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Transcript of Final Projct
1
LIST OF FIGURES/DIAGRAM
Chapter No Title
Page
No
7 Logistics Marketing 72
7.1 Conceptual model and statement of purpose 73
7.2.1 4 Ps of marketing 74
7.4 Total Cost Concept 79
2
LIST OF TABLES
Chapter No Title Page No
8 Research Design 102
8.1.1 Data Analysis 109
3
LIST OF ABBREVIATION
1) JNPT- Jawaharlal Nehru Port Trust
2) CHA- Custom House Agent
3) ICD- Inland Container Depot
4) LCL- Less Container Loaded
5) ICES- Indian Customs EDI System
6) EDI- Electronic Data Interchange
7)TEU- Twenty Equivalent Unit
8) ODC- Over Dimension Container
9) IGM- Import General Manifest
10) NOC- No Objection Certificate
11) CBT- Close Body Truck
12) FOB - Freight on Board
13) ACC- Air Cargo Complex
14) CFS - Container Freight Station
15) CAN- Cargo Arrival Notice
16) SMTP- Sub Manifest Transport Pass
17) GSP - General System of Preferences
18) SEZ - Special Economic Zone
19) IEC - Import Export Code
20) CCP- Custom Clearance Permit
21) EPZ- Export Processing Zone
22) DEEC- Duty Exemption Entitlement Certificate
23) DERC- Duty Free Replenishment Certificate
24) EOU- Export Oriented Unit
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25) RCMC- Registration Cum Membership Certificate
26) CIF- Cost, Insurance and Freight
27) DDP- Delivery Duty paid
28) DEPB- Duty Entitlement passbook scheme
29) DGFT- Director General for foreign trade
30) FDI- Foreign Direct Investment
31) OGL- Open General license
32) NAFTA- North American Free Trade Agreement
33) SIL- Special Import License
34) GATT- General Agreement on Tariff and Trade
35) FTZ- Free Trade Zone
36) AEZ- Agriculture Export Zone
37) TOM- Total Quality Management
38) ISO- International standards Organization
39) NTB- Non Tariff Barriers
40) WTO- World Trade Organization
41) ASEAN- Association of South East Asian Nations
42) FICCI- Federation of Indian Chamber of Commerce & Industries
43) FEDA- Foreign Exchange Dealers Association of India
44) EIC- Export Inspection Council
45) EHTP- Electronic Hardware Technology Parks
46) FIEO- Federation of Indian Export Organisation
47) IIP- Indian Institute of Packaging
48) MFN- Most Favoured Nation
49) TDA- Total Development Authority of India
50) DFRC- Duty Free Replenishment Certificate
5
CHAPTER 1
EXECUTIVE SUMMARY
6
EXECUTIVE SUMMARY:
The real growth that Indian GDP has (greater than 7.5% in 2005) is reflected
in its international trade and consequently in the traffic growth that ports
have been witnessing over the past few years. This trend in growth is
expected to continue, with international trade expected to grow at a rate even
higher than at present. JNPT has an important place amongst Indian ports due to the kind of traffic
that it serves as well as being a pioneer in involving large-scale private
sector participation. The report considers a large range of topics related to
Role of EXIM Documentation and Marketing in Logistics Management. It
includes the topics such as
The process of Export Import
Documents required for Logistics Management
Marketing concept
Relation of Marketing mix with the total cost of logistics
SWOT Analysis of JNPT
The report also includes the strategy to achieve the goals of increasing traffic
focussing on the following elements –
• Cost: JNPT endeavours to reduce costs by improving efficiency and
thereby ensure competitive services for user.
• Customers: JNPT attracts and retain customers through addition of core
and value added services.
7
• Geographies: JNPT focus on the northern and Maharashtra region and
would enable traffic from the regions through planned development within
and nearby the port.
• Services: JNPT provides value added services and would capture a larger
share of the logistics value chain.
The strategy for achieving the goals needs to be supported by a financial and
commercial strategy.
• Commercial Strategy: The commercial strategy deals with the three levers
of customer management, cost management and service offerings of the
port. It is aimed at achieving commercial success within the operating
business environment through effective management of customers and
suppliers.
• Financial Strategy: The financial strategy of the port focuses on utilization
of financial resources of the port. It delineates the sources of finance and
expected costs.
8
CHAPTER 2
OBJECTIVE OF THE STUDY
9
OBJECTIVE
The project entitled to carried out the following objectives:
1. To understand Indian logistics industry.
2. To understand EXIM documentation procedures
3. To identify the strategies that is currently being used by JNPT
port trust
4. To identify problems in logistic management related to
marketing and EXIM documentation.
