ZEYAUL HAQUE,
Manager, Link Courier & Logistics, New Delhi, for giving us an opportunity
which gave us more knowledge about the lengthy and the complicated
procedures of import and export. With the help of this project we could
understand the role of clearing and forwarding agents in export and import
procedures.
I express my deep sense of gratitude to my project coordinator Professor M.
ALTAF KHAN whose experience and guidance helped me a lot in preparing the
project report entitled Role of Logistics in International Business
I express my special thanks to those who supported me during the analysis
phase also to those people of management who have helped me during the
queries about software requirements, hardware requirements and network
specification.
I would be failing in my duty if I dont offer special thanks to my parents and god
almighty for his showers of blessing and pray that he may continue to bless my
endeavors.
HAIDER ALI
ROLL NO. 07-MIB-14
MIB: SEM. III
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CONTENTS
TOPICS PAGE NO:
EXECUTIVE SUMMARY 4
INTRODUCTION 6
COMPANYS PROFILE 14
OBJECTIVE AND RESEARCH METHODOLOGY 19
SOME FACTS ABOUT SHIPPING 22
FINDINGS AND ANALYSIS 29
PROCEDURE AND DOCUMENTATION 35
ROLE OF EDI IN LOGISTICS 59
BIBLIOGRAPHY 69
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EXECUTIVE SUMMARY
The project title The Role of Logistics Industry in International Business isan attempt to briefly dwell upon the phenomenon growth of the Indian logistics
sector, particularly in recent years, and what the future looks like. The objective
of the report aims to quantify the change in the size, composition and direction of
Indian logistics sector and its role in the global trade.
With the changing economic scenario, factors such as globalization of markets
international economic integration, removal of trade barriers to business and
trade, increased mobility of the factors of production and increased competition
have enhanced the need of efficient logistical activities. This is one of the most
important infrastructure requirements, which is essential for the expansion of
opportunities and plays an important role in making or breaking the competitive
positioning.
Logistics is an important element of any business venture. If we closely examine
the cost of a product, the raw material cost forms a significant portion, nearly40% of the total cost. Logistics views transportation, production planning with
efficient demand management, distribution management design, location of
plants warehouses, inventory management, etc: as integral parts of its function to
achieve the overall objective of customer satisfaction.
Coming to the port sector the long coastline of India is dotted with 11 major ports,
which are managed by the Port Trust of India under Central Government
Jurisdiction, and 139 minor operable ports under the Jurisdiction of the
respective State governments. The ports are located at Kolkata/Haldia, Mumbai,
and Jawaharlal Nehru Port at Nhava Sheva, Chennai, Cochin, Vishakhapatnam,
Kandla, Mormugao, Parardip, New Mangalore and Tuticorin. The major ports
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handle 90 per cent of all-India port throughout, and thus bear the brunt of sea
borne trade.
The present problems and crises facing the transport sector, to a great extent are
the results of lack of integrated thinking of the government from the beginning.
India was one of the few countries, which attempted to evolve a cohesive
transport policy. On the commercial side, all of the major transportation modes
are facing serious problems. Motor carriers are getting slammed from several
different directions. Fuel cost and freight bill surcharges are straining
relationships between the carriers and the shippers customers. The railroad
industry is not faring much better. The Railroads, which are operating at or near
capacity, are clogged with freight. And that, in turn translates to a reduction in
service reliability. Yet the railroads have been reluctant to make the hugeinvestments requiring for rolling the stock and supporting infrastructure needed to
ease the problem. As a result, the existing congestion is only likely to worsen,
leading to more service and capacity problems for shippers.
While the governments should look at closely how best they can improve the
efficiency and effectiveness of the macro logistics, the industries and companies
should attempt to improve the micro logistics, and optimize their logisticsfunctions.
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INTRODUCTION
The report Role of Logistics Industry in International Business provides a
comprehensive picture of the Indian logistics industry and covers the major components of it. With the changing economic scenario, factors such as
globalization of markets international economic integration, removal of trade
barriers to business and trade, increased mobility of the factors of production and
increased competition have enhanced the need of efficient logistical activities.
This is one of the most important infrastructure requirements, which is essential
for the expansion of opportunities and plays an important role in making or
breaking the competitive positioning.
Logistics usage in India remains much less than those in the developed
countries. India has still to go a long way in strengthening and streamlining its
logistical network. Still the countries logistical network and facilities suffers from
several inadequacies and hurdles and, in particular it has little resilience to deal
with unforeseen and fluctuating demands.
Logistics, like all other industries is large influenced by information and
communication technologies with the focus being on knowledge of customer
needs and value added services.The foundation of any logistics program is reliable cost effective, time definite
transportation and it encompasses everything from basis point to-point moves
to complicated, end-to-end integrated logistics.
The infrastructure is supported by a network of consolidation / deconsolidation
gateways and integrated logistics centers covering all major transportation
distribution centers.
Each of these gateways is an integral part of the global network, the multi modal
information system, and these facilities have state if the art racking, sorting,
assembling and depending on the market, refrigeration and high tech product
handling and security services are provided.
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The strengths in core transportation services and fitted information systems are
an integral part of innovative logistics and distribution infrastructure. North
American and Pan-European distribution networks, Asia to store / door delivery
and innovative warehousing with just in-Time and Merge-in-Transit services
allow the clients to increase inventory visibility and velocity while reducing total
cost and cycle time.
Effective global logistics is built upon basic operational capabilities in air, ocean,
surface and multi modal transportation. When these capabilities are provided on
both an international and intra-continental basis connected by one information
system the promise of end to enc logistics becomes real.
GLOBAL TRANSPORTATION
1. AIR2. OCEAN
Air
The worldwide volume of million tones combined with the industry experiences,
global network, multi modal information system and superior customer servicesprovide the clients with increased global capability, inventory velocity and
shipment visibility.
Some companies like Geologistics operate as a non-asset based carrier, while
others like APL act as vessel owned, which gives customer variety of innovative,
cost effective, time definite programs-whether airport-to-airport, door-to-point
airfreight or integrated into end-to-end logistics programs. Organization know
what can and what cannot be accomplished and thus no false promises are
made, generally. The logistics companies maintain an alliance with a core group
of carriers allowing for competitive pricing, space allotments in peak season,
cargo security and integrity, time definite transits, date management through EDI
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links and complete export / import documentation. The result increased capability
with lower total costs for the clients.
Air Services
Direct and consolidated consignments.
Multi modal tracking, and trace. (JayemSkynet)
Charters and part charters.
Oversize and restricted cargo.
Complete documentation.
Security
Break bulk.
On forwarding
EDI links to carriers.
Direct to customer distribution.
Air Benefits
Reliable, time definite service
Ease of information access.
Shipment and inventory visibility.
Cost effective.
Multiple service options.
Increased capability.
Ocean
With years if experience in transportation, and annual ocean expenditure of
million and nearly 5 lakh TEU moved per year, some organization like Jayem,
APL, Geologistics meets and exceeds the customers expectation. Utilizing the
network of services centers, global information system, superior customer
service and attention to detail their ocean programs are real and measurable.
