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To: Students 1. Must be punctual (15 minutes rule) 2. No telephone, drink & food during lecture 3. Do not leave class without permission! Please go to.

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Presentation on theme: "To: Students 1. Must be punctual (15 minutes rule) 2. No telephone, drink & food during lecture 3. Do not leave class without permission! Please go to."— Presentation transcript:

1 To: Students 1. Must be punctual (15 minutes rule) 2. No telephone, drink & food during lecture 3. Do not leave class without permission! Please go to toilet before the class starts. No rule without exception!

2 Evaluations Examination 60% Class performance 20% Class attendance 10% Papers 10%

3 How to proceed this class ? 1)Reading assignment (text book) 2)More discussion 3)Questions and answers 4)Practical knowledge 5)Case studies 6)Attendance and participation to the class – get high point

4 Topics 1 : BOP Business World Population is around 7billion. There are 4 billion people is on BOP which is less than US$3000 a year.

5 Base of Pyramid Business Current situation of BOP population world population 7 billion Annual income per capita <$3000 4 billion

6 Background 1 1) Saturated market of developed countries 2) Size of population and population growth rate 3) Economic growth rate 4) Rate of younger generation 5) Aggressive acceptance of developed technologies etc.

7 EXAMPLE 1) 1.6 billion 3rd world residents need glasses, but less than 5% have. 2) Governments are preoccupied with life threatening maladies and urban optical shops are inclined to sell high- end glasses. The failure of both Government & Market

8 .

9 +3.00 Reading Glasses SCOJO New York

10 SCOJO SCOJO is a famous reading glasses company in USA which is selling very fashionable & high-end reading glasses US$ 42~US$112. They started BOP business. Cost (producing & delivery) =$1 Wholesale price =$2 Retail price = $3

11 Back Ground 2 1) In BOP, there are many types of job, which can not be sufficiently carried out if your sight is not enough. 2) 1.6billion would need reading glasses. Especially, 95% of 35~80 years old population needs reading glasses.

12 Scheme Business (franchising) Training of local entrepreneurs in BOP market SCOJO Local Entrepreneurs BOP

13 Before starting this class

14 Now we are in a global society – one world. Economically and culturally, a world become more smaller than ever by media, IT (information technology) and transportation. WTO, ACEAN and FTA will integrate each market into one world market – no border. Prologue

15 Recent happenings 1. The growing power of retailers 2. Technological advance 3. Globalization of trade = International Trade

16 WTO News Release Following the record-breaking 14.5% surge in the volume of exports in 2010 world trade growth should settle to a more modest 6.5% expansion in 2011. this would be higher than the 6.0% average yearly increase between 1990 and 2008. Global supply chains cause goods to cross national boundaries several times during the production process, which raises measured world trade flows compared to earlier decades.

17 Competition is not just in domestic market but also, in international market. The Logistics & SCM is a key for the success in international trade.

18 This is the reason why we must study “Logistics” & “Supply Chain Management”

19 Topics 2 World Logistics World Bank reported that world rank of “logistics” which is called “Logistics Performance Index” = LPI

20 Germany, Singapore and Sweden are the best 3. Japan is 7 th, USA 15 th, China 27 th and Thai 35 th among 155 countries. WB said the credibility of logistics would be more important than price and cost in international trade.

21 International LPI Ranking 1 Germany 4.11 2 Singapore 4.09 3 Sweden 4.08 4 Netherlands 4.07 5 Luxembourg 3.98 6 Switzerland 3.97 7 Japan 3.97 8 U K 3.95 9 Belgium 3.94 10 Norway 3.93

22 11 Ireland 3.89 12 Finland 3.89 13 Hong Kong 3.88 14 Canada 3.87 15 USA 3.86 16 Denmark 3.85 17 France 3.84 18 Australia 3.84 19 Austria 3.76 20 Taiwan 3.71

23 21 New Zealand 3.65 22 Italy 3.64 23 Korea, Rep. 3.64 24 U A E 3.63 25 Spain 3.63 26 Czech Republic 3.51 27 China 3.49 28 South Africa 3.46 29 Malaysia 30 Poland 3.44

24 31 Israel 3.41 32 Bahrain 3.37 33 Lebanon 3.34 34 Portugal 3.34 35 Thailand 3.29

25 Thai LPI 35 Thailand 3.29 Customs 3.02 Infrastructure 3.16 International shipments 3.27 Logistics competence 3.16 Tracking & tracing 3.41 Timeliness 3.73


27 050456 International Logistics (& Supply Chain) Management Yoshio Maki, Visiting Professor May 2012------September 2012 AT KKU

28 Part 1. Concept of Logistics (& Supply Chain) 1) Logistics 2) Supply Chain Management This is very difficult to teach just Logistics.

29 1) What is Logistics? ① Origin The word “Logistics” comes from the Greek logistiki, meaning accounting and financial organization. Logistics is considered to have originated in the military‘s need to supply themselves with arms, ammunition (powder, shot, shrapnel, bullets, cartridges and primers etc.) and rations (foods) as they moved from their base to a forward position. From Wikipedia

30 ② Definition by Council of Logistics Management Logistics is that part of the supply chain process that plans, implements, and controls the efficient, effective forward and reverse flow and storage of goods, services and relate information between the point of origin and the point of consumption in order to meet the customers’ requirements.

31 What is customer’s requirements? needs & wants Seller’s market  Buyer’s market After world war II, seller’s market was created because of mass- production. Products had to be marketed not just produced and sold.

32 Mass Production The first “modern” mass-production system was Ford Type T assembly line (conveyer belt) at Highland Park Factory of Ford in 1914. Many factories followed this system and especially, during WWII, mass- production system was developed for the armament industry in USA.

33 Needs are things people must have to live—food, clothing, and shelter. Wants are things people would like to have but do not need in order to live. Effective “marketing” converts needs to wants.

34 2) Supply Chain ① Definition A supply chain is all activities associated with the flow and transformation of goods from the raw material through to end user as well as the associated information flow. Coordinating not only within organizations but across organizations as well.

35 Change to new ideas 1NCPDM ( The National Council of Physical Distribution Management ) was established in 1963. 2 ( NCPDM changed its name to CLM (Council of Logistics Management) in 1985. 3CLM changed its name to CSCMP ( The Council of Supply Chain Management Professionals ) in 2005.

36 SCM is wider concept than Logistics Logistics is essentially a planning orientation and framework that seeks to create a single plan for the flow of products and information through a business.

37 On the other hand, SCM (Supply Chain Management) builds upon this frame work and seeks to achieve linkage and co-ordination between the processes of other entities in the pipeline, i.e. suppliers and customers and the organization itself.

38 Thus, one goal of SCM might be to reduce or eliminate the buffers of inventory that exist between organizations in a chain through sharing information on demand and current stock.

39 Supply Chain Chart Parts supplier Supplier subassembly Maki Factory Transporter Retailer End user End User Goods information End user Warehouse Wholesaler

40 Bullwhip Effect The term "bullwhip effect" refers to the magnification of demand fluctuations as orders move up the supply chain. Improved forecasting techniques at any one level in the supply chain cannot eliminate the bullwhip effect and may worsen it if used improperly. Information flow and coordination of orders across the supply chain offer the only hope of taming the bullwhip effect.

41 Size of this preview: 800 × 600 pixels. Other resolutions: 320 × 240800 × 600 pixels


43 Topics 3 Real Business

44 My Business 1 I am importing Bioniche IV Vitamin C around 170,000 vials a year. ① Cash discount @€6.9 x 170,000 vials = € 1,173,000 € 1,173,000 x 0.05 = € 58,650 =THB 2,316,000 ②Currency exchange gain (profit) JPY135-JPY98=JPY37 JPY37 x € 1,173,000 = JPY43,401,000 =THB 17,360,000

45 I am selling this product to around 300 registered Japanese medical doctors. Yearly Sales unit price JPY1,785 x 170,000 vials =JPY303,450,000=THB121,380,000 Cost €6.555 (CIF Tokyo) x 170,000 x JPY98 =JPY109,000,000 15%(import & delivery charge) + 5% tax=20% 109,000,000 x 1.2 = JPY 130,000,000 Gross profit (= Sales – Cost) 303,000,000 – 130,000,000 = JPY173,000,000=THB69,000,000


47 Business Chart Money & Product Flow Wish International (Hong Kong) Bioniche (Ireland) Maki Corp. (Japan) Doctor M M M M M


49 Part 2. Why Logistics & SCM ? 1) Economic impact of logistics Logistics cost in GDP is increasing year by year but logistics as a percentage of GDP is decreasing year by year. Logistics cost is around 10% of GDP and one of the most important components in a country’s economy. Logistics also, play an important role in economic growth and development.

50 2) Competitive Advantage Logistics & SCM can provide a major source of competitive advantage. Successful companies either have a cost advantage or they have a value advantage, or combination of two.

51 ① Cost advantage Not just, production cost by economy of scale (achieving bigger sales volume and/or improving market share), Logistics & SCM can provide a multitude of ways to increase efficiency and productivity and hence contribute significantly to reduced unit cost.

52 ② Value advantage Market have become more service- sensitive. Not just a product itself but also delivery service, after sales services, financial packages, technical support and etc. Customers are looking for reduced lead time, just-in-time delivery and value- added services. Logistics & SMC supports cost reduction & service enhancement.

53 ③ Customer satisfaction Logistics Also Plays a Critical Role in Customer Satisfaction. Many services organizations make the mistake of focusing the vast majority of their customer service and satisfaction activities on external issues, often to the exclusion of key internal issues such as inventory management and logistics.

54 However, these key internal issues can also play an important role in facilitating desired levels of customer service and satisfaction. A services organization should focus not only externally, at its direct customer interface and interaction, but also internally, at its global inventory management and logistics activities as well - especially as they might impact a multinational customer base.

55 3) The best example 1 Manufacturer Logistics started military supply system and the supply chain idea started from Toyota. Toyota is one of the biggest and the most profitable car manufacturers in the world. Toyota “Kanban” and “ JIT (Just in Time) system” is the one of the best examples of Supply Chain.

56 Partnership with each company is the key to success of the supply chain. They must disclose and share the necessary information each other. As a team, these companies to save cost, time and energy to achieve the target of the team.

57 What is Kan-ban? More than 20 years ago, Kanban System was developed, by Mr. Taiichi Ohno, a vice president of Toyota. Kanban scheduling systems operate like supermarkets. A small stock of every item sits in a dedicated location with a fixed space allocation.

58 A Kan-ban ( 看板) is a card containing all the information required to be done on a product at each stage along its path to completion and which parts are needed at subsequent processes.