5. To interpret solution with the help of EXIM documentation and
procedures and various marketing tools.
10
CHAPTER 3
RESEARCH METHODOLOGY
11
RESEARCH METHODOLOGY
Research Methodology is a way to systematically solve the research
problem. It may be understood as a science of studying how research is done
scientifically. It involves the various steps that are generally being adopted
by a researcher in studying his research problem along with the logic behind
them.
The objective behind this project is to understand the Role of EXIM
documentation and Marketing in logistics Management.
The information was collected in two phases, Primary phase and Secondary
phase.
Primary Phase: In the primary phase the information was collected
personally interviewing the Dy. Manager Mr. Akode and Asst. Manager Mr.
Chincholkar at JNPT.
The information was also collected for customs clearance by visiting
Custom House at JNPT. They all provided me with the necessary and
required information regarding all the objectives. The information once
collected was carefully analyzed and then a conclusion was reached to it.
Secondary Phase: In the secondary phase various books related to logistics
were referred. Various websites related to logistics were also browsed. This
helped me in gathering information related to the details about the Role of
EXIM documentation and Marketing in Logistics Management.
12
LITERATURE REVIEW
1. Ajay kumar garg, Nabhi’s How to Export, 17 revised edition, Nabhi
publications, September 2009.
New foreign trade policy and procedures 2009-14, has been announced by
the ministry of commerce & Industry on 27.8.2009. The new policy
envisages giving major boost to exports by focusing on new product and
new markets.
2. Ajay kumar garg, Nabhi’s How to Import, 17 revised edition, Nabhi
publications, September 2009.
New foreign trade policy and procedures 2009-14, has been announced by
the ministry of commerce & Industry on 27.8.2009, Making significant
changes in matters relating to import and export business.
3. Donald J. Bowersox, David J. Closs, Logistics Management-The
Integrated Supply Chain Process, Ninth Edition, Tata Mc-Graw Hill
publishing.
Over the last four decades, the decipline of business logistics has advanced
from the warehouse and transportation dock to the boardroom of leading
global enterprises. We have had the opportunity to be actively involved in
this evolution through research, education and advising.
13
4. By Dr.Khushpal. S. Jain EXPORT IMPORT PROCEDURES &
DOCUMENTATION Sixth Edition Himalaya publishing house 2008.
This is the 5th revised edition of the volume “Export Import Procedures &
Documentation” This book would serve the purpose of students pursuing
career in export import management as also other course in commercial
arena.
5. By: James.R Stock & Douglas M Lambert Strategic Logistics
Management Fourth edition Mc Graw Hill Irwin 2001
Logistics is a big business. Its consumption of land, labour, capital &
information coupled with its impact on the world’s standard of living has
enormous implication. Strategic Logistics management approaches the topic
from a managerial perspective, Each chapter introduces basic logistics
concepts in a format that is useful for management decision making.
14
CHAPTER 4
INTRODUCTION
15
INTRODUCTION :
4.1 Abstract Logistics management is increasingly becoming a topic of interest among
academicians and practitioners since it may lead to reduced operational
costs, improved delivery performance and increased customer satisfaction
levels.
The global logistics industry is estimated to be worth USD 300 billion.
Though most of the large service providers are headquartered in Europe, the
biggest market is the US, which captures about one-third of the world
market. The global logistics industry is characterized by high costs of
operations, low margins, shortage of talent, infrastructural bottlenecks,
demand from clients for investing in technology and providing one-stop
solutions to all their needs, and consolidation through acquisitions, mergers
and alliances.
Though, in India, the industry is still in its infancy, there is immense
potential for growth. The Indian logistics industry is currently plagued with
low demand, poor infrastructure, high costs, government regulations etc.
However, it is going to turn around on the back of robust GDP growth,
globalization, FDI in logistics and increasing government support. This
paper highlights the current state of the industry, including the dynamics and
opportunities for growth, globally, in general, and in India, in particular,
based on findings from surveys of logistics service providers, and users, of
India and other countries.
16
4.2 Global Logistics Industry This section gives an overview of the size of the global logistics industry and
its current status and prevailing dynamics.
