Supply chain management

SUPPLY CHAIN MANAGEMENT

Session 8 Transportation Management Incoterms

Barcelona, Fall 2018

Luis J. Díaz. Industrial Engineer. M.B.A.

Transportation is the largest element of logistics cost…. –60% of a typical firm´s

logistics expenditures

SUPPLY CHAIN MANAGEMENT TRANSPORTATION MANAGEMENT

Factors which influence rates: ØDistance: Major influence on transportation cost. There are fixed costs associated with shipment pick up and delivery. ØWeight: Transport cost per unit of weight decreases as load size increases. ØDensity: Combination of weight and volume. Vehicles are more constrained by cubic capacity than by weight.

SUPPLY CHAIN MANAGEMENT TRANSPORTATION MANAGEMENT ECONOMIC DRIVERS

Basic document utilized in purchasing transport services. In case of loss,

damage or delay, the bill of lading is the basis for damage claims.

Information contained on the bill of lading determines all responsibiities

related to timing and ownership.

SUPPLY CHAIN MANAGEMENT TRANSPORTATION MANAGEMENT BILL OF LADING

Incoterms are international rules that are accepted by governments, legal authorities and practitioners worldwide for the interpretation of the most commonly used terms in international trade. They either reduce or remove altogether uncertainties arising from differing interpretations of such terms in different countries

SUPPLY CHAIN MANAGEMENT INCOTERMS. INTRODUCTION

The scope of Incoterms is limited to matters relating to the rights and obligations of the parties to the contract of sale with respect to the delivery of goods sold, but excluding "intangibles" like computer software. Each Incoterm is referred to by a three-letter abbreviation

SUPPLY CHAIN MANAGEMENT INCOTERMS. MAIN CONCEPTS

All Incoterms include a ‘named place’, which is extremely important to in the agreement. If the terms are EXW or FCA, the named place is the loading location. For FAS and FOB, it is the port of loading, while for CFR and CIF, it is the destination port. For CIP, DDU and DDP the final delivery address is the named place.

SUPPLY CHAIN MANAGEMENT INCOTERMS. MAIN CONCEPTS

EXW EX WORKS (named place)*

FCA FREE CARRIER (named place)

FAS FREE ALONGSIDE SHIP (named port of shipment)*

FOB FREE ON BOARD (named port of shipment)

CFR COST AND FREIGHT (named port of destination)

CIF COST, INSURANCE AND FREIGHT (named port of destination)*

CPT CARRIAGE PAID TO (named place of destination)

CIP CARRIAGE AND INSURANCE PAID TO (named place of destination)*

DAF DELIVERED AT FRONTIER (named place)*

DES DELIVERED EX SHIP (named port of destination)

DEQ DELIVERED EX QUAY (named port of destination)*

DDU DELIVERED DUTY UNPAID (named place of destination)*

DDP DELIVERED DUTY PAID (named place of destination

SUPPLY CHAIN MANAGEMENT INCOTERMS. LIST

ØEXW (Ex Works) The seller is not obliged to load the goods into the truck or container, nor does it oblige the seller to fulfil the necessary export customs formalities. ØFCA (Free Carrier) The seller/exporter is responsible for loading the goods and providing export documentation.

ØFAS (Free Alongside Ship) The seller delivers the goods, cleared for export, at a named port of shipment. The buyer pays for the THC incurred at the terminal

SUPPLY CHAIN MANAGEMENT DESCRIPTION

ØFOB (Free On Board) The seller clears the good for export, and pays for the THC at a named port

ØCFR (Cost And Freight) The seller pays for the main carriage of good to named destination port, but the buyer is liable for loss and damage during transportation and should be properly insured.

ØCIF (Cost, Insurance and Freight) The seller has to provide marine insurance against the buyer’s risk of loss and damage during transportation

SUPPLY CHAIN MANAGEMENT DESCRIPTION

ØDDU (Delivered Duty Unpaid) Buyer pays for duties and customs clearance.

ØDDP (Delivered Duty Paid) Seller pays both duties and customs clearance

SUPPLY CHAIN MANAGEMENT DESCRIPTION

THANK YOU!