0601065 selection of service provider for international logistics

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A

PROJECT REPORT

ON

SELECTION OF SERVICE PROVIDER FOR

INTERNATIONAL LOGISTICS

FOR

ATLAS COPCO (INDIA) Ltd. NASHIK

IN PARTIAL FULFILLMENT OF

MASTER IN BUSINESS ADMINISTRATION

UNIVERSITY OF PUNE

BY

SUKDEB N SUR

M.B.A.

(2006-2008)

GUIDED BY

MR. SHRIPAD KHIRE (ATLAS COPCO)

PROF. Mrs. SMITA SOVANI (VIM)

VISHWAKARMA INSTITUTE OF MANAGEMENT,

PUNE

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ACKNOWLEDGEMENT

A Project usually falls short of its expectation unless guided by the right person atthe right time & good opportunities. Success of a project is an outcome of sincere efforts,

channeled in the right direction, efficient supervision and the most valuable professional

guidance. This project would not have been completed without the direct and indirect

help and guidance of such luminaries. They provide me with the necessary recourses and

atmosphere conductive for healthy learning and training.

I am indebted to ATLAS COPCO (INDIA) Ltd for providing me an opportunity

to undergo my project with them. I am great full to Mr. SATISH INAMDAR, HUMAN

RESOURCE MANAGER, ATLAS COPCO (INDIA) Ltd for giving the opportunity to

work in Logistics Department.

At the outset I would like to take this opportunity to gratefully acknowledge the

kind and patient guidance I have received from my project guide Mr. SHRIPAD

KHIRE, MANAGER- LOGISTIC AND SERVICES, and his colleague Mr. Kotekar,

Executive Import and Export, & Mr. Abbas without there critical evaluation and

suggestion at every stage of the project, this report could not have reached its present

form. In addition, my internal guide Prof. Mrs. Smita Sovani has critically evaluated myeach step in developing this project report

I express my sincere thanks to Dr. Sharad Joshi, Director, Vishwakarma

Institute of Management, Pune, for their valuable advice and guidance. They are

always a source of inspiration for me. My thanks are also due to the faculty and non-

faculty member of Vishwakarma Institute of Management, Pune, for their cooperation

and support in completion of my project.

Finally I would like to thank My Family Members and My Friends for their

valuable inputs.

SUKDEB N SUR

[email protected]

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INDEX

Sr. No. Topic Page No.

1 Introduction... 1

2 Aim and objective. 3

3 Company Profile... 5

4 Terminology of logistics... 8

5 INCOTERMS 15

6 Trade Facilitation/e-Business/e-Commerce Sectors. 18

7 Export Transport Logistics Cost... 24

8 Letter Of Credit. 41

9 Types of containers... 45

10 Research Methodology. 51

11 Summary... 62

12 Conclusion 63

13 Bibliography . 64

14 Annexure... 65

1. Executive Summary.

Outsourcing of logistics function is a business dynamics of growing

importance all over the world. Growing awareness that competitive advantage comes

from the delivery process as much as from the product has been instrumental in

upgrading logistics from its traditional backroom function to a strategic boardroom

function. In order to handle its logistics activities effectives effectively and efficiently,

a company may consider the following it can provide the function in-house by

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making the service, or it can own logistics subsidiaries through setting up or buying a

logistics firm, or it can outsource the function and buy the service. Currently, there

has been a growing interest in the third option, i.e. outsourcing of logistics function to

third party logistics service providers.

A study done by B. S. Sahay and Ramneesh Mohan on 3PL practice in Indian

Industries reveals that,

Warehousing, inbound and outbound transportation, custom clearing and

forwarding are the most frequently outsourced activities.

Activities such as packing, fleet management and consolidation are gaining

attention and growing in popularity.

More and more companies are planning to use 3PL service in the future as an

integrated set of services rather than for just movement of material.

The motivation for doing so comes due to the benefits of logistics cost

reducing, ability to focus on the core business, and improving supply chain

efficiency.

Atlas Copco Ltd. accepted the importance of the logistics service provider and

they use the service of Agility Logistics. But they where looking for a single point

contact approach towards the logistic process.

This project was done to select one 3PL which can give a complete export

logistics service to Atlas Copco Ltd. as per there requirements. This report contains

the questioners which where sent to the prospected logistics companies, there replays

in the form of quotation, analysis of the quotation and finally the selecting of the

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service provider on analysis made which where done on the predetermined set of

requirements. This report also contains the commonly used terminology in logistics,

the cost associated with logistic operation, and the Incoterms (International

Commercial Terms) used in the international trade.

2. Aim and objective

2.1. Aim: To select logistics service provider for export in Atlas Copco Pvt

Ltd. The service provider will look after the forwarding, custom clearance,

warehousing, shipping (sea and air), dock handling, documentation, local

transportation, etc.

2.2. Background: As per the discussion made by the logistics Manager Mr.

Shripad Khire,

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1. There where many forwarder, different CHAs, many shipping lines

etc. where used to exports the shipment to its destination.

2. Though they had tie up with Agility logistics which was held as a CHA

agent for AC. They where facing a huge problem in arranging the

forwarder, shipping Co. etc.

3. Hence they wanted a single point contact approach to this whole

process. So that they can reduce the time, which was largely wasted on

coordinating forwarder (to arrange the container), CHA (for custom

clearance), shipping Co. (for arrangements of the ship) and of course

the paperwork.

2.3. Objective: There are two objective of the project,

1. To understand

i. Working operation of the logistic department.

ii. Documentation involved in exports/imports.

iii. Terminologies.

2. To select a Logistics Service provider which fulfills the following

quality requirement,

i. A reputed 3PL company.

ii. Charges lowest in local transportation (between Nashik and

Mumbai).

iii. Requires least time when transported by sea.

iv. Lowest airfreight when transported by air.

v. Strong Client base.

vi. Lowest agency charges.

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3. Company Profile

tlas Copco is a world leading provider of industrial productivity solutions.

Atlas Copco has its headquarter at Sweden. Atlas Copcos products and

services range from compressed air and gas equipment, generators, construction and

mining equipment, industrial tools and assembly systems to related aftermarket and

rental.

A

Atlas Copcos Compressor Technique business area develops,

manufactures, markets, and services oil-free and oil-injected stationary air

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compressors, portable air compressors, gas and process compressors, turbo

expanders, electric power generators, air treatment equipment and air

management systems. It also offers specialty rental services.

Atlas Copcos Construction and Mining Technique business area

develops, manufactures, markets and services rock drilling tools,

construction and demolition tools, drill rigs and equipment.

Atlas Copcos Industrial Technique business area develops, manufactures

and markets industrial power tools, assembly systems, aftermarket products,

software and service.

In close cooperation with customers and business partners, and with more

than 130 years of experience, Atlas Copco innovates for superior productivity.

Atlas Copcos customers are located almost everywhere on the globe. To

them, Atlas Copco is a local company; at the same time, the Atlas Copco Group is a

global enterprise with worldwide resources.

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Headquartered in Stockholm, Sweden, the Groups global reach spans more

than 150 markets, with its own sales operations in about 80 countries. In the other

countries, the products are marketed through distributors and service networks.

The Group has 68 production facilities in about 20 countries. Manufacturing

is mainly concentrated in Belgium, Sweden, the United States, Germany, France,

and China.

Atlas Copco (India) Ltd.

Atlas Copco (India) Ltd. has two establishment in India one is Pune and

other is at Nashik. Atlas Copco India Ltd are in two segments Compressor

Technique segment and Construction and mining segment. The Atlas Copco India

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Ltd are lead by Chairman Mr. A.K. Hirjee and Managing Director Mr. H.O. Meyer.

The total revenue for the year 2005-06 was Rs.74,713.40 lakhs compared to

Rs.57,681.04 lakhs in the previous year, showing a growth of 30%. The entire

manufacturing facility for Construction and Mining segment will be in operation in

the Nashik Plant and Compressor manufacturing facility will be in operational in the

Pune Plant. The Construction and Mining segment had an 37% and Compressor

segment had an 16% of growth in total revenue in the year 2005-06.