Size of the global logistics industry
Currently the annual logistics cost of the world is about USD 3.5 trillion. For
any country, the annual logistics cost varies between 9% and 20% of the
GDP, the figure for the US being about 9%. US-based Armstrong &
Associates, Inc. tracks the issues and trends in the world logistics market and
in the US logistics market, in particular, in their annual surveys of top 25
global LSPs. According to the firm, the global logistics market sizes in 1992,
1996 and 2000 were USD 10 billion, USD 25 billion and USD 56 billion,
respectively. In 2003 and 2004, the corresponding figures were USD270
billion and USD 333 billion, registering high growth rates. Though most of
the large LSPs are headquartered in Europe, the US logistics market is the
largest in the world capturing one-third of the world logistics market. In
2003, it was about USD 80 billion. In 2004, it grew to USD 89 billion, and
in 2005, it registered an impressive growth rate of 16% to cross the USD 100
billion mark for the first time and reach USD 103.7 billion (Foster and
Armstrong, 2004, 2005, 2006). However, considering the fact that the
logistics market in the US is about 10% of its annual logistics cost (Foster
and Armstrong, 2006), there is still immense potential for growth of 3PL in
the US in particular, and in the world in general.
Current status and dynamics of the industry
17
The extant literature on the logistics industry points to a number of issues
that service providers have to address, such as pricing pressures, high costs
of operations and low returns on investments, hiring and retaining talent,
pressure from clients to broaden the range of service offerings and
internationalize operations, demand for customized solutions and more
value-added services, besides infrastructural bottlenecks and government
regulations. Service providers complain that clients expect them to have the
latest software, databases and ERP (Enterprise Resource Planning)
packages, and invest in new technologies such as RFID and satellite-based
real-time tracking systems. Clients perceive that these investments are part
of the basic service package, and often do not want to match the same with
increased payments for these additional services. Pressure from clients to
broaden the range of service offerings and internationalize operations, has
forced service providers to look for suitable alliances, mergers and
acquisitions that help fill the gaps in service offerings, and industry verticals
and geographic areas served, achieve economies of scale and enhance
service providers’ capability to support international operations.
Currently, the world logistics market is going through a consolidation phase.
Tibbett & Britten Group of North America was acquired by Exel Logistics
in August, 2004, and Deutsche Post World Net, parent company of DHL,
took over Exel in December, 2005. Bax Global was taken over by Deutsche
Bahn, parent company of Schenker, in November, 2005 while A. P. Möller
acquired P&O Nedlloyd in February, 2006, and TNT Logistics was sold to
Apollo Management L. P. in November, 2006. However, mergers and
18
acquisitions have their own set of problems in terms of integration of two
diverse business units. Carbone and Stone (2005) tracked the evolution of 20
leading European LSPs between 1998 and 2004 in terms of their approach to
mergers, acquisitions and alliances, and found that although growth led to
more coverage, integration of two different cultures was one of the most
difficult challenges faced by these firms in the consolidation process. Recent
trends in the logistics industry indicate that to be successful, service
providers have to differentiate themselves from their competitors in terms of
offering value-added services, focus on key customer accounts that have the
potential to generate high profitability for a long term, enter into suitable
alliances to complement the range of services offered and geographic areas
served, and sell logistics services to clients’ suppliers and customers, thus
leading to complete supply chain integration.
4.3 INDIAN LOGISTICS INDUSTRY – AN OVERVIEW
The major logistics functions for the Indian industries include
Transportation, Warehousing, Freight Forwarding, and other Value Added
Operations including Management of Information Systems (MIS).of these
functions, transportation and freight forwarding have been traditionally
outsourced to external service providers with relevant expertise and
infrastructure. The warehousing and MIS functions have been mostly
managed in-house by industries.
India spends 13% of its GDP on logistics compared to an average of 10% in
other developing countries. Worldwide, better supply chain management has
19
reduced logistics costs by nearly 1% in 10 years. The India industry is
looking at this improvement in the supply chain and logistics activities as a
means to gain the competitive edge by adopting logistics and SCM concepts
& practices.
This has created a need for a range of Logistics and SCM solutions
ranging from logistics, supply chain, transportation and material handling to
storage, warehousing, IT, inventory management, etc., that benefit the
productivity and efficiency of the entire value chain in the multiple
dimensions of customer service ,costs, profits and speed.
The Indian logistics and transport industry has a huge potential growth
prospects for local and foreign operators alike. A liberalizing market,
massive investment in infrastructure, increasing levels of disposable income
and dynamic manufacturing and retail sectors are combining to produce a
market environment which could one day rival the fast moving Chinese
economy.
JNPT was established with the goal of creating a world-class port in India.
Indeed, it clearly enjoyed an edge over other Indian ports with respect to
both infrastructure and performance even in the pre-reforms period.
