Group 5

Arroyo, Aileen Jane

Hernandez, Jaya Ley
Tumambing, John Dave
LOGISTICS
IS THE MANAGEMENT FLOW OF GOODS,
INFORMATION AND OTHER RESOURCES.

IT INVOLVES THE INTEGRATION OF INFORMATION, TRANSPORTATION,

INVENTORY, WAREHOUSING, MATERIAL – HANDLING, AND
PACKAGING AND OCCASIONALLY SECURITY
INBOUND LOGISTICS

Activities associated with

receiving, storing and
disseminating inputs products
HOW CAN INBOUND LOGISTICS CAN BE IMPROVED?

1. LOCAL ECONOMICS
2.PLANNING OF INBOUND LOGISTICS
3.FORECASTING
OUTBOUND LOGISTICS

ACTIVITIS ASSOCIATED WITH

COLLECTING, STORING AND
PHYSICALLY DISTRIBUTING
THE PRODUCT TO THE
BUYERS
INTERNATIONAL
PROCUREMENT
STRATEGY
What is a Strategy?

A strategy is an action plan

designed to achieve specific
long term goals and
objectives.
Strategic purchasing
is the process of "planning,
implementing, evaluating, and controlling
strategic and operating purchasing
decisions for directing all activities of the
purchasing function toward opportunities
consistent with the firm's capabilities to
achieve its long-term goals
The Strategic Role of Purchasing

Perform sourcing related activities in a way that

support the overall objectives of the organization

by establishing external contacts with the supply

market
COMMON REASONS FOR A GLOBAL
PURCHASING STRATEGY
• REDUCING OVERALL COST STRUCTURE
• AVAILABILITY OF NEW TECHNOLOGY AND CAPACITY
• ESTABLISHING ALTERNATIVE SOURCES OF SUPPLY-
REDUCED RISK
• ACCESS TO NEW DESIGNS

DOWNSIDE
• INVENTORY MANAGEMENT INCREASE
• INCREASED TRANSPORTATIOIN/LOGISTICS
SUPPLY STRATEGIES
• TRANSLATING ORGANIZATIONAL OBJECTIVES INTO SUPPLY
OBJECTIVES

• GLOBAL SOURCING BRINGS MORE PROFIT IN THE BUSINESS

• THE SOURCING AGENT OF THE GLOBAL SOURCING COUNTRIES HELPS

YOU TO IDENTIFY THE PROPER COUNTRIES.
STRATEGIC COMPONENTS

ANY STRATEGY CHOSEN SHOULD INCLUDE

DETERMINATION OF WHAT,QUALITY, HOE MUCH, WHEN,
WHAT PRICE, WHERE, HOW AND WHY
 Global
outsourcing
Definition
● Outsourcing can be defined as the strategic use of outside
resources to perform activities traditionally handled by
internal staff and resources.

● It is where an organization contracts out major functions

to specialized and efficient service providers, who then
become valued business partners.
Why do companies
outsource?
Why do companies outsource?
● External supplier has better capability
● Freeing resources for other purposes
● Reduction and control operating costs
● Sharing risks with a partner company
● Lack of internal resources
● Streamlining or increasing efficiency for time-consuming
functions
● Desire to focus more tightly on core business
● Benchmark
Pros & cons
of global
outsourcing
 pros cons
• Greater flexibility • Long lead times/capacity
• Lower investment risk shortages
• Existing staff may feel
• Improved cash flow
disposable or threatened
• Lower potential labor • Issues with product/service
costs quality
• Problems with communication
• Loss of control over policies
and procedures
• Threats to data security
How to implement
outsourcing?
The outsourcing life cycle
Most important factors
influencing success in
outsourcing
Most important factors influencing success in outsourcing
● Understanding company goals and objectives
● A strategic vision and plan
● Selecting the right, high quality supplier
● A properly structured, effective contract and contract
monitoring
● Good relationship with the supplier
Documentary
credit
Definition
A Documentary Credit as an instrument of settlement of
payment obligation between buyer and seller.

● Letter of Credit : A credit issued by the issuing bank and

addressed to the Beneficiary in the form of a ‘Letter’
● Commercial Credit : A credit issued by the issuing bank in
settlement of a commercial transaction
Definition
● Documentary Credit : A credit issued by the issuing bank
and requires the presentation of stipulated documents for
compliance
● Standby Letter of Credit : A credit issued by the issuing
bank to be used for settlement only where there has been
some form of default or financial guarantee
 Sellers (exporters) and buyers

Roles of letter (importers) have the following

concerns when signing the

of credit (LC)
contract:
● Exporter/Seller : What if we ship
the goods but they don’t pay us the
Counterparts of a trade are usually located
overseas. proceeds?
● Importer/Buyer : What if we are
forced to pay the proceeds but the
goods do not arrive?
Role of LC
An Letter of Credit is a letter issued by a bank to guarantee
the payment of proceeds. The bank, which issued an L/C,
guarantees that the proceeds will be paid even if the
importer goes bankrupt or is unable to pay for any other
reason, on the condition that the documents satisfying
certain conditions (terms of L/C) are presented.
Other Roles of LC
1. Supplementation of credit of the buyer (importer). L/Cs
make it easier for buyers to gain trust from sellers in
selling their product.
2. Convenient tool for the seller (exporter). Sellers will
have the opportunities to receive finance for the
proceeds from the bank easily, in the form of negotiation
of export bills.
What should we
know about lc
What should we know about lc
● U.C.P.600, Uniform Customs and Practice for Documentary Credits
2007 Revision (UCP600) has been established by the International
Chamber of Commerce (ICC), to standardized interpretations and
procedures of L/Cs. Majority of L/Cs are subjected to the rules of UCP.
● L/C transactions are entirely based on the presentation of documents
What should we know about LC
● Transactions with L/Cs are separate and independent from export contracts
that are the background of the L/Cs. They are entirely based on the
presentation of documents.
● Therefore, banks issuing L/Cs must pay the proceeds as written in the L/C so
long as the documents fulfilling the terms and conditions of the L/C are
presented, even if the goods or their shipment violate the export contract
Example
Flow of Documentary Credit
INCOTERMS 2010
Incoterms
Abbreviation for INTERNATIONAL COMMERCIAL
TERMS

They are set of rules which define the responsibilities of

sellers and buyers for the delivery of goods under sales
contract for domestic and international trade

1936 – First issued INCO terms

Sept. 2010-January 2011 INCOterms 2010 launched
INCO TERMS - is a registered trademark of the ICC

This provide a common set of rules to clarify

responsibilities of sellers and buyers for the delivery of
goods under sales contract.