Few facts about Atlas Copco

Location: Sickla Industrivg 3, Nacka, SE-10523 Stockholm, Sweden

Home page: http://www.atlascopco.com

Founded: 1873

Management: Gunnar Brock, President and CEO

Board of Directors: Sune Carlsson, Chairman

Company focus: Atlas Copcos vision is to be First in Mind -- First in

Choice with its customers and other stakeholders. The Group strives for profitable

growth through a combination of organic growth and acquisitions, coupled with a

strong focus on its aftermarket business.

Unique product characteristics: The products and solutions are innovative

and have quality which increases customers productivity. At the same time, the

products are renowned for their ergonomic design and for features reducing their

impact on the environment.

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Customer segments: The manufacturing industry is the main customer

segment. Other major segments are construction, mining and process industries.

Brands: Owner of famous brands such as Atlas Copco and CP. The Group

also owns a portfolio of smaller brands which focus on niche markets.

4. Terminology of logistics

1. Exporter: This is a person/organization intends to export goods from

the country where it is situated to another country.

2. Origin of goods: This means the origin country from where the

movement of goods is started. This may be different from the export country.

In case of re export of goods the origin of goods may be different from export

country.

3. Location: This means a location in the country identified by UN

location list.

4. Port: This is the location from where the goods leave a country or

enter a country. Essentially Custom clearance of goods takes place and the

Import/Export identification happens here.

5. Port Authority: is the Owner organization of the Port.

6. Sea Port: This means the port is located near sea e.g. Chennai,

Mumbai, etc.

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7. Dry Port: This means the port does not have sea e.g. Bangalore,

Coimbatore, etc. But goods are cleared for export by customs.

8. Line: This means an organization having license to carry goods from

one location to another. Typically a Line could be an Air Liner or Sea Liner.

9. Carrier: A line which undertakes to carry goods.

10. Container: A Box of specified sizes 20, 40, Double height etc. in

which goods are carried.

11. Seal: There are multiple seals for a container Customs seal is done by

customs dept. Lines seal is done by the agent taking responsibility of goods

for export.

12. Cargo: Goods when packed and sea worthy by a carrier.

13. Packing: Distinguish product packing and packing for carrying. The

outer packing makes the goods sea worthy normally. The inner packing makes

the product show case worthy.

14. Stuffing: This is an operation by which the cargo is placed inside the

container boxes.

15. De stuffing: Represents the process of opening a container and

removing all the cargo and accounting for the same.

16. Warehouse / Cargo Freight Station (CFS): This is a very large

facility for trucks to come in and move out and with facility of material

handling equipments and a large storage space which is well laid out and

mapped for storage purposes.

17. Gang: This the labor force available at the CFS who carries the

stuffing, destuffing operations.

18. Empty: A container also called a box which is empty without cargo.

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19. Depot: A location where empty containers are stacked for future use

without any cargo inside.

20. Special Type Container: These are containers specially designed to

carry goods which are delicate in nature e.g. Refrigerated containers,

Containers to carry live stock etc.

21. Container Yard: This is place earmarked normally closed to ports

where the loaded containers are stacked awaiting arrival of Vessels for

loading.

22. LCL: Refers to Less than Container Load. This means the cargo is

smaller in weight and volume that a container can handle.

23. FCL: Refers to Full Contain Load. This means the cargo is more than

90% capacity and up to 100 % capacity that a container can handle.

24. Workshop: This is a special facility with a depot which can also

undertake repairs to container boxes. Due to usage a box can get damaged at

any time with or without cargo. Workshop undertakes these repair works.

25. Customs: This is government agency which certifies the cargo and the

contents of a container and clears for export after verifying necessary customs

duty if any is paid by the exporter.

26. Agent: Since the Line is the carrier of goods and the export import

business has to be performed across different countries Line appoints agents

who perform the export, import activities.

27. Transshipment: This refers to an import and a matching export

operation done in a port without goods entering the country.

28. Vessel: This means an ocean going vessel which carries containers as

its payload.

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29. Voyage: This means a trip of a vessel from an origin port to

destination port traversing via several ports.

30. Call: When a vessel intends an arrival at a port in a voyage makes a

call and is sanctioned by the port authority.

31. Call Number: The same vessel when calls on a port each visit in the

same voyage will carry a unique number. This is called Call Number.

32. Origin Port: The port from where the vessel starts its voyage.

33. Calling Port: This means a port on which the vessel calls upon (an

arrival, stay for a while and departure).

34. Destination Port: This means a port where the voyage is closed.

35. Vessel Crossing: Refers to movement of a container from one vessel

to another (advanced Logistics).

36. Terminal: A port usually has a number of terminals. A vessel will stay

in a terminal for its operations.

37. Terminal Operator: This is not port authority. They are contractors

who operate the terminal, monitor the loading and unloading of containers.

38. Warf: A large platform in the terminal where the containers will be

unloaded (for import) and loaded (for export).

39. Loading: This means placing container from land on to the vessel by

terminal operator.

40. Load List: Refers to the list containing Box numbers, Shipper, Cargo

details for Loading.

41. Discharge List: Refers to the list containing Box numbers, Shipper,

Cargo details for Unloading from a vessel.

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42. Discharging or Unloading: This means placing a container from

vessel to land by terminal operator.

43. Delivery: Refers to handing of container to importer or his agent upon

production of Bill of Landing (Proof of ownership).

44. Hook: Refers to the crane or lifting facility of the terminal.

45. Booking: Refers to an export request done by an exporter with an

agent with a request to move goods to a import location and hand over the

same to the importer.

46. Surveyor: is a person qualified in estimation of damages who certifies

the fitness, damage and estimates the cost in cases of disputes.

47. Export Banker: This is the exporters Bank.

48. Import Banker: This is the importers Bank.

49. Bill of Lading: A Document issued by the Line who is licensed to the

exporter of cargo stating that the goods intended for export have been placed

on the vessel for onward journey towards the import destination.

50. Insurer: An organization which agrees to pay the beneficiary in case

of any damage to cargo during the export import process.

51. Export Process: The exporter gets in to an agreement with the

importer for supply of goods.

52. Exporter trusts export banker. (Not the Importer).

53. Importer trust import banker. (Not the Exporter).Export and Import

Bankers know each other and so they trust each other.

54. Documentation: The set of associated paperwork which is carried

when exporting or importing goods take place by shipper, agent, exporter,

Line, Banker etc.

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Now the Documentation(generally used in practice),

Exporter requests export banker to issue a letter of credit for import of goods

from importer amount being payable to import banker on submission of export

documentation. Export Banker issues a letter of credit in favor of exporter payable to

export banker against proof of dispatch.

Exporter books the shipment though an export agent of the liner. Lines

releases instruction to depot for release of empty container for export purpose.

Exporter stuffs the goods in the container and gets a customs seal and line seal put and

releases for export.

The container is brought to Container Yard and awaits arrival of the vessel.

When the container is loaded the Master (Captain) confirms placing of the container

in the slot intended for it and the line or its authorized agent releases a document

called Bill of Lading to the exporter. This document is proof of dispatch by exporter.

Now exporter approaches his banker submits the bills of lading along with his

invoice on the exporter for collection from export banker. This international collection

may take some time. Some times due to want of funds the export banker may release

the payment to exporter and collect from the export banker later. But this being an

additional facility they may charge the exporter some interest.

The Original copy of the Bill of Lading is sent to the importer and exporter or

his clearing agent produces the document to the line collects the container called

delivery (distinguish from discharge from vessel)

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Exporter gets money from Export Banker (Against LC). Export Banker gets

money from Import Banker (Collection). Import Banker gets money from Importer

(Discharge of LC).

Importer Gets goods from Line, normally 7 working days are given for

emptying a container. With in that period the importer empty the container and returns

the container to line or his agent. In case if the retention is more than 7 days a charge

called demurrage is levied based on the number of days and the same will be paid by

the importer.