59 Customers come to the store and visually select items. An electronic signal goes to the supermarket's regional warehouse detailing which items have sold. The warehouse prepares a daily replenishment of the exact items sold.

60 These cards are used to control work-in-progress, production, and inventory flow. A Kan-ban System allows a company to use Just-In- Time (J.I.T) Production and Ordering Systems that allow them to minimize their inventories while still satisfying customer demands.

61 A Kan-ban System consists of a set of these cards, with one being allocated for each part being manufactured, that travel between preceding and subsequent processes

62 The Best Example 2 Retailer One of the most advanced products distribution system in retail industry is 7-Eleven. We will study this company as a special study later.

63 4) Logistics & SCM contributes to an Economic Utility An economic utility is the satisfaction that a consumer receives by deciding to purchase a particular good or service from a specific manufacturer or supplier. The actual amount of satisfaction that is achieved can be compared to the ability of similar goods or services to provide a similar level of satisfaction or possible provide even greater benefits

64 ① Possession utility Additional consumer value created by transferring a product's ownership ② Form utility The value given to a product by virtue of the fact that the materials and components which comprise it have been combined to make the finished product.

65 ③Place utility The value given to a product by virtue of the fact that it is where it is wanted. ④ Time utility Enhancing a product's marketability by making it available at a convenient time.

66 5) Logistics activity ① ( Raw ) Material Management Raw materials, component parts etc. brought from outside organizations (70% of defects from non-quality materials from outside organizations)

67 Just for your reference This is a presentation material for Pharmaceutical industries in India but very common for any industry.

68 MATERIAL MANAGEMENT By DR.I.SELVARAJ, I.R.M.S Sr.D.M.O (Selection Grade Officer) (on study leave), INDIAN RAILWAYS MEDICAL SERVICE B.Sc., M.B.B.S., D.P.H (Madras medical college, Recognized by MCI)., D.I.H., PGCH&FW (NIHFW, New Delhi) III rd year Post graduate student in M.D Community medicine Department of Community medicine Sree Ramachandra Medical College, Porur,Chennai

69 Definition It is concerned with planning, organizing and controlling the flow of materials from their initial purchase through internal operations to the service point through distribution.

70 AIM OF MATERIAL MANAGEMENT To get 1. The Right quality 2. Right quantity of supplies 3. At the Right time 4. At the Right place 5. For the Right cost

71 PURPOSE OF MATERIAL MANAGEMENT To gain economy in purchasing To satisfy the demand during period of replenishment To carry reserve stock to avoid stock out To stabilize fluctuations in consumption To provide reasonable level of client services

72 Primary Right price High turnover Low procurement & storage cost Continuity of supply Consistency in quality Good supplier relations Development of personnel Good information system Objective of material management Secondary Forecasting Inter-departmental harmony Product improvement Standardization Make or buy decision New materials & products Favorable reciprocal relationships

73 Economy in material management Containing the costs Instilling efficiency in all activities

74 Four basic needs of Material management 1.To have adequate materials on hand when needed 2.To pay the lowest possible prices, consistent with quality and value requirement for purchases materials 3.To minimize the inventory investment 4.To operate efficiently

75 Basic principles of material management 1.Effective management & supervision It depends on managerial functions of Planning Organizing Staffing Directing Controlling Reporting Budgeting 2. Sound purchasing methods 3.Skillful & hard poised negotiations 4.Effective purchase system 5.Should be simple 6.Must not increase other costs 7.Simple inventory control program

76 Elements of material management 1.Demand estimation 2.Identify the needed items 3.Calculate from the trends in Consumption during last 2 years. 4.Review with resource constraints

77 Functional areas of material management 1. Purchasing 2. Central service supply 3. Central stores 4. The print shops 5. The pharmacy 6. Dietary & Linen services

78 Procurement cycle Review selection Determine needed quantities Reconcile needs & funds Choose procurement method Select suppliers Specify contract terms Monitor order status Receipt & inspection

79 Objectives of procurement system Acquire needed supplies as inexpensively as possible Obtain high quality supplies Assure prompt & dependable delivery Distribute the procurement workload to avoid period of idleness & overwork Optimize inventory management through scientific procurement procedures

80 Inventory control It means stocking adequate number and kind of stores, so that the materials are available whenever required and wherever required. Scientific inventory control results in optimal balance

81 Functions of inventory control To provide maximum supply service, consistent with maximum efficiency & optimum investment. To provide cushion between forecasted & actual demand for a material

82 Economic order of quantity EOQ = Average Monthly Consumption X Lead Time [in months] + Buffer Stock – Stock on hand

83 Re-order level: stock level at which fresh order is placed. Average consumption per day x lead time + buffer stock Lead time: Duration time between placing an order & receipt of material Ideal – 2 to 6 weeks.

84 ABC ANALYSIS (ABC = Always Better Control) This is based on cost criteria. It helps to exercise selective control when confronted with large number of items it rationalizes the number of orders, number of items & reduce the inventory. About 10 % of materials consume 70 % of resources About 20 % of materials consume 20 % of resources About 70 % of materials consume 10 % of resources

85 ‘A’ ITEMS Small in number, but consume large amount of resources Must have: Tight control Rigid estimate of requirements Strict & closer watch Low safety stocks Managed by top management

86 ‘B’ ITEM Intermediate Must have: Moderate control Purchase based on rigid requirements Reasonably strict watch & control Moderate safety stocks Managed by middle level management

87 ‘C’ ITEMS Larger in number, but consume lesser amount of resources Must have: Ordinary control measures Purchase based on usage estimates High safety stocks ABC analysis does not stress on items those are less costly but may be vital

88 CONCLUSION Material management is an important management tool which will be very useful in getting the right quality & right quantity of supplies at right time, having good inventory control & adopting sound methods of condemnation & disposal will improve the efficiency of the organization & also make the working atmosphere healthy any type of organization, whether it is Private, Government,Small organization, Big organization and Household. Even a common man must know the basics of material management so that he can get the best of the available resources and make it a habit to adopt the principles of material management in all our daily activities

89 ② Order processing Between the time a customer places an order and the time it is received and paid by the customer. Operational elements Communication elements Credit & payment elements

90 ③ Packaging Consumer packaging and Industrial packaging. Industrial packaging is protective packaging that prepare a products for storage and transit. ④ Transportation The actual physical movement of goods from one place to another.

91 ⑤ Inventory Stock of goods that are maintained for a variety of purposes such as for resale to others as well as support manufacturing. (mass production-too much products-too much inventory)

92 ⑥ Warehousing Places where inventory can be stored for a particular period of time. ⑦ Material handling Short distance movement of products within factory, warehouse.

93 ⑧ Customer service Keeping existing customers happy Five Rights Right products Right place Right time Right condition Right cost

94 6) Factors driving logistics improvement ① Globalization of the economy & market ② Government deregulation ③ Transportation technology change ④ Information technology change

95 7) Other activities a. Demand forecasting b. Parts & service support c. Reverse Logistics d. Communication -Bullwhip effect

96 Reverse Logistics We refer to the term "reverse logistics" as all activity associated with a product/service after the point of sale, the ultimate goal to optimize or make more efficient aftermarket activity, thus saving money and environmental resources. Forward Logistics (SC) vs. Reverse Logistics (SC) Supply Chain vs. AfterMarket SC

97 The chart below shows how ReverseLogistics™ comes into play in the Supply Chain.

98 RMA management In recovering value from scrap materials received through the product returns, reverse logistics function helps identify hidden value through our return materials warranty evaluation process. During the return material authorization (RMA) management screening process, each component is tested and inspected to identify materials that currently fall under manufacturer warranty for credit recovery

99 Discussion 1. Please define Supply Chain and Logistics respectively by yourself. 2. Why logistics can be such an important component in country’s economy? 3. How does Logistics contribute to time and place utility? 4. Explain the significance of the fact that the purpose of logistics is to meet customer requirements.

100 Topics 4 Franchise ranking

101 1 SUBWAY® US ASandwich & Bagel Franchises 2 McDonald's US A Fast Food Franchises 3 KFC US A Chicken Franchises 4 7 Eleven US A Convenience Store Franchises 5 Burger King US A Fast Food Franchises 6 Pizza Hut US A Pizza Franchises 7Wyndham Hotel Group US A Hotel Franchises 8Ace Hardware Corporation US A Home Improvement Retail Franchises 9 Dunkin' Donuts US A Bakery & Donut Franchises 10 Hertz US A Car Rental & Dealer Franchises Top 100 Global Franchises Rankings

102 Number of Franchising stores 7Eleven 46,004 stores Subway 36,900 McDonald 33,000 KFC 20,200 KFC begins franchising in 1952 and would be the first franchising company in the world

103 Part 3. Mode of Transport Preface Transportation services has changed dramatically during the last 20 years. Freight rates were relatively fixed by Government regulations until early 1980s. There were was very little differentiation among suppliers of transportation in terms of either quality or price. Deregulation allowed pricing flexibility for carries and also significantly reduced restrictions on transportation services and relationships.

104 Today, a wider range of transportation alternatives exists for product or raw material movement than ever before. For example, a firm may consider for hire-transportation, private transportation or variety of contractual arrangement with different transport specialists.

105 1) Principles There are two principles guiding transportation management and operations. ① Economy of scale Transportation cost per unit of weight decreases when the size of the shipment increases. ② Economy of distance Transportation cost per unit of distance decreases as distance increases.

106 2) Transport Functionality Transportation functionality provides two major functions : Movement & Storage ① Product movement Since transportation utilizes temporal, financial and environmental resources, it is important that items be moved only when it enhances product value.

107 ② Product storage Although the major objective of transportation is to move product from an original location to a prescribed destination, there is a less common function: storage. Product storage in transportation can be costly. However, it may be justified from a total cost or performance perspective when loading & unloading costs, or the ability to extend lead times are considered.

108 3 ) Shipper, Carrier & Consignee The shipper and the consignee have the common objective of moving goods from origin to destination with in a prescribed time at the lowest cost. Today, wide range of transportation alternatives exist for product movement. Carriers and shippers have the flexibility to negotiate responsibility and cost for all transportation services.

109 Shipping Chart Bangkok Tokyo ETD June 10 ETA June 16 Carrier Shipper Consignee

110 4 ) Five Modes of Transports ① Motor Carriers ② Railroads ③ Air Carriers ④ Water Carriers ⑤ Pipelines

111 The 6 th mode of transport ⑥ Electronic Transport This is the fastest and the newest mode of transport. Advantage flexible and cost efficient Disadvantage be used only for data, music, pictures, book, electric energy

112 ① Motor Carriers Highway transportation has expanded rapidly since the end of WWII. Motor carriers have flexibility because they are able to operate on all types of roadway. Motor carries favor manufacturing and distributive trades, short distance, high value products. Compared to railroads, motor carriers have relatively small fixed investments in terminal facilities and basically maintenance of roads and highways are operated publicly.

