Logistics

"It is a process of Planning, Implementing, and controlling the efficient and effective flow of
goods/services and related information from the point of origin to point of consumption
conforming to customer requirements"

7R of Logistics
1.
2.
3.
4.
5.
6.
7.

Right product - delivered to the customer/client. Needs to meet customer specifications

Right customer - receiving the goods they require
Right time - when the customer can take delivery
Right place - no good at the wrong place
Right condition - working and undamaged
Right quantity - no good being one piece short of the required number
Right cost

5 P's of logistics Management.

1: Production: Production of right material with right raw material availability

2: Price: The right produced product can be made more competitive by using more
competitive and effective logistics operation.
3: Product: The right product can be produced by using best collaboration between
marketing and logistics. So that the packing and size of the product should be feasible.
4: Promotion: logistics should work closely with marketing to decide which strategy of
distribution either push or pull will be followed.
5: Place: It refers to the distribution channel's decision. Whether warehouse, the type of
transportation and so on.

Terms:

Consular invoice
A consular invoice is a document, often in triplicate, submitted to the consul or embassy of a
country to which goods are to be exported before the goods are sent abroad. [1] The completed
documents then travel with the goods and enable the customs officials in the destination country
to verify the quantity, value and nature of the goods on arrival. A fee may be charged by the
consulate for the checking and approval of the documents.

Commercial invoice
A commercial invoice is a document used in foreign trade. It is used as a customs declaration
provided by the person or corporation that is exporting an item across international borders.
[1]

Although there is no standard format, the document must include a few specific pieces of

information such as the parties involved in the shipping transaction, the goods being transported,
the country of manufacture, and the Harmonized System codes for those goods. A commercial
invoice must also include a statement certifying that the invoice is true, and a signature.
A commercial invoice is used to calculate tariffs, international commercial terms (like the Cost in
a CIF) and is commonly used for customs purposes.

Certificate of origin
A certificate of origin (often abbreviated to C/O, COO or CoO) is a document used
in international trade. In a printed form or as an electronic document, it is completed by
the exporter and certified by a recognized issuing body, attesting that the goods in a particular
export shipment have been produced, manufactured or processed in a particular country.

Bill of lading
The bill of lading also serves as a receipt of shipment when the good is delivered to the
predetermined destination. This document must accompany the shipped goods, no matter the
form of transportation, and must be signed by an authorized representative from the carrier,
shipper and receiver.

Cargo Manifest or Packing list

A shipping document used by customs personnel reviewing a particular transport vehicle's

intended trip that summarizes all bills of lading that have been issued by the carrier or its
representative for that particular shipment. For example, a cargo manifest might be used for
shipments made by sea, air or land, and will generally show the shipment's cosigner and
consignee, as well as listing product details such as number, value, origin and destination.

Import license
An import license is a document issued by a national government authorizing the importation
of certain goods into its territory. Import licenses are considered to be non-tariff barriers to
trade when used as a way to discriminate against another country's goods in order to protect a
domestic industry from foreign competition. Each license specifies the volume of imports
allowed, and the total volume allowed should not exceed the quota. Licenses can be sold to
importing companies at a competitive price, or simply a fee. However, it is argued that this
allocation methods provides incentives for political lobbying and bribery. Government may
put certain restrictions on what is imported as well as the amount of imported goods and
services. For example, if a business wishes to import agricultural products such as vegetables,
then the government may be concerned about the impact of such importations of the local
market and thus impose a restriction.

Certificate of Insurance
Document issued by an insurance company, it certifies that an insurance policy has been
bought and shows an abstract of the most important provisions of the insurance contract. But
it is not a substitute for the actual policy, and is normally a non-negotiable document-it
cannot be assigned to a third party, and is unacceptable under the terms of a letter of credit
and in making a claim. In life and health insurance a COI is issued to the members of a group
insurance plan, evidencing their participation. In marine insurance (where cargo is insured
against a floating insurance policy) COI serves to assure the consignee that insurance is in
effect for the goods in transit and a proper policy will follow. Also called insurance
certificate.

Export Declaration Form

Customs form completed and submitted by an exporter at the port of export, it is meant to
serve two major purposes:

To provide information on amount, nature, and value of exports to the statistical office for

compilation of foreign trade data, and

Serves as an export control document. In some cases, an export license and/or a certificate
of origin is also required to be attached.