The exporter has to pay the cost of export documentation to the line or lines

agent. If the ocean and logistic freight is also paid by the exported the export price

will include freight as it is pre-paid. Some times the importer agrees to pay for the

ocean freight. In this case the exporters obligation is limited to putting the cargo on

the vessel and confirming the same to the importer (FOB) free on board. It is

important to note when the property in goods under export shifts from exporter to

importer and accordingly inventory in cargo accounted.

Please note the line or agent who undertakes the movement of goods can never

own the goods. They hold the goods during transit in trust on behalf of the true owner

of the goods. In case the goods get damaged on receipt a certificate is obtained by the

holder in due course of the Bill of Lading which is a negotiable instrument and the

insurer will settle the claim for the sum assured under the policy. The Policy is usually

taken by the importer and he is thus the beneficiary in case of a legal claim.

It may so happen that the ocean logistics longer duration say 15 days. In the

mean time the importer in case finds a buyer (which is most likely) will sell the goods

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on high seas and provide a bill of lading (BOL) corrector to the line directing the line

to deliver the goods to his customer directly. This way the goods can change multiple

hands during its voyage. Occasionally it may also move to another country by

transshipment.

5. INCOTERMS

5.1. International commercial terms (Incoterms): These are a series of

international sales terms that are widely used throughout the world. They are used to

divide transaction costs and responsibilities between buyer and seller and reflect state-

of-the-art transportation practices. They closely correspond to the U.N. Convention on

Contracts for the International Sale of Goods.

Incoterms deal with the questions related to the delivery of the products from

the seller to the buyer. This includes the carriage of products, export and import

clearance responsibilities, who pays for what, and who has risk for the condition of

the products at different locations within the transport process. Incoterms are always

used with a geographical location and do not deal with transfer of title.

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5.2.1 Group E - Departure:

5.2.1.1 EXW: Ex Works (named place) the seller makes the goods available at his

premises.

5.2.2 Group F - Main Carriage Unpaid:

5.2.2.1 FCA: Free Carrier (named place) the seller hands over the goods, cleared

for export, into the custody of the first carrier (named by the buyer) at the named

place. This term is suitable for all modes of transport, including carriage by air, rail,

road, and containerized / multi-modal transport.

5.2.2.2 FAS: Free Along side Ship (named loading port) the seller must place the

goods alongside the ship at the named port. The buyer must clear the goods for

export. Suitable for maritime transport only.

5.2.2.3 FOB: Free On Board (named loading port) the classic maritime trade term,

Free On Board: seller must load the goods on board the ship nominated by the buyer,

cost and risk being divided at ship's rail. The seller must clear the goods for export.

Maritime transport only.

5.2.3 Group C - Main Carriage Paid:

5.2.3.1 CFR: Cost and Freight (named destination port) seller must pay the costs

and freight to bring the goods to the port of destination. However, risk is transferred

to the buyer once the goods have crossed the ship's rail. Maritime transport only.

5.2.3.2 CIF: Cost, Insurance and Freight (named destination port) exactly the

same as CFR except that the seller must in addition procure and pay for insurance for

the buyer. Maritime transport only.

5.2.3.3 CPT: Carriage paid to (named destination port). The general/

containerized/ multimodal equivalent of CFR. The seller pays for carriage to the

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named point of destination, but risk passes when the goods are handed over to the first

carrier.

5.2.3.4 CIP: Carriage and Insurance Paid to (named destination port): the

containerized transport/multimodal equivalent of CIF. Seller pays for carriage and

insurance to the named destination point, but risk passes when the goods are handed

over to the first carrier.

5.2.4 Group D - Arrival:

5.2.4.1 DAF. Delivered At Frontier (named place)

5.2.4.2 DES. Delivered Ex Ship (named port)

5.2.4.3 DEQ. Delivered Ex Quay (named port)

5.2.4.4 DDU. Delivered Duty Unpaid (named destination place)

5.2.4.5 DDP. Delivered Duty Paid (named destination place)

They are devised and published by the International Chamber of Commerce

(ICC). The English text is the original and official version of Incoterms 2000, which

have been endorsed by the United Nations Commission on International Trade Law

(UNCITRAL). Authorized translations into 31 languages are available from ICC

national committees.

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6. Trade Facilitation/e-Business/e-Commerce Sectors.

6.1 Regulatory Sector

6.1.1 Directorate General of Foreign Trade

6.1.1.1 Nature of Project

Directorate General of Foreign Trade (DGFT) is an organization under

Department of Commerce, Ministry of Commerce and Industry engaged in

formulation of Foreign Trade Policy of the country and its administer. All types of

licenses required for export and import within the country are issued by this

organization. The interface with trade and industry is provided by the 34 offices of

DGFT scattered through out the country. EC/EDI implementation stipulates day to

day electronic interface with trade and industry and related organization for electronic

delivery of services.

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6.1.1.2 Status

Computerization and networking of all the 34 offices of the DGFT has been

completed. Software for all export promotion schemes has been in operation. The web

based electronic application filing system facilitates on-line and off-line submission

and processing of application in all the offices. Licenses are now issued in 6 hours as

compared to 45 days earlier. Banks are also integrated with system and facilitating e-

payments for license fee. Digital Signature have also been integrated into the license

application processing. 90% licenses are now issued electronically. The electronic

interface with Customs is also in operation using digitally signed documents. This

would enable paperless license regime.

6.1.2 Indian Customs EDI System (ICES)


ICES are customs clearance system providing paperless transactions in the

Customs House. The system is integrated with users and Bank. Import/export

documents, Clearance messages are transmitted over the network to/from the Custom

House Agents (CHAs) and trading community.

6.1.2.2 Status

The ICES provides online assessment, duty payment and clearances as well as

connectivity with the custom house agents, banks, custodians like the Airports

Authority of India, Port Trusts, Container Corporation of India etc, Reserve Bank of

India, Export Promotion Councils, Director General of Foreign Trade, Director

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General of Commercial Intelligence and Statistics besides a host of other

Governmental and Non Governmental agencies. It has following important features:

Electronic filing of Goods Declarations.

Paperless processing of the electronically filed declaration in a manner

that is transparent and accountable.

Electronic messaging with the banks for the collection of duties and

disbursal of duty drawback.

Designed to handle electronic messaging with all agencies concerned

with cargo clearance.

Single point of interface of trade with Customs.

Varieties of information access channels are available to the trading

community through Enquiry Counters, Touch Screen Kiosks, Interactive Voice

Response System, SMS on GSM mobile phones, Service Centers, Helpdesks, Help

mails, Web based Systems, etc.

E-filing has been facilitated at 33 locations through the customs e-commerce

gateway (ICEGATE), which enables the importer/exporter/agents to file their import

and export documents from their offices and receive assessment and duty payment

related messages. Online help desk has been created for the users of the system. The

Customs has also started functioning as certifying authority for its domain.

Customs duty payments are done electronically by having debit orders issued

against exporters/importers bank accounts and crediting the Customs account

automatically in the Bank. Duty notices and advice of payments are integrated with

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Customs ICES system. The drawback payments to exporters have also been

automated through ICES.

The bank branches are connected with the Customs EDI system for duty

payments and drawback disbursements. Export Drawback scroll is sent

electronically at all locations. The e-payment of custom duties by importers has also

been started.

6.2 Portsector

6.2.1 Port EDI system


Eleven Major Ports (Kolkata, Chennai, Cochin, Tuticorin, Mumbai, JNPT,

Goa, New Mangalore, Vishapatnam, Kandla and Paradip) are under the ambit of EDI

implementation. Out of which the six ports i.e. Kolkata, Chennai, Cochin, Tuticorin,

Mumbai and JNPT handle substantial volume of containers. These ports are

implementing systems for efficient cargo management and tracking, Port Automation,

Uniform procedure/ documentation, Electronic sharing of information with all trading

partners (like Customs, Container Corporation of India Ltd. (CONCOR), Banks,

Shipping lines, Freight Forwarders, etc), Advance shipment information availability at

all ports, etc.

6.2.1.2 Status

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All the 11 major ports are equipped with hardware, software and networking.

This covers 75% of sea trade. The electronic interface with Customs, Banks, shipping

lines, agents, freight forwarders etc. is operational. A uniform/centralized web based

Port Community System (PCS) is being finalized for all the major ports to provide a

single window message exchange with community partners.

