Logistics & Supply

Chain Overview

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 LOGISTICS

WHAT IS LOGISTICS ???

Logistics has always been a critical part as one of the 4 Ps in Marketing:

Product, Place, Price and Promotion. The “Place” component ensures the
product is at the right place, at the right time, in the right quantity and the
right quality.

Logistics received recognition in military operations during World War II. It

gained its momentum as it contributed to the effective distribution of
Machinery and supplies to Troops. A service delivery failure here may mean
an unnecessary increase in fatalities. We in industry borrowed this term and
have applied it to the discipline known as “Business Logistics”.

Peter Drucker (a business guru in 1960s) identified logistics as a growing

concern within business. This generated more prominence towards the
practice of logistics.

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 LOGISTICS (CONTD.)

The Council of Supply Chain Management Professionals (CSCMP) has

defined logistics as…” that part of supply chain management that plans,
implements, and control the efficient, effective forward and reverse flow
and storage of goods, services and related information between the point
of origin and the point of consumption in order to meet customers’
requirements”.

A second more concise definition offered by CSCMP is “ the management

of inventory, at rest or in motion”.
 LOGISTICS (Contd.)

Within this process there are key logistics activities that facilitate the above flows. They are:
Customer Service: Ensuring the right product is at the right place at the
right time.
Demand Forecasting & Planning: Determining the quantity to be ordered.
Inventory Management: Balancing inventory levels to achieve high
customer service levels.
Communication Technology: Linking suppliers to customer demand
patterns to facilitate Just-In-Time product replenishment.
Materials Handling: Minimizing the movement of raw materials, work in
process and finished goods.
Order Processing: Using e-commerce to facilitate information exchanges.
Purchasing: Selecting the best supplier to meet quality requirements.
Transportation: Selecting the best mode of transportation (air, rail, water or
truck).
Warehousing: Locating and designing facilities to meet customer service
levels.

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 LOGISTICS (CONTD.)

The above activities must be coordinated well together in order to achieve

the least total logistics cost. Trade-offs exist that increase the total cost if
only one of the activities is optimized.

For example, Full Truckload (FTL) rates are more economical on a cost per
pallet basis that less than truckload (LTL) shipments. If, however, a full
truckload of a product is ordered to reduce transportation costs there will
be an increase in inventory holding costs which may increase total logistics
costs.

It is therefore imperative to take a systematic approach when

planning logistical activities.
 LOGISTICS (CONTD.)

As a piece of the corporate landscape, logistics covers a broad array of functional areas. At
a bare minimum, the scope of logistics entails traffic/transportation, shipping and receiving,
warehousing and import/export operations. Many times, the additional areas of inventory
management, purchasing, production planning and customer service can fall under the
umbrella of logistics as well. For most companies, this function is not a core competency.
The process is labor-intensive and, as such, expensive to perform in-house. As well, most
organizations are not set-up to capture all the relevant shipment data and provide the
extensive reporting offered by most freight pay companies. Additionally, most freight pay
companies can provide an easy means for EDI transmission of freight bills: always an
attraction for the major carriers.
 COMMON INTL. COMMERCIAL TERMS (INCO)

EX-WORKS (EXW) : EXW applies to goods available only at the seller's premises.
Buyer is responsible for loading the goods on truck or container at the seller's premises, and
for the subsequent costs and risks.

FREE ON-BOARD (FOB) : The delivery of goods on board the vessel at the named port
of origin (loading), at seller's expense. Buyer is responsible for the main carriage/freight,
cargo insurance and other costs and risks.

COST AND FREIGHT (CFR) : The delivery of goods to the named port of destination
(discharge) at the seller's expense. Buyer is responsible for the cargo insurance and other
costs and risks. The term CFR was formerly written as C&F.
 INCO TERMS (CONTD.)

COST, INSURANCE AND FREIGHT (CIF) : The cargo insurance and delivery of
goods to the named port of destination (discharge) at the seller's expense. Buyer is
responsible for the import customs clearance and other costs and risks.