Air transport
Air transport is the most recent mode of transport. It is the gift of the 20th century to the
world. The two world wars gave a great impetus to the development of air transport in almost
all the countries of the world. The peculiar characteristic of air transport is that is does not
need a specific surface track for its operations.

It has no physical barriers as in the case of other mode of transport. Political boundaries are
also immaterial although it has to observe the requirements of the International Law. The
supreme advantage of air transport lies in its quickness.

It is the fastest mode of transport. But the cost of its operation is very high and thus it is
suitable for only rich passengers, mails and light and costly cargo. However, in advanced
countries like U.S.A., Germany, etc. it offers a tough competition to the railways.

Characteristics:
1. Unbroken Journey:
Air transport provides unbroken journey over land and sea. It is the fastest and quickest
means of transport.
2. Rapidity:

Air transport had the highest speed among all the modes of transport.
3. Expensive:
Air transport is the most expensive means of transport. There is huge investment in
purchasing aero planes and constructing of aerodromes.
4. Special Preparations:
Air transport requires special preparations like wheelers links, meteorological stations, flood
lights, searchlights etc.

Advantages:
1. High Speed:
The supreme advantage of air transport is its high speed. It is the fastest mode of transport
and thus it is the most suitable mean where time is an important factor.
2. Comfortable and Quick Services:
It provides a regular, comfortable, efficient and quick service.
3. No Investment in Construction of Track:
It does not require huge capital investment in the construction and maintenance of surface
track.
4. No Physical Barriers:
It follows the shortest and direct route as seas, mountains or forests do not come in the way of
air transport.
5. Easy Access:
Air transport can be used to carry goods and people to the areas which are not accessible by
other means of transport.
6. Emergency Services:
It can operate even when all other means of transport cannot be operated due to the floods or
other natural calamities. Thus, at that time, it is the only mode of transport which can be
employed to do the relief work and provide the essential commodities of life.

7. Quick Clearance:
In air transport, custom formalities can be very quickly complied with and thus it avoids
delay in obtaining clearance.
8. Most Suitable for Carrying Light Goods of High Value:
It is most suitable for carrying goods of perishable nature which require quick delivery and
light goods of high value such as diamonds, bullion etc. over long distances.
9. National Defence:
Air transport plays a very important role in the defence of a country. Modern wars have been
fought mainly by aeroplanes. It has upper hand in destroying the enemy in a very short period
of time. It also supports over wings of defence of a country.
10. Space Exploration:
Air transport has helped the world in the exploration of space.

Disadvantages:
In spite of many advantages, air transport has the following limitations:
1. Very Costly:
It is the costliest means of transport. The fares of air transport are so high that it is beyond the
reach of the common man.
2. Small Carrying Capacity:
Its carrying capacity is very small and hence it is not suitable to carry cheap and bulky goods.
3. Uncertain and Unreliable:
Air transport is uncertain and unreliable as it is controlled to a great extent by weather
conditions. Unfavourable weather such as fog, snow or heavy rain etc. may cause
cancellation of scheduled flights and suspension of air service.
4. Breakdowns and Accidents:
The chances of breakdowns and accidents are high as compared to other modes of transport.
Hence, it involves comparatively greater risk.

5. Large Investment:
It requires a large amount of capital investment in the construction and maintenance of
aeroplanes. Further, very trained and skilled persons are required for operating air service.
6. Specialised Skill:
Air transport requires a specialised skill and high degree of training for its operation.
7. Unsuitable for Cheap and Bulky Goods:
Air transport is unsuitable for carrying cheap, bulky and heavy goods because of its limited
capacity and high cost.
8. Legal Restrictions:
There are many legal restrictions imposed by various countries in the interest of their own
national unity and peace.

Scheduled and Non-scheduled goods

Goods are classified into scheduled and non-scheduled categories. Goods of high value are
termed as scheduled goods. For e.g. gold coins, precious stones, currency notes, work of art,
articles of ivory or sandalwood. Etc. The carrier can charge extra for carrying such costly
articles provided their value exceeds Rs. 100 and will be liable for loss or damage only if the
value and description of goods has been disclosed by the consignor in advance or if the loss is
due to a criminal act of the carrier, his agents or servants. Other types of goods are called
non-scheduled goods.