6.2.2 Container Management System


A system for having interface for Electronic sharing of information with

trading partners like Customs, Port Trusts etc., and automation for efficient cargo

movement and cargo tracking is under process.

6.2.2.2 Status

CONCOR has VSAT based network at 55 CONCOR locations across India

with ISDN backup network. The Export/Import Terminal Management System

(ETMS) with uniform automation has been implemented at 38 locations on

Centralized architecture for the EXIM business. Message interface with Customs is

operational at Delhi, Ahmedabad, Bangalore, Hyderabad and Ludhiana. An online

container tracking system is operational, which is integrated with Indian Railways to

provide exact location of container on a route. A web based community partner

message exchange system has also been made operational at Tuglakabad.

6.3 Air Sector

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6.3.1 Nature of Project

The community partners in Air sector facilitates EC/EDI based processing into

the clearance of export and import consignments. The community partners in this case

are Airports Authority of India (AAI), Airlines, Customs, Banks, Agents, etc. The

EDI based cargo handling system and Electronic interface between trading partners is

to be established.

6.3.2 Status

The seven international airports at Delhi, Mumbai, Kolkata, Chennai,

Hyderabad, Bangalore and Trivandrum have established electronic message exchange

with Customs. A web based system for AAIs electronic interface with Airlines,

Agents, Banks, etc. is operational. All export transactions at Delhi, Mumbai, Chennai,

and Kolkata airports are done through the system. The system provides interface with

airlines, agents, banks etc. The integration of automatic data capturing tools in the

automation of AAI is also being done. It has been started at Delhi airport for exports.

6.4 Financial Sector

6.4.1 Nature of Project

The project is for implementation of intra-bank, inter-bank, and bank-user

electronic interface establishment for facilitation of electronic receipts/payments.

6.4.2 Status

Banks have established electronic message exchange with major players in

international trade like Customs, DGFT, Ports, Airports, etc. Real Time Gross

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Settlement (RTGS) has been made operational by the Reserve Bank of India and

21671 bank branches are connected with RTGS. The system provides for inter-bank

settlement of funds on a real time mode. All export intensive centers (106 centers

identified for the purpose) are connected and facilitates electronic transactions. The

digital signatures are available through Institute for Development & Research in

Banking Technology for banking sector.

7. Export Transport Logistics Cost

Ocean and surface transport costs are excessive and create a major barrier to

foreign market. Transport infrastructure, such as ports, ICDs, CFSs, etc., plays an

essential role in facilitation international trade, constituting as they do the main

interface between ocean transport and surface transport. The level of infrastructure

development and the quality of services are major factors in the cost of transportation.

The major component of export transport logistics cost are:

i. Labour charges for handling, stowing etc

ii. Road transport charges

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iii. ICD charges

iv. CFS charges

v. Port Terminal Handling charges

vi. Clearing charges

vii. Consolidation charges

viii. Liner freight

This article will serve as a guideline to work out export transport logistics

costs associated with export of containerized shipment.

7.1 Export transport logistics cost estimates do not include the following:

i. On carriage charges payable at destinations port

ii. Transport insurance

iii. Duties and taxes

iv. Storage and demurrage charges.

7.2 Containerized Shipment

Basically, shipments are classified into two broad categories, bulk shipment

and small shipment. Bulk shipment is further divided into two, liquid bulk, e.g. POL,

chemicals, edible oil etc. and dry bulk e.g. ore, food grain, fertilizer etc. Small

shipment is further divided into two, Containerized shipment and non- Containerized

shipment (break-bulk or general cargo).

To cater to the movement of these shipments, shipping companies provide two

types of services, tramp shipping and liner shipping. Tramp shipping provides

services on demand and carries bulk shipment (liquid and dry bulk), between

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nominated ports. Transportation charges, i.e. freight are based on supply and demand

situation for the ship in the market.

In contrast, liner shipping provides schedule service to advertised ports, on

different selected trade routes in the world. Liner shipping carries containerized

shipment and non- Containerized shipment (break bulk or general cargo). Liner

shipping carries small shipment, received from N-number of exporter in various ports

and deliver to N-number of importer located in various ports. Liner shipping receives

the shipment, irrespective of characteristics, volume, weight and quantity of cargo.

Freight rates are fixed and made known to traders in advance; this enables them to

quote prices on CIF basis or as per Incoterm 2000.

Containerized shipment is further divided into less than container load (LCL)

and full container load (FCL).

7.3 Movement of containerized shipment

Generally, an exporter based in hinterland, irrespective of distance from the

servicing gateway port, prefers to move cargo by road to CFS (a transit facility where

he stuffs cargo in containers and containers are transported to port for loading on

board the ship).Some preferred to move cargo in container under factory stuffed

facility by road. In both LCL/FCL and factory stuffed, cargo moves through the CFS

(Container Freight Station), a transit facility, before entering in port premises for

loading on board the ship.

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7.3.1 Following are the steps involved in the movement of shipment by road and

stuffing of shipment in container is done at CFS, port:

1. Transfer of cargo into truck

2. Storage of cargo in truck

3. Road (truck) journey

4. Breaking out of cargo from truck

5. Transfer of cargo from truck to storage point/shed/yard in CFS

6. Unpacking for customs examination

7. Repacking for customs examination

8. Consolidation of cargo according to destination

9. Stuffing of cargo in the container

10. Locking and sealing of container

11. Loading of container on truck

12. Transportation of loaded container to container yard in port

13. Unloading of container in container yard in port

14. Stacking of container tin container yard in port

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

16. Truck journey from container yard to alongside ship, i.e., Quay

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

18. Sea voyage

7.3.2 Following are the steps involved in the movement of factory stuffed FCL

shipment container:

1. Central excise clearance

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2. Transfer of cargo into container in presence of Central Excise

Inspector

3. Stowage of cargo in container

4. Central excise sealing


6. Road journey

7. Unloading of container from truck and storage/stacking of container in

buffer yard in CFS.

8. Customs clearance/sealing of container


10. Transportation of loaded container to container yard in port

11. Unloading of container in Container Yard in Port

12. Stacking of container in Container Yard in Port

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

14. Truck journey from Container Yard to alongside ship i.e., Quay.


16. Sea voyage

Factory stuffing serves certain advantages over CFS stuffing. It reduces

multiple handlings of packages/cases, etc., thus reducing labour cost and material

handling equipment hiring cost. Further, it also reduces risk related to loss or

damage due to theft, mishandling.

7.3.3 Following are the steps involved in the movement of shipment by road and

rail and stuffing done at ICD:

1. Transfer of cargo into truck

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2. Stowage of cargo in truck

3. Road journey

4. Breaking out of cargo from truck

5. Transfer of cargo from truck to shed/place of examination in ICD

6. Unpacking for customs examination

7. Repacking after Customs examination

8. Consolidation (in case of LCL)

9. Stuffing of cargo in container

10. Locking and sealing of container

11. Loading of container on flatbed wagon

12. Rail journey

13. Unloading of container from flat bed wagon and storage of container in

container yard in port.

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

15. Truck journey from container yard to quay.


17. Sea voyage

The movement of containerized shipment through ICD is more cost effective.

Containers are moved by rail from ICD to gateway port, serves the advantages like no

traffic congestion, i.e., quick transit, rail freight cheaper than road transport, ICD

containers exempted from octroi formalities etc.

7.4 Road Transport

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In India, Motor Vehicle Act 1988 deals with transportation of goods by

road: registration of vehicle, safety, economic life of vehicle, etc. This act prohibits

overloading of cargo.

Road transportation charges are more than rail transportation charges. Cost of

fuel accounts for more than 50 percent of the running cost of truck, heavy labor

charges engaged for unloading, road traffic congestion because of bad road

conditions, toll collection at various points and detention at toll points, i.e., loss of

time and money contributes to higher transportation charges. However, road transport

continues to be the preferred choice because unlike the Railways, road transport

provides door-to-door service.

