Strategic Logistics Management Australian Expansion

Strategic Logistics Management Australian Expansion

MGT 400 Logistics Management

Introduction

Strategic Logistics Management Incorporation is a United States based third party organization whose main business is the delivery of logistics services. Currently, the company manages various warehouses in New York, New Jersey and Los Angeles. It offers expertise in ocean as well as air shipping, forwarding, ground transportation, warehousing as well as customs clearance. The company has, for the last 5 years, established an effective logistics information system that includes technology, personnel plus equipment. The logistics information system contains two significant logistics support systems- transportation management system and the warehouse management system. The company has experienced employees in the United States who handle various logistics activities in addition to providing customized logistics solutions as well as services. Strategic Logistics Management is considering expanding its global operations in Australia to offer the same services including imports, door-to-door services and exports.

Strategic Logistics Management is considering entering into a contract with Brooks Brothers Company, a clothing organization based in New York, for warehousing as well as transportation of clothing. These will be placed in different sized cardboard boxes that can easily assemble into a single load of 48 inch by 40 inch pallet. The consignment will be shipped from New York, United States to Melbourne, Australia. The each pallet will weigh 50 kilograms and the total consignment weighs 1,500 metric tons. This paper is a logistics plan for Strategic Logistics Management Company and it explores various areas of logistics management like mode of transportation, warehousing, documentation and incoterms among others.

The Products Physical Property

In the contract between Strategic Logistics Management and Brooks Brothers Company in Melbourne, Australia, the former will transport 1,500 million metric tons of clothing. The company will ship the cargo to Melbourne, Australia in cardboard boxes can assemble into a single load of 48 inch by 40 inch pallet with each pallet weighing 50 kilogram. This is a larger shipment as it is more than one twenty foot equivalent unit. According to Leachman (2008) the two commonly used international standardized container types include the 20 foot and the 40 foot containers. Given that a 20 foot container has a payload of approximately 18 to 19.5 metric tons Strategic Logistics Management Company will require at least 77 containers (1,500 metric tons divided by 19.5 metric tons) to transport cardboard boxes of clothing that can assemble into a single load of 48 inch by 40 inch pallet with each pallet weighing 50 kilogram The approximate size, payload as well as volume of a 20 foot container and a 40 foot container are illustrated in figure 1.

Figure 1: Dimensions of a 20 foot container and a 40 foot container

Dimensions 20 ft container 40 ft container
Inner length 5.90 m 12.02 m
Inner width 2.33 m 2.33 m
Inner height 2.21 m 2.21 m
Door width 2.30 m 2.30 m
Door height 2.14 m 2.21 m
     
Payload (approximately) 18-19.5 metric tons 28 metric tons

(Source: Harborside logistics, 2018)

Containerization will provide extra protection and effective handling of the cargo, but, this may increase the transportation cost. As a result the company will transport full containers to not only utilize the available space, but also to save costs. Most importantly, the company will avoid the use of less than container that consolidates cargo or consignments from various clients to avoid the risk of delays as well as abuse that may arise if one of the consignments experiences challenges in clearing customs.

Mode of Transportation

Selecting the right mode of transportation is a critical component of logistics management because it greatly affects both the profitability as well as the effectivity of the realized transportation. This is to say the selection of a suitable mode of transport provides significant financial savings and is entail for efficient import and export operation (Hall, 2012).  Generally, there are four major modes of transport: air, rail, road as well as water, and each mode of transport has its merits and demerits. The merits and demerits of a mode of transportation are decisive in choosing a certain mode or modes of transport. They include various factors like the availability of a mode of transport, speed, cost of transportation, reliability, speed, safety as well as additional services (Myerson, 2012). 

Strategic Logistics Management Company will utilize modes of transport-road, rail and water to ship the consignment from Melbourne, Australia to Los Angeles, California. Road transport provides excellent accessibility and the company will use it for door to door delivery without unnecessary transshipment of consignment. The company will use water transport because it is relatively cheaper over long distances and offers high capacity. Also, the consignment will be transported by road to railway terminus for further transportation to the port of loading.Water transport is particularly suitable for the transportation of large volume consignments, like the 2 million pounds of stainless steel brushfire mesh,over long distances. The company will use rail transport as a link between water transport and rail transport. Also, rail transport can carry large volumes of heavy goods and is relatively reliable as well as cheaper over long distances compared to road transport.

Warehousing

There are three major types of warehouses private warehousing, public warehousing as well as contract warehousing available for Strategic Logistics Management Company. Ackerman (2012) indicates that in public warehousing, warehouses are owned as well as operated by third parties and they are mainly for short term usage. The third party charges for the kind of service utilized. Private warehousing, also referred to as proprietary warehousing, is where a warehouse is operated as a division within an organization. These can be either onsite or offsite warehousing. Contract warehousing is, at its core, a variation of public warehousing where the warehouse is owned as well as operated by a third party.