Railway transport
Railway transport occupies a significant role in the transport system of a country because the
development of trade, industry and commerce of a country largely depends on the
development of railways.

Advantages:
i. It facilitate long distance travel and transport of bulky goods which are not easily
transported through motor vehicles.
ii. It is a quick and more regular form of transport because it helps in the transportation of
goods with speed and certainty.
iii. It helps in the industrialization process of a country by easy transportation of coal and
raw-materials at a cheaper rate.
iv. It helps in the quick movement of goods from one place to another at the time of
emergencies like famines and scarcity.
v. It encourages mobility of labour ad thereby provides a great scope for employment.
vi. Railway is the safest form of transport. The chances of accidents and breakdown of
railways are minimum as compared to other modes of transport. Moreover, the traffic can be
protected from the exposure to sun, rain snow etc.
vii. The carrying capacity of the railways is extremely large. Moreover, its capacity is elastic
which can easily be increased by adding more wagons.
viii. It is the largest public undertaking in the country. Railways perform many public utility
services. Their charges are based on charge what the traffic can bear principles which helps
the poor. In fact, it is a national necessity.

Disadvantages:
i. The railway requires a large investment of capital. The cost of construction, maintenance
and overhead expenses are very high as compared to other modes of transport. Moreover, the
investments are specific and immobile. In case the traffic is not sufficient, the investments
may mean wastage of huge resources.
ii. Another disadvantages of railway transport is its inflexibility. It routes and timings cannot
be adjusted to individual requirements.

iii. Rail transport cannot provide door to door service as it is tied to a particular track.
Intermediate loading or unloading involves greater cost, more wear and tear and wastage of
time. The time cost of terminal operations are a great disadvantage of rail transport.
iv. As railways require huge capital outlay, they may give rise to monopolies and work
against public interest at large. Even if controlled and managed by the government, lack of
competition may breed in inefficiency and high costs.
v. Railway transport is unsuitable and uneconomical for short distances and small traffic of
goods.
vi. It involves much time and labour in booking and taking delivery of goods through
railways ascompared to motor transport.
vii. Because of huge capital requirements and traffic, railways cannot be operated
economically in rural areas. Thus, large rural areas have no railway even today. This causes
much inconvenience to the people living in rural areas.

Advantages of Ocean Waterways

(1) Ocean transport facilitates foreign trade.
(2) It is also the cheapest mode of transport, as there are no roads or railways to be built or
maintained
(3) The ocean offers a free route to all the countries of the world.
(4) It is traversible in all directions.
(5) It is possible to increase almost indefinitely the size of vessels.
(6) The operational cost is less than on any other mode of transport.
(7) Ships can carry more freight than trains or trucks, because of their large size.

Surcharge

Surcharge is a fee or other charge that is added to the cost of a good or service. A surcharge is
typically added to an existing tax, and may not be included in the stated price of a good or
service.

Bunker adjustment factor

Bunker adjustment factor, bunker surcharge or BAF refers to floating part of sea freight
charges which represents additions due to oil prices.[1] BAF charges used to be determined
by Carrier Conferences to be applicable for a certain period on a certain trade route.
The European Commission banned Carrier Conferences as of October 17, 2008. The shipping
lines now set their own independent BAF rates. They will be closely monitored by the EC to
ensure that no collusion is taking place.
Fluctuations in oil prices will alter rates depending on any of a wide variation in applications.

Currency adjustment factor (CAF)

The currency adjustment factor (CAF) is a fee placed on top of freighting charges for carrier
companies. The charge was developed to account for constantly changing exchange rates
between the dollar and other currencies. Thus its goal is to offset any losses from constantly
fluctuating exchange rates for carriers. Calculation basis & methodology might vary from
carrier to carrier.
The CAF increases as the US dollar decreases. It is applied as a percentage on top of the Base
Exchange rate, which is calculated as the average exchange rate for the previous three
months. Due to this added charge, shippers tend to enter into "all inclusive" contracts at one
price that accounts for all applicable charges, to limit the effect of the CAF.
In recent years, the CAF charged on shipments to Japan was 51%.

Feight Rebate

A refund of a portion of previously paid transportation charges, usually in return for the
shippers tendering a certain volume of freight to the carrier. This practice is illegal in some
countries, such as US. This can have the unintended consequence of making legitimate claims
against carriers difficult, since they must be fully documented to prove that they are not
actually rebates in disguise.