113 Advantage of Motor Carriers 1. Speed 2. Door to Door Service 3. Extensive Road Network 4. High Competition 5. Low Damage Disadvantage of Motor Carriers 1. High Cost 2. Low Capacity 3. Weather Sensitive

114 ② Railroads Railroads have handle the largest number of cargos in USA before WWII. Japan and European counties had the same tendency. However, railroad share of revenues and ton-miles is declining because of the extensive development of roads and highways for motor carriers.

115 The Union Pacific in USA is using new information technology and improves their service to customers, and started intermodal service with truckload carriers. Thai railroad is operated by The State Railway of Thailand. Because of development of Bus transportation which is more economical and punctual operation than railroad, railroad transportation is not so popular in Thailand.

116 In December 2010, following Chinese plans to extend their (standard gauge) network to Xishuangbanna( 西双版納 )on the China-Laos border and further into Laos, the Thai government agreed to start negotiations on building a standard-gauge network. This would initially involve two lines: from Bangkok to the Lao border, and a longer line from Bangkok along the peninsula to the Malay border.

117 Topics 5 Standard gauge Rail gauge is the distance between the inner sides of the heads of the two load bearing rails that make up a single railway line. Sixty percent of the world's railways use a standard gauge of 4 ft 8½ in (1,435 mm).

118 Traces the origin of the 4 ft 8½ in gauge even further back than the coalfields of northern England, pointing to the evidence of rutted roads marked by chariot wheels dating from the Roman Empire. We can see the evidence of 1435mm chariot wheel marked roads at Pompeii and Ercolano, Italy.

119 City of Pompeii The city of Pompeii is a partially buried Roman town-city near modern Naples in the Italy. Along with Herculaneum, Pompeii was partially destroyed and buried under 4 to 6 m (13 to 20 ft) of ash and pumice in the eruption of Mount Vesuvius in AD 79.

120 Advantage of Railroads 1. Capacity 2. Capability 3. Low cost 4. Reliability & Safety Disadvantage of Railroads 1. Low Accessibility 2. Few Operators 3. Limited Network 4. Long Transit Time 5. Double Handling

121 ③ Air Carriers A very new mode of transport is airfreight. The first consignment of cargo carried by air was transported between London and Paris in 1924. Since this first cargo, flight the carrying capacity and efficiency of aircraft has developed and increased dramatically. The movement of cargo by air is a highly specialized business, which is, in many respects, very different from moving cargo by sea or overland

122 . It is subject to restrictions that arise from the nature of the aircraft itself. Its significant advantages lies in the speed, and the biggest disadvantage is the high cost. However, this can be traded off for high speed which allows other elements of logistical design such as warehousing and inventory.

123 Two major changes have taken place over recent years in many manufacturing industries and it is due to these changes that air freight is becoming a popular choice for transporting products internationally. The reason for this increase is: The growing volume of technology-based products, these products are becoming lighter and smaller while their value is becoming greater justifying the expense of air freight

124 The second is the rapidly increasing trend in many industries towards "just- in-time" (JIT) inventories JIT is most effective where the goods in question can be moved by air. The benefits of JIT ordering are: – A substantial reduction in capital requirements – A substantial reduction in stockholding

125 Advantage of Air Carriers 1. Speed 2. Low Inventory Cost 3. Reliable Service 4. Low Damage 5. High Frequency Disadvantage of Air Carriers 1. High Cost 2. Limited Accessibility 3. Weather Sensitive

126 ④ Pipeline Pipelines are significant part of the US transportation system. In addition to petroleum, natural gas, manufacturing chemicals, cement, flour and water. Pipelines operate on 24 hours,7days a week. Pipelines are the highest fixed cost and lowest variable cost.

127 Advantage of Pipe line 1. 24 HR operation 2. Low variable cost Disadvantage of Pipe line 1. Low Accessibility 2. Few Operators 3. Limited Network 4. Highest fixed cost

128 Special Notice Internship To Japan 1) One month March or April 2013 2)At Maki Corporation Tokyo, Japan 3)Student Airfare B30,000 & Meal B30,000 4)Company Hotel & commuter fee 5) Hopefully 2 boys or 2 girls Maximum 2 boys & 2 girls 6) Application dead line is July 17, 2012 VISA to Japan could get in Khon Kaen??? Maybe, I could arrange internship in China or Hong Kong? No commitment!

129 Topics 6 Smart TV Like a smart phone, the smart TV is developing very much especially by Samsung and LG, Korean manufacturer. Sony introduced “Internet TV”. However, Samsung Smart TV would be much better than Sony, Panasonic, Toshiba and Sharp. TV + PC


131 Accessing Apps, Signature Services and browsing are easy. Voice and gesture controls, face recognition, the Smart Touch Remote Control and the Smart View Mobile App, all provide unique ways to interact with your TV. Gesture control Voice control Wifi installed SKYPE camera installed Dual core processor

132 Topics 7 Fortune Global 500 companies U.S. 132 companies China 73 Japan 68 France 32 Germany 32 Britain 26 Thailand 1

133 Top 10 Revenues ($ millions) 1 Royal Dutch Shell 484,489 2 Exxon Mobil 452,926 3 WalMart Stores 446,950 4 BP 386,463 5 Sinopec Group 375,214 6 China National Petroleum 352,338 7 State Grid 259,142 8 Chevron 245,621 9 ConocoPhillips 237,272 10 Toyota Motor 235,364 95 PTT 79,690

134 Air vs Ocean Maki told that 99.7% of international trade used ocean transportation in Japan. Mr. Doi of Mitsui OSK told that 99.5% of international trade between North America and Japan used ocean transportation in terms of volume base. How about percentage of ocean transportation usage for International trade in the world?

135 Transportation Modal Shares of World Trade 1. By volume (millions of metric tons) Seaborne 89.79% Airborne 0.25% Overland/Other 9.96% 2. By value (billions of dollars) Seaborne 72.71% Airborne 12.97% Overland/Other 14.32%

136 ⑤ Water Carriers Water is the oldest and the most important mode of transportation. The original sailing vessels were replaced by steamboats in early 1800s and by diesel power in 1920s. The main advantage of water transportation is the capacity to move extremely large shipments. The main disadvantage of water transport are the limited range of operation and speed.

137 Advantage of Water Carriers 1. Huge Capacity 2. Low Cost 3. Safe 4. Pollution Disadvantage of Water Carriers 1. Slow 2. Limited Accessibility 3. Weather Sensitivity 4. Low frequency

138 5) Types of Containers

139 ① Dry storage container The most commonly used shipping containers; they come in various dimensions standardized by ISO. They are used for shipping of dry materials and come in size of 20ft, 40 ft and 10ft.

140 40" Dry Freight Container (L 40' x W 8' x H 9,6') Interior DimensionL 12,052m x W 2,352m x H 2,390m Door OpeningW 2,340m x H 2,280m Tare Weight8.265 lbs – 3.750 kg Cubic Capacity2,390 cuft – 67,7 cbm Pay Load63.385 lbs – 28.750 kg

141 20" Dry Freight Container (L 20' x W 8' x H 8,6') Interior DimensionL 5,898m x W 2,352m x H 2,393m Door OpeningW 2,340m x H 2,280m Tare Weight5.070 lbs – 2.300 kg Cubic Capacity1,172 cuft – 33,2 cbm Pay Load62.130 lbs – 28.180 kg

142 40" High Cube Dry Container (L 40' x W 8' x H 9,6') Interior DimensionL 12,032m x W 2,352m x H 2,698m Door OpeningW 2,340m x H 2,585m Tare Weight8.605 lbs – 3.940 kg Cubic Capacity3.045 cuft - 86 cbm Pay Load61.025 lbs - 27.860 kg

143 45" High Cube Dry Container (L 45' x W 8' x H 9,6') Interior DimensionL 13,556m x W 2,352m x H 2,698m Door OpeningW 2,340m x H 2,585m Tare Weight10.625 lbs - 4.820 kg Cubic Capacity3,045 cuft - 86 cbm Pay Load61.025 lbs - 27.960 kg

144 ② Flat rack container With collapsible sides, these are like simple storage shipping containers where the sides can be folded so as to make a flat rack for shipping of wide variety of goods.

145 ③ Open top container With a convertible top that can be completely removed to make an open top so that materials of any height can be shipped easily.

146 ④ Tunnel container Container storage units provided with doors on both ends of the container, they are extremely helpful in quick loading and unloading of materials. and unloading of materials.

147 ⑤ Refrigerated ISO containers These are temperature regulated shipping containers that always have a carefully controlled low temperature. They are exclusively used for shipment of perishable substances like fruits and vegetables over long distances.

148 ⑥ Car carriers Car carriers are container storage units made especially for shipment of cars over long distances. They come with collapsible sides that help a car fit snugly inside the containers without the risk of being damaged or moving from the spot.

149 ⑦ Tanks Container storage units used mostly for transportation of liquid materials, they are used by a huge proportion of entire shipping industry. They are mostly made of strong steel or other anti corrosive materials providing them with long life and protection to the materials.

150 Topics 8 Another use of containers






156 6) Containerization History of Containerization Modern container shipping celebrated its 50th anniversary in 2006. Almost from the first voyage, use of this method of transport for goods grew steadily and in just five decades, containerships would carry about 60% of the value of goods shipped via sea. The idea of using some type of shipping container was not completely new.

157 In 1955, Malcom P. McLean, a trucking entrepreneur from North Carolina, USA, bought a steamship company with the idea of transporting entire truck trailers with their cargo still inside. He realized it would be much simpler and quicker to have one container that could be lifted from a vehicle directly on to a ship without first having to unload its contents.

158 His ideas were based on the theory that efficiency could be vastly improved through a system of "intermodalism", in which the same container, with the same cargo, can be transported with minimum interruption via different transport modes during its journey. Containers could be moved seamlessly between ships, trucks and trains

159 This would simplify the whole logistical process and, eventually, implementing this idea led to a revolution in cargo transportation and international trade over the next 50 years. Containerization is contributing greatly to international transportation and international trade.

160 7) Intermodal Transport Intermodal Transport is using more than two modes of transportation (rail, ship, air and truck), without any handling of the freight itself when changing modes. The method reduces cargo handling, and so improves security, reduces damages and loss, and allows freight to be transported faster.

161 Two modes of transport 1. Sea-Rail Link 2. Sea-Road Link 3. Sea-Air Link Multi- Modes 1. Road –Sea –Air Links 2. Rail-Sea-Road Links 3. Air-Sea-Rail Links

162 International Multimodal Transport International Multimodal Transport is operated by one carrier using more than two modes of transportation. Operator issues one single transport document to cover more than two modes of transportation and take a responsibility for all modes of transportation. Thailand has Multimodal Transport Act 2005.