DELIVERY DUTY UNPAID (DDU) : The delivery of goods and the cargo insurance to
the final point at destination, which is often the project site or buyer's premises, at seller's
expense. Buyer assumes the import customs clearance and payment of customs duties and
taxes. The seller may opt not to insure the goods at his/her own risks.

DELIVERY DUTY PAID (DDP) : The seller is responsible for most of the expenses,
which include the cargo insurance, import customs clearance, and payment of customs
duties and taxes at the buyer's end, and the delivery of goods to the final point at
destination, which is often the project site or buyer's premises. The seller may opt not to
insure the goods at his/her own risks.
 SUPPLY CHAIN

Supply chain management (SCM) is the oversight of materials, information,

and finances as they move in a process from supplier to manufacturer to
wholesaler to retailer to consumer.

Supply chain management involves coordinating and integrating these

flows both within and among companies.

It is said that the ultimate goal of any effective supply chain management
system is to reduce inventory (with the assumption that products are
available when needed).

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 SUPPLY CHAIN (CONTD.)

As factors like Globalization, Deregulation & Information technology fuelled

efficiencies, logistics gained more prominence in organization around the
world. A natural extension was to link the logistical operations from each
firm to the entire supply chain. The new paradigm became known as the
“systems approach” to supply chain management and introduced the
concept of trade-offs.

In order to achieve least total supply chain cost, operational integration of

the 5 main areas of logistics must be simultaneously optimized.
Warehousing, Transportation, Inventory, Order Processing and Lot
Quantities. Optimizing any one of these areas individually will sub-optimize
the system as a whole.
 SUPPLY CHAIN (CONTD.)

As the business landscape constantly changes with mergers and

acquisitions and as globalization grows, there are corresponding changes
in the supply chain that need to continuously be optimized to ensure least
total supply chain costs.

Radio Frequency Identification (RFID) and other technologies will continue

to drive down inventories as better information in made available in a
timely manner. Since supply chain activities cross-over all functional areas
in an organization (such as Marketing, Finance and Human Resources),
new metrics must be developed to track true supply chain costs.
Organizations that measure and benchmark these costs will have a
sustainable competitive advantage, going forward.
 MODES OF TRANSPORTATION - WATER

Waterway Carriers offer low-cost means of shipping bulky

products which have low transportation value in relation to
weight. This mode of transport is used when speed of
transportation is not essential.

There are different types of cargo Ships/Vessels:

Container Ships are meant to carry only containerized cargo.
Single-decked vessels are meant for carrying bulk cargo like
timber.
Ro-Ro Vessels are meant to carry only rolling stocks like cars,
buses & trucks.
Break-bulk Vessels have their own on-board crane & is meant to
carry heavy & over-dimensional cargo.
MODES OF TRANSPORTATION - ROAD

Road Transport carriers are less advantageous for the

transport of bulky, low value goods. However, they can
perform door-to-door delivery, as they reach places
inaccessible to railways. This repeated handling &
transshipment can be avoided, this being an advantage of
transportation by road.

Different types of carriers facilitates easy carrying of

goods to even remote locations. Tank lorries are used for
liquids, tipper lorries for building materials, reefer lorries
for perishables and small vans for general goods.
 MODES OF TRANSPORTATION - AIR

Air freight is used for goods where speed is essential, such as

perishables, medicines, spare parts, and goods of high value
for which safety of transportation is a prime consideration,
that is more important than the higher cost of transport by air.
 CONTAINERIZATION – OCEAN CARGO

Containerization is a system of inter-modal cargo transport using standard

ISO containers (known as shipping containers or isotainers) that can be
loaded and sealed intact onto Container Ships, Railroad Cars, Aircrafts,
and Trucks.

The introduction of containers resulted in vast improvements in port

handling efficiency, thus lowering costs and helping lower freight charges
and, in turn, boosting trade flows. Almost every manufactured product
humans consume spends some time in a container.

Although having its origins in the late 1780s or earlier, the global
standardization of containers and container handling equipment was one
of the important innovations in 20th century logistics.
 CONTAINERIZATION (CONTD.)

