Professional Documents
Culture Documents
Impact of Purchase Contract On Firms' Profitability and Productivity in EXIM Business
Impact of Purchase Contract On Firms' Profitability and Productivity in EXIM Business
PITHWA
Dewang Pandya
Roll No. 15
INTRODUCTION
The paper presents a framework, along the
dimensions of strategy & cost to manage
EXIM business effectively and efficiently.
• Since the parties to the transaction are at a distance and since a Letter of Credit type
of a documents is the only link, it is all the more important that the twin objectives
of customer satisfaction and profitability of the transaction be given more focus.
• Delay in delivery, damages in transit, missing components, faulty documentation
pose serious threat to the possibility of continuing business relationship and directly
contribute to erosion of profitability.
• World Congress 2008 - Achieving high Performance in Global Business, April 10-12, 2008. Hyatt
Regency Atlanta, Atlanta, GA
• www.ICC.org
•
• www.thermaxindia.com
•
The Contemporary Causes of Globalization
5
International Business vs. Domestic Business
International business can differ from domestic business for a number of
reasons, including the following:
– CURRENCY
The countries involved may use different currencies, forcing at least one party to convert its
currency into another.
– LEGAL COMPLIANCE
The legal systems of the countries may differ, forcing one or more parties to adjust their practices
to comply with local law.
– CULTURAL DIFFERENCE
The cultures of the countries may differ, forcing each party to adjust its behavior to meet the
expectations of the other.
– RESOURCES
The availability of resources differs by country; the way products are produced and the types of
products that are produced vary among countries.
6
The International Operations
Foreign- Environment
(Uncontrollable)
Cultural Forces
Economic Environment
Domestic- Environment
Forces Uncontrollable
(Uncontrollable)
Country Market A
Structure of
Distribution
7
WHY GROWTH OF IB
– Expansion of technology
Transportation and communication are quicker and less costly
8
EXTERNAL INFLUENCES
– Physical and societal factors— must understand
• Politics that affect whether and how IB occurs
• Domestic and international law determines what managers can do in IB
• Economics
• Geography—determine location and availability of world’s resources
– Competitive environment
• Varies by industry, company, and country
– strategies differ across companies
» e.g., importance of controlling labor costs
» e.g., influence of local and international competitors
– size of market differs across countries
9
International Business:
The Choice of Entry Mode
Management
11
Common Terms
• Pre-carriage:
– Initial transport of goods from the seller to the main carrier
– Usually by truck, rail, or inland waterway
• Main carriage:
– Primary transport of goods
– Longest part of the journey & from one country to another
– Usually by sea or air, but may be by truck, or rail
• On-carriage:
– Transportation from arrival point in the destination country
to buyer, which can be by any mode
• Carrier:
– Any party who arranges for the primary transportation by
truck, plane, ship, rail, etc.
12
Common Terms
• Delivery:
The term delivery is used in two contexts in Incoterms:
–The seller bringing the goods to the named point
–Traditional sense of the buyer receiving the goods
• Customs clearance:
Clearing the goods for export or import means
–Paying the duties, taxes and administrative costs
–Performing administrative matters related to:
• Clearance and Customs formalities
• Import and/or export regulations
• Typically, the Shipper (exporter) clears the goods for
export the Buyer (importer) clears the goods for
import
13
Organization of Incoterms 2000
Incoterms are divided into four (4) categories:
• “E” term – Seller makes the goods available to the buyer at the
seller’s premises or other place named by the seller
Governed by:
-UCC Article 5
-International Chamber Commerce’s Uniform Customs and Practices for
Documentary Credits (UCP)
Other Shipping Documents
Certificate of Origin
• Commercial Invoice
• Certificate of Inspection
• Import License
• Certificate of Origin
• ISO 9000 and 9001, 14001 and OHSAS 18001 Certified Units
• Manufacturing plants spread over 250,000 Sq. mtr in Pune, 400,000 Sq. mtr in Vadodara & 175,000 Sq.
mtr in China
• Manufactures to international standards – ASME, EN, GOST, BS, DIN, UDT, IBR, PED etc.
• International Sales & Service network spread over South East Asia, Middle East, Africa, Russia, Europe
and Latin America
CASE STUDY
• Problem is How Purchase contract for Import
affects Firm’s Profitability and Productivity
• Welding Consumable requirements for
fabrication of Boiler Pressure Parts
• We (as end User) raised the inquiry no.
111271, 111300 & 111332, Dtd. 19/02/10 NEXT
• Our Buyer placed the PO No. 70162, 63 & 66
Dtd. 17/03/10 NEXT NEXT
PROCESS FLOW OF IMPORT
USER GROUP PLACE THE INDENT
Comparative Statement for Welding Consumables for LANCO INFRATECH Project (Ref. Dewang mail dtd 24-02-10)
Sr. no. Description Qty. Unit Nivek Agencies, Mumbai Indian Agencies, Baroda Bohler Welding Group, Mumbai Meridian Exports, Mumbai
Extra at Actual
Incl (Rs. 165.90 x Incl (appx. Rs.
ED @8.24% Excl OR incl 82950.00 150000.00 239928.00 Cenvate appx. 54000.00
500 kgs. = 82950) 300/kgs)
Rs. 108/Kgs.
Transportation Free 0.00 Free 0.00 Extra (From German 35399.50 Free 0.00
y to Savli)-By Air
Not in ex-stock and will 120 kgs. Ex-stock and 114 Kgs.ex-stock and
Ex-Stock OR 3-4
Delivery: take @ 6-8 wks OR balance 4-8 wks OR balance will be 6-8 wks or
Wks
asap. asap asap
(1) Nivek has quoted price for Dia. 2.4 mm as Dia. 2.0 mm not available in Ex-stock and can't committe on Dia. 2 (2) We well discussed with Dewang Pandya (Welding Cell) and has recomanded to place order to Bohler
Welding (Import) being L2 + we need mater
Contd.
• Payment and Delivery terms
• L/C and FOB at Hamm, GmbH
• L/C not accepted by Seller’s Banker
• Amendment of L/C and Charges NEXT
• Nominate a Freight Forwarder
• Booked the material on 22/06/10
IMPACT ON FIRM
• Job was loaded in shop
• Because of consignment delayed for 3 months, We
badly required consumables
• We have to purchase from local dealer, who is
Highest qouted
• Have to justify the matter and generate file note, got
it approved from competent authority for deviation
and audit purpose
• Financial Loss to the org. is INR 4,38,196
• Impoted material have Inventory cost
CORRECTIVE ACTIONS
• We have demanded for 60 days payment credit with
the Manufacturer
• They consider our request
• Germany based Insurance company has audited our last
5 years transactions and qualify us for 30 days credit
• Shop Buyer is not a right person for EXIM business, mgt.
decide to handover activities to EXIM cell
• We asked for VMI (Vendor Managed Inventory)
• Best negotiate with vendor and make rate contract
• Now a days we operate smoothly
VMI
P
r
Thermax Loss to company o
N Supplier
Stores d
u
c
t
i
o
n
Thermax
VMI Supplier d
Stores
a
t
e
Days
The VMI Model
Managing inventory outside the four walls