163 Example Thailand manufacturers can send their products from Bangkok to Seattle by Sea and then send them to Chicago by truck. International Multimodal transport operator issues one bill of lading to cover Bangkok to Chicago.

164 Discussion 1.Describe the five modes of transportation. (Also, 6 th mode) 2.What is the most advantage and disadvantage of each mode of transportation. 3.What is intermodal transportation? 4.Why is Motor Carrier Freight Transportation the most preferred method of product shipment?

165 8) Evaluating the suitability of transport modes The exporter & importer involves the process of deciding which is the most ideal mode(s) of transport. The ultimate selection can vary seasonally and by quantity. Some services vary considerably from summer to winter due to market demand and climate conditions.

166 Moreover, the dispatch of a small quantity, urgently required may be ideal for airfreight, but a larger consignment, needed less urgently for later dispatch may be suitable for a deep-sea container and LCL schedule under consolidation arrangements.

167 FCL = Full Container Load FCL is the abbreviation for a “Full Container Load” used in the International shipping Industry for Exporting and Importing sea freight cargo. This term is commonly used to describe an international sea freight service that is designed for ocean freight shipments of cargo where an exporter or importer has exclusive use of a dedicated sea freight container (normally a 20ft or 40ft container).

168 LCL = Less than Container Load When you don’t have enough cargo for a full container (FCL), you need LCL (less than container load) service. This is a sea freight service which groups a number of customers shipments together into a container load and gets your shipment moving without delay.

169 TEU=twenty-foot equivalent unit Standard unit for describing a ship's cargo carrying capacity, or a shipping terminal's cargo handling capacity. A standard forty-foot (40x8x8 feet) container equals two TEUs (each 20 x 8 x 8 feet).

170 Container ship

171 The biggest container ship 2006 Emma Mærsk 397.7 m/1,305 ft 56.4 m/185 ft 15,500 151,687 Maersk Line/Denmark


173 The first container ship The world's first purpose-built container ship was the Clifford J. Rodgers, built in Montreal in 1955 and owned by the White Pass and Yukon Route. Its first trip carried 600 containers between North Vancouver, British Columbia and Skagway, Alaska, on November 26

174 The Clifford J. Rodgers

175 Part 4. Freight Freight is the reward payable to the carrier for the carriage of goods. Now, International Transportation is one of the most important factors in Logistics. In many cases, we must get raw materials, parts, finished goods from foreign countries. There are several mode of transports like as vessels, air, tracks, railroads, pipelines and a combination of these modes of transport.

176 1) Basic idea of freight The most basic is the decision of what kind of transport to use: air freight or ocean freight. Whether you’re a business that will be shipping overseas all the time or an individual moving to a new country, deciding whether to go with ocean freight or air freight is an important choice. There are four key factors you should consider when making this decision.

177 ① Cost Airlines bill you by what is called a chargeable weight. Chargeable weight is calculated from a combination of the weight and size of a shipment. Sea carriers charge per container rates for shipping in standard containers (20’ and 40’ being the most common sizes). While weight can factor into the price from sea carriers, their charge tends to be based more on the size of a shipment.

178 If you are shipping less than a container load, your price is often determined by cubic meter. With larger and heavier shipments, it is often much cheaper to ship by sea. As a shipment gets smaller, the margin between the prices gets smaller and sometimes air will even end up less expensive.

179 ② Speed When it comes to speed, there is no question that air freight is usually much faster. Since time is money, this factor could more than make up for a higher cost of flying cargo. Many sea shipments can take around a month to arrive while an air shipment takes a day or two. For most business shipping, faster is better.

180 When it comes to the individual moving a household, it is often good to have the extra time to prepare for the arrival of household goods in a new country. It should be noted that technology keeps moving forward in the international shipping world.

181 ③ Reliability Air freight shipping has a much, much shorter history than ocean freight shipping, yet air freight tends to win the battle of reliability. Flights get delayed by weather and other factors, but airlines tend to be very on top of their schedules. Ocean carriers are notorious for being bad about this. It is not uncommon for ships to be off schedule. For many, a day or two here or there doesn’t hurt; however, for many businesses, a day or two could have serious cost effects.

182 With airlines, there are usually daily flights back and forth between major cities around the world. Because of this, missing a flight doesn’t cause much of a delay for a cargo shipment. Ocean lines tend to have weekly schedules. Missing the cutoff at a seaport means a longer delay.

183 ④ Environmental Impact While the social awareness of environmental issues can change the way the public looks at a company and affect its bottom line, we all have a responsibility of taking care of the planet on which we live. It would seem that ocean freight wins this category. CO2 emissions are much higher in air freight transport than ocean freight transport.

184 This causes cargo shipping by air to have a much larger carbon fingerprint than cargo shipping by sea. However, considering oil spills and the water ecosystems affected by ocean freight, gives pause. Perhaps the jury is still out on this final factor.

185 Pollution Reducing Air Pollution from International Transportation Because of their reliance on petroleum-based fuels and their dramatic growth rates in recent decades, air and sea transport are responsible for significant emissions of both traditional (criteria) air pollutants (e.g. sulfur oxides (SOx), nitrogen oxides (NOx)) and greenhouse gases (e.g. carbon dioxide (CO2)).

186 International seaborne and airborne transportation are estimated to produce perhaps more than 7% of total global CO2 emissions from the combustion of fossil fuels at present. But compared to other transport modes, these have few options for transitioning to other fuels in the near- to medium-term.

187 Topics 9 CNGV CNGV is an alternative fuel vehicle that uses compressed natural gas (CNG) as a clean alternative to other fossil fuels. Worldwide, there were 14.8 million CNGV by 2011. Compressed Natural Gas Car in Thailand is quite popular now. 1. Clean energy and cost efficient 2. Thailand found a source of natural gas in the Gulf of Thailand in 1981. It allows the country to depend on domestic energy sources.

188 Benefits of NGVs 85-99% Methane Clean burning Exhaust emissions from NGVs are much lower than those from equivalent gasoline-powered vehicles Reduced greenhouse gas emissions Noise reductions Lower cost By Paweenuch Chainuwat Email:

189 2) Factors determining Freight Rate The pricing of air and sea transport services, usually in combination with land transport services, is dependent on the forces of supply and demand.

190 ① Nature/ Value of commodity Ex. Dangerous Goods Class 1: Explosives Class 2: Gases Class 3: Flammable Liquids Class 4: Flammable Solids Class 5: Oxidizing Substances & Organic Peroxides Class 6: Toxic and Infectious Substances Class 7: Radioactive Material Class 8: Corrosive Substances Class 9: Miscellaneous Dangerous Substances & Articles

191 Ad Valorem (“at value”) An ad valorem freight rate (Ex. 3~5% of cargo value) is one where the freight is based on the value of the goods. An ad valorem bill of lading is one where the value of the goods is shown on the face of the document, which value then becomes the carrier’s limit of liability, in return for this increased liability the carrier will charge an addition to the sea freight

192 ②. The origin & destination of commodity ③. The nature of packaging & convenience of handling ④. The load-ability of transport unit ⑤. The susceptibility of the cargo to damage & pilferage ⑥.The need heavy lift, strong room, live stock facilities, etc. ⑦. The mode of transport

193 3 ) Ocean Freight R ate ① Freight Pricing ---- Base rate Base rate + Surcharges More than 20 years ago, each freight conference has a published class rate, commodity rate etc. They are very strict and must use their published rate if we use the first class carriers. (There are no conference vessels also.)

194 Because of deregulation in USA in 1984 and 1998, conferences are very weak, they do not publish tariffs. Each ship company negotiates with each customer who wants to use a vessel for transport. Base rate is negotiable.

195 Big companies like Sony are doing a bid every year for their transport of goods for several thousand of containers. For LCL customers, ship- owner company do not collect cargos from customers. Freight forwarder is doing this business on behalf of them.

196 Minimum freight rate LCL SEA FREIGHT RATE ALWAYS HAS A MINIMUM CHARGE ON SHIPMENT. Example: $125 per CBM / $125 minimum charge. It is often less expensive to dispatch small consignments by air than by sea.

197 Cubic Meter A cubic meter is something 1 meter long by 1 meter wide by 1 meter high 1m x 1m x 1m = 1 CUBIC METER Technically cubic meter could be any combination of lengths as long as all three dimensions multiplied together equals 1. 0.5m x 0.5m x 4m = 1 CUBIC METER

198 Revenue ton For calculation of freight If cargo is rated as weight or measure, whichever produces the highest revenue will be considered the revenue ton. Weights are based on metric ton and measures are based on cubic meter. Ocean shipment 1M3 = 1,000kgs Air shipment 1kg = 6,000CM3

199 ② Fees and surcharge a ) B/L Charge Minimum Bill of Lading Charges: Ex. Less Than Container Load Cargo: US$ 100 Full Container Load Cargo : General Dry Cargo US$ 350 Refrigerated Cargo US$ 500 Hazardous Cargo US$ 500 All Other Cargo US$ 350 b) Freight surcharge Freight surcharge is other than freight base rate like as BAF & CAF.

200 Currency Adjustment Factor (CAF) This arises when freight rate is related to floating currency such as YEN. YEN Appreciation Surcharge=YAS If the rate were based on US dollar, then Japanese yen rate of exchange in June 2012 would go up or down, CAF ( Currency surcharge) is imposed to minimize loss of ship owners.

201 Bunker Adjustment Factor (BAF) Fuel cost is a substantial proportion of direct voyage cost. Ship-owners are not prepared absorb the variation in fuel prices. If fuel prices increase, ship-owners impose BAF (Bunker surcharge)

202 Ocean Freight Rate In case of LCL Cargo BASE : US$50 W/M BAF : US $ 8.00/RTN CFS CHARGE : US$ 50/RTN THC : US$35/RTN DOC : US$35/BL Less than 3RTN 0 - 1 RTN : US$ 20/BL 1 - 2 RTN : US$ 15/BL 2 - 3 RTN : US$ 10/BL 4-10RTN : US$8/BL

203 Question Please calculate the freight charge for the following cargo. 1)Furniture 3 cubic meter 1250Kg 2) Material handling machine 5 cubic meter 7500Kg

204 4 ) Air freight Airline freight rates are based on a "chargeable weight", because the volume or weight that can be loaded into an aircraft is limited. The chargeable weight of a shipment will be either the "actual gross mass" or the "volumetric weight", whichever is the highest.