Toward the end of World War II, the U.S. Army began using specialized
containers to speed up the loading and unloading of transport ships. The
army used the term "transporters" to identify the containers, for shipping
household goods of officers in the field.

During the first twenty years of growth containerization meant using

completely different, and incompatible, container sizes and corner fittings
from one country to another. Containerization has revolutionized
cargo shipping. Today, approximately 90% of non-bulk cargo worldwide
moves by containers stacked on transport ships
TYPES OF SHIPPING CONTAINERS
TYPES OF SHIPPING CONTAINERS (CONTD.)
TYPES OF SHIPPING CONTAINERS (CONTD.)
 OCEAN CONTAINER DIMENSIONS CHART

Details Inside Inside Inside Door Door Capacity Tare Maximum

Containers Length Width Height Width Height Weight Cargo

20’ DV/Standard 19’4” 7’8” 7’10” 7’8” 7’6” 1,172 ft3 2,229 Kg. 21, 727 Kg.
5.89 m 2.33 m 2.38 m 2.33 m 2.28 m 33.18 m3
40’DV/Standard 39’5” 7’8” 7’10” 7’8” 7’6” 2,390 ft3 3,701 Kg. 26,780 Kg.
12.01 m 2.33 m 2.38 m 2.33 m 2.28 m 67.67 m3
40’HQ/High Cube 39’5” 7’8” 8’10” 7’8” 8’5” 2,694 ft3 3,968 Kg. 26, 512 Kg.
12.01 m 2.33 m 2.69 m 2.33 m 2.56 m 76.28 m3
20’OT/Open Top 19’4” 7’7” 7’8” 7’6” 7’2” 1,136 ft3 2,394 Kg. 21,600 Kg.
5.89 m 2.31 m 2.33 m 2.28 m 2.18 m 32.16 m3

40’OT/Open Top 39’5” 7’8” 7’8” 7’8” 7’5” 2,350 ft3 3,850 Kg. 26,630 Kg.
12.01 m 2.33 m 2.33 m 2.33 m 2.26 m 66.54 m3
20’Reefer/Refrigerat 17’8” 7’5” 7’5” 7’5” 7’3” 1,000 ft3 3,193 Kg. 20,756 Kg.
ed 5.38m 2.26 m 2.26 m 2.26 m 2.20 m 28.31 m3
40’Reefer/Refrigerat 37’8” 7’5” 7’2” 7’5” 7’0” 2,040 ft3 4,889 Kg. 25,526 Kg.
ed 11.48 m 2.26 m 2.18 m 2.26 m 2.13 m 57.76 m3
20’FR/Flat Rack 18’5” 7’3” 7’4” --- --- --- 5,479 Kg. 21,469 Kg.
5.61 m 2.20 m 2.23 m
40’FR/Flat Rack 39’7” 6’10” 6’5” --- --- --- 5,479 Kg. 38,918 Kg.
12.06 m 2.08 m 1.95 m
 UNIT LOAD DEVICES (ULDs) – AIR CARGO

The term Unit Load Device (ULD) means any type of container with an
integral pallet, or aircraft pallet whether or not owned by an IATA member,
and whether or not considered to be aircraft equipped.

Aircraft ULDs
These are units that interface directly with an Aircraft loading and restraint
system. They meet all normal restraint requirements without the use of
supplementary equipment – providing they are loaded in accordance with
the specific Aircraft Load and Balance Manual. Such units become an
integral part of the Aircraft structure, when loaded and are typically
Certified Aircraft Containers or Pallet and Net assemblies.