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Operating as either a forwarder or NVOCC, Geologistics ocean services meet
the demands with cost effective flexible services LCI, FCL, contract
management, vendor consolidation, multi modal transportation, warehousing and
distribution with purchase order management makes a difference in designing an
increase in the capability of global market. Others also give the same with the
vessel under considerations. Using a combination of conference and non-
conferences steamship lines, they offer competitive pricing, weekly sailings, and
a verity of routings and transit times to meet the specific needs and budgets.
Ocean Services
Global NVOCC, on VOCC, FCL, LCL. Tracking services. (Geologictics Geoista )
FCL contract management.
Projects and charters.
Multi modal transportation.
Weekly sailings.
Timely and accurate documentation.
Warehousing.
Vendor and origin consolidation.
Ocean Benefits
Reliable and time definite.
Ease of information access.
Reduced cost
Increased capability
Increased service option flexibility.
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Everybody promises end-to-end logistics solution. With the package of services,
customers get it. The capabilities in air, ocean, surface and multi modal
transportation- connected by the global information system lets the customer
confidently extend their corporate reach around the world.
EXECUTIVE RELOCATIONS
An international move can be more complicated than a domestic relocation.
Packing and loading methods are different. Transportation options increase.
Customs must be cleared. And the complexity of documentation can increase
greatly. In short, an international move is something you should leave to an
expert.
Some company like Geologistics specializes in the door-to-door movement of
household goods and personal effects for thousands of relocating executives
each year. As one of the largest international household goods carriers in the
industry, the very best relocation services to some of the largest multinational
organizations in the world.
Utilizing the extensive network, Geologistics controls each step of every move,
allowing maximizing quality and minimizing cost, with over 1000 service centers,
the knowledge required to minimize transit time and customs delays is in store.
This includes customs regulations, documentation requirements, port
capabilities, holidays, and local infrastructure.
EXECUTIVE RELOCATION SERVICES
International tracking and shipment monitoring.
Origin / destination services.
Export packing, specialized crating.
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Wrapping, loading, and containerization.
Inland drainage.
International air and ocean transportation.
Warehousing. Customs brokerage.
Delivery to residence and unpacking.
Insurance coverage and claims processing.
EXECUTIVE RELOCATION BENEFITS
Reliable, time definite service worldwide.
Shipment visibility and control.
Reduction in overall relocation expenses.
Single source accountability.
Higher level of transferee satisfaction.
The entire international relocation services and process is controlled from start to
finish. Eliminating the complexities of international household goods logistics and
ensuring on time, cost effective delivery of their personal effects maximizes
expatriate satisfaction.
PROJECT CARGO
Project cargo management is the unique process of managing a dedicated
logistics channel, enabling a high volume of materials and equipment to be
sourced from multiple origins to a single job site on time and in the right
sequence.
Project cargo management is a highly specialized segment of the international
logistics industry. Few companies have the required expertise, trained personnel,
and network of service centers or experience in the unique aspects of project
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cargo management. The project experience covers all the regions of the
world, with particular focus on the developing economies of Russia and the
CIS, China and Latin America.
The project cargo movement is not a series of separate moves, but rather an
integrated logistics process linked with sophisticated information technology.
Companies assumes full responsibility for the movement of goods from multiple
suppliers facilities (regardless of location) through delivery on the job-site or final
destination. Customers will benefit from the economies of scale, carrier
relationships, on-time delivery, and industry expertise-resulting in cost-effective
programs, time definite services and successful project implementation.
Project Cargo Services
Multi modal tracing via the Internet.
Feasibility studies.
Management teams.
On site supervision.
Packing and crating. Specialized loading for oversized cargo.
Warehousing.
Air and ocean transportation and chartering.
Unconventional surface transportation.
Customs clearance.
Project Cargo Benefits
Single point of contact.
Global network of experts.
Shipment visibility.
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Emerging markets specialists.
Cost effective project management.
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COMPANY PROFILE
Link Courier & Logistic Pvt Limited
We are a Business Organization that is dedicated to the Enhancement of
Customer Care and Satisfaction through the means of a Proficient and Efficient
Courier Services.
The knowledge and Experience that has been acquired from our time with the
Company along with our allegiance to the professionalism and efficiency has
proven to be our most valuable tools.
With a wide Customer base of Blue chip Companies active in an extensive range
of industries, we have the experience to match.
We are committed to effective solutions to the distribution needs of our
Customers by offering exceptional service performance to time definite
standards.
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National Offices
Ambala Bangalore ChandigarhChennai Cochin Delhi - NorthDelhi - Central Delhi - West Delhi - South
Gurgaon Hyderabad Jaipur Jodhpur Kanpur KolkataLucknow Ludhiana MumbaiNagpur Udaipur Varanasi
DOMESTIC SERVICES
We prides ourselves in understanding the local as well as global needs of all our
Customers . Due to reason , we offer whole range of Courier and Parcel services to
meet your specific needs within Delhi Metro , within Country and to any part of the
World.
PRIORITY - Committed Time Bound Before Noon deliveries through special messenger.
This is a unique product exclusively designed for time sensitive consignments. This
Service is available for all Metro Locations only.
EXPRESS - Guarantees upliftment by the fastest and first available carrier to ensure
express delivery of consignments in the least possible time. This Service is available for
all nationwide locations.
ECONOMY - A cost effective and reasonably designed tariff to match requirement of
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your bulk shipments to be forwarded through Road /Rail Network . This Service is
available for all nationwide locations. Minimum chargeable weight is 5 kgs .
METRO - This product is widely used by Foreign & Pvt. Banks , MNCs , Mailing
Companies , Insurance Companies , Individuals etc. for distribution of their Mailers ,
Invoices , Banking Instruments , Greetings etc wherein we utilize our well knitted city
network supported by Professional Manpower and a large fleet of vehicles . This Service
is backed up by Online Tracking of consignments which helps us to provide the status
and any reports of all Consignments on daily basis . Presently this service is limited to all
Metro locations.
INTERNATIONAL SERVICE
EXPRESS - All the major gateways of the World are connected through our own
network and delivery partners. We value safe and prompt deliveries of your International
shipments through the fastest available Airlines, Routes and Networks all over the World.
SAVER - A Unique product designed to match requirement of your less time sensitive
shipments and giving you extra edge of economy pricings . This service is available for
Europe , Far East , USA & Canada only . Minimum chargeable weight is 11 kgs .
FREIGHT - We understand your Business requirements and also offer Port to Port Air
and Sea Freight for all your commercial shipments . Apart , we also offer Door to Door
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Air Freight consignments to most of the locations across the world . This product
undertakes Customs formalities at origin & destination to ease your job.
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Objectives of the study:
(1) To quantify the change in the size, composition and direction of Indian
logistics industry growth as a result of the liberalization, privatization
and globalization process.
(2) To study the trends in logistics industry including various modes of
transport.
(3) To identify the key areas of growth for the logistics sector.
(4) To analyze the future trends and growth patterns in the Indian logistic
industry.
Scope of the study:
The Indian logistics industry has undergone so many changes in the past
few years and is changing constantly, because the importance and character of
the industry is changing with the changing environment. As a result of the fact,
which was true yesterday, may not be true today. Many of the sources of data
are secondary. As a result discrepancy may occur in spite of all the precaution
one can take. Time though ample but to remain strictly on the topics which
otherwise could have been very important.
Limitations of study:
1. Most of the executives were a bit conservative as well as tired in revealing
few details.