Road freight (without container): Rate / Ton

Road freight (with container): Rate / TEU

7.5 Rail Transport

Rail transport is a more convenient mode of transport for cargo movement

from the hinterland to port. It is not only cheap, but also eliminates traffic congestion

and detention at Octroi. Railways, initiated the process of containerized cargo

transportation way back in 1966.

To promote and manage effectively the growth of containerized cargo traffic

in India, the Container Corporation of India (CONCOR), a sister concern of Indian

Railways, was incorporated in 1988. Apart from transportation of containers by rail,

CONCOR also operates a huge network of ICDs and CFSs all over India. By

injecting the competition in container rail transport segment, the monopoly status of

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CONCOR in container rail transport came to a standstill. It is envisaged that

competition in container rail transport will reduce the cost of transport.

Rail Freight Rate

For Empty container Rate / TEU

For Loaded container Rate / TEU

7.6 CUSTOMS CLEARING CHARGES

Custom House Agents (CHA) main job responsibility is to study the laws

governing the export and import and interpreting the levies payable and incentives

received by clients. They also assist their clients in preparation of document according

to expectation of customs authorities.

These Custom House Agents are known by different names in different

countries such as Customs Clearing Agent, Freight Forwarding Agent, Customs

Broker and Shipping and Forwarding Agent. But one aspect of their activities, which

is common to all of them, whatever name they use, is that they all sell their services

only.

On behalf of the shipper, CHA does all procedural and documentation

formalities, involved in the Customs and port clearance. Such as:

i. Processing of documents, shipping bills etc.

ii. Carting of goods/cargo to CFS

iii. Arranging of physical examination of goods

iv. Collection of measurement certificate

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v. Handover goods/cargo to carrier i.e., shipping line

vi. Personally attending stuffing of cargo in container

vii. Collection of Bill of Lading from shipping line

viii. Collection of documents from Customs such as duplicate copy of

shipping bill, attested copy of Invoice & Packing List.

Today, CHA or Freight Forwarding Agent does except everything except

manufacturing the goods and they are a real third party logistics providers.

7.6.1 Following are the charges payable to CHA for the service rendered:

1. Agency Expenses

There is no fixed yardstick for charging agency expenses. Some charge 0.75%

of invoice amount, if invoice amount is more than Rs. 10 Lakh. And some charges 1%

of invoice amount, if invoice amount is less than Rs. 10 Lakh. Some charge fixed rate

per TEU for FCL shipment and some fixed minimum charges for LCL shipment.

2. Documentation Charges. Rate / Shipping Bill

Charges varies according to type of Shipping Bill, i.e., free drawback, DEEC,

DEPB, etc

3. N Form charges Rate / Invoice

4. Measurement charges Rate / Package or Carton

5. Examination Charges Rate/ Shipping bill

6. GSP Charges & expenses Rate / Certificate

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7. Postage, courier charges Rate / DOC set

8. Bill of Lading charges Rate / Bill of Lading

9. Consolidation charges Fixed Amount

7.7 INLAND CONTAINER DEPOT (ICD) AND CONTAINER

FREIGHT STATION (CFS).

Both ICD and CFS is an infrastructure facility, owned and operated by public

or private authority, especially designed for offering services of handling, storage and

movement of containerized cargo and cargo under Customs supervision.

7.7.1 Services Offered By ICD/CFS.

ICD and CFS handle only containerized shipment, thus special kind of

facilities are provided like:

1. Sheds for temporary storage of cargo

2. Container yard for temporary storage of container

3. Customs clearance facility

4. Cargo handling equipment

5. Container handling equipment

6. Manpower for stuffing the cargo into container and destuffing the

cargo from container

7. Road/rail connectivity to and from serving gateway port.

8. Bonded warehousing facility

9. Maintenance and repair of container unit

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10. Packaging, palletisation fumigation

Advantage

Basically, shipping company, CHA and individual exporter and importer

are the users of these infrastructure facilities. Every user has some unique

advantages:

1. Port authority receives ready-to-load condition container, thus port

authority relieved from traditional job of preparing tally sheets etc and enable port to

provide faster turnaround time to shipping lines ultimately ports productivity and

profitability increases.

2. Almost all ICDs linked to port by rail thus quick transit at lower

transport cost, no traffic congestion, no detention at octroi post.

3. ICD / CFS is a logistic hub for LCL cargo thus consolidation became

more easy.

4. ICD / CFS assist exporter / importer is reducing inventory cost.

5. ICD / CFS are owned and operated by public and private authorities

thus every user gets quality service at competitive rates.

7.7.2 ICD / CFS charges

Following are the charges payable to ICD / CFS authorities for the services

rendered:

1. Ground rent charges

a. Loaded container Rate / TEU / Day

b. Empty container Rate / TEU / Day

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2. Cargo Storage Charges Rate / Sq. Mt

a. For LCL Rate / TEU

Unloading of cargo from truck, stacking in storage area, providing

labour and CHE for taking out packages for examination, consolidating consignment,

shifting of container to stuffing point, stuffing of cargo in the container, locking and

sealing.

b. For FCL Rate / TEU

Providing labors, equipment (for taking out required number of

packages from container), unpacking for Customs examination, repacking, stuffing

the packages in container, locking and sealing.

3. Lift on/Lift off charges

a. Loaded Container Rate / TEU

b. Empty Container Rate / TEU

4. Transportation of container from ICD/CFS to JN Port

a. Loaded Container Rate / TEU

b. Empty Container Rate / TEU

7.8 TERMINAL HANDLING CHARGES

Once the cargo is stuffed in container to its fullest capacity and after

completion of all due documentation formality, sealed containers are moved from

CFS/ICD to gateway servicing port for further loading on containership.

Port authority provides facility to receive container, stacking of container in

yard, transportation of container from yard to quayside and loading on board the ship.

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For providing these facility, port authority recover some charges from shipping line or

agent of vessel or cargo agent, commonly known as Terminal Handling Charges

(THCs).

Normally, THCs are quoted per TEU separately for loaded and empty

container. Rate varies per TEU for the type of container used like reefer container,

flatbed container, hazardous cargo carrying container.

.8.1 Following are the THCs for normal container:

1. from truck to Container Yard: Rate / TEU

2. from rail flat wagon to Container Yard: Rate / TEU

3. from CFS to Container Yard: Rate / TEU

4. from Container Yard to Ship: Rate / TEU

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

to port authority and, subsequently, recover from the concerned party i.e., exporter or

importer.

7.9 OCEAN FREIGHT

Liner conference is an association of liner shipping company. Liner

conference appoints a Rate Committee to prepare liner freight tariff, application of

which will be binding to all the member shipping companies associated with the

conference.

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I. LCL Shipment

a. For heavy cargo RATE/TONNE

b. For voluminous cargo RATE/CBM

II. FCL Shipment RATE/TEU

Ocean freight is fixed per TONNE or per CBM or per TEU basis, commonly

known as Basic Ocean Freight. During a voyage, shipping line incurs extra

expenditure or losses due to impact from external forces, which are beyond control of

shipping line. Thus, in order to recover such expenditure or losses, shipping lines

imposes surcharges on and above Basic Ocean Freight.

These surcharges are:

I. Currency Adjustment Factor (CAF) + or x% of BOF

Whenever a shipping line incurs certain losses or gain certain profit due to

fluctuation in value of currency, they recover the losses by adding some per cent

of BOF to BOF or pass on the share of profit by deducting some per cent of

BOF from the BOF.

II. Bunker Adjustment Factor (BAF) + y% of BOF

The cost of fuel is incorporated in the BOF. On certain occasion, shipping

lines incur additional expenses on purchase of fuel due to sudden escalation in

international fuel prices. These additional expenses are loss to shipping lines. To

recover additional cost on fuel, shipping lines impose surcharge called BAF by adding

some per cent of BOF to BOF.

III. Port Congestion Surcharge Fixed Amount/TEU

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Port workers strike, inadequate harbor and terminal infrastructure facility,

sudden change in demand and supply leads to situation like pre-berthing detention,

slower turnaround time, and slower movement of container from/to hinterland. Such

situations are beyond control of shipping lines. This not only hampers the further

schedule, but also inflates the standing cost of shipping lines. Disturbance of schedule

and additional standing cost is loss to shipping lines. To recover this loss, shipping

lines impose surcharge by adding some per-cent of BOF or fixed amount per TEU to

BOF.