Reduce misunderstanding among traders and thereby

minimize trade disputes and litigation
BENEFIT OF INCO TERMS

 The main benefit of incoterms is to reduce risk.

 Incoterms do not cover, however, ownership or title

transfer of the goods. These terms are agreed upon
separately between two transacting parties.
The Categories
The Steps of Global Logistics

Customs Clearance
for Export
2 3 4
Handling
Loading Outbound
1 Preliminary
Transportation
5
Packing
6
Insurance
Main
Customs International
Clearance Transportation 7
Duties

11 10 9 8

Unloading Final Handling

Transportation Inbound
Acronym (…named location)
Acronym dictates mode and where the lines are drawn

SELLER Export Import BUYER

Clearance Clearance

Goods

PRE -CARRIAGE MAIN CARRIAGE ON-CARRIAGE

Seller’s Risk

Seller’s Cost
E Terms: Departure

 EXW (named place)

Under E-terms, the seller minimizes his risk
by only making the goods available at his own
premises.
Export Import
SELLER Clearance BUYER
Clearance

Goods

PRE -CARRIAGE MAIN CARRIAGE ON-CARRIAGE

Seller’s Risk

Seller’s Cost
 EXW = Ex Works

 The seller fulfills his obligation to deliver when he has made

the goods available at his premises to the buyer.
 The seller is not responsible for loading the goods on the
vehicle provided by the buyer
 The seller is not responsible for clearing the goods for export,
unless agreed.
 The buyer bears all costs and risks involved in taking the
goods from the seller’s premises to the desired destination.
 Group F: Main Carriage Not Paid
by Seller

 FAS - Free Alongside Ship

 FCA - Free Carrier
 FOB - Free On Board

Under F-terms, the seller arranges and pays for pre-carriage in

the country of export. Including export clearance under FCA and
FOB
 FAS (…named port of shipment)
Seller
• delivers goods alongside ship
• evidence of delivery

SELLER Export Import BUYER

Clearance Clearance

Goods

PRE-CARRIAGE MAIN CARRIAGE ON-CARRIAGE

Seller’s Risk
Buyer
• export documents
• nominates carrier,
Seller’s Cost • contracts carriage
• pays freight
 FCA (…named place)
Seller
• clears export customs,
• delivers goods to carrier
• evidence of delivery

SELLER Export Import BUYER

Clearance Clearance

Goods

PRE-CARRIAGE MAIN CARRIAGE ON-CARRIAGE

Seller’s Risk

Buyer
Seller’s Cost • nominates carrier,
• contracts carriage
• pays freight
 FOB (…named port of shipment)
Seller
• clears export customs,
• delivers and loads goods on ship
• evidence of delivery
SELLER Export Import BUYER
Clearance Clearance

Goods

PRE-CARRIAGE MAIN CARRIAGE ON-CARRIAGE

Seller’s Risk

Buyer
Seller’s Cost • nominates carrier,
• contracts carriage
• pays freight
 Group C: Main Carriage Paid by
Seller

 CFR - Cost & FReight

 CIF - Cost, Insurance & Freight
 CPT - Carriage Paid To
 CIP - Carriage & Insurance Paid to

Under C-terms, the seller arranges and pays for the main
carriage but without assuming the risk of the main carriage.
CFR (…named port of destination)

SELLER Export Import BUYER

Clearance Clearance

Goods

PRE-CARRIAGE MAIN CARRIAGE ON-CARRIAGE

Seller’s Risk

Seller’s Cost
CIF (…named port of destination)

SELLER Export Import BUYER

Clearance Clearance

Goods

PRE-CARRIAGE MAIN CARRIAGE ON-CARRIAGE

Seller’s Risk

Seller’s Cost + Insurance

Ocean vs Other
● Ocean Terms Other Terms

○ CFR CPT

○ CIF CIP
 Group D: Arrival

 DAF - Delivered At Frontier

 DES - Delivered Ex Ship
 DEQ - Delivered Ex Quay
 DDU - Delivered Duty Unpaid
 DDP - Delivered Duty Paid
Under D-terms, the seller’s cost/risk is maximized because he must make
the goods available at the agreed destination. Including import clearance
under DEQ and DDP
DAF (…named place)

SELLER Export Import BUYER

Clearance Clearance

Goods

PRE-CARRIAGE MAIN CARRIAGE ON-CARRIAGE

Seller’s Risk

Seller’s Cost
DES (…named port of destination)

SELLER Export Import BUYER

Clearance Clearance

Goods

PRE-CARRIAGE MAIN CARRIAGE ON-CARRIAGE

Seller’s Risk

Seller’s Cost
DEQ (…named port of destination)

SELLER Export Import BUYER

Clearance Clearance

Goods

PRE-CARRIAGE MAIN CARRIAGE ON-CARRIAGE

Seller’s Risk

Seller’s Cost
Ocean vs Other
 Ocean Terms Other
Terms
DES DDU
DEQ DDP