However, it suffered from some of the inherent drawbacks ailing the Indian
port sector that prevented it from achieving world standards in port
efficiency. As the most modern among Indian ports, and also the one with
the least labor problems, JNPT was the natural choice as a test case in
privatization of port operations..
20
It is clear that the reform process was well designed and optimally
sequenced with active participation of a wide range of actors. The nitty-
gritty of the reform process at JNPT was not imposed top-down. The reform
has been a reasonable success. With the creation of a new private terminal
and the follow-up measures undertaken thereafter, JNPT has demonstrated
its capability to enhance efficiency of the public terminal through the
introduction of intra-port competition and it has succeeded in earning the
distinction of being the world's 29th largest container port .In 2006,JN Port
rank 28th in the world. .
Size of the Indian logistics industry
The annual logistics cost in India is estimated to be 14% of the GDP, which
translates into USD 140 billionassuming the GDP of India to be slightly over
USD 1 trillion. Out of this USD 140 billion logistics cost, almost 99% is
accounted for by the unorganized sector (such as owners of less than 5
trucks, affiliated to a broker or a transport company, small warehouse
operators, customs brokers, freight forwarders, etc.), and slightly more than
1%, i.e. approximately USD 1.5 billion, is contributed by the organized
sector. So, one can see that the logistics industry in India is in a nascent
stage.
However, the industry is growing at a fast pace and if India can bring down
its logistics cost from 14% to 9% of the GDP (level in the US), savings to
the tune of USD 50 billion will be realized at the current GDP level, making
21
Indian goods more competitive in the global market. Moreover, growth in
the logistics sector would imply improved service delivery and customer
satisfaction leading to growth of export of Indian goods and potential for
creation of job opportunities.
22
Logistics: Moving up profits
India’s logistics sector attracted investments worth Rs. 23,200 crore in
first half of 2008.
It outclassed some of the major sectors including aviation (Rs 20,890
crore), metals and mining (Rs 8500 crore) and consumer durables (Rs
6000 crore) among others.
Mumbai has emerged as the preferred location for the development of
logistics parks with an investment of approximately $ 200 million.
The development of seven to eight logistics parks are in pipeline on
600 acres around Mumbai.
A large number of upcoming SEZs have necessitated the development
of logistics for the domestic market as well as for global trade.
Indian logistics industry is expected to grow annually at the rate of 15-
20 percent, reaching revenues of approximately $ 385 bn by 2015.
Market share of organized logistics players is also expected to double
to approximately 12 percent during the same period.
About 110 logistics parks spread over approximately 3,500 acres at an
estimated cost of $1 bn are expected to be operational and an
estimated 45 mn ft2 of warehousing space with an investment of $
500 mn is expected to be developed by various logistics companies by
2012.
23
CHAPTER 5
ABOUT JNPT
24
5.1 Mission
The port is committed to meeting the needs and expectations of its customers
through:
Equipping itself with state-of-the-art equipment and technology and
efficient, professional and computer integrated terminal operation
systems.
Conforming to international standards and offering competitive rates.
Ensuring security and safety of life, equipment and cargo.
Perceiving the principles of sustainable development.
Courtesy to Customers.
Container Terminal:
Three berths (Linear quay length of 680 Metres)
Can handle third generation container vessels.
Rail mounted quay cranes - (RMQC): 8
Post Panamax - 6 No.
Super Post Panamax - 2 No
Rubber tyred gantry cranes - (RTGC): 18 numbers
Rail mounted gantry cranes - (RMGC): 5 numbers.
25
Present capacity: 6,00,000 TEUs per annum.
Main Container yard: 35 hectares (30,000 TEUs capacity)
Additional paved area: 1,80,000 square metres.
Reach stackers: 10 numbers.
Tractor Trailers: 120 numbers.
Fork lifts: 3 numbers.
Reefer slots: 280 numbers.
26
5.2 Rail Infrastructure at JNPT
JNPT is linked with the Indian railways though a lead line connecting the port
with it serving station Jasai. Jasai itself is located on the Panvel – Uran branch
line section of Mumbai division, Central Railway at a distance of 9 km from the
port. The rail system at the port, which is now owned, operated and maintained
by the Indian railways, has 8 full length railway lines serving the three existing
container terminals, besides a 4 line intermediate holding yard between Jasai and
the port. The Jasai station yard deals with all traffic to and fro from JNPT and the
Indian Oil Tank farm Ltd. The 4 line intermediate holding yard between Jasai and
the port serves to hold back and regulate traffic in the event of congestion at
JNPT or at Jasai yard. Inside JNPT the rail infrastructure of 10 lines are divided
by terminals as follows:
JNPCT - 4 lines (line no 1 & 2 , as well as 6 & 8). Line no 6 & 8 are
currently being served by reach stackers but conversion to a full fledged
ICD with RMGCs and under the gantry stacking facilities is underway.