Term of sale Freight

paid by

Freight

charged to

Risk

transfer

point

Ownership

in transit

Claims

FOB Origin Freight

Collect

Buyer Buyer Port of

shipment

Buyer Buyer

FOB Origin Freight

Prepaid

Seller Seller Port of

shipment

Buyer Buyer

FOB Origin Freight

Prepaid & Charged

back

Seller Buyer by

adding

amount toinvoice

Port of

shipment

Buyer Buyer

FOB Destination

Freight Collect

Buyer Buyer Port of

Destination

Seller Seller

FOB Destination

Freight Prepaid

Seller Seller Port of

Destination

Seller Seller

FOB Destination

Freight Collect &

Allowed

Buyer Seller by

deducting

amount

from

invoice

Port of

Destination

Seller Seller

Table No. 1.

IV. War Risk Premium

Fixed Amount/TEU

Whenever a ship passes through war-prone zone, insurance underwriter

imposes additional premium to shipping lines. Normal insurance premium paid by

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shipping line is incorporated in freight. This additional premium is additional

expenditure. To recover additional expenditure, shipping lines impose surcharge by

adding some per cent of BOF or fixed amount per TEU to BOF.

7.10 INCOTERM

FOB (free on board) means that the exporter fulfils his obligation to deliver

when the goods have passed over the ships rail at the named port of shipment. This

means that exporter bears entire export logistics costs till the goods shipped on board

the ship in port of shipment and completes all formalities of export. And importer has

to bear all costs and risk of loss or damage to the goods from that point onwards.

Importer pays for freight, insurance and import duty etc.

FOB cost to the buyer = Sum of inland transport cost (road + rail) +

Transit facility charges (CFS / ICD) + CHA charges + Consolidation charges

+ THC + Cost price of goods.

Some common terms of sale now a day practiced in international trade are

FOB Origin, FOB Destination etc. In FOB Origin a buyer pays freight and risk is

transferred from seller to buyer in the port of shipment. Whereas in FOB Destination,

seller pays freight and risk is transferred from seller to buyer in the port of destination.

The sale term like freight prepaid, freight collect when clubbed with FOB origin or

destination, it gives a different ground for negotiation. The table above gives details

of each term.

INCOTERM 2000 provides interpretation of obligations and responsibilities

to be discharged by exporter and importer in international trade. There are 13 terms

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including FOB as explained above. All these terms have unique feature. These terms

can also be used as negotiating and cost-cutting tool.

The FOB as a concept signify a price which includes entire export transport

logistics cost incurred up to the time that the goods are on to ship for exportation.

Government authorities keep the difference of 15 per cent between cost price and

declared FOB. This difference can be said to include the profit margin and export

transport logistics cost incurred up to the time when goods are loaded onto the ship

for exportation.

Globalization and internationalization of industries have increased the

importance of logistics within the firm since its costs, especially transportation,

becomes a larger part of the total cost structure.

Apart from transportation cost, exporters are also forced to incur on inventory,

inventory carrying cost, warehousing cost etc. with no value addition to the product.

The value is added by minimizing these costs and by passing the benefits to customers

and to the firms shareholders.

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8. Letter Of Credit.

Documentary letters pf credit or documentary drafts are often used to protect

the interests of both buyer and seller. These two methods require that payment be

made based on the presentation of documents conveying the title and those specific

steps have been taken. Letters of credit and drafts can be paid immediately or at a

later date. Drafts that are paid upon presentation are called sight drafts. Drafts that are

to be paid for the later date, often after the buyer receives the goods, are called time

drafts or date drafts.

A letter of credit adds a banks promise to pay the exporter to that of the

foreign buyer provided that the exporter has complied with all the terms and

conditions of the letter of credit. The foreign buyer applies for assonance of a letter of

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credit from the buyers bank to the exports bank and therefore is called the applicant;

the exporter is called the beneficiary.

A letter of credit is a written commitment by a bank to make payment at sight

of a defined amount of money to a beneficiary (exporter) according to the terms and

conditions specified by the importer (applicant). The letter of credit should set a time

limit for completion and specify which documents are needed to confirm the

transactions fulfillment.

Payment under a documentary letter of credit is based on documents, not on

the terms of sale or the physical condition of the goods. The letter of credit specifies

the documents that are required to be presented by the exporter, such as an ocean bill

of lading (original and several copies), consular invoices, draft, and insurance policy.

The letter of credit also contains an expiration date before date, the bank responsible

for making payment, verifies that all document conform to the letter of credit

requirement. If not, the discrepancy must be resolved before payment can be made

and before the expiration date.

8.1. Components of letter of credit:

1. Applicant: the party applying for the letter of credit, usually the importer in a

grain transaction.

2. The issuing bank: the bank that issues the LOC and assumes the obligation to

make payments to the beneficiary, usually the exporter.

3. Beneficiary: the party in whose favor the LOC is issued, usually the exporter

in a grain transaction.

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4. Amount: the some of money usually expressed as a maximum amount, of the

credit defined in a specific currency.

5. Terms: the requirements, including documents that must be met for the

collection of the credit.

6. Expiry: the final date for the beneficiary to present against the credit.

8.2. Information to be provided in the LOC by the parties:

1. The full, correct name addresses and contacts information of the beneficiary,

usually the exporter.

2. The brief description of the grain involved, including the quantity, quality and

unit price.

3. The method, place and form of shipment, the location of the final destination

and other shipping issues including transshipment, partial shipment and the

latest shipping rates.

4. The full correct description of the documents required, including the period of

time after the documents are issued within which they must be presented for

payments. In addition, the credit should specify if payment is to be

immediately (at site) or with some degree of deferment ( i.e., 4 days after

acceptance)

5. Details of the LOC itself, including the amount (usually expressed as a

maximum), the expiry date, how the credit will be made available and the

transferability of a credit.

8.3. Types of Letter of credit

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There are Two Basic Forms of LOC: Standby and Documentary.

1. Documentary LOC.

a. Documentary revocable LOC: - Revocable credits may be modified or

even cancelled by the buyer without notice to the seller.

b. Documentary irrevocable LOC: - Irrevocable credits may not be

modified or cancelled by the buyer.

i. Unconfirmed irrevocable LOC: - In an unconfirmed credit, the

buyers bank issuing the credit is the only party responsible for

payment to the seller. The sellers advising bank pays only after

receiving payment form the issuing bank.

ii. Confirmed irrevocable LOC: - In a confirmed credit, the

advising bank adds its guarantee to pay the seller to that of the

buyers issuing bank.

2. Standby LOC

3. Special LOC

4. Back-to-back LOC

5. Deferred Payment LOC

6. Red Clause LOC

7. Revolving LOC

8. Transferable LOC

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9. Types of containers

9.1. General purpose containers

9.1.1 Characteristics

As the name suggests this closed container is suitable for the carriage of all

types of general cargo, and with suitable temporary modification for the carriage of

bulk cargoes, both solid and liquid.

The containers are basically a steel framework with steel cladding, in all cases

the floors are either hardwood sheeted. Access for loading and unloading is through

full width doors. Cargo securing / lashing points are located at floor level at the base

of the sidewalls (generally 5 per side in 20 and 9 per side in 40 containers all with a

safe working load of 2032 kg each).

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The tare weight of containers vary, therefore no absolute figure is quoted for

payload, but it should be mentioned that the fleet of 20 General purpose containers

have a maximum gross weight of between 22,806 kg and 30,480 kg. all 40 GP

containers have a maximum gross weight limits acceptable in the country of origin

and destination must be given to the maximum weight limits acceptable in country of

origin and destination.

20ft x 8ft x 8ft 6 in UNITS 6.1m x 2.4m x 2.6m

Average interior Dimension Door dimension Cubic capacity

averageL1 B1 H1 B2 H2

5890 2345 2400 2335 2290 33.3m3

Tare weights vary between 1800kg and 2500kg.


