Moro is a recent grad from a Canadian college.
He has taken a position with a local SME (small or medium enterprise) only a
short transit ride from his home. Megaexp Enterprises Inc. is located on 123
Progress Avenue in Toronto. Megaexp is a wholesaler, importer and exporter of
various types of consumer goods. The owner is finding that he needs someone to
help him with the logistics of his business. He hired Mark to bring new
knowledge to help him get his products to the right place, at the right time,
at the right price.
Mark has had some business experience in a
retail store as a sales associate. His diploma included courses on Global
Logistics and Customs Procedures. He is confident that he has the foundation to
help his boss navigate the supply chain to offer suggestions on how make it
leaner.
The boss had always negotiated the trade
deals himself. Starting from the price, method of payments and the logistics he
controlled it all. He states “I buy my goods the same ways with each of my
suppliers, so I know how to get the best prices”. He reveals his method; the
supplier will be paid half the invoice value in advance and the other half when
the product is ready to ship. The invoice value includes all transportation
costs and customs costs. Your boss only pays the total invoice value and his
shipment arrives at his door.
You ask your boss if you could look at the
documents for a couple of the shipments, to get a “feel” of where the goods are
shipped from. He provides the documents. You are familiar with most of the
documents, due to your studies at the Canadian college, and start to analysis
them. Your boss leaves the movement of the freight with the supplier and trusts
that they will work in his, your boss, interests.
Mark is discovering that when a shipment is
being shipped, it is too late to change its routing. His boss advised him that
there is a shipment of product, one pallet weighing 100kg that is being shipped
by ocean (as per the vendor), and your customer needs the product within 10
days. Mark thinks to himself, not a problem. Then your boss tells you the
product is in China! You ask your boss, can you just not call the vendor and
ensure it gets shipped today? Can it be that simple? Your boss tried calling
Beijing with no success. If the shipment does not arrive at the customer’s
warehouse you may lose that customer. Now you remember in your studies,
gateways and hubs were discussed and you wonder what role, if any, they play.
As you await the outcome of the
conversation between your boss and the vendor, you wonder, as your company
sources new suppliers how should freight terms be negotiated. Incoterms is what
you turn too. You know that properly understanding Incoterms will save you
company money. In fact, the savings could help lower prices of your product and
will contribute to sustaining competitiveness. Now you will have to discuss
with your boss the concept of Incoterms. All of the companies import shipments
are transported by ocean. From your studies you know that sometimes shipping by
air is more effective and affordable. The key point is to understand how the
Incoterms are applied. Your boss has finished his conversation with the
supplier. He asks you for your suggestion of how to get the product to the
customers store within the 10 days. You now see an opportunity to introduce
Incoterms.
Part 1 International Trade
1) Who are the parties involved in an
International Trade movement. How would you explain International Trade to your
boss?
2) Who would you recommend to give you
guidance and assistance in this matter? Why did you choose that party? Explain
the process you used to determine how you found that party.
Part 2 Routing
1) What trade route would an ocean (or a
multimodal shipment that includes ocean) shipment follow departing Beijing with
arrival in Toronto (explain the route not only departure and arrival,
where/which ports the ship would pass through)? Include the expected transit
time. Where did you find this information?
2) Based on the information you provided
above what other ocean route / gateway (major port) would you recommend? Why?
Where did you obtain your information?
3) What could be a reason that the Boss
could not “connect” with the supplier? Justify your answer and provide a
solution.
Part 3 Incoterms
1) Which is the Incoterm presently being
used, based on the information provided in the case studies? Justify your
answer.
2) What two types of transfer take place
when dealing with Incoterms? How would you explain it to your boss?
3) Which Incoterm would you suggest (based
on the present freight movement) that should be examined to see if a more cost
efficient freight rate can be obtain? Why? Would you involve a freight
forwarder? Why or why not?
4) What suggestion would you recommend to
get the product to the customer in time? Include transit times in your answer.
What is the Incoterm associated with your suggestion?
5) Your boss asks you to offer an opinion
as to which Incoterm you would recommend be considered to be used in future
negotiations. Explain your choice.