Strategic Logistics Management Company will use contract warehousing to establish a long term contract with third party providers. By doing so, the organization will acquire customized space and receive customized services over a long period of time. Also, there is a trade- off between warehouse location flexibility for space assurance over the contractual period and lower price, which is normally lower than applicable warehousing rates. Most importantly, the company will have the opportunity to contract for either the entire building or for a well defined and fixed portion of cubic foot storage space.

Export and Import Documentation

Export Documentation in the United States

A company is only safe if it has proper documentation and this part covers the common documents that a company will require for exporting products away from and importing goods into the United States. The specific requirements differ by destination as well as product. If the documents are improperly prepared the shipment will experience difficulty clearing at the United States customs border, payments via letter of credit could delay leading to discrepancy charges and an importer will have challenges clearing the cargo at the port of destination. Moreover, the destination nation’s custom department may seize the shipment and either party to the transaction can be fined. The key players involved in the transaction are the seller, the buyer, the freight forwarder, the pre-shipment inspection firm, seller’s banks or another bank in the United States, the United States customs and border protections and personnel from the mode of transport (U.S. Commercial Service, 2018). Some of the basic documents are:

Commercial Invoice: This is a basic agreement as well as payment terms from a seller to a buyer. The document contains pertinent information related to a transaction and customs officials use it to determine duties as well as taxes on goods in a consignment (U.S. Commercial Service, 2018).

Consular Invoice: This is a special country invoice and some countries require specially formatted invoices. The document must be a consulate of the importing country or a freight forwarder can have the document (U.S. Commercial Service, 2018).

Certificates of Origin: This document states the origin of the consignment being exported and is required by some nations or by the terms of a letter of credit in order to verify the nation of origin. A chamber of commerce may, if necessary, certify and stamp this document.There is a standard certificate of origin document but some countries have certain form that is needed for existing free trade agreement (U.S. Commercial Service, 2018).

Packing List: This document itemizes the contents of a package, including their weights, measurements as well as detailed contents. The packing list must be attached outside of or included inside a package. Shipper and forwarders use the document to determine the cost of freight. The United States and foreign customs officials use the document to check the content of a specific package (U.S. Commercial Service, 2018).

Bill of Lading: It is a contract between a shipper and a carrier. There are two types of bill of lading-the straight bill of lading, which is non-negotiable and the shipper’s bill of lading, which is negotiable. A customer needs the original or a copy of bill of lading as proof of ownership to a particular good (U.S. Commercial Service, 2018).

Shipper’s Letter of Instruction: This is a company’s instruction to the freight forwarder.

Automated Export System: This Bureau of Census electronic form records exports and is filled out by the exporting organization of a freight forwarder. This document serves as a census record for the United States export statistics since many reports are generated using the statistics. Additionally, the automated export system serves as a regulatory document because the form should specify the applicable export license destination. The document is especially required if the value of export shipment is greater than 2,500 dollars per schedule B number. Also, it applies if all shipments require export license from governing agencies (U.S. Commercial Service, 2018).

Import Documentation in Australia

The Australian Customs and Border Protection Service enjoys the sole jurisdiction of clearing imports in the country. Importers must obtain formal custom clearance for shipment. Goods entering the country may incur good services tax, customs duty and additional taxes. Custom duty rates differ and depend on various factors like the type of goods as well as the country of origin. Nonetheless, 99 percent of goods from the United States are duty free because of the Australia United States Free Trade Agreement. Nonetheless, an importer is responsible for the applicable goods and services tax (ACBPS, 2013). Some of the most common documents are:

The Import Declaration Form (B650): All goods imported into the country with a value exceeding the import threshold of 1,000 Australian dollars must be cleared by issuing a filled in import declaration form (B650). Also, the importer must pay duty and goods and services tax as well as other applicable charges (ACBPS, 2013).

Self Assessed Clearance Declaration: An importer must submit a completed self assessed clearance declaration form for low value goods that do not meet the 1,000 Australian dollars threshold except for goods that arrived by post. In many cases the freight forwarder will make a self assessed clearance declaration on behalf of the importer. In some cases the importer may have to have to engage a self assessed clearance declaration service provider to make a self assessed clearance declaration on his or her behalf at a fee (ACBPS, 2013).

Import Declaration: Before the Customs and Border Protection can clear the goods, the importer or his agent may have to submit an import declaration. Whoever submits the import declaration must: present a correct as well as completed import declaration, provide evidence of identity of the owner, provide Australian Business Number or a Customs Client Identifier and register as a client using form B319. Also, he or she must provide bills of lading, commercial documents, invoices as well as air waybills is necessary and provide licenses, approvals or permits if required (ACBPS, 2013).

Other Documents: The minimum documentation necessary for customs clearance are a completed Informal Clearance Document, a bill of lading, an air waybill, invoices plus other documents related to the importation. A special form of invoice is unnecessary since normal commercial invoices; receipts as well as bills of lading are acceptable. The documents must contain: invoice terms, name and address of the consignor, country of origin as well as the monetary unit (ACBPS, 2013).