2. Scope and objective is limited to certain standard, as it cannot be covered
in a single project.
3. Some views are based on personal opinion.
4. Some information is not up to date till present date.
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Methodology Adopted:
The Indian logistics industry is emerging from a neglected field to an
internationally recognized industry. Consequently, the statistics and analysis is
derived from a number of primary and secondary data sources. In order to arrive
at the most feasible model, the following approach has been adopted.
RESEARCH DESIGN:
As logistics management is known to be a major role player in any of the
organization, it includes entire logistics process required by an organization.
1. Exploratory
2. Descriptive and Diagnostic
Exploratory Research is done to get the details of the present scenario.
Finally the latter is carried out to get a view of logistics management andproducts in the industry as well as in deciding how the movement occurs.
Data Collection:
Primary Data- has been collected through verbal interviews, telephonic
interviews with executives of various organizations. Secondary Data - bulk of data belongs to this category, from magazines,
journals, shipping times, various websites and books.
Tools
Bar Diagram
Pie-Chart
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SOME FACTS ABOUT SHIPPING INDUSTRY
Shipping Industry Historical Perspective
The physical movement of cargo can be achieved by employing various meansof transportation. The shipping industry has grown from manual sea ships that
would take a long time to traverse short distances to large cargo carriers who
cover large distance sonly in matter of days. The European initially developed the
ship building industry and invented navigational systems.
Right from the beginning till today developed countries controlled the shipping
industry. Their technological edge had contributed largely to their superiority.
Liners and Tramp Operations
Cargo ships can be categorized as liner ships and tramp ships. Liner ships
represent the organized sector of the shipping industry due to their fixed
schedules of arrival and departure, predetermined voyages and trade routes and
pubic ocean freight rates. Liner ships are governed by shipping conference and
offer the following advantages to shippers.
Regular sailings to schedule port of call
Uniform rates for all shippers
Coverage of wide range of ports Rebates of freight rates based on loyalty agreements
Tramp Ships on the other hand have the following characteristics---
They are free to move anywhere on the high seas at their will
Their voyage routes and schedules are flexible
They arrive or depart without a fixed route
The freight rates of tramp ships depend upon the demand and supply
conditions in the shipping industry
Tramps normally carry homogeneous cargo like grains, ores, coal, timber,
fertilizers etc.
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Type of ships and international trade:
About five thousand million tones of cargo are transported by sea every year
from one part of globe to another. Those cargos manufactured, semi
manufactured and bulk cargo. There are various types of ships, which carry
these cargoes. Some of them are as follows
General cargo ships
Bulk carriers
Tankers
Specialized ships- With a view to saving time and cost, may new types of ships
have come into being? These are
Container ships
Roll- on- roll- off (RO-RO) ships
Barge Systems
Multi purpose vessels
Multi purpose vessels tend to be more expensive then conventional general
cargo but cheaper than container ships, RO_RO vessels or Barge carriers.
These are
General cargo/liner type vessels
Combination of bulk carriers and container vessels
Combination of container and RO_RO vessels
BO_RO vessels
Water transport:
Overview
Water transport can be broadly divided into two groups - Inland water transport
and Shipping. Shipping, in turn, can again be divided into two categories Coastal
shipping and overseas shipping.
Inland Water Transportation
Inland water transport includes natural modes as navigable rivers and artificial
modes such as canals. The inland waterways have played an important role in
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the Indian transport system since ancient times. However, in recent times the
importance of this mode of transportation has declined considerably with the
expansion of road and rail transport. In addition, diversion of river water for
irrigation has also reduced the importance of inland water transport. The decline
is also due to deforestation of hill enrages leading to erosion, accumulation of silt
in rivers and failure to modernize the fleet to suit local conditions. The
transportation of goods in an organized form is confined to West Bengal, Assam,
parts of North Eastern region and Goa.
Development of inland water transport commenced from the Second Five Year
Plan and up to the end of Fifth Plan the total expenditure on this sector was Rs.
34 crores. It was only in the Sixth Plan that this sector was given priority and
specific schemes of inter-State and national importance for development of inland water transport were taken up. The Seventh Plan was an important
landmark in the development of inland water transport. The expenditure on this
sector in the Plan (at Rs. 131.85 crores) was more than the expenditure incurred
right up to the end of the Sixth Plan. Three objectives were laid down in the
Seventh Plan for the development of inland water transport. Development of
inland water transport in the regions where it enjoys natural advantage.
Modernizations of vessels and country crafts to suit local conditions-andImprovement in the productivity of assets. The Inland Waterway Authority has
been set up which is a big step forward and should help in the accelerated
development of inland water transport.
Coastal Shipping
India has a long coastline of 7,516.6 kms, a number of ports (11 major and
139 minor working ports) and a vast hinterland. Therefore coastal shipping
holds a great promise more so because it is the most energy efficient and
cheapest mode of transport for carriage of bulky goods like iron and steel,
iron ore, coal, timber, etc. over long distances. However, despite this fact
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(and despite the fact that coastal shipping was reserved exclusively for
Indian ships after Independence), there has been a sharp decline in
coastal shipping operations. For instance, the number of ships fell from 97
in 1961 to only 56 in 1980 while Gross Registered Tonnage (GRT) fell
from 3.1 lakhs to 2.5 lakhs over the same period. However, at the end of
1994 the fleet strength was 438 vessels of 6.3 million GRT. The main
factors affecting the growth of coastal shipping adversely have been High
transportation costs especially for movement other than those between a
pair of water front locations, port delays, poor turnaround time of coastal
ships on account of averaged vessels, lack of mechanical handling,
facilities etc. The coastal fleet is ageing fast; about 52 per cent of the
tonnage is already overdue for replacement. Also, there is imbalance incoastal traffic movement as traffic is not equally available in both
directions. This makes it necessary for coastal ships to sail in ballast, at
times, on return journey. Moreover, slow handling of the cargo at port and
undue port delays inflict heavy losses on shipping, companies. It is
estimated that at present 70% of the ship time is spent at ports and only
30% of voyage.
Overseas Shipping
Because of the importance of overseas shipping in international trade,
considerable attention has been paid to increase the shipping tonnage in
the planning period. As a result, the share of Indian shipping in the
transportation of India's overseas trade has slowly and consistently
increased in the planning period. From around 5 per cent in the first Plan,
it increased to around 34.0 per cent at the end of 1993-94. As compared
to 1.92 lakh GRT (Gross Registered Tonnage) at the time of
Independence, shipping tonnage increased to 6.30lakhs Modernization of
fleet on the basis improved ship design and fuel efficiency in engine.
Replacement of over aged fleet on a selective basis. Drivers fixation of
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fleet by acquisition of cellular container ships and specialized product
carriers.
Inland Waterways: Renewed Thrust
Indias extensive water network consists of 14500 km of navigaval
waterways. Out of this, around 5700 km of rivers and canals are navigable
by motorized craft. Inland water transport has the potential to be a very
cost efficient mode of transport. Apart of involving substantially cheaper
maintaince and capital costs, it is also an environmentally friendly mode of
transport. According to conservative estimates, a shift of one billion-tone
km of cargo by inland water transport will reduce fuel cost by about Rs
250 million.Despite these advantages, inland water transport has failed to take off in
India. Cargo Transportation is an organized manner takes place mostly on
the three national waterways and in the states of Assam, Goa, Kerela and
West Bengal. Inland water transport contributes a minuscule 0.15% of the
1000 billion tone km inland cargo market.
