UNIT III

Commerce
 Transport
• Transport is an aid to trade concerned with the moving of goods and people from
one place to another.
• All activities used to remove the difficulties emerged due to individuals; place
and time in the exchange of goods are called ‘commerce’. The first difficulty
among the above mentioned one has been abolished with the emergence of
trading community. The traders act as middlemen between the producers and the
consumers. Goods are manufactured in factories. Carrying the goods from the
factories to the market is a problem. This problem is solved by transportation.
Transport is mere movement of persons and things from one place to another.
 Importance of Transport
• Assistance in exchange of goods
• there is place and space gap in reaching the goods from the producers to
the consumers. Transport fills up this gap/ this is the reason that success of
business in a country depends upon the availability of means of transport
in that country. The change of place is necessary for exchange of a thing
and change of place is possible by the means of transport.
 Importance of Transport
• Assistance in large scale production
• it is essential to transport raw materials to the factories and finished products from the
factories to the market for large scale production. This is possible only through
means of transport
• Proper Industrial Location: transport facilitates the location of industries at suitable
places. It is an important factor influencing industrial location.
• Incentive to economic activities in a particular area: The importance of transport
is not limited only to the exchange of goods. The means of transport encourage the
economic activities in a particular area.
 Advantages Of Transport
• (a) All commodities are not in each area but only those commodities are
produced in a area for the production of which the circumstances are
available there. Thus transport facilitates specialization.
(b) The scope of competition is extended. Thus, it is not possible for the
local producers to increase the prices of commodities in the market at their
will.
• (c) Mobility of labour increases which reduces the possibility of
exploitation of workers.
 Selection of Mode of Transportation
• Distance of the place of buyer
• Quantity of Goods
• Price of Commodity
• Types of Goods
• Transportation Expenses
• Instruction of the Buyer
• Availability of means of Transport
• Question of Safety
• Weather
 Means of transport
• I. Road
• II. Railway
• III. Waterway
• IV. Airway
 Road transport
• Road transport means transportation of goods and personnel from one
place to the other on roads. Road is a route between two destinations,
which has been either paved or worked on to enable transportation by way
of motorised and non-motorised carriages.
 Advantages of Road transportation
• Approach to every place: the trains move on a definite way on railways.
Thus the goods are transported to the place. But it is possible to move
vehicles at every place in road transport.
• Service from door to door: the road transport is more convenient than
railways for passengers. The people have to cover a distance to reach the
railways for passengers.
 Advantages of Road transportation
• Low expenditure on safety of goods: the expenditure on safety of goods
is low in road transport as compared to railways. Moreover, there is
greater risk of goods being lost or damaged in railways.
• Convenient and cheap: the rates of bus fare are lower than rates of bus
fare in railways, ships and aero planes. Thus the road transport is
convenient and cheap as well.
 Advantages of Road transportation
• Quicker for short distance: the road transport is quicker than railways for
short distance. James Stephenson has mentioned in his book that it took about
one week transport tea from London to Yorkshire through railways and sea
routes. But with the advent of road transport tea could be transported from
London to Yorkshire in a day by motor vehicle.
• Advantages relating to packing: the process of packing is less complicated
in road transport than in railways and in waterways.
• Easy construction: road construction is easier than railway lines installation.
 Disadvantages of Road transport
• Road transport is not convenient for transporting goods to longer distance.
• It is convenient to transport low bulk goods through motor vehicles.
• Road transport is not safer than railway. Cyclone, winds, rains, way
offenders etc. have substantial effects on road transport.
• Road transport is inconvenient and costlier to transport high bu1k and
low priced goods.
• Speed of road transports is comparatively low.
 Railway transport
• The modern mechanized transportation begins with railways. Railways
had in a way monopoly in land transport till the world war. The
importance of road transport increased during the period of war. However,
the road transport may not be expected to over shadow the importance of
railways.
 Importance of Railway Transport
• Railways have helped in many respects in the economic development of a
country. Railways are the only convenient and economical means to
transport high bulk goods to far off distance.
 Advantages of Railway transport
• Goods are transported quickly because the trains have high speed.
• Railway is the only convenient and economical means of transporting
high bulk goods from one place to another. The goods of high bulk can be
transported by roads only to a short distance.
• The goods of perishable nature can also be transported through railways to
distant Places because of high speed of the trains.
• Goods are safe because they are dispatched in closed wagons.
 Disadvantages of Railway Transport
• The rails cannot be easily installed at all places in all regions. Large rural areas have
no railway services even today.
• It involves much time in booking and taking delivery of goods through railways. Thus
the perishable goods are not conveniently transported through railways.
• There is heavy investment on railways. The reason is that heavy compensation is paid
for the land acquired for installing rail lines. Bridges are constructed at different places.
• The goods are not transported to the place of business and thus it is a half-way
transport service.
 Waterway Transport
• Goods arealso transported from one place to another through waterways.
Sea routes, rivers, channels and canals are under the waterways. It need
not be mentioned here that the foreign trade is largely done through
waterways or sea routes. The river navigation is also important in the
internal parts of the country.