205 Airfreight calculation Chargeable weight x Freight rate + Fuel Surcharge (& Other surcharge)

206 Air shipment 1kg = 6,000CM ³ Weight : 8kgs < Volume weight : 10kgs 30cm X 40cm X 50cm÷6,000 = 10kgs → Chargeable weight is 10kgs

207 Fuel surcharge Thailand All Destinations (except where indicated below) 39.00 THB / CW Thailand Asia (except Southwest Pacific) 20.00 THB /CW Thailand Latin America 80.37 THB/CW Thailand Mexico 65.03 THB/CW


209 Internship Japan I will accept all 5 students to go to Tokyo to study at my office for one month between March-April 2013. China/Hong Kong Maybe I could ask 3 students to go to Guangzhou, Shenzhen, Shanghai or Hong Kong for one month between March- April 2013, but not confirmed yet.

210 Preface

211 What is a warehouse? A warehouse is a commercial building for storage of goods. Warehouses are used by manufacturers, exporters, wholesalers, retailers, transport businesses, customs (exporters, Importers), etc. They are usually large plain buildings, equipped with loading docks to load and unload consignment from trucks.

212 In simple words, warehouse is a facility where the supply chain holds or stores goods, until they are needed by the customers. Warehouse can be owned by manufactures, wholesalers, retailers to store the goods.

213 Many years ago, individual households functioned as self- sufficient economic units. Consumers performed storage and accepted the attendant risks. Meats were kept in smokehouses, and perishable products were protected in underground food cellars.

214 Transportation capability developed, it become possible to engage in economic specialization. Product storage was shifted from households to retailers, wholesalers, and manufacturers

215 The warehouse initially viewed as a storage facility. Now we have a public warehouse as a business to store the goods for customers.

216 Part 5 Management of Warehouse A warehouse is a typically viewed as a place to store inventory. This perspective of storage created a tendency to consider warehouse as “a necessary evil” that added costs to the distribution process.

217 Companies seeking to operate effectively between points of procurement, manufacturing and consumption gave little attention to internal warehouse operations. However, changing requirement of the retail environment more than offset any reductions in warehousing gained through manufacturing improvements.

218 1) Warehousing Functions A warehouse was a place to store inventory, however, now it is a very important to understand as a switching facility in a logistics system.

219 ① Storage Toys and Christmas cakes are seasonable products and sell in a very short period. But manufacturing them all year round.

220 ② Interface Warehouse is a point of interconnection between parts suppliers and factory or between factories and customers. Consolidation, Break Bulk and Cross-Docking

221 Consolidation A warehouse receives and consolidates products from a number of manufacturing plants destined to a specific customer on a single transportation shipment.

222 Consolidation Consolidation Warehouse Meiji Milk Coca Cola Tipco F & B Customer

223 Break bulk A break bulk operation receives combined customer orders from manufacturers and ships them to individual customers.

224 Break bulk Pepci Cola Break bulk Warehouse Customer A Customer B Customer C

225 Cross-Docking The term cross docking refers to moving product from a manufacturing plant and delivers it directly to the customer with little or no material handling in between.

226 Cross docking not only reduces material handling, but also reduces the need to store the products in the warehouse In most cases the products sent from the manufacturing area to the loading dock has been allocated for outbound deliveries.

227 In some instances the products will not arrive at the loading dock from the manufacturing area, but may arrive as a purchased product that is being re-sold or being delivered from another of the companies manufacturing plants for shipment from the warehouse.


229 ③ Production Support To steady supply various parts and components to a factory as they need. =JIT ④ Marketing Support To supply various products at one time for customer needs

230 ⑤ Value-added service a. Packaging b. Labeling c. Blending or Mixing

231 d. FRM (Floor-Ready Merchandise) FRM started from Apparel industry and merchandise is ready to floor of retailer with hanger, labels and price tag. So that retailers could display it at their store within few minutes.

232 The Rich Millionaire / Billionaire

233 William E Heinecke: Expanding waistlines nationwide Millionaire= The Rich By Merrill Lynch’s definition, the rich should have more than US$1 Million as financial asset. Japan has 1.4 million people in the rich category. (Around 1 % of population.)

234 American sociologist Leonard Begley classifies all households with net worth exceeding USD 1 million as "The Rich". There were 10 million people around the globe who are classified as U.S.- dollar millionaires as of 2008. from wikipedia

235 Financial Asset A non-physical asset. Examples of financial assets include bank accounts and shares in a publicly-traded company. Financial assets are distinguished from physical assets like real estate and personal property.

236 Carlos Slim Helú Carlos is the wealthiest people in the world. He was born on January 28, 1940, in Mexico City to a family of Lebanese Christian immigrants. He became a billionaire after the economic crash of 1982 when he purchased investments at low prices that would later be extremely valuable. In 2000, he founded the Foundation for the Historic Centre of Mexico City to restore and save significant buildings.

237 He is the chairman and chief executive of telecommunications companies Telmex and América Móvil. América Móvil, which in 2010 was Latin America’s largest mobile- phone carrier, accounted for around US$49 billion of Slim's wealth by the end of 2010. His corporate holdings as of March 2012 have been estimated at US$69 billion.

238 World Richest Persons

239 1 Carlos Slim Helu & family $69 B72telecomMexico 2 Bill Gates$61 B56Microsoft United States 3 Warren Buffett$44 B81 Berkshire Hathaway United States 4 Bernard Arnault$41 B63LVMHFrance 5 Amancio Ortega$37.5 B75ZaraSpain

240 6 Larry Ellison$36 B67Oracle United States 7 Eike Batista$30 B55 mining, oil Brazil 8 Stefan Persson$26 B64H&MSweden 9 Li Ka-shing$25.5 B83diversified Hong Kong 10 Karl Albrecht$25.4 B92AldiGermany

241 Thai Richest Persons

242 133 Dhanin Chearavanont & F$7 B72 Food CP Group 正大集団 Thailand 184 Charoen Sirivadhanabhakdi$5.5 B67 Drinks Beer Chang Thailand 205 Chaleo Yoovidhya$5 B 80 Died Drinks Red Bull Thailand 683 Aloke Lohia$1.9 B53PolyesterThailand 1015 Krit Ratanarak$1.2 B65 Media, real estate BBTV Thailand

243 Interesting Thai Rich Person

244 When you see restaurants like Dairy Queen, Burger King and Swensen’s in Thailand, you have one man to thank -- or curse -- in the name of globalization: William E. Heinecke. The 61-year-old founded his company, Minor Group, in 1967, and now owns more than a thousand restaurants and 27 hotels in Thailand and throughout the Asia Pacific region.

245 Other brands his company controls in Thailand include the Marriott, the Four Seasons, Pizza Company and Sizzler. Thailand has been good to Heinecke: he is thought to be worth $425 million. Heinecke was born in the U.S. but his family moved to Thailand when he was a teenager. He is now a Thai citizen.

246 You might not know: The resilient Heinecke beat Pizza Hut at their own game. He bought the Pizza Hut franchise in Thailand in 1980 but had a contract dispute with its U.S. parent company. Pizza Hut then closed in Thailand, but Heinecke built a new company -- Pizza Company --using Pizza Hut’s old store locations. The result: he captured some 70 percent of Thailand's pizza market in just six months.

247 Chinese Richest Persons

248 86 Robin Li$10.2 B43 Technology Baido China 113 Liang Wengen $8.1 B55manufacturingChina 146 Zong Qinghou $6.5 B66beveragesChina 161 He Xiangjian$6.2 B69appliancesChina 173 Hui Ka Yan$5.8 B53real estateChina


250 History of warehousing Individual households are self-sufficient units. Consumers performed storage by themselves. Transportation capability developed Economic specialization Product storage was shifted to retailers, wholesalers and manufacturers.

251 Warehousing's roots go back to the creation of granaries to store food, which was historically available for purchase during times of famine. As European explorers began to create shipping-trade routes with other nations, warehouses grew in importance for the storage of products and commodities from afar. Ports were the major location for warehouses.

252 World War II impacted warehousing in several ways, including the need to increase the size of warehouses and the need for more mechanized methods of storing and retrieving the products and materials. As mass production grew throughout manufacturing, the needs of efficient and effective warehousing capabilities grew with it.

253 Mass- production Too much Products Need efficient Warehousing capabilities

254 Warehousing & Logistics Film

255 2) Warehouse Benefits Economic benefits of warehousing result when overall logistical costs are directly reduced by utilizing one or more facilities. It is not difficult to quantify the return on investment of an economic benefit because it is reflected in a direct cost-to-cost trade-off.

256 For example, if adding a warehouse to a logistical system will reduce overall transportation cost by an amount greater than the fixed and variable cost of the warehouse, then total cost reduced.

257 Changing requirements of the retail environment more than offset any reduction in warehousing gained from through manufacturing improvements. The retail store, faced with the necessity of stocking an increasing variety of products, was unable to order sufficient quantity from a single supplier to enjoy the benefits of consolidated shipment.

258 The cost of transporting small shipments made direct ordering prohibitive. This resulted in a need to utilize warehouses to provide timely and economical inventory assortments to retailers. At the wholesale level of the channel of the distribution, the warehouse become a support unit for retailing.

259 ① Consolidation and Distribution Parts and Products Warehouse ② JIT (Just In Time) Parts Warehouse ③ Production Economies Products Warehouse

260 ④ EOQ ( Economic Order Quantity) Parts Warehouse ⑤ Quantity Discount Cash Discount / Seasonal Discount / Trade Discount Parts Warehouse ⑥ To Maintain Supply Products Warehouse

261 Parts Wrehouse Manufacturing support Assembly plant Manufacturing Warehouse Vendor A Vendor B Vendor C

262 ⑦ Customer Service Policy Service benefits gained through warehouses in a logistical system may or may not reduce costs. A warehouse improve in the time and place capability of the overall logistic system

263 ⑧ Minimizing Total Logistic Cost To reduce total cost is an important idea in logistics system.

264 3) Type of Warehouse -1 1)General Purpose Warehouse 2)Distribution Center RDC

265 Distribution Assortment Distribution Center P & G Shiseido Kao Customer A Customer B Customer C

266 In Transit Mixing Warehouse Transit Mixing Point Factory A Factory B Factory C Customer H A&B products Customer I A&C Products Customer J A,B&C Products

267 4) Type of Warehouse-2 Warehousing Alternatives We have three options of public, private and contract warehouse. It is very important to decide to have our own warehouse, rent the space at a public warehouse or get specially tailored warehousing services from a contract warehouse.

268 1) Public Warehouse A public warehouse is operated as an independent business offering an range of service like as storage, handling and transportation. Public warehouse are used extensively in logistical systems. Almost any combination of services can be arranged with the operator either for a short term or over a long duration.