Aircraft ULDs may be loaned to shippers and agents for loading purposes
provided they can prove that they are equipped and capable to handle
them in accordance with the Aircraft Load and Balance Manuals.
 UNIT LOAD DEVICES (ULDs) – AIR CARGO

Lower Deck Pallet Lower Deck Container

Maximum Gross Weight

3,175 kg / 7,000 lb Volume Maximum Gross Weight
6.94 m3 / 245 ft3 6,033 kg / 13,300 lb Volume
Tare 13.7 m3 / 480 ft3
90 kg / 198 lb   Tare
External Dimensions 200 kg / 440 lb
(L x W x H)   External Dimensions
3,175 mm x 1,534 mm x 1,626 mm (L x W x H)
(125 in x 60.4 in x 64 in) 3,175 mm x 2,438 mm x 1,626 mm
Aircraft Accepted For (125 in x 96 in x 64 in)
DC10, DC10-30 Freighter, 747, 777 Aircraft Accepted For
747, 747F
 UNIT LOAD DEVICES (ULDs) – AIR CARGO

Main Deck Pallet Main Deck Container

Maximum Gross Weight Maximum Gross Weight

13,608 kg / 30,000 lb Volume 6,804 kg / 15,000 lb Volume
33.25 m3 / 1,174 ft3 17.16 m3 / 606 ft3
Tare Tare
400 kg / 882 lb   260 kg / 572 lb
External Dimensions   External Dimensions
(L x W x H) (L x W x H)
6,058 mm x 2,438 mm x 2,438 mm 3,175 mm x 2,438 mm x 2,438 mm
(238.5 in x 96 in x 96 in) (125 in x 96 in x 96 in)
Aircraft Accepted For Aircraft Accepted For
DC10-30 Freighter, 747F 747F
 UNIT LOAD DEVICES (ULDs) – AIR CARGO

Cargo Aircraft Cross Section

Upper Deck Container

Maximum Gross Weight

6,033 kg / 13,300 lb Volume
9.91 m3 / 350 ft3
Tare
200 kg / 440 lb  
External Dimensions
(L x W x H)
3,175 mm x 2,235 mm x 1,626 mm
(125 in x 88 in x 64 in)
Aircraft Accepted For
N/A
 CUSTOMS CLEARANCE

Definition of Exports & Imports states that – “Goods or Services clearing the
Customs Barrier of the any Country sending or receiving”. Thus, a country
cannot involve in foreign trade unless due importance is given to the
customs department.

Customs clearance in India takes place for both Import and Export Cargoes
at the Seaports and Airports. The Customs Department is governed by the
Customs Act 1962 and the amendments thereof. The customs department
is part of Central Board of Excise & Customs (CBEC), under the jurisdiction
of Ministry of Finance.
 CUSTOMS CLEARANCE (CONTD.)

Requirement of documents for Export Customs Clearance are , but not limited to the
following:

1. Import/Export (IE) Code letter copy issued by Directorate General of Foreign Trade
(DGFT).
2. Letter from Exporter’s Bank mentioning the Authorized Dealer (AD) Code of the Bank.
3. 4 Sets of Invoice in the prescribed format.
4. 4 Sets of Packing List in the prescribed format.
5. Contract, Letter of Credit (LC) and/or Purchase Order copy.
6. ARE-1 Form of Central Excise, if applicable.
7. Inspection Certificate, if applicable.
8. Customs declaration if exporting under any special scheme extended by Govt. of India.
 CUSTOMS CLEARANCE (CONTD.)

Requirement of documents for Import Customs Clearance are , but not limited to the
following:

1. Letter of Authority from Importer to Clearing Agent (CHA) to customs clear the
shipment on Importer’s behalf.
2. Original Invoice & Packing List from Supplier.
3. Certificate of origin, if applicable.
4. Technical Write-up & Catalogue of imported cargo.
5. Bills of Lading Copy or Airway Bill Copy.
6. Delivery Order issued by the Carrier (Airline or Shipping Line).
7. Contract, Letter of Credit (LC), Order copy.
8. Import License, if applicable.
9. Customs Declaration, if importing under any concession duty scheme of Govt. of India.
HANDLING OF PROJECT CARGO
 TYPES OF SHIPS (CONTD.)

Roll-on Roll-off (RORO) Vessel

 TYPES OF SHIPS (CONTD.)

A Large Ship at Port World’s largest Container

Ship (Emma Maersk)
 PORT HANDLING EQUIPMENTS

Container Forklift Truck Port Gantry Crane

 PORT HANDLING EQUIPMENT (CONTD.)

Quay Crane Reach Stacker