A considerable hurdle lies in the lack of supporting infrastructure like
adequate and properly equipped terminals and warehouses. Another constraint is the lack of availability of vessels. Navigational hazards further
complicate the situation. Most waterways suffer from the mange of shallow
waters, narrow width of channels during the dry season, salutation, bank
erosion, and inadequate navigational aids to permit 24-hour operations.
The inland waterways authority of India is responsible for the development
and regulation of the sector. It was set up in 1996. Given its potential to
contribute to and estimated 50-billion tone km to the total cargo
movement, steps are being taken to invigorate inland water transport. At
present three waterways have been identified as national waterways.
Recognizing the roles of state governments in developing water ways,
various projects were to be assisted on a 50-50 basis under a centrally
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responsible scheme. The grant assistance to other states is limited to
90%.
On the policy front, the inland water transport policy was introduced in
2001. The main thrust of the policy to facilitate the private sector
participation. Its sought to encourage the entry of private players in ----
1. Ownership and operations of vessels for cargo and passengers.
2. Fair way development and maintenances.
3. Construction and operation of river terminals or river ports.
4. Provision and operation of mechanized cargo handling systems.
5. Putting up and maintenance of navigational aids.
6. Provision of pilot age services.7. Setting up and running of IWT training institutes.
8. The policy offered various concessions to attract private players. It also
enhanced the fund raising capacity of the IWAI by authorizing it to raise bonds
ion the market. The IWAI could also enter into commercial or joint venture.
9. The Asian Development bank has given in principle approval for a three
hundred million loan to the IWAI for the development of the sector. The loan will
be given in two phases. The ADB is presently working on a feasibility project for the use of inland waterways in transporting goods, a task entrusted to it by the
WAI.
10. IWT also forms an important constituent of the ambitious rupees 1000-
billion sagar mala project. If all these majors are properly implemented, inland
water transport could see a dramatic improvement.
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FINDING AND ANALYSIS
0
5
10
15
20
25
30
35
40
N o . o
f r e s p o n
d e n
t s
Air Export Ocean Export Air Import Ocean Import
Transportation Mode ( sample size 25)
There are various modes of transport through air, ocean, rail, road etc. The
people interviewed were mainly dealing in Air export (9), Air import (6), Ocean
export (8) and Ocean import (17) which, shows that companies in export tend to
prefer ocean rather than air because of economic reasons. In case of import air
transportation is more preferred which may be due to the reason of faster
delivery of raw materials.
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Terms of Payment
25%15%
60%
0%10%20%30%40%50%60%70%
15 daysCreditPolicy
AdvancePayment
40 daysCreditPolicy
EastWest
The people of the various companies who were interviewed most of them opted
for 40 days credit policy-21 (60%) which gave them the time to collect the
amount smoothly. 6 (25%) companies opted for 15 days credit policy and 3
(15%) companies opted for advance payment. 10 companies did not come out
with their policies.
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IMPORT BASIS
0.00%
10.00%
20.00%
30.00%
40.00%
50.00%
60.00%
70.00%
C.I.F. F.O.B.
B A S I S
VALUE
The graph of Import basis shows that around 66.67% of the sample companies
have their import routed through the C.I.F. (Cost, Insurance and Freight) basisand rest of the companies goes for F.O.B.
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EXPORT BASIS
0.00%
10.00%
20.00%
30.00%
40.00%
50.00%
60.00%
70.00%
80.00%
C.I.F. F.O.B.
B A S I S
VALUE
The graph of Export basis shows that 30.35% of the sample companies have
their Export routed through the C.I.F. (Cost, Insurance and Freight) basis. The
rest is done, i.e. 69.65%, through the F.O.B. (Free On Board) basis.
Key reasons for inefficient logistics: -
Poor Infrastructure.
Underused potential to cut cost.
Numerous regulatory bottlenecks.
Transport Industry is an unorganized sector.
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No professional approach.
Low transportation efficiency, 250 kms/day (Global average is 1000
kms/day)
Unsuitable vehicles, 45% containerized (global 90%).
Unfocused spending global outsourcing trends.
Outsource logistics is growing 25-30% per annum in US market.
70% of fortune 500 companies are outsourcing their logistics
requirements.
In India companies like Telco, GE, Godrej, Toyota, Kirloskar, P&G and
Lafarge are outsourcing their logistics.
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PROCEDURE AND DOCUMENTATION
Export Documents
Pre-shipment documents:
Commercial documents
The commercial documents are those, which, by customs of trade, are required
for effecting physical transfer of goods and their title from the exporter to the
importer and the realization of export sale proceeds.
14 out of 16 commercial documents have been standardized and aligned to one
another. Shipping order and bill of exchange could not be brought within the fold
of the aligned documentation system because of their very different data
elements and having a very little in common with other commercial documents.
The commercial documents may be classified into Principal Documents and
Auxiliary Documents.
Principal documents
Out of the 16 commercial documents mentioned above, the exporter is required
to send the following eight documents to the importer. These are known as the
principal export documents.
1. Commercial invoice
2. Packing list
3. Bill of lading
4. Combined transport documents
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5. Certificate of inspection/quality control
6. Insurance certificate/policy
7. Certificate of origin
8. Bills of exchange and shipment advice
Auxiliary documents
The remaining eight commercial documents are known as auxiliary documents.
1. Performa invoice
2. Intimation for inspection
3. Shipping instructions
4. Insurance declaration
5. Shipping order
6. Mate receipt
7. Application for certificate of origin
8. Letter to the bank for collection/negotiation of documents
Regulatory documents
Regulatory pre-shipment export documents are those which have been
prescribed by different government departments/bodies in compliance of the
requirements of various rules and regulations under relevant laws governing
export trade such as export inspection, foreign exchange regulations, export
trade control, customs etc.
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There are 9 regulatory documents associated with the pre-shipment stage of an
export transaction and are as follows:
1. Gate pass-I/Gate pass-II (prescribed by central excise authorities)
2. AR4/AR4A form (prescribed by central excise authorities )
3. Shipping bill/bill of export (prescribed by central excise authorities )
For export of goods
For export of duty free goods
For export of dutiable goods
For export of goods under claim for duty drawback
4.export application (prescribed by port trust)
5.receipt for payment of port charges
6.vehicle ticket
7.exchange control declaration prescribed by RBI GR/PP forms
8.freight payment certificate
9.insurance premium payment certificate
The different commercial regulatory documents may be classified into documents
related to shipments, documents related to payment; documents related to
inspection, documents related to excisable goods and documents related to
foreign exchange regulations.
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Documents related to goods:
(i) Invoice
CUSTOMS INVOICE
The customs invoice is used in lieu of the commercial invoice in a few importing
countries for customs purposes, but the importer often needs a commercial
invoice too. The customs invoice can be in a form called the certificate of value.
The invoices vary in format but they contain essentially the same data as in the
commercial invoice and packing list. The invoice is self-certified by the exporter.
The blank customs invoice is available from the customs broker or forwarder and
specialized printer. Certain importing countries may require their importers, not
the exporters in the exporting country, to provide the completed customs invoice
for customs clearance.