269 Classification of Public warehouse ① General merchandize ② Refrigerated ③ Special commodity ④ Bonded ⑤ Household & furniture

270 a. Advantage of Public Warehouse ① Lower variable cost-lower pay scale, better productivity ② Greater operating & management expertise

271 Variable & Fixed Costs All the costs faced by companies can be broken into two main categories: fixed costs and variable costs.

272 Variable costs Variable costs are costs that vary with output. Generally variable costs increase at a constant rate relative to labor and capital. Variable costs may include wages, utilities, materials used in production, etc

273 Fixed costs Fixed costs are costs that are independent of output. These remain constant throughout the relevant range and are usually considered sunk for the relevant range (not relevant to output decisions). Fixed costs often include buildings, machinery, etc.

274 ③ Financial Flexibility ④ Flexibility to change location, size and number of facilities ⑤ Economies of Scale

275 b. Disadvantage of Public Warehouse ① Space Availability- cannot expect to get a space any time ② Specialized Service- cannot expect to accept easily specialized service like as a private warehouse ③ Communication – cannot expect better communication like as a private warehouse

276 2) Private Warehouse Private warehouse is operated by the company owning the product. However, actual facilities maybe owned or leased.

277 a. Advantage of Private warehouse ① Control - The company has a decision making authority. ② Flexibility- The company can adjust customers’ special needs.

278 ③ Cost - Less cost than public warehousing because of no profit markup. ④ Market Presence- 7-eleven RDC in Khon Kaen is more responsive to local customers in this area for quick response and delivery

279 b. Disadvantage of Private Warehouse ① Investment – big investment for land, facilities and material handling equipments ② Flexibility - No flexibility to change location, size etc. No financial flexibility

280 3) Contract Warehouse Contract warehousing combines the best characteristic of both private and public operations.

281 ① long term relationships ② To share risks ③ lower cost than public warehouse ④ Expertise, flexibility, economies of scale

282 4) Special Purpose Warehouse ① Refrigerated Warehouse ② Chilled Warehouse ③ Flammable Storage Warehouse ④ Bonded Warehouse ⑤ Silo



285 5) Warehouse Operations ① Receiving ② Identifying & Sorting ③ Storage ④ Damage Protection

286 ⑤ Order picking ⑥ Transportation & Packing ⑦ Shipping ⑧ Inventory Checking ⑨ Reporting

287 Part 6 MODERN ISSUES The warehouse industry found itself recovering from a recession at the start of the twenty-first century, partially brought on by the hype of the dot-com bubble and the excess production created after it burst.

288 It also coped with new methods of distribution, such as just-in-time (JIT) manufacturing—where warehousing is unnecessary because products are shipped directly to customers. Warehousing companies are now striving to become more than simply storage facilities.

289 They are transforming themselves into "third-party logistics providers" or "3PLs" that provide a wide array of services and functions. In addition to packing and staging pallets, contemporary warehousing facilities offer light manufacturing, call centers, labeling, and other non- storage options.

290 3PL Third party logistics refers to outsourced tasks for businesses which help them manage their supply chain, such as warehousing, picking, packing, shipping and inventory management. Some 3PLs might also help with the administrative side of these tasks, such as invoicing and accounts receivable

291 4PL Fourth party logistics companies serve as consultants who manage the relationship between the principal company and one or more 3PLs to make sure all operations are running smoothly. They can carry various levels of responsibility, from advice on choosing the best companies, right up to the day-to-day management of essential logistical tasks being performed for the principal company.

292 Future of warehousing We are looking at how warehousing will be transformed into a highly automated environment. There would be no labor required in the first place, in fact they will be no space for humans to walk (except for service engineers).

293 There will be rails and tracks all around on which automated pick Robots would move to pick and put away pallets and cases around the warehouse. These robots would move on horizontal and vertical tracks and can reach every location within each zone where they operate. There will be sensors all over the warehouse to guide robots, round the clock.

294 Part 7 Global Logistics Why global logistics become more and more important?

295 1) Domestic and Global Whereas an effective logistics system is important for domestic operations. Domestic logistics focuses on performing value-added services in a relatively controlled environment. Global logistic operations must accommodate all domestic requirements and also deal with increased uncertainties associated with distance, demand, diversity, and documentation.

296 2) Localized focus and global production For more than 20 years, there has been a steady trend towards the worldwide marketing of products under a common brand umbrella --- like Apple, Coca-Cola, IBM, Toyota, Sony etc.

297 At the same time, the global company has revised its previously localized focus; manufacturing and marketing its products in individual countries, and now instead will typically source on a worldwide basis for global production and distribution.

298 The global company seeks to grow its business by extending its markets whilst at the same time seeking cost reduction through “scale of economies” in purchasing and production and through focused manufacturing and/or assembly operations.

299 Strategy change of the global company Seeking scale of economies Localized focus Global production & distribution.

300 In this direction, we have two challenges. a. World markets are not homogeneous. b. We need a high level of co-ordination the complex logistics of managing global supply chains which may result in higher cost and extended lead times.

301 How to mange the links in the global chain from sources of supply through to end user? There is a danger that some global companies in their search for cost advantage may take too narrow a view of cost and only see the purchasing or manufacturing cost reduction that may be achieved through using low cost supply sources.

302 In reality, it is a total cost trade-off where the costs of longer pipelines may outweigh the production cost saving. The trend towards global organization of both manufacturing and marketing is highlighting the critical importance of logistics and supply chain management as the key to profitability.

303 Localized Focus  Global distribution & manufacturing Management of Logistics & Supply chain is critical. Mfg. Cost Reduction > Logistic Cost

304 3) Globalization in the supply chain To remain competitive in this new global environment, companies will have to seek ways in which costs can be lowered and service enhanced, meaning that supply chain efficiency and effectiveness will become ever more critical.

305 What degree of centralization is appropriate in terms of management, manufacturing and distribution, and how can the needs of local markets be met at the same time, as the achievement of economies of scale through standardization. Three ways are implemented as their global logistics strategies.

306 Three Global Logistic Strategies ① Focused Factories ② Centralization of Inventories ③ Postponement and Localization

307 ① Focused Factories By limiting the range and mix of products manufactured in a single location, the company can achieve considerable economies of scale.

308 The global business will treat that the world as one market and produce fewer products in volume. The nationally oriented business will have “local for local” production. However, a number of crucial logistics trade-offs maybe overlooked.

309 a. The most obvious trade-offs is the effect on transport costs and delivery lead times. The cost of shipping products, often of relatively low value, across greater distances may erode some or all of production cost saving.

310 b. Similarly the longer lead times involved may need to be countered by local stockholding, again possibly offsetting the production cost advantage.

311 c. The needs for local packs with labeling in different languages or even different brand names and packages for the same products.

312 d. No flexibility to produce “variety “ of products at focused factories where volume and economies of scale are critical issues. Sony decided to bring back assembly line of digital camera and camcorders to Japan. Sony was producing these products in China to seek lower labor cost.

313 ② Centralization of inventories The globalization trend has encouraged companies to rationalize production into fewer locations, so too has it led to a trend toward the centralization of inventories.

314 ③ Postponement & Localization Although the trend to global brands and products continues, there are still significant local differences in customer and consumer requirements.

315 Postponement is based on the principle of seeking to design products using common platforms, components or modules but where the final assembly or customization does not take place until the final market decision and/or customer requirement is known.

316 ④ Thinking global and acting local The implementation of global pipeline control is highly dependent upon the ability of the organization to find the correct balance between central and local management. Increasingly, the difference between success and failure in global marketplace will be determined not by sophistication of product technology but rather by the management and control of global logistics pipeline.

317 ⑤ The future of global sourcing Offshore sourcing was a big trend for more than 20 years to seek “low cost”. However, true cost of global sourcing is greater than originally thought.

318 Losses from global sourcing ① Increasing cost of transportation ② Needs higher level of inventory because of longer lead time ③ Mark-downs or write-offs because of short life cycle market ④ Quality problems ⑤ Loss of intellectual property

319 Local for local Global sourcing Global + Local Seeking low cost Realizing true total cost


321 Special study The biggest franchising system in the world. 7 - ELEVE n

322 Seven & i Holdings 7-Eleven is a part of Seven & I group in Japan. This company group started as Ito-Yoka Do, super market chain stores.

323 Ito-Yoka Do bought out 7-Eleven (convenience store), Seibu and Sogo (Department stores) and many other retailers. Now Seven & I group is the biggest retail company in Japan and Asia.

324 7 & I is the 14 th biggest retailer in the world with sales US$5.7billion. Walmart is the largest retailer in the world. and is also the biggest private employer in the world with over two million employees.

325 Store Network of Seven & i Holdings Global : approx. 48,000 stores Japan : approx. 15,000 stores Number of Customer Store-Visits per Day Global : approx. 48 million Japan : approx. 17 million

326 World Top 15 retail Company (Million US$) 1 Wal-Mart Stores U.S. 418,952 2 Carrefour France 119,642 3 Tesco U.K 92,171 4 Metro Germany 88,931 5 Kroger U.S. 82,189 6 Schwarz Germany 79,119 7 Costco Wholesale U.S. 76,255

327 8 Home Depot U.S. 67,997 9 Walgreen U.S. 67,420 10 Aldi Germany 67,112 11 Target U.S. 65,786 12 Rewe Germany 61,134 13CVS Caremark U.S. 57,345 14Seven & Japan 57,055 15Auchan France 55,212

328 1. What is 7-Eleven? 1) 7-Eleven is an international franchiser, licensor, and operator of a chain of convenience stores. 2) It is also, since March 2007, the largest chain store in any category, beating Subway & McDonald's by 10,000 stores.

329 3) Its stores are located in more than eighteen countries, with its largest markets being Japan, the United States, Thailand, Korea, Taiwan and Malaysia.

330 Number of Franchising stores 7Eleven 46,004 stores Subway 36,900 McDonald 33,000 KFC 20,200 KFC begins franchising in 1952 and would be the first franchising company in the world

331 2 Convenience store & 7-11 Japan Franchising system 1 ) What is a convenience store? Small centrally located store featuring ease of access, late-night hours, and a limited line of merchandise designed for the convenience shopper. Convenience stores charge above-average prices compared to large supermarkets that generate large- volume sales.

332 2 ) Difference CS vs Super Market like Big C CS vs Wholesale Club like Makro

333 7-Eleven Japan Franchise system 1) Type of ownership a. Land and buildings Franchisee provides b. Seven-Eleven Japan provides

334 2) Sales equipments, computers, etc. Seven-Eleven Japan provides 3) Contract period 15 years Utilities Seven-Eleven Japan 80%; Franchisee 20%

335 4) Seven-Eleven charge (royalty) 43% of gross profit An amount calculated on a sliding scale based on gross profit 5) 5-year incentives and 15-year contract renewal incentives (reductions in franchise fee are offered)

336 Market Concentration Strategy 7-Eleven’s fundamental strategy is market concentration, whereby a high concentration of stores is positioned within one region.