 Advantages of waterway Transport
• It is the cheapest means of transport. There is no need of way constructions
because the rivers and seas have natural routes. Moreover, there is no
maintenance cost of these routes.
• Waterways are the main means of transport in foreign trade.
• The capacity of goods transportation is much more. The ships provide wider
space than motor vehicles to place goods.
• It would he convenient to transport easily breakable native goods through ships.
 Disadvantages of waterway Transport
• Speed of transportation is very low in waterways. Thus goods cannot be
transported quickly through waterways.
• The waterways are convenient to transport goods places.
• The rivers are not navigable throughout the year and thus goods cannot be
transported through the rivers all round the year.
• The waterways also could not transport the goods to the destination.
 Airway Transport
• The importance of airways transportation is increasing in areas, where
railway or Waterway or roadway means of transport arc costlier and
uncertain.
 Advantages of Airway Transport
• It is the quickest of all means of transportation. .
 Disadvantages of Airway Transport
• The greatest convenience to the air transport is that it is the most costly
means of transport.
• The air flights depend upon weather and thus they are uncertain.
• There is comparatively great risk.
• Only low bulk and high priced commodities could be transported through
it.
 Containerization
• Containerisation is a system of transporting goods in containers.
• Containers are large metal boxes of standard size in which goods are
packed at place of manufacture. The containers are sealed under the
supervision of the customs authority of the country of manufacture. Once
sealed, containers are not opened when they reach the destination.
• Containerisation is used mostly in road, rail and sea transport.
 Advantages of containerization
• Containerisation increases speed of goods delivery.
• Containers are transferred quickly between different forms of
transport i.e. trans-shipment is made easy.
• Goods are not taken out of containers until they reach the
country of destination. This provides security of goods.
 Advantages of containerization
• Containers ease the problem of loading and unloading of goods.
• Containerisation eliminates the problem of loading and
unloading of goods as Containers can be used for storage of
goods as they are stacked outside.
• Containers increase the safety of goods as there is less risk of
pilferage and damage to goods.
 Advantages of containerization
• Containers increase quick turn-round of ship and vehicles.
• Containers enable mixed cargoes to be easily carried.
• Goods carried containers are easily documented
 Documents Used In Transport

• Bill of lading: this is important document in foreign trade. This document is evidence
that the goods are loaded on the ship. The place in foreign trade is the same as the
railway receipt in home trade.
• It contains the following:
• Name of the shipper
• Name of the ship
• Quantity of goods, packing and marks
• Name of the importer
• Name of the importing sea port
 Airway Bill
• An airway bill is a document used when goods are sent by air transport.
• It is a consignment note that gives details of goods being carried.
• An airway bill is not a document of title and therefore it cannot be used to
transfer ownership of goods.
• An airway bill is prepared in sets of three copies: a copy for the
transporting company, a copy for importer, and a copy for the exporter.
 Main Functions Airway Bill
• It acts as a receipt for goods put on the aeroplane. It is prepared by the
captain of the aeroplane carrying goods and given to the sender (exporter)
of goods.
• It serves as an evidence of contract of carriage of goods
• It gives an approximate value of goods for customs purpose.
 Charter Party
• It will be cheaper and beneficial to hire the entire ship to dispatch goods in huge
quantity. The agreement with the shipping company for hiring the ship is called
‘charter party’. The following facts are mentioned in it:-
• Name of the parties and description
• Conditions of hiring the ship
• Full description of goods sent by the air
• Amount of freight and mode of payment
• Sea routs
 Railway receipt
• The railway authority issues a receipt on taking the goods to the parcel office.
This receipt is called railway receipt or R/R. In this way, R/R is a receipt of
goods issued to the sender (consignor) of goods by the railway authority on taking
the possession of goods. The following facts are mentioned in it:-
• Place of dispatch of goods
• Destination railway station
• Sender’s name
• Receivers name
 Railway receipt
• Brief description of goods, packing; net weight, chargeable weight etc.
• Amount of the freight
• Freight(a charge paid for carriage or transportation of goods) paid or to pay
• Number of the R/R
• Signature of the parcel clerk
• The condition on which the railway accepts the consignment are printed on
the back of the R/R.
 Warehouse
A large building where raw materials or manufactured goods may be stored
prior to their distribution for sale.
 Meaning of warehousing
• The act of storing goods that will be sold or distributed later
Warehouses are essential in the production and business systems of present
age. In the words of Stephenson: “a warehouse is an establishment for the
storage on accumulation of goods.” warehouse is the place of safety where
goods are stored. Goods are produced these days before they are demanded.
 Functions of warehouse
• Warehouse provides storage facilities for the goods and thus the
businessmen assemble the goods before stipulated time.
• The businessmen, who have no warehouse or there is limited space is
bonded warehouse, they may store their stocks in hired warehouse. Thus,
the business has no limitation because of non-availability of space.
 Functions of warehouse
• When the shops are near to warehouse, the retailers can make the goods
available to the customers at less expense. It may be pointed out here that
in absence of warehouses a wide and large shop is needed. This will
increase the establishment cost of the shop. Ultimately the price is
increased.