CONSULAR INVOICE
As the name implies, the consular invoice is a specific invoice issued by the
Consul of the importing country. Many importing countries, mainly less developed
countries, have already phased out this invoice. It is used for customs clearance
and other purposes, as such any errors or omissions on the invoice may cause
problems and fines at the customs in the importing country. The consular invoice
is a form of non-tariff barrier. The format of the consular invoice form varies
greatly, but it contains essentially the same data as in the commercial invoice
and packing list. The invoice form is either in the language of the importing
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country (e.g. Spanish usually) or bilingual, that is, a combination of English and
Spanish usually. The exporter's declaration normally is included in a consular
invoice. The consular legalization and payment of a consular fee is required. The
consular fee can be a percentage of the FOB invoice value.
(ii) Packing list:
The packing list is the detailed list of contents of the shipment, including
quantities, items, model numbers, dimensions and net and gross weights. A
packing list should specify per carton or crate the number and type of units of
material inside. The shipper gets the packing list ready at the time the goods are
being is prepared for shipping. There is no standard format for packing lists.
Although it is not a required customs document, the packing list is often used by
the customs broker to obtain additional information about the shipment.
(ii) Certificate of origin:
The Certificate of Origin is only required by some countries. In many cases, a
statement of origin printed on company letterhead will suffice. Special certificates
are needed for countries with which the United States has special trade
agreements, such as Mexico, Canada and Israel. More information about filling
out these special certificates is available from the
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Certificates related to shipment:
(i) Mate receipt: mate receipt is a receipt issued by the commanding office of
the ship when the cargo is loaded on the ship, and contains information
about the name of the vessel, berth, date of shipment, description of
packages, marks and numbers, condition of the cargo at the time of receipt
on board the ship etc.
(ii) Shipping Bill: - Shipping bill is the main document for obtaining custom
permission for shipping goods. This document is of four types: -
Free shipping bills
Drawback shipping bills
Ex-bond shipping bills
Dutiable shipping bills is filled up where the consignment is subject to
export duty and where duty drawback is to be claimed. Whereas free shipping
bills is filled up when the consignment is subject to export duty and no duty
drawback is to be claimed. Ex-bond shipping bills is needed in case of shipment
from the customer bounded warehouse.
(iii) Airway bills: - Airfreight shipments are handled by air waybills, which can
never be made in negotiable form.
(iv) Bill of lading: - is a contract between the owner of the goods and the carrier
(as with domestic shipments). For vessels, there are two types: a straight bill of
lading which is non-negotiable and a negotiable or shipper's order bill of lading.
The latter can be bought, sold, or traded while the goods are in transit. The
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customer usually needs an original as proof of ownership to take possession of
the goods
DOCUMENTATION : -
Generally documentation is perceived to be the most complex, difficult and
critical activity of export marketing particularly in India. Successful
consummation of an export order needs innovative skills and meticulous planning
including proper compliance and subsequent documentary provision.
One may categorize export documents into three dimensions on the basis of their
role in smooth flow of trade.
REGULATORY CONTROL IN INDIA
After becoming an exporter company it is required to obtain a (RCMC) from the
relevant export promotion council, commodity board or any other designated
body. This certificate is needed for getting some more export incentives given by
the govt.of India. Next step in becoming an exporting unit is to obtain importer-
exporter code number from Director General of Foreign Trade.
a) GR FORM / PP FORM : -
GR FORM / PP FORM in duplicate is required for every consignment for
obtaining customs clearance. This form is needed as a legal requirement under
the Foreign Exchange Regulation Act of India. GR FORM is needed for all
consignments other than ones being shipped by post, while PP FORM is needed
for goods going by post.
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b)
DOCUMENTATION: -
Various documents originated during export marketing activities of Moserbaer
are defined below: -
SALE ORDER / CONTRACT: -
It is a premiere document that has to be generated in any transaction. It is an
agreement between buyer and seller, in which seller has agreed to buy them, at
an agreed price with specified delivery terms. Delivery terms may be F.A.S,
F.O.B, and C&F etc.
F.A.S (Free Along Side)
In this seller has the obligation to deliver the goods alongside the vessel on the
quay. The buyer has to bear all the cost and risk of loss or damage to the goods.
Dutiable shipping bills
F.O.B (Free On Board): -
When the delivery condition is F.O.B, the seller has the liability to load the
goods / materials on the vessel specified by the buyer. The transportation,
insurance and other agreements are to be made by the buyer.
C & F (Cost and Freight): -
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The seller must pay the costs and freight necessary to bring goods to the named
port of designation but the risk of loss and damage to the goods is transferred
from the seller to the buyer.
In case of International Trade the buyer and seller separated by distant
boundaries. Hence it becomes less viable for the parties to come together to
form a contract. Thus it so happens the buyer or seller initiates the formation of
contract by sending purchase order or sale order respectively. Sometimes the
buyer intimates the seller by sending the purchase order, or if seller finds the
initiative lucrative, he sends his sale order to the buyer. Thus in this way the
parties enter into a contract with each other. Such type of contract is known as
Constructed Contract.
Various contents of sale order are listed below:-
a. Price of the product
b. Quantity and quality of the product
c. Period of delivery
d. Port of delivery
e. Standard terms and condition
f. Types of financial arrangements
g. Payment terms
Documents related to payment
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(i) LETTER OF CREDIT: -
L /C is the most popular method of payment / receipt in foreign trade transaction
as well as it the mother document which give rise to all other documents. Under
L/C the buyer promise to pay the seller on due date. In this type of credit, the
buyers liable to pay. It is thus also known as bankers commercial or
documentary credit.
It is commonly referred as commercial L/C as it a means to opening a credit in
favour of someone, under which payment will be made provided that certain
conditions are fulfilled within given time.
PARTIES INVOLVED IN L/C: -
1.Buyer or importer
2. I) Issuing or opening Bank
II) Reimbursing Bank
3. Seller or exporter or beneficiary
4. I) Advising / confirming Bank
II) Paying Bank
III) Negotiating Bank
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Based on security, L/C can be classified into 3 types: -
1.Revocable or irrevocable : -
A revocable L/C can be cancelled or modified, by the buyer at any time withoutany notice to the seller. But an irrevocable L/C cannot be cancelled without prior
notice to the seller of exporter.
2.Confirmed or Unconfirmed: -
When the bank authorized by opening bank confirms an irrevocable L/C, it
becomes confirmed. Otherwise the L/C is unconfirmed.
3.Recourse or without recourse: -
If the advising bank pays the seller but does not get reimbursing from the
opening bank, then this bank can recover the whole money with interest from the
seller.
But in case of without recourse, the liability of the exporter ends after he has
deposited the required documents and received payments.
(ii) BILLS OF EXCHANGE : -
It is a document for the goods exported. It is the means of collecting money
through banking channels and also a method of payment by credit. A bill of
exchange is also referred as Draft. It is a legal document. In India, Section 5
of Negotiable Act, 1881, defines bill of exchange as:-
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An instrument in writing containing an unconditional order, signed by the maker,
directing the person to pay certain amount .
It has the following characteristics:-
a. It is an instrument in writing
b. It is an unconditional order signed by Maker (Drawer)
c. It is a direction given to a specific person (Drawee)
d. It is a direction to make payment of specific or fixed amount.