Average interior Dimension Door dimension Cubic capacity

averageL1 B1 H1 B2 H2

12015 2345 2362 2335 2260 66.9m3

Tare weights vary between 3700kg and 4380kg. gross weight is 30840kg

Table No. 2. Dimension of 20 and 40 container.

9.2. Open top containers

9.2.1. Characteristics

This container with its top loading facility is designed for the carriage of

heavy and awkward cargoes, and those cargoes with height in excess of that which

can be stowed in a standard General Purpose Container.

The floor of the container is of hardwood timber plank or plywood, and there

are a number of cargo securing points in the floor or along the bottom side rail

(generally 5 per side in the case of 20 and 9 per side 40, each with a safe working

load of 2032kg)

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This steel container with its removable door header and removable roof bows

allows loading to be affected either directly through the roof aperture or through the

door using overhead or lifting equipment. Tarpaulin tilts are supplied to protect cargo.


Overall interior

Dimension

Door dimension Roof aperture Height

at side*

H3 mm

Width

#

B3 mm

Cubic

capacity

averageL1

mm

B1

mm

H1

mm

B2

mm

H2

mm

L2 mm B4

mm

5890 2345 2400 2335 2290 5712 2175 1974 1830 33.3m3

Tare weights vary between 1800kg and 2500kg.


Overall interiorDimension

Doordimension

Roof aperture Heightat side*

H3

Width #B3

Cubiccapacity

average

L1

mm

B1

mm

H1 mm B2 mm H2

mm

L2 mm B4

mm

12015 2345 1974 1830 2260 11832 2150 1950 1840 66.9m3

Tare weights vary between 3700kg and 4380kg. gross weight is 30840kg

*H3 = height at sides under top side rails, #B3 = width between header stubs

Table No. 3. Dimension of Open 20 and 40 container

9. Import Export Procedures in Atlas Copco. Ind. Ltd.

9.1 Export procedures (Please see Annexure1).

Step1. The Overseas Buyer (OSV) communicates the requirement of the material by

releasing a purchase order (P.O.) to the production manager of the exporting

company. The P.O should contain following details such as banker details for

payment, name of the forwarder for pick up, correct price, Currency of

payment, mode of shipment, etc.

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Step2. If the material is ready or has a feasibility of manufacturing then the

production manager give an acknowledgement of P.O. with information of

delivery and price.

Step3. The acknowledged copy of P.O. is send to the export dept. for further

procedures.

Step4. Simultaneously the required material is send to the stores for dispatch.

Step5. Store packs the material in carton or in wooden box (carton for the air

shipment and wooden pallet for shipment by sea). The store prepares a

packing list and sends it to the export dept.

Step6. As soon as the export dept receives the P.O. and the packing list, the export

dept give this per-shipment doc to CHA.

Step7. The pickup instruction is given to the transporter by CHA.

Step8. The transporter takes the cargo under its custody from the stores

Step9. The transporter coordinates with the CHA about the cargo.

Step10. Post-shipment doc. is send to export dept. by CHA.

Step11. Post-shipment doc. is negotiated to the Bank (this is the bank to which the

export company has tie up) for the further payment procedure.

Step12. As soon as the production department gives the acknowledgement to the

OSB, they send the original copy to the bank of the exporting company. The

bank ask for the payment

Step13. After the original doc. and the post-shipment doc. are collected by the bank,

the bank releases the bank realization certificate (BRC) to export dept.

Step14. Bank pays the amount to the ASAP.

10.2. Import Procedure (Please see Annexure2)

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Step1. The requirement of material is communicated by sourcing dept. to the overseas

vender by releasing the purchase order (P.O.) which is properly sealed and

signed. The P.O should contain following details such as banker details for

payment, name of the forwarder for pick up, correct price, Currency of

payment, mode of shipment, etc.

Step2. If the material is ready or OSV aggress to deliver the material then OSV sends

an acknowledgement of P.O. and a Performa Invoice to sourcing.

Step3. For the further procedure the sourcing department gives the acknowledged

P.O. and Performa Invoice to the imports department.

Step4. After receiving the documents if the condition of import is advance payment

then imports department asks ASAP for approval and to complete the Payment

procedures.

Step5. To complete the Payment procedures ASAP approaches the bank (the bank to

which company has a tie-up) and ask the bank to make payments to OSV.

Step6. As per the instruction form the ASAP, the bank pays the OSV the prescribed

amount.

Step7. OSV receives the payment form the bank and intimate the imports dept. via

mail about the readiness to release material.

Step8. As soon as the OSV agrees to release the material, the import dept. gives a

pick-up instruction to the forwarder. The forwarder can be a predetermined or

a forwarder who can perform that specific job.

Step9. Before forwarder takes the custody of the cargo it is necessary to insure the

goods by an insurance company which has to be imported. The insurance of

the goods can also be done by the importing company if it is not done by the

forwarder.

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Step10. After the insurance is done the forwarder take the custody of the cargo form

the OSV place. The forwarder sends the cargo to the country of the importer.

Step11. When the cargo arrives in the importers country the forwarder sent a copy of

CAN (Cargo Arrival Notice). to import dept.

Step11.1 A copy of CAN is also sent to CHA (Custom House Agent) of the company.

Step12. Simultaneously OSV sends original documents to the Bank after the

forwarder takes the cargo.

Step13. Bank sends the original documents to the import department.

Step14. When both the documents (CAN and the Original Doc.) are received by

import department, sends the documents for the custom clearance to CHA.

Step15. CHA sends a custom duty doc. to import department for the payment of

custom duty

Step16. Import dept. demands ASAP for custom duty payments.

Step17. The payment of custom duty is done to SBI PDD A/c by ASAP.

Step18. Simultaneously after the forwarder produces the CAN ASAP pays the fright

charges.

Step19/20. CHA asks customs for the B/E (Bill of Entry) and the clearance

doc(custom doc.). The customs examines the docs and gives the B/E and

clearance.

Step21. The docs send by the customs are called Post Clearance Doc. This post

clearance docs are given to the import dept. by CHA.

Step22. CEN VAT Doc. is given to ASAP.

Step23. After the docs are cleared by the customs the CHA gives the responsibility of

delivery of cargo to the transporter.

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Step24. The transporter takes the custody and delivers the cargo to the stores of the

importing company.

Step25. As soon as the material is received by stores a GRR No. is given to it and is

communicates to the Import dept. and Sourcing dept. to start production

activities.

10. Research Methodology

9.1 Research Methodology.

This project is based on research methodology on collection of data from

primary sources. The primary sources were the 3PL providers, and data collection was

through questionnaire send to the logistics companies, responses of those companies.

The secondary data source was past experience of the logistics manager Mr. Shripad

Khire. The details of the questionnaire design are present in the Annexure 3. As we

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were doing this task of the selection of service provider for the first time in history of

Atlas Copco India Ltd. Nashik, hence we do not have the past data to compare with

the present data. So in the lack the secondary data the comparison was only on the

basis of the responses got from the logistics company.

10.2 Questionnaire design.

10.2.1 Sheet No. 1. Please see Annexure 3

The sheet no.1 contains two sections agency charges and the other is local

transportation.

Sections 1: Agency Charges1

The respondent was asked for the agency charges in terms of percent of CIF

(cost insurance and freight) value. The respondent was provided by slabs/ range of

CIF value in which the Atlas Copco deals in.

Section 2: Transportation Charges.

The respondent was asked for the transportation charges which are local in

nature. The charges between Nashik and Mumbai, and Nashik and JNPT for FLC (full

load container), 6Ton, 3.5Ton, 2.5Ton was asked. They were also asked for the

charges in the whole range of 20ft and 40ft container.

They were also asked for the charges of N form, naka charges, dock clearance

charges, loading charges etc. This rates are all expense hence the objective of the

company was to keep it less.


1 Agency charges: This is the charges which are charged by the logistic service provider for service

they provide to the customer.

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The sheet no. 2 contains three sections one is the air fright charges, another is

sea fright charges, and the last is the agency charges for the custom clearance charges

for the exports.

Section 1: Air fright charges from Mumbai airport.