337 Effects of area market concentration strategy 1) Greater familiarity with customers 2) Efficient construction of production bases 3) Effective sales promotions

338 4) Efficient construction of distribution structure 5) Improved efficiency in guiding franchised stores 6) Preventing entry by competitors

339 3. 7-Eleven History from Wikipedia 7-Eleven has its origins in 1927 in Dallas, Texas, USA. When an employee of Southland Ice Company started selling milk, eggs and bread from an ice dock.

340 Although small grocery stores and general merchandisers were present in the immediate area, the managers of the ice plant discovered that selling "convenience items" such as bread and milk were popular. Eventually, several locations would open up in the Dallas area.

341 Initially, these stores were open from 7 a.m. to 11 p.m., The company began to use the 7-Eleven name in 1946. By 1952, 7-Eleven opened its 100th store. In 1962, 7-Eleven first experimented with a 24-hour schedule in Austin, Texas. In 1963, 24-hour stores were established in Las Vegas, Fort Worth, and Dallas.

342 In the 1980s the company ran into financial difficulties and was rescued from bankruptcy by Ito- Yokado, its largest franchisee. The Japanese company gained a controlling share of 7-Eleven.

343 Number of 7-Eleven as of September 30, 2007 Japan 11,837 U.S.A. 6,173 Taiwan 4,651 Thailand 4,199 South Korea 1,568 China 1,337 Total 33,220

344 Number of 7-Eleven Japan as of February 29, 2012 and other area as of June, 2012 JAPAN 14,231 (11,837) U.S. 7,503 ( 6,173) THAILAND 6,660 ( 4,199) SOUTH KOREA 6,442 ( 1,568) TAIWAN 4,852 ( 4,651) CHINA 1,848 ( 1,337) Total 47,298 ( 33,220 )

345 4. 7-Eleven Japan 7-11 Japan announced that they would like to open more than 1,500 stores (and close less than 600 stores) in 2013 fiscal year. (opening 1250 stores in 2012.)

346 It is a big tendency in Japan that more the aged and housewives become their customers recently. Because of Market concentration Strategy, there are 7 prefectures out of 47 prefectures which has no 7-11 stores. They are preparing to open 7-11 stores in these prefectures.

347 The daily sales turnover at new opening stores is JPY 600,000 (THB240,000) in March-May 2012. (JPY520,000 =THB200,000 in 2019) After 2011 Tohoku earthquake and tsunami, people have come to a new understanding of the convenience stores.

348 Number of Convenience stores in Japan 7-Eleven Japan 14,311 as of July 2012 Lawson 10,457 Family Mart 8,834 Circle K Sunkus 6,169 Other CVS 5,326 Nationwide 44,791

349 5. 7-ElevenThailand The franchise in Thailand is the Charoen Pokphand Group. Their name was changed to CP ALL. There are 6,660 7-Elevens in Thailand, of which more than 1,500 are in Bangkok, making Thailand have the 3rd largest number of stores after Japan and US.

350 7-11 Regional Distribution Center 1) RDC Regional Distribution Center For 7-11, RDC in KK was the pilot distribution center and this size of Distribution Center would be more cost efficient compared with their big distribution center.

351 2) Chilled warehouse They have a Chilled warehouse for butter, cheese,milk, sausage, ham, etc. 3) FIFO First In, First Out. FIFO accounting is a common method for recording the value of inventory. A firm records the last units purchased as inventory value.

352 4) LIFO Last In, First Out LIFO accounting, a historical method of recording the value of inventory, a firm records the first units purchased as inventory value. 5 ) QC Quality Control

353 Seeing is Believing We will visit 7-Eleven RDC in Khon Kaen from 9:30 AM~12:00 on 29 th August.

354 6. 7-Eleven China 1) 7-11 started to establish Seven - Eleven (Beijing) Co. Ltd. and wanted to make a original China model store. Ex. Chinese loves warm foods than Japanese customer. So, each store has a kitchen to cook warm foods. Now, 7-11(Beijing) has 147 stores and 7-11 (Chengdu) has 41 stores.

355 2) April 2009, 7-11 established 7-11 China and gave franchise right for Shanghai to President Chain Stores ( 統 一超商) which has 4,651 store in Taiwan. Now they have 1,604 stores in Shanghai area.

356 How to calculate Freight? 1)Ocean freight Revenue Ton (RNT) 2) Air freight Chargeable weight

357 1) Revenue ton For calculation of Ocean freight If cargo is rated as weight or measure, whichever produces the highest revenue will be considered the revenue ton(RNT). Weights are based on metric ton and measures are based on cubic meter. Ocean shipment 1m 3 = 1,000kgs

358 Furniture Volume 3m 3 Weight 1250Kg Revenue ton 3m 3 1250 Kg--------> X RTN BASE : US$50 RTN BAF : US $ 8.00/RTN CAF : 12% of base rate CFS CHARGE:US$ 50/RTN THC : US$35/RTN DOC: US$35/BL

359 Furniture Volume 3 m 3 Weight 1250Kg Revenue ton 3 m 3 > 1250Kg---> 3RTN BASE : US$50 RTN 50x3 = 150 BAF : US $ 8.00/RTN 8x3 = 24 CAF : 12% of base rate 150x0.12 =18 CFS CHARGE:US$ 50/RTN 50x3 =150 THC : US$35/RTN 35x3 =105 DOC: US$35/BL = 35 = US$482

360 Sewing Machine Volume 4m 3 Weight 5500Kg BASE : US$40 RTN BAF : US $ 8.00/RTN CAF : 12% of base rate CFS CHARGE:US$ 50/RTN THC : US$35/RTN DOC: US$35/BL

361 Sewing Machine Volume 4m 3 Weight 5500Kg Revenue ton 4m 3 5.5RTN BASE : US$40 RTN 40x5.5 = 220 BAF : US $ 8.00/RTN 8x5.5 = 44 CAF : 12% of base rate 220x0.12 =26.4 CFS CHARGE:US$ 50/RTN 50x5.5 =275 THC : US$35/RTN 35x5.5 =192.5 DOC: US$35/BL = 35 = US$792.90

362 2) Chargeable weight The Chargeable Weight is the Actual Gross Weight or the Volumetric weight of the shipment – whichever is the greater. The chargeable weight is calculated as follows: 1 metric ton = 6 m 3

363 Stationery Weight : 8kgs Volume : 30cm x 40cm x 50cm Actual Gross Weight is 8kgs Volumetric weight 30 x 40 x 50 = 60,000 60,000/6000= 10 kg

364 Answer 10kgs is greater than 8kgs, so the Chargeable Weight will be 45kgs

365 Ex. 2 Maki Company is planning an import shipment into Thailand from Varun Company in Germany. The shipment consists of 3 boxes, each weighing 15kgs, and each measuring 48cm (length) x 34cm (width) x 34cm (height). Using our instructions above:-

366 Answer Actual Gross Weight = 3 boxes x 15kgs each = total 45kgs Volumetric Weight in kg = (48 x 34 x 34cm) x 3 boxes / 6000 = 27.74kgs 45kgs is greater than 27.74kgs so the Chargeable Weight will be 45kgs

367 Part 8 Terms of Sale

368 1) What is Terms of Sale (Trade Terms) The buyer and the seller should determine when & where to transfer the goods, payment etc. a) The goods b) Payment for the goods, freight charges, insurance for the in-transit goods. c)Legal title to the goods d)Required documentation e)Responsibility for controlling or caring for the goods in-transit

369 2) Common Trade Terms Even professional businessmen do not use proper trade terms at the real business occasions. Because they have no clear definition on trade terms. It is very important to understand the correct interpretation of delivery trade terms. Incoterms and usual trade terms have a big difference in most cases.

370 The 3 most common trade terms a) Ex Factory =Ex Works / Incoterms b) FOB (Free On Board)= FCA / Incoterms In USA, they are still using their own trade terms from “American Foreign Trade Definitions” in 1941. FOB terms are using very differently from Incoterms. c) CIF (Cost, Insurance & Freight) = CIP/ Incoterms This is not a product trade but a document trade.

371 a) Ex Factory EX-FACTORY is where a seller’s responsibility ends when the buyer at point of origin, i.e., factory, accepts merchandise. This can also be written as Ex- Warehouse, Ex-works, Ex-Mill, etc.

372 EX Factory RISK COST I E

373 Ex. 1 Sunny, 22 years old Thai, wants to sell his watch to Japan. Maki, Japanese guy asked him to pick it up at his shop in Khon Kaen. Watch Patek Philippe THB2 million FEDEX charge to Tokyo, Japan THB2500 Insurance THB3500

374 b) FOB Free on Board" means that the seller delivers the goods on board of the vessel, nominated by the buyer at the named port of shipment or procures. The risk of loss of or damage to the goods passes when the goods are on board the vessel by the seller, and the buyer pays all costs from that moment onwards.

375 FOB may not be appropriate where goods are handed over to the carrier before they are on board the vessel, for example goods in containers, which are typically delivered at a terminal. In such situations, the FCA rule should be used in Incoterms.

376 FOB requires the seller to clear the goods for export, where applicable. However, the seller has no obligation to clear the goods for import, pay any import duty or carry out any import customs formalities.


378 Ex. 2 The seller (exporter) is in Khon Kaen, Thailand wants to sell a pick-up tracks to the buyer in Japan. FOB Bangkok US$20,000 The seller pay all charges until the warehouse at Leam Chabang Port and the cost to clear the custom for export. The buyer (importer) will pay freight to Tokyo and insurance. Title of the goods passes at Leam Chabang Port.

379 c) CIF CIF (COST, INSURANCE & FREIGHT) is a shipment where all shipping costs are paid by the exporter, including insurance.


381 Ex.3 Narin, 23years old,Khon Kaen, Thailand wants to buy a washing machine from Whirlpool, Chicago USA. The product cost : US$ 2,000 Ocean freight : US$400 Insurance : US$80 Custom clearance charge in Thai THB1500 Import duty : 35% Truckage LC Port to Khon Kaen : THB850

382 3) Difference from USA Trade terms FOB shipping point (or FOB shipping point, freight collect) = FCA shipping point FOB shipping point, freight prepaid = CPT destination FOB destination (or FOB destination, freight prepaid) = DAT destination FOB destination, freight collect =No Incoterm equivalent

383 4) Incoterms ① What is Incoterms? Incoterms was created by International Chamber of Commerce (ICC) in 1936. Exporters(Sellers)&Importers (Buyers) had a lot of troubles relating to the rights and obligations of each parties.