A bill of exchange performs the following functions: -
i. Means for collecting payment
ii. Means for demanding payments
iii. Means for extending credit
iv. It is a promise of payment
v. It is a receipt of payment
Various documents are required for custom clearance. Exporter or his agent
submits the following documents to the custom department so as to get custom
clearance for export.
(iii) BANK CERTIFICATE OF PAYMENT
It is a certificate issued by the negotiating bank of the exporter, certifying that thebill covering particular consignments has been negotiated and that the proceeds
received in accordance with exchange control regulation in the approved
manner.
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DISPATCH INSTRUCTION: -
Dispatch instruction is almost like sale order. It is an instruction or order given by
the companys marketing department to the plant to dispatch specified goods to
the port of any other designations.
Contents of dispatch instruction are given below:-
a. Specification and quantity of materials to be transported
b. Port of dispatch
c. Shipment schedule
d. Place and port of schedule
e. Name of the buyer
A.R.4 FORM: -
In India exportable goods are exempted from duty. Hence if the company
exports goods to foreign countries, to gain foreign exchange, it applies to central
excise department to get exemption, from excise duty, by giving application in a
It is an application, by the company to the central excise department of custom,
for excise relief. prescribed format under rules 158, 185, 1730. This application
is known as the A.R.4 FORM.
The contents of A.R.4 FORM are listed below:-
a) Name and address of range officer
b) Name of the company
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c) Port of loading
d) Country of loading
e) Central excise regd. No.
f) Number and description of goods
g) Gross weight / net weight
h) Value of goods
i) Weight and quantity of goods
j) Duty rate and amount
k) Amount of rebate claimed
l) Remarks
m) Declaration of the company
DELIVERY INVOICE: -
The plant prepares it at the time of removal of goods from the plant. It is meant
for excise purpose. It contains the following: -
a. Quantity of goods dispatched
b. Price of goods
c. Mode of dispatch
d. Port of dispatch
e. Buyers details
f. A.R.4 reference
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PERFORMA INVOICE: -
It is basically a form of quotation by the seller to the buyer. It is a sort of
invitation to the buyer from the seller to place a firm order to him. It is deposited
with the custom clearance for estimation of excise duty. It helps in getting
custom clearance.
A Performa invoice contains:-
a. Exporters name
b. Consignees name
c. Notifys name
d. Buyers name
e. Countrys of origin
f. Designation
TEST CERTIFICATE: -
It is a verification certificate that shows that the goods shipped have the required
cast no. And percentage composition.
INSPECTION CERTIFICATE: -
It is a document which certifies that the goods have been inspected (prior to
shipment). This certificate is generally desired by the importer so that he can be
sure that right types of goods ordered are being send by the exporter. In India
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certain goods are subjected to quality control. For this purpose an agency called
(EIC) was created.
G.R FORM: -
It is one of the most important documents in international business. This form is
obtained from R.B.I. This form is filled by the exporter and is endorsed by the
customs. This form is one kind of guarantee given by exporter to R.B.I. The
exporter gives guarantee that within six months of transaction the foreign
currency involved will be realized.
G.R FORM contains: -
a. Exporters name and address
b. Invoice no. And date
c. Consignees name and address
d) Port of loading and discharge
e) Country of designation
f) Exchange rate
g) Currency of invoice
h) Net & gross weight, particulars, description
SHIPPING BILL: -
It is the main document on which custom permission for export is given. It is
custom document. It is a document, which is necessary for loading the cargo on
ship.
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It contains the following: -
a. Exporters name and address
b. Invoice no. and date
c. Port of loading
d. Port of designation
e. Details of packages and goods
f. Analysis of export value; currency; amount
MATE RECEIPT: -
When the cargo is loaded on the ship, the commanding officer /
captain of the ship will issue the receipt called the mate receipt for goods
loaded.
It contains the following information:-
a. Name of the vessel
b. Berth
c. Date of shipment
d. Description of packages etc
BILL OF LADING: -
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It is a document which is issued by the shipping company acknowledging the
receipt of goods mentioned there / in and undertaking that the goods are in
condition and will be delivered to the consignee, provided that the freight
specified therein is duly paid.
It serves the following 3 purposes: -
It is a document of title of goods shipped,
It is a receipt for goods, received by the steamship company,
It contains the terms of the contract between the shipper and shipping
company
MARINE INSURANCE: -
When the goods are transported from one place to another there is always risk
involved. Hence to avoid such transit losses, marine insurance is taken up. In
India there are various insurance companies, such as General Insurance
Company. Insurance Policy is normally done through agents.
Marine insurance contains the following:-
a. Name and address of the subsidiary of insurance company
b. Claim payable
c. Name of the insured
d. Vessel no.
e. Place of dispatch
f. Port of loading and dispatch
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g. Destination
h. Insured value
i. Terms of insurance
j. Particulars and description of goods
IMPORT DOCUMENTS
1. INVOICE
2. PACKING LIST
3. PURCHASE ORDER
4. BILL OF LADING
5. DOUBLE DUTY BOND (If Required)
6. ENDUSE BOND (If Required)
7. DECLARATION: If the supplier of the goods is different from the
manufacturer, the importer or his agent has to file the declarations
required under GATT Valuation act.
8. WORK SHEET
9. INCOME TAX CERTIFICATE
10.TR6 CHALLAN
11.IGM (Import General Manifest): The declaration to be filed under section
30 of the Customs Act 1962, known as Import Report in case of import by
land and Import General Manifest, in case of import by sea or air. It is filed
by the Capt. Of the Vessel within 24 hours of the arrival of the vessel in
the customs station. In case of import by vessel, IGM may be delivered
even before the arrival of the vessel. This is not permitted in the case of import by air or by land.
BILL OF ENTRY
After receiving the documents required for the import procedure Bill of Entry
is prepared.
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They are basically of 3 types.
1. B/E for Warehousing.
2. B/E for Home Consumption.
3. B/E for Ex-Bond.
B/E for Warehousing is made when the importer does not
require all the goods at the same time. So the importer only takes a part of goods
required by him and keeps other goods in the warehouse.
B/E for home consumption is made when the goods imported are fully
taken up by the importer or in other words fully consumed by the importer.
B/E for Ex-Bond is made in order to take the goods from the warehouse.Every time the goods are taken from the warehouse or Ex-Bonded, this type of
B/E is prepared.
SALIENT FEATURES OF BILL OF ENTRY
1. Origin and vessels Particulars: This includes Port of Shipment, Countryof Origin, Vessels Name, Rotation No., and Bill of Lading No. &Date.
2. Particulars of the Goods: This includes description of goods as well asmarks & no. of packages, weight / volume /quantity, description of goods
as per classification and gross weight & total no. of packages.
3. Value: Assessable value is to be indicated with following breakup of Invoice Value, Freight, Insurance, and Exchange rate, Loading & Local
agency commission, Misc. charges & landing charges.
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4. Duties Levi able: The Customs duty rate and amount indicating Tariff Heading & Exemption notification wherever applicable should be indicated
for both Basic as well as Auxiliary duty. Also the Central Excise Tariff
should be indicated.
5. Codes: Code numbers are to be indicated by the importer while filing theBill of Entry which includes Port code, Customs House Agents Code,
Country of Origin, Consignment Code, Unit Code, Currency Code etc.