The air fright charges depend on the weight of the cargo and hence rates per

Kg were asked to the respondents. The port of shipment is the Mumbai airport. As per

the requirement the ports of discharge and the range of the weight was mentioned on

the basis of which the respondent had given there rates.

Section 2: Sea fright charge from Mumbai port.

The sea fright charges are charged on the basis of space and also the weight

hence rates per 20/40ft per ton were asked. The port of shipment is the Mumbai i.e.

JNPT port. The port of discharge and the range of weight were provided.

Section 3: Agency charges for custom clearance.

The agency charges for custom clearance were asked for the 20ft, 40ft, and the

LCL (less than container load)


The 3rd sheet contains 32 questions which provide the company to have

broader look to the respondents. This 32 question contains various queries such as

yearly turnover, is the company ISO certified, top 5 customers of last year, facilities

such as the number of containers, warehouses, number of trucks they have etc. they

have, export volumes of the last year, cargo tracking technique, penalties if the cargo

is not delivered, material handling equipments, etc. These responses of the questions

will give a broader view of the logistics company as it will contain the information

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apart form the charges they charge for the service. This type of responses will show

the professionalism nature, commitment, and trust worthiness of the logistic company.

10.3. Administrating the Questionnaire

The question was prepared as per the requirements of the company. Now the

time was to search the potential logistics companies who had establishment and also

are functional in Nashik India. The logistics companies which was selected were the

companies which had done business in past with Atlas Copco. The questions was

communicated to the companies by email. After a week or so the companies

responded to the mail duly filled and also with the inputs which they thought it was

required to be communicated by there side. This questionnaire was send to 9 logistic

companies named Agility, Tulsidas Kumji Pvt. Ltd, Jeena, Nippon Express, Flyjac,

expediters, schenkar, Taitan, Kunhe Nagal. But 5 out of the 9 logistics companies

responded to the questionnaire. The companies which did not responded had some

common reasons such as not having presence in Nashik etc. The responses were

compared and the companies were asked to give a revised quote. This revised quote

was asked to have more competitive rates and lesser transit times1. Hence after

comparing the rates and all other terms which was mentioned in the questionnaire best

two of the five companies were suggested to Atlas Copco India ltd. Nashik.

1 Transit time: this is the lead time which is required between transfers of the material from the

companies gate (exporter) till the delivery is made to the importer.

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10. Analysis

The analysis was done on the data given by the respondents. The major

emphasis was given on the fright rates taken by the logistics company for the local

transportation (between Nashik and Mumbai and JNPT), FTL and LTL containers,

and sea fright. But for the air transportation, the time which was taken by the logistics

company to deliver the cargo was the major factor to be considered. The analysis of

the data collected is done on every section as mention in the design of the

questionnaire. From every section top two respondents were considered. The analysis

of each section is given below.

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10.1. Sheet No. 1

10.1.1. Section No. 1: Agency Charges.

The respondent was asked for the agency charges in terms of percent of CIF

(cost insurance and freight) value for imports. The respondent was provided by slabs/

range of CIF value in which the Atlas Copco deals in. The agency charges of these

five companies are ranging form 0.25% to 0.75% of the total CIF value. The least i.e.

0.25% was quoted by Agility and the next 0.35% was quoted by Nippon Exp and

Flyjac. The comparison chart is shown in Exhibit No.1.

Respondent with least quote: 1. Agility

2. Nippon Exp and Flyjac.

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Exhibit No. 1. CIF Values for Imports

00.1

0.2

0.3

0.4

0.5

0.6

0.7

0.8

CIF value upto

100 K INR

CIF value from

100 K INR to

500 K INR

CIF value from

500 K INR to

2500 K INR

CIF value from2500 K INR to

5000 K INR

CIF value above

5000 K INR

Range

%value

of

CIF

value

Agility

Jeena

TKPL

Nippon Exp.

Flyjac


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10.1.2. Section 2: Local Transportation.

The respondent was asked for the transportation charges which are local in

nature. The charges between Nashik and Mumbai, and Nashik and JNPT for FLC (full

load container), 6Ton, 3.5Ton, 2.5Ton was asked. They were also asked for the

charges in the whole range of 20ft and 40ft container.

They were also asked for the charges of N form, Naka charges, dock clearance

charges, loading charges etc. This rates are all expense hence the objective of the

company was to keep it less.

For the transportation between the Nashik Mumbai and JNPT, TKPL

(Tulsidas Kumji Pvt Ltd.) quoted the least rate that is 5200. For the whole range of

20ft containers TKPL quoted the least but for the 40ft range Agility had the least

rates. Exhibit No 2. shows the rate quoted by the logistics companies and a

comparison chart for the local transportation.

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Respondent least quoted: 1. TKPL.

2. Agility.

10.2. Sheet No. 2.

10.2.1. Section No. 1: Air fright charges from Mumbai airport.

Almost 70% business of the Atlas Copco Nashik is with customers in

Anthwerp port Sweden. Agility had quoted the least in the air fright with a flat rate of

Rs.78 per kg for the whole range of weight. The transit time required is an important

factor in air shipment. All the companies had a transit time of 2-3 days, but the Jeena

logistics was assuring 2days of transit time. The comparison chart of the air fright is

shown in the Exhibit No.3.

Respondent with least fright and transit times: 1. Agility.

2. Jeena.

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Exhibit No. 2. Local Transportation

0

5000

10000

15000

20000

25000

30000

Nashik to

Mumbai -

FTL

Nashik to

JNPT - FTL

- 20 ft / 10T

- 20 ft / 15T

- 20 ft / 20T

- 40 ft / 20T

- 40 ft / 30T

Range

IN

Rs. Agility

Jeena

TKPL

Nippon

Flyjac


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10.2.2. Section 2: Sea fright charge from Mumbai port.

The sea fright charges are charged on the basis of space and also the weight

hence rates per 20/40ft per ton were asked. The port of shipment is the Mumbai i.e.

JNPT port. The port of discharge and the range of weight were provided.

All the companies are having flat rates for all ranges of weight in 20ft as well

as 40ft containers. TKPL was having the least quote and next to least quote was

flyjac. As Atlas Copco deals more in 20ft containers, Flyjac was selected for this

section though Agility had lower quote than Flyjac.

Respondents for least quote are: 1. TKPL.

2. Flyjac.

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Exhibit No.3 Air Fright to Anthwerp

0

50

100

150

200

250

0-150 / 100-250 151-500 / 300-500 501-1000 1000 PlusRange

Per

Kg.

Rate

Agility

Jeena

TKPL

Nippon Exp.

FlyJac


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10.2.3. Section 3: Agency Charges

The agency charges which the logistics company charges for transporting the

cargo overseas were asked. The range for which the rats were asked are 20ft, 40ft, and

the LCL (less than container load).

Respondents with lower agency charges: 1. Flyjac

2. Nippon.

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Exhibit No. 4. Sea Fright to Anthwerp

0

500

1000

1500

2000

2500

3000

ANTWERP NV / USD - 20' (10 T / 15T /

20T )

ANTWERP NV / USD - 40' (20T / 30T )

Range

Per

Ton.

Rate

Agility

Jeena

TKPL

Nippon

Flyjac


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10.3. Sheet No. 3: Other information.

The 3rd sheet contains 32 questions which provide the company to have

broader look to the respondents. This 32 question contains various queries such as

yearly turnover, is the company ISO certified, top 5 customers of last year, facilities

such as the number of containers, warehouses, number of trucks they have etc. they

have, export volumes of the last year, cargo tracking technique, penalties if the cargo

65

Exhibit No. 5. Agency Charges for Sea

0

1000

2000

3000

4000

5000

6000

CONTAINER - 20 FT CONTAINER - 40 FT LCL SHIPMENT

Agility

Jeena

TKPL

Nippon Exps

FlyJac


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is not delivered, material handling equipments, etc. These responses of the questions

will give a broader view of the logistics company as it will contain the information

apart form the charges they charge for the service. This type of responses will show

the professionalism nature, commitment, and trust worthiness of the logistic company.

Out of the 32 questions, we have selected 10 questions for the

0601065 selection of service provider for international logistics

Documents