• The imported goods can keep in the warehouse situated on the port, when
they are to be exported. This saves the expenses to the businessmen. In the
absence of warehouse, they would have to take the goods to their own
warehouse, and again to the port for export.
 Functions of warehouse
• The importers are not required to pay import duty immediately because of
warehouse facility on the port. The goods unloaded from the ship can be
kept in bonded warehouse till the import duty is paid.
• Loans may be taken from the owner of the warehouse on the security of
goods stored in the warehouse on the security of goods stored in the
warehouse.
 Importance of warehousing
• Warehousing provides storage of raw material, party finished goods, finished
goods, spare parts and equipment awaiting transport, processing or sale.
• Warehousing provides storage for seasonal goods such as Christmas cards,
jerseys, umbrellas, raincoats etc.
• Warehousing reduces losses of goods due to theft, bad weather and
deterioration.
• Warehousing allow production of goods to tack place ahead of demand.
 Importance of warehousing
• Warehousing stabilises prices of goods by storing goods when they are plentiful and releasing them
gradually when they are in short supply.
• Warehousing helps to prevent shortages by storing goods when they are in abundant and releasing
them gradually unto the market when goods are in short supply.
• Warehousing storage goods awaiting payment of customs duty such as the goods stored in bonded
Warehousing.
• Warehousing enables goods to be prepared for sale by allowing the repacking, blending and
bottling of goods to tack place during storage time.
• Warehousing is important for the storage of goods whist in transit at railway station, airports,
seaport etc.
 Types of Warehouse
• Large scale retailers Warehouses: These are Warehouses owned by large
companies such as pep stores, Shoprite checkers, manufacturers awaiting
to process the raw material into a finished product.
 Wholesaler’s warehouses
• These large ware houses owned by wholesalers where they store goods bought from
manufactures awaiting sales to retailers.
• They allow there- packaging of goods into smaller units to suit the requirements of
retailers.
• They allow the preparation of goods for sale such as blending, branding, bottling etc.
• They allow particularly small retailers to inspect goods before they buy.
• They prevent theft and damage of goods.
• They provide storage for seasonal goods such as jerseys, umbrellas, etc.
 Importance of retailers Warehouses
• Importance of retailers Warehouses
• They enable goods to be prepared for sale, for example by retailers
breaking the bulk into smaller quantities to suit the requirement of
consumers: pricing of goods, blending and branding of goods etc.
• They reduce losses of goods due to theft, weather and deterioration.
• They allow the stocking of large quantities of goods for supplying to
branch outlets.
 Manufacturers’ warehouse
These are warehouses owned by manufacturers where they store raw materials, spare parts,
tools and equipment required for manufacturing process.
• Importance of Manufacturers’ Warehouses:
• They provide storage for raw materials that enables production of goods to go on without
interruption.
• They allow production of goods to take place in anticipation of demand.
• They provide storage for seasonal goods such as Christmas cards and raincoats
• They prevent shortage by storing goods when they are plentiful on market and releasing
them gradually when they are in short supply
 Cold storage warehouses
These are cold rooms in which items like fresh fish, fresh meat, vegetables,
and fruits and so on stored. They were equipped with frozen units.
• Importance of Cold storage Warehouses:
• They reserve seasonal agricultural goods such as maize. Tomatoes and
pumpkins and so on for supply to consumers throughout the year.
• They enable perishable goods such as fresh fish, fresh meat and so on to
be exported to any part of the world without going bad.
 Public warehouses
• Public warehouses are found at railway stations, airports and seaports where goods in
transit are stored. They may be equipped with frozen units and heating facilities for storing
goods that require special storage conditions.
• Importance of Public warehouses:
• They provide storage for goods awaiting transport at railway stations, airports and seaports.
• They protect goods from losses due to theft and bad weather.
• They facilitate international trade by providing storage for goods awaiting transport or
awaiting customs clearance.
 Bonded Warehouses
Bonded warehouses are used for the storage of dutiable goods on which
customs duty has not yet been paid. They may be owned by private
individuals, or by companies, or by government. They are under the strict
control of the customs and excise duty.
• Anyone who owns a bonded warehouse enters into a bond (agreement)
with the customs and excise authority not to release dutiable goods kept in
a bonded warehouse until when customs duty is paid.
 Importance of bonded warehouses
• They allow for the preparation of goods for sale such as bottling,
blending, grading, and branding during storage.
• They enable goods to be offered for sale while in bonded warehouse.
• They allow the importer to transfer payment of customs duty to the new
buyer.
• They provide protection for goods against theft and weather.
When can a bonded warehouse be preferred to
other types of warehouses?
• When dutiable goods are imported and the trader does not have enough
money to pay customs duty.
• When the goods imported are not urgently required and need to be kept in
a bonded warehouse under the control of the customs and excise authority
until they are removed.
 Documents Used In Warehouse
• Warehouse receipt
• Delivery Order
• Docks Receipt: (a structure built out over water in a port along which ships can land to
load and unload, or the enclosed area of water between two such structures. ) Document
issued by a shipping company to acknowledge that goods have been received for
shipment.
• Document guaranteeing the existence and availability of a given quantity and quality of
a commodity in storage for safekeeping; often used in cash