6. Declaration of Importers / Clearing Agents: This declaration includes
the declaration about the correctness of the contests of the goods thathave been purchased on outright purchase / Consignment basis and
whether the importer has any connection with supplier / manufacturer.
ACTIVITIES IN IMPORT OPERATIONS
. Notification of arrival: -
Process of informing the importer of the date and location of goods arrival & the
requisite documents required for custom clearance.
. Customs Clearance: -
Presentation and clearance of cargo through the customs.
. Payment of duty and Freight Charges: -
Payment on behalf of his principal at the time of importation. This avoidsdelay in the dispatch of goods to the importer.
. Delivery to the importer: -
Process of delivering goods to the importers premises following customs
clearance.
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. Breaking Bulk & Distribution: -
The agent may be an umbrella agent whereby he will have commodities
not only of his clients but also those of other agents with whom he has a
contractual arrangement.
Procedures of Custom Clearance for Imports
At first all the documents along with Bill Of Entry and the GATT & the
small declaration are presented to the Appraisal Officer. The Appraisal Officer
checks for all the documents and if found it correct sends it to the Deputy
Commissioner of Customs for cross checking. This process is called noting and
assessment of B/E. If the Appraisal officer does not get satisfied he can send the
person for checking. After the examination of the container is done, then thecustoms gives a security seal no. which has to be put in the container. This
container is then sent to the factory for destuffing. Before this the containers
should be taken out of charge. If the Appraisal Officer requires checking of the
cargo he can remove the cargo on the ground itself before sending it to the
factory.
Categories of Importers
Actual User: Actual user (Industrial) persons who utilize the imported
goods for manufacturing their own industrial units or manufacturing for their
own use in another unit including a Jobbing unit.
Actual User (Non-Industrial): Person who utilizes the imported goods for
their own use in -
Any commodity establishment carrying on any business, trade
or profession or any laboratory, scientific or research and development
institution, university or other educational institute or hospital Or any
service industry.
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Non-Actual User include: Importers for stock and sale.
Personal imports.
Import for gifts.
1. Particulars of the Goods: This includes numbers of description of goodsas well as marks & no. of packages, weight / volume /quantity, description
of goods as per classification and gross weight & total no. of packages.
2. Value: Assessable value is to be indicated with following breakup of Invoice Value, Freight, Insurance, and Exchange rate, Loading & Local
agency commission, Misc. charges & landing charges.
3. Duties Leviable: The Customs duty rate and amount indicating Tariff Heading & Exemption notification wherever applicable should be indicated
for both Basic as well as Auxiliary duty. Also the Central Excise Tariff
should be indicated.
4. Codes: Code numbers are to be indicated by the importer while filing theBill of Entry which includes Port code, Customs House Agents Code,
Country of Origin, Consignment Code, Unit Code, Currency Code etc.
5. Declaration of Importers / Clearing Agents: This declaration includesthe declaration about the correctness of the contests of the goods that
have been purchased on outright purchase / Consignment basis and
whether the importer has any connection with supplier / manufacturer.
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ROLE OF EDI IN LOGISTICS
Computerization has changed the way business is conducted the world over.
No aspect of business has remained untouched by computer revolution. This
also includes international business where a large number of people located
in different parts of the world conduct transactions with each other. These
activities include manufacturing, inland transportation, customs and exercise
matter, port operations, shipping, clearing, and forwarding etc.
EDI is defined as the computer-to-computer transfer of commercial or
administrative transactions using a pre-defined standard to structure the datarelated to the transaction. In such case transactions means carrying out
functions like consignment instructions, payment of customs duty, processing
of duty draw back applications, DEPB applications etc. The need for such
electronic link between various agencies involved in the logistics operation
was felt world wide, because of increasing number of transactions. EDI can
be best described as an inter organizational computer-to-computer exchange
of business documentation in a standard machine process able format. EDI
takes place through proprietary, value added networks.
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DEVELOPMENT OF EDI IN INDIA
In India, where a major part of work is done manually, EDI is making its
presence felt slowly but surely. The progress is slow because of stiff
resistance from labor unions at docks, airports and other government
establishment. The progress of EDI depends upon the computerization of
these departments.
PORTS:
Different ports in India are linked to each other through EDI system. Some of
these ports are J.N.P.T., COCHIN Port, KOLKATA Port, CHENNAI Port andVISHAKHAPATNAM Port. Earlier this system was used for the disbursement
of duty drawback. Under the duty drawback scheme, the exporters are
reimbursed the duty paid on the raw material and other commodities imported
for use in the manufacturing of export items. In this case, EDI help in the
disembarrassment of duty drawback more efficiently and effectively. Cochin
AND Chennai ports are the two ports in India that has been linked with
different shipping lines. Once all the ports will be linked with the shipping lines
there will be drastic change in the turnover time of ships on the Indian ports.
As the lines will be in position to inform the port authorities about the arrival of
ship in advance documents can be processed accordingly and hence less
time will be consumed.
AIRPOPRTS:
Operations at all the airports in India have been computerized. The increased
use of air cargo in international business is basically due to the speed itoffers. It enables just in time manufacturing practices, sourcing the raw
materials and components from anywhere in the world and opens new
markets. Profile of air cargo industry is changing rapidly to cope up with the
new demands from markets. Companies like FEDEX AND UNITED PARCEL
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SERVICES act as integrators forwarders who have their own aircrafts. Thus
the turnover time has decreased and this system (EDI) is helping a lot.
SHIPPING LINES:
Around 30shipping lines operating presently in India are linked electronically
with their headquarters in other countries. Their local offices/agents receive
information about the schedules and departures of various ships at different
ports. They also receive import manifests, cargo details etc. EDI facilitates
linkage between different shipping lines, ports and customs, thereby
substantially reducing duplication of work, improving the efficiency and cutting
down the transaction costs and delays.
INLAND CONTAINER DEPOTS:
Electronic linkage of ICDs with different ports will make the various links in the
logistics chain stronger. CONCOR, which manages various ICDs, is already
planning to link the ICDs through computers and it has done so in the recent
years i.e. connected many of them. This linkage enables them to receive the
information about the arrival of different cargos from various ports in India.
EDI will help various other agencies operating at ICDs such as customs,
shipping line representatives, freight forwarders, exporters and importers to
bring more efficiency to their work.
RAILWAYS:
Indian railways have also computerized its network, so that different parties
like freight forwarders, exporters, importers, shipping lines, CHA can check
the status of container at their will all over the world. This linkage helps theshippers to keep track of their cargo and monitor its status at the various
stage of transit.
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BENEFITS OF EDI:
EDI saves the repetitive data entry work at various points.
EDI enables error free and quick transmission of data from one point to
other point. Many of the problems thus arising out of the data entryerrors can be minimized.
EDI helps the exporters and importers to practice just-in-time
inventory concept, thereby reducing inventory-carrying costs.
EDI improves the cash flow position of the exporters by quick
processing of invoices and drawback applications.
EDI speed up the customs clearance by reducing the transit time of the
cargo.EDI reduces the turn around time of the ships at the ports.
EDI improves the efficiency of port authorities and helps them to earn
more revenues.
EDI reduces the paperwork and thus saves time and money.
