lecture-13 transportation management

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Project Procurement & Contract Management

Transportation Management

Muhammad Ali Raza Federal Board of Revenue [email protected]


Scope of Discussion Proactive Transportation Management Contracting with Carriers Transportation Documents INCOTERMS Cost of Service & Freight Terminal & Line-haul Services by Carriers

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Supply Chain Management A Wider Perspective

. Supply Chain Management

Procurement Management Logistics

Transportation

Warehousing Contract Management

Inventory Mgmt

Post Award Pre-Award

Contract Design

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Total Procurement Price

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Basic Input Price

Direct Transaction Costs

Supplier Relationship Costs

Transportation Costs

Quality Control Costs

Operations / Logistics Costs

Multi-modal Delivery

Incoterms

Warehousing

Inventory Mgmt

Quotation

Shipping Documents

Purchase Order

Supplier Evaluation

Buyer Only Buyer & Supplier Muhammad Ali Raza


Why Transportation Management? q Transportation Costs are 40-50% of total

logistics cost q Transportation Costs are 4-10% of product

selling cost q Costs on Carrier pricing, services &

documentation are 3-5% of Product selling cost

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Proactive Contract Management in Transportation

q Reducing Number of Carriers: Shipper/Seller Increases its freight volume Increases in freight revenue paid to carrier Increases ability to get good rates from carrier Carrier becomes more dependent on shipper

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Proactive Contract Management in Transportation (Cont)

q Contracting with Carriers: Through Contract Terms, Shipper/Seller Enables a carrier to eliminate a empty backhaul Specifies pickup time Increases tonnage Attracts carriers to give concession

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q Consolidating Shipments: Through bundling, Shipper/Seller gets lower rates from carrier for larger shipment

volumes gets to lower shipping time for FCL rather than

LCL reduces Carrier cost per weight unit transported

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q Monitoring Service Quality: Through contract monitoring, Shipper/Seller

Manages delivery on schedule Gets undamaged goods at destination Manages replenishment of reduced

inventory Manages to reduce transit time

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Transportation Management Bill of Lading

Bill of Lading (B/L) is a Document issued by a common carrier to a shipper for the receipt for the goods delivered to the carrier. The B/L defines the terms of the contract of carriage and acts as a title to the goods contained therein

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The principal use of the bill of lading is as a receipt issued by the carrier once the goods have been loaded onto the vessel. This receipt can be used as proof of shipment for customs and insurance purposes, and also as commercial proof of completing a contractual obligation, especially under Incoterms

Transportation Management Bill of Lading (Cont.)

Muhammad Ali Raza


You are required to use the Bill of Lading when;

The goods are being traded/sold in transit. The letter of credit terms require that a

negotiable document to be used. The laws and regulations of a country

demand the production of a paper Bill of Lading.

Bill of Lading

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Documentation - Domestic:

Bill of Lading: The single most important transportation document

It originates the shipment Provides all the information the carrier needs to

accomplish the movement Stipulates transportation Contract terms Acts as a receipt for goods the shipper gives to

Carrier Shows certificate of title to the goods Muhammad Ali Raza 13


Documentation - Domestic:

i) Straight Bill of Lading: Non-negotiable instrument Carrier does not require presentation of its

original copy to effect delivery Carrier must simply deliver the goods to

person as consignee



Documentation - Domestic: 2) Order Bill of Lading:

Negotiable instrument

Shows certificate of title to the goods it names

Consignor retains security interest in goods.

Consignee must pay goods invoice value to obtain original copy that must be presented to

Carrier for delivery, if arranged as such.


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A Sea Waybill is used in lieu of a Bill of Lading for straight consignments whenever a letter of credit or similar banking arrangement is not involved in the sale of goods. You can use a Sea Waybill when; The recipient of the cargo is known, Cargo will not be traded/sold during transport. Payment of goods is made under an open account or

there is a high degree of trust between the importer and exporter and

where a negotiable transport document is not required under a letter of credit.

Not specifically a Title Document

Seaway Bill

Muhammad Ali Raza

Transportation Management Documentation Domestic (Cont):

Freight Bill: Carriers Invoice for charges the Carrier incurs in

moving a given shipment

It lists the shipment, origin & Destination It lists the consignee & consigner It lists the items, total weight It lists the total charges



Freight Bill (Cont): A brief description of Carriers credit

payment terms Procurement Manager to have working

knowledge of carriers credit payment as some carriers have Excessive penalties for not paying within the

allowed payment terms Discounts for paying early


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Freight Bill (Cont):

Freight Bills may either be for: Prepaid Shipment- Carrier presents

freight bill on effective day of shipment Collect Shipment Carrier presents

freight bill on effective day of delivery



Freight Bill (Cont):

Freight Bill Auditing: It involves matching the computer-generated

charge with Carriers freight bill. If two do not match, Freight Bill is given to

Procurement Manager to resolve Often, audit occurs prior to paymen of freight

bills



q Freight Claims: A document (with no prescribed form) that a shipper

files with the carrier to recoup monetary losses resulting from;