384 Because, each country has deferent interpretations and practices. The purpose of Incoterms is to provide a set of international rules for the interpretation of commonly used trade terms in foreign trade.

385 ② Problems on Incoterms Incoterms is the most common rules of international & domestic trade. If the exporters and the importers use Incoterms, we will reduce a lot of troubles between two parties. However, not so much companies are using Incoterms and many of them do not understand the details of Incoterms.

386 Especially, FOB and FCA terms are misusing at everywhere in the world and make it more complicated. Many students are studying Incoterms at colleges & universities, but they do not have much chance to use at real business word after graduation.

387 ③ History In order to remedy the trade troubles from misunderstandings, disputes and litigation, with waste of time & money, ICC published a set of international rules for the interpretation of trade terms called Incoterms in 1936. In 1953, 1967, 1976, 1980,1990, 2000&2010 Incoterms was added and/or amended to adjust the current international trade practices. Now we are using Incoterms 2010.

388 ④ Scope of Incoterms The scope of Incoterms is limited to matters relating to the rights and obligations of the parties to the contract of sales with respect of the goods sold. (not including intangibles like as computer software)

389 ⑤ Misconception of Incoterms There are 3 common misconceptions on Incoterms a) Incoterms should apply to the contact of sales not to the contract of carriage. b) Incoterms is limited to the rights & obligation of the parties on the delivery of goods sold. (Not all the duties in the contract of sales.)

390 c) This is not an international law for international trade. The exporters & the importers wishing to use Incoterms 2010 should clearly specify that their contract is governed by Incoterms 2010 in their contract of sales.

391 If you want the Incoterms 2010 rules to apply to your contract, you should make clear in the contract, through such words as, the chosen Incoterms rule including the named place followed by Incoterms 2010.

392 Example EXW 499/80 Mitrapharp Rd. Khon Kaen, Thailand, Incoterms 2010

393 Incoterms 2010 The International Chamber of Commerce has released the table of contents to the Incoterms 2010. Incoterms 2010 consists of only 11 Incoterms, a reduction from the 13 Incoterms 2000.

394 The Incoterms 2010 are organized into two categories; Incoterms for any Mode or Modes of Transport & Incoterms for Sea and Inland Waterway Transport Only.

395 Any Mode or Modes of Transport E-Term EXW- Ex Works F-Term FCA - Free Carrier C-Term CPT - Carriage Paid to CIP - Carriage and Insurance Paid to D-Term DAT - Delivered At Terminal (new) DAP - Delivered At Place (new) DDP - Delivered Duty Paid

396 Sea & Inland Waterway Transport Only FAS - Free Alongside Ship FOB - Free On Board CFR - Cost and Freight CIF - Cost, Insurance and Freight

397 Any Mode or Modes of Transport

398 E-Term

399 EXW (Ex Works) The buyer bears all costs and risks involved in taking the goods from the seller's premises to the desired destination. The seller's obligation is to make the goods available at his premises (works, factory, warehouse). This term represents minimum obligation for the seller. This term can be used across all modes of transport.

400 The Seller’s Obligations A1 General obligations of the seller The seller must provide the goods and the commercial invoice in conformity with the contract of sale and any other evidence of conformity that maybe required by the contract. Any document referred to in A1~A10 may be an equivalent electronic record or procedure if agreed between the parties or customary.

401 EXW (named place of delivery) RISK I E

402 A2 Licenses, authorizations, security clearances & other formalities Where applicable, the seller must provide the buyer, at the buyers request, risk & expense, assistance in obtaining any export license, or other official authorization necessary for the export of the goods. Where applicable, the seller must provide the buyer, at the buyers request, risk & expense, any information in the possession of the seller that is required for the security clearance of the goods.

403 A3 Contract of Carriage & insurance a) contract of carriage The seller has no Obligation to the buyer to make a contact of carriage b) contact of insurance The seller has no Obligation to the byer to make a contact of insurance. However, the seller must provide the buyer, at the buyer’s request, risk and expense (if any), with information that the buyer needs for obtaining insurance.

404 A4 Delivery To place goods at disposal of the buyer A5 Transfer of risks Must bear all risk & loss until A4 A6 Allocation of costs To pay all cost until A4 A7 Notice to the buyer Must give sufficient notice

405 A8 Delivery document No Obligation A9 Checking-Packaging-Marking Must pay cost of checking, packaging & marking A10 Assistance with information & related costs Must render assistance any documents for export/import and necessary information for insurance

406 The Buyer’s Obligations B1 General obligations of the buyer Must pay the price as provided in the contract B2 Licenses, authorizations, security clearances & other formalities Must obtain any export & import license at own risk & expenses B3 Contracts of Carriage & insurance No Obligation

407 B4 Taking Delivery Must take delivery of the goods B5 Transfer of risk Must bear all risk & loss after A4 B6 Allocation of costs Must pay all cost after A4 B7 Notices to the seller Must give sufficient notice

408 B8 Proof of delivery. To provide evidence of having taken delivery B9 Inspection of goods Must pay the costs of pre-shipment inspection including inspection by the authority. A10 Assistance with information & related costs Must pay all costs & charges for A10 and reimburse.

409 F-term

410 FCA (Free Carrier) The seller's obligation is to hand over the goods, cleared for export, into the charge of the carrier named by the buyer at the named place or point.

411 If no precise point is indicated by the buyer, the seller may choose within the place or range stipulated where the carrier shall take the goods into his charge. When the seller's assistance is required in making the contract with the carrier the seller may act at the buyers risk and expense. This term can be used across all modes of transport.

412 FCA( Named place of destination) E I Delivery

413 C-Term

414 CPT (Carriage Paid To) The seller pays the freight for the carriage of goods to the named destination. The risk of loss or damage to the goods occurring after the delivery has been made to the carrier is transferred from the seller to the buyer. This term requires the seller to clear the goods for export and can be used across all modes of transport.

415 CPT (named place of destination) E I

416 CIP (Carriage & insurance Paid to) The seller has the same obligations as under CPT but has the responsibility of obtaining insurance against the buyer's risk of loss or damage of goods during the carriage. The seller is required to clear the goods for export however is only required to obtain insurance on minimum coverage. This term requires the seller to clear the goods for export and can be used across all modes of transport.

417 CIP (named place of destination) E I

418 D-Term

419 DAT (Delivered At Terminal) New Term - May be used for all transport modes. Seller delivers when the goods, once unloaded from the arriving means of transport, are placed at the disposal of the buyer at a named terminal at the named port or place of destination. "Terminal" includes quay, warehouse, container yard or road, rail or air terminal

420 Both parties should agree the terminal and if possible a point within the terminal at which point the risks will transfer from the seller to the buyer of the goods. If it is intended that the seller is to bear all the costs and responsibilities from the terminal to another point, DAP or DDP may apply.

421 DAT (named place of destination) E I T

422 Responsibilities Seller is responsible for the costs and risks to bring the goods to the point specified in the contract. Seller should ensure that their forwarding contract mirrors the contract of sale Seller is responsible for the export clearance procedures.

423 Importer is responsible to clear the goods for import, arrange import customs formalities, and pay import duty. If the parties intend the seller to bear the risks and costs of taking the goods from the terminal to another place then the DAP term may apply

424 DAP (Delivered At Place) New Term - May be used for all transport modes The Seller delivers the goods when they are placed at the disposal of the buyer on the arriving means of transport ready for unloading at the named place of destination. Parties are advised to specify as clearly as possible the point within the agreed place of destination, because risks transfer at this point from seller to buyer. If the seller is responsible for clearing the goods, paying duties etc., consideration should be given to using the DDP term.

425 DAP (named place of destination) E I

426 Responsibilities Seller bears the responsibility and risks to deliver the goods to the named place. Seller is advised to obtain contracts of carriage that match the contract of sale. Seller is required to clear the goods for export If the seller incurs unloading costs at place of destination, unless previously agreed they are not entitled to recover any such costs. Importer is responsible for effecting customs clearance, and paying any customs duties.

427 DDP (Delivered Duty Paid) The seller is responsible for delivering the goods to the named place in the country of importation, including all costs and risks in bringing the goods to import destination. This includes duties, taxes and customs formalities. This term may be used irrespective of the mode of transport.

428 DDP (named place of destination) E I

429 Sea and Inland Waterway Transport Only

430 FAS (Free Alongside Ship - named port of shipment) The seller must place the goods alongside the ship at the named port. The seller must clear the goods for export. Suitable only for maritime transport but NOT for multimodal sea transport in containers (see Incoterms 2010, ICC publication 715). This term is typically used for heavy-lift or bulk cargo.

431 FOB (Free On Board - named port of shipment ) The seller must load themselves the goods on board the vessel nominated by the buyer. Cost and risk are divided when the goods are actually on board of the vessel (this rule is new!). The seller must clear the goods for export.

432 The term is applicable for maritime and inland waterway transport only but NOT for multimodal sea transport in containers. The buyer must instruct the seller the details of the vessel and the port where the goods are to be loaded, and there is no reference to, or provision for, the use of a carrier or forwarder.

433 Misuse of FOB This term has been greatly misused over the last three decades ever since Incoterms 1980 explained that FCA should be used for container shipments.

434 CFR (Cost & Freight) The seller must pay the costs and freight required in bringing the goods to the named port of destination. The risk of loss or damage is transferred from seller to buyer when the goods pass over the ship's rail in the port of shipment. The seller is required to clear the goods for export. This term should only be used for sea or inland waterway transport.

435 CIF (Cost, Insurance & Freight) The seller has the same obligations as under CFR however he is also required to provide insurance against the buyer's risk of loss or damage to the goods during transit. The seller is required to clear the goods for export. This term should only be used for sea or inland waterway transport.

436 FIFO First In, First Out. FIFO accounting is a common method for recording the value of inventory. A firm records the last units purchased as inventory value, but it does not necessarily mean that the exact oldest physical object has been tracked and sold.

437 LIFO Last In, First Out LIFO accounting, a historical method of recording the value of inventory, a firm records the first units purchased as inventory value. This method is not fit to International Financial Reporting Standards..

438 Reference books 1) Logistical Management by Donald J. Bowersox 2) Essential of Supply Chain Management by Michael H. Hugos 3) Logistics & Supply Chain Management by Martin Christopher ===================================== Built to Last: Successful Habits of Visionary Companies by Jim Collins & Jerry I. Porras

439 BHAG A Big Hairy Audacious Goal is a strategic business statement which is created to focus an organization on a single medium-long term organization-wide goal which is audacious, likely to be externally questionable, but not internally regarded as impossible.

440 Closing Thank you very much for taking my class. I hope all of you would have a nice future. I would like to help you as much as possible. If you need me please contact me at the following e-mail address.

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