INTERNATIONAL TRADE AND EDI:
There is a very close relationship between EDI and the international trade. EDI
was first used immediately after the Second World War in 1948. Huge bulk of
cargo arrived in BERLIN and all the carriers coming with the goods contained the
description of goods in different language and it caused a problem. Hence, a
common format was developed and thus came the standard format.
Since then EDI has developed a lot and facilitates the data interchange around
the world. It handles large amount of information, which controls and regulates
the movement of cargo, containers, ships and aircrafts. Such information is
useful only if they arrive before the cargo.
Following figure illustrates the flow of cargo and related documents in a typical
international transaction.
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CUSTOMS AND EDI:
Every consignment entering or leaving a country must clear the customs barrier.
The customs official of most of the countries have to operate under tremendous
pressure of physical examination of cargo, completing paper work, collecting the
customs dues, keeping the cargo in bounded warehouses etc. On the one hand
they have to comply with the governments rule and regulations, and on the other
hand they have to expediter the clearance of cargo, which is legally entering the
country with proper documents.
Following are the reasons for which many countries are adopting EDI and
advising the shippers to transact with customs department electronically instead
of submitting paper: -Liberalization of the economies across the world has given a boost to the
world trade. This has resulted in increased volume of cargo to be
examined by the customs department at ports, airports and land borders.
Technology has enabled to increase the speeds and sizes of ships and
aircrafts, which bring in large amount of cargo in one go.
IMPORTER EXPORTER
FREIGHTFORWDER
CUSTOMSSHIPPING
LINE/AIRLINECUSTOMS
FREIGHTFORWARDER
Purchase Order/Letter of Credit
Cargo RelatedDocuments
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The scope of customs department has widened and now covers areas
such as intellectual property rights, toxic wastes and endangered species.
Governments, international agencies and NGOs demand data related to
the international trade more frequently.
EDI helps customs department to cope up with increasing demands on
their time. It is emerging as a useful tool of transaction for customs
departments in many developed and developing countries.
EXPORT PROCESS UNDER EDI:
EDI enables the customs department on the ports and airports to process the
shipping bill very fast. Instead of paper documents going from table to table as
happen in most of the government departments, EDI makes it possible to
process and send the documents on-line from one department on the port to
another. Various steps involved in the processing of shipping bills under EDI are
as follows:
Step 1: - Submission of shipping documents
Shipping documents such as invoice, packing list, quality certificate of
export inspection agency etc. are first handed over to registrationcounters at customs house along with the processing charges.
Step 2: - Preparation of Check List
The customs clerk checks all the documents and a checklist is
prepared which contains the description of goods and other details.
This checklist is crosschecked by the exporter/CHA.
Step 3: - Endorsement of Shipping Bill Number
The shipping bill is generated online and second copy of checklist is
given to exporter/CHA with shipping bill number endorsed on it.
Step 4: - Transfer to Customs Appraiser
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At this stage, the original documents along with checklist are forwarded
to customs appraiser to pass the shipping bill. Since shipping bill is not
prepared physically, it is transferred on-line to appraiser. He passes
the shipping bill online after checking all the documents. He also gives
the examination order by giving details of the extent to which cargo has
to be examined.
Step 5: - Transfer to Assistant Commissioner
Shipping bill is then transferred to Assistant Commissioner for counter
signature. In this way shipping bill is passed under EDI system. The
examination order issued in such cases issued by the appraiser is alsotransferred on-line on the docks to the examiner. The export promotion
copy is issued to the exporter for his future use is issued at the docks.
IMPORT PROCESS UNDDER EDI:
Step 1: - Collectio0n of Documents
All the documents necessary for clearing of import consignment such
as invoice, packing list, bill of lading or any other document as per
contract are submitted by importer.
Step 2: - Annexure Preparation
Annexure-1 is prepared and submitted along with other shipping
documents for noting with customs departments.
Step 3: - Endorsement of Bill of Entry Number
Import general manifest (IGM) filed by shipping company carries
details of goods carried on board, vessel number, name of importer
and exporter etc. on the basis of the information in the IGM customs
department checks the details of documents and issues a checklist.
The bill of entry number is endorsed on this checklist.
Step 4: - Action of Appraiser
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Customs appraiser checks the documents on the basis of checklist
available top him on-line takes the following action:
1. Issuing of examination order indicating the extent of
examination.
2. Making entry in DEPB/DEEC.
3. Calculate the amount of import duty payable by importer.
Step 5: - Documents Audit
The auditor cross checks the following information in the documents:
1. Import duty amount calculated by customs appraiser.
2. Correctness of entry in DEPB/DEEC book.
Step 6: - Online clearance of Documents
Next, the checklist is sent on line to deputy commissioner of customs
along with physical documents. The documents are passed on line and
TR6 challan is issued for payments of duty. One copy of bill of entry is
generated on line for record purpose by customs department.
Step 7: - Payment of Duty
TR6 challan is issued in 3 copies for payment of import duty. Customs
department keeps first copy, the bank while depositing duty amountkeeps second copy and third copy is given to the importer. After the
duty is paid 2 copies of bill of entry are printed. One is the exchange
control copy, which importer sends to R.B.I. and he retains the second
copy.
Step 8: - Issue of Delivery Order (D/O)
Once the duty is paid the D/O is issued to the importer. The importer
also hand over the bill of lading received from the exporter abroad and
importer must pay administrative charges and stamp duty charges on
the import duty amount to the shipping line D/O is necessary for
accessing the goods and carrying out the examination of import cargo.
Step 9: - Examination of Goods
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On the basis of forwarding order stamped on the reverse of D/O by
dock authority the customs appraiser examines the cargo. After
completing the examination, he puts his remarks on the examination
order and enters the same in the computer also. At this stage, final
release order is issued.
Step 10:-Issuance of Gate-Pass
After the payment of port charges, the customs appraiser issues final
gate pass, which allows the carriage of the goods out of dock
premises.
LOGISTICS AND E-COMMERCE:
There is tremendous scope of IT in logistics. In fact, the modern supply chain is
held together by the strength of IT, either through its ability to transit huge
amount of data speedily or make global data available to expedite the decision
making process.
Due to such advantages offered by IT, many logistics providers are planning to
handle majority of their commercial transactions electronically. Also many
exporters are already using IT for various activities ranging from e-procurementof goods to availing transportation services on the net.
In spite of the strides made by the IT, the phone and fax will still remain the
preferred mode of communication between shippers and shipping lines. This is
because the information highway is still not fully integrated fully with logistics
system.
Shipping lines are keen to encourage their customs to use the Internet, and have
developed a number of attractive tools. The biggest benefit of these tools is that
both shippers as well as shipping lines gain by using them. Following are some
of the important tools:
1. Electronic receipt of vessel schedule information
2. Tracking and tracing of cargo
3. Remote bill of lading (B/L) printing
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4. Simple data entry reporting
5. Exception reporting
6. Online tendering etc.
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BIBLIOGRAPHY
LOGISTICAL MANAGEMENT BOWERSOX / CLOSS
MARKETING RESEARCH MR. AKARANDE
Internet sites - www.shipping.nic.in
- www.jayem.co.in
- www.reverselogistics.com
ASSOCHAM Winning Strategies of Supply Chains.
FICCI.
EXIM Newspaper.
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