The Appropriate Incoterm

Based on Strategic Logistics Management Company mode of transportation, Ex Works, Free Carrier, Carriage Paid To, Carriage and Insurance Paid To, Delivered Duty Paid, Delivered at Terminal and Delivered at Place rules will apply.

Ex Works According to the International Chamber of Commerce (2010) Ex Works represents a seller’s minimum obligation because a seller should only place the goods at the buyer’s disposal. The buyer should carry out all export and import clearance tasks. The buyer must also arrange for carriage and insurance.

Free Carrier (named place): This term implies that the seller shall deliver the goods, which have been cleared for export, to a carrier nominated by a buyer at named place. The seller must pay for carriage to named place (Bergami, 2012).

Carriage Paid To (named port of destination): This term implies that a seller shall deliver goods to a carrier nominated by him and the seller must pay the necessary cost of carriage to take the goods to a named destination. A buyer, on the other hand, bears the costs incurred after the carrier has delivered the goods. The seller clears the goods for export. Carriage Paid To can be used for all modes of transport including multimodal (Bergami, 2012).

Carriage and Insurance Paid To (named place of destination). This term is similar to Carriage Paid To with the exception that a seller also must procure any transportation mode.

Delivered At Terminal (named terminal of destination): This term implies that a seller delivers the when goods once unladed from arriving means of transportation, are placed at the buyer’s disposal at the named terminal at the named place of destination. Terminal includes all places, whether covered or not, like a quay, container yard, road, rail as well as air cargo terminal or a warehouse. A seller bears all the risks associated with bringing the shipment to as well as unloading them at a named terminal at a named place of destination (ICC, & ICC, 2010).

Delivered At Place (named place of destination) – This rule can be used irrespective of the utilized mode of transport and is suitable for intermodal transportation. Delivered at Place implies that a seller delivers only when the goods are placed at the buyer’s disposal on arriving means of carriage and ready for unloading at a named place of destination. A seller bears all risks associated with bringing the goods to a named place of destination (ICC & ICC, 2010).

Delivered Duty Paid (named port of destination): This terms places maximum obligation on a seller. Nonetheless, it should not be used in case a seller cannot obtain an import license, whether directly or indirectly. Delivered at Duty Port means the same as Delivered at Place with the only exception that a seller must bear all costs as well as risks associated custom formalities such as payment of taxes, custom fees as well as duties (ICC & ICC, 2010).

Lean Six Sigma for Warehouse Operations

Lean six sigma is a combination of two philosophies or methodologies that complement each other if applied in supply chain management. The primary goals of lean is elimination of waste and decrease in work in progress inventories, which decreases process as well as manufacturing lead times, thereby increasing supply chain flow. Lean practitioners do not focus on individual costs like warehousing and transportation but on total cost. Six Sigma focuses on variation reduction in processes and implementation of improvement measures for accurate and reliable processes that center around customer expectations (Martin, 2007). Strategic Logistics Management will use these principles to uncover and minimize wastes and inefficiencies in warehouse operations. To do so, it will use the logistics bridge model to obtain the insight as well as direction on how to solve day to day warehousing challenges and put in place an effective path for continuous success. In particular, there is need for the company to bridge the gap between its clients and its own warehousing processes. This must happen with the aim of reducing costs and increasing the market share.

Budget Line Items

Budget Line Item Rationale
Shipment consolidation Cost savings management
Warehouse safety and security Efficient and safe warehouse operations
Software implementation Order management, customer relationship management, and load-planning for a truck trailer
Shipping Goods shipped outside the warehouse must be secured
Inventory management It is important to treat to minimize wastes
Organization best practices It is important to maximize the available space
Picking best practices For easy location and storage of materials leading to neater appearance and better organization

References

Ackerman, K. B. (2012). Practical handbook of warehousing. Berlin/Heidelberg, Germany: Springer Science & Business Media.

Australian Customs and Border Protection Service. (2013). Documentary import declaration comprehensive guide. Customs House; Canberra: Australian Government.

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Hall, R. (Ed.). (2012). Handbook of transportation science (Vol. 23). Berlin/Heidelberg, Germany: Springer Science & Business Media.

International Chamber of Commerce (ICC.), & Chambre de Commerce internationale (ICC.). (2010). Incoterms 2010: ICC rules for the use of domestic and international trade terms: Entry into force: 1 January 2011. International Chamber of Commerce.

Leachman, R. C. (2008). Port and modal allocation of waterborne containerized imports from Asia to the United States. Transportation Research Part E: Logistics and Transportation Review44(2), 313-331.

Martin, J. W. (2007). Lean Six Sigma for supply chain management: The 10-step solution process. New York, NY: McGraw-Hill.

Myerson, P. (2012). Lean supply chain and logistics management. New York, NY: McGraw-Hill.

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N.Y.: AMACOM

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