Loss Damage Delay Claim within 9 months of delivery Released Value by Shipper-less liability by Carrier


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Transportation Management Documentation International:

q Sales Documents: Initial document in any international

business transaction Export sales contract Describes commodities, price, payment terms Describes Transportation arrangement Explain Insurance requirements Gives Carriers information


Transportation Management Documentation International (Cont):

q Letter of credit (LC): After negotiating the sales contract, parties

involved determine method of payment through LC which is

a banks assurance that buyer will make payment as long as the seller meets the sales terms to which the parties have agreed. Only Bill of Lading will be used here



q Terms of Sale: Known as INCOTERMS:

o Unlike domestic terms of sale, where buyers & sellers primarily use FOB origin &

FOB destination terms, there are 11

different INCOTERMS (revised 2011)


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Incoterms & Cargo Risk Coverage

Muhammad Ali Raza


o The Incoterms 2010 are arranged in two categories as follows:

o Rules for Any Mode of Transport q EXW - Ex Works

FCA - Free Carrier CPT - Carriage Paid To CIP - Carriage and Insurance Paid DAT - Delivered At Terminal DAP - Delivered At Place DDP - Delivered Duty Paid

o Rules for Sea and Inland Waterway Transport Only

o FAS - Free Alongside Ship FOB - Free On Board CFR - Cost and Freight CIF - Cost, Insurance and Freight


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Incoterms 2013 Responsibility Chart

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q INCOTERMS: E-Terms: EX-Works : Departure Contract At suppliers premises / Point of Origin Buyer bears risk of total shipment Export Packing Cargo Insurance Custom duties


Transportation Management Documentation International (cont):

q INCOTERMS: F-Terms: These terms obligate the seller to incur

cost of delivering shipment cleared for export to the carrier designated by the buyer

FAS (Free-Alongside Ship): Risk transferred to buyer when goods delivered alongside the ship

FOB (Free On Board): Risk transferred to buyer when goods are loaded on vessel water mode

FCA (Free Carrier): Risk of Seller till delivery to Carrier



q C-Terms: (Shipment Contracts) - Obligate the Seller to obtain & pay for main carriage and/or cargo insurance

CFR (Cost & Freight): Sellers Risk till shipping destination-Water Transportation

CPT (Carriage Paid To): Sellers Risk till shipping destination-Any mode


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q C-Terms (cont) Seller pays for both main carriage & cargo Insurance

CIF (Cost Insurance & Freight): Sellers Risk till shipping destination Cargo Insurance by seller CD & Inland transportation by Buyer Water Carrier



q C-Terms (cont) Seller pays for both main carriage & cargo Insurance

CIP (Carriage & Insurance Paid ): Seller till shipping destination Cargo Insurance by seller CD & Inland transportation by Buyer Any mode-air, motor, rail, inter-modal



q D-Terms: Obligate seller to incur all costs related to delivery shipment to foreign destination.

DAT (Delivered AT Terminal): Sellers Risk till

unloading at terminal + payment of Taxes

DDP (Delivery Duty Paid): Sellers Risk till Place of Installation + payment of Taxes


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q Other Documents

E x p o r t D e c l a r a t i o n : P r o v i d e s i n f o r m a t i o n c o n c e r n i n g e x p o r t shipments nature & value

Export Licence: For Regulated Export



q Other Documents Invoice: Sellers Commoditys value

less freight Commercial Invoice (Import Value) Consular Invoice (Import Statistics)

Carnet: Issued for shipment in a sealed container



q Other Documents (Cont)

Bill of Lading: Export Bill of lading (All inclusive) Ocean Bill of lading (ocean part) Order Bill of Lading (proof of ownership evidence)

Liability (Insurance Receipt) Dock receipt (At Terminal) Airway Bill


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q Other Documents (Cont) Liability (Insurance Receipt)

Perils of sea Acts of God Acts of public enemies Inherent defects of cargo Shippers negligence

Dock receipt (At Terminal) Universal Airway Bill



q Basis for rates:

Cost of service: It reflects Carriers costs

Value of service: It is how much the

Shipper is willing to pay



Terminal services Consolidation Breakbulk Shipment services Freight Handling services Vehicle supply Loading/Unloading Shipment monitoring & Tracing


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Line-Haul Services by Carriers: Re-consignment: Permits shipper to change

destination and/or consignee after shipment has reached its original destination but before the Carrier has delivered it to the original consignee

Diversion: Permits shipper to effect same changes while shipment is en-route and before it reaches the original destination



q Line-Haul Services by Carriers (Cont.) Pooling: Shipper combines many LCL or LTL

shipments into one CL or TL

Stopping In Transit: Also called Drop Shipment Partial loading to complete the shipment or partial unloading of freight

Transit Privilege: change Product physically-repacking etc


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Thankyou

Q & A


lecture-13 transportation management

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