NSICT - 2 lines (line no. 4 & 5)
GTIPL - 2 lines (line no. 9 & 10)
Line no 3 & 7 are used as a common engine run round line and do not
handle container traffic.
ICD lines 1 & 2 are served by 3 Rail Mounted gantry cranes with a span of 25.5.
m and lift capacity of 35.5 tonnes. Line nos. 4 & 5 are served by 3 RMGCs
27
Rail Operations at JNPT
The handling of container trains is done by 3 main agencies – Railways,
CONCOR and the terminal operators. Railways provide the fixed infrastructure in
the form or track, motive power and train crews. They have a small component of
staff responsible for ensuring safe/receipt dispatch of container trains and
compliance with regulations related to safe movement of trains.
CONCOR is presently the sole provider of rail-borne container transportation
between the port and the hinterland. It owns all container flat cars as well as a
large number of ICDs in port hinterlands. It is responsible for advising the
terminal operators of the incoming container trains, particulars of containers to be
unloaded and destination for each outward container train.
The terminal operator is responsible for the unloading and loading plan of each
individual train and deploys the required tractor trailers (TT) and RMGCs for
timely completion of loading/unloading operations.
28
29
ICD (INLAND CONTAINER DEPOT)
5.3 COMPETITIVE POSITION JNPT has a significant share of the western coast container traffic. Over the
past 11 years this share has grown (83% in 05-06) indicating that the western
coast traffic is primarily serviced by JNPT. ICD traffic from roads in India is
minimal. The ICD split of rail traffic at JNPCT terminal shows that the ICD
traffic at JNPT is contributed primarily by the northern regions (over 70%). This
indicates that JNPT serves primarily as a port for the northern and western traffic.
The traffic from Eastern, Central and Southern regions is less than 10% in
comparison indicating that southern regions contribute marginally to
JNPTs traffic.
30
More than 40% of up-country cargo is being transported to Container Freight Stations (CFSs) for carting; containerized at CFS and transported to JNPT for loading on the vessels at JNPCT, NSICT and GTI.All the above CFS Operators facilitate stuffing and destuffing for quick turnaround of containers to catch the vessels and reduce the inventory cost for the shipping lines.
Sr.No. CFS Total Area in Sq. Mtrs. Estimated Capacity(TEUs)
1 JNP-CWC 215,000 60,000 2 CWC Kalamboli 90,000 48,000 3 CWC-D’Node 195,000 90,000 4 MAERSK 70,000 90,000 5 CONWARE 107,700 72,000
6 GATEWAY DISTRIPARK 150,000 180,000
7 CONCOR DRT 62,000 72,000
8 BALMER LAWRIE 90,000 75,000
9 CWC Distripark 125,000 60,000
10 Sea Bird Marine Service 25,000 50,000
11 Trans India 70,000 40,000 12 ULA 20,000 25,000
13 Maharashtra State Ware Housing Corporation
29,010 36,000
14
M/s. CONTINENTAL WAREHOUSING CORPORATION (NHAVA SEVA) LIMITED
35 acres 10 to 12 thousand teu per month with 3 covered Warehouses
Future coming CFS 1 Ameya- CFS 1,13,000 48,000
2 JWC Logistic Park(ICD) 34,000 55,000
3 Priti Logistic (ICD) 40,000 15,000
31
5.4 Berthing Facilities At present JNPT has three container terminals; JNPCT, NSICT
and GTICT. Apart from this JNPT also has a shallow berth and two
captive liquid cargo berths for BPCL. JNPCT is operated by JNPT and
NSICT (set up on BOT basis). The Bulk cargo terminal comprising the
bulk berth and two multipurpose berths are under conversion as a Third
Container Terminal (on BOT basis) by a consortium of MAERSK
and CONCOR as GTICT.
Liquid Chemical Terminal – Bharat Petroleum Corporation Limited
(BPCL) and Indian Oil Limited (IOL) are operating a liquid bulk terminal
on BOT basis to handle bulk liquid chemicals, POL and edible oil.
Shallow Water berth - It can handle 165 m LoA for break bulk and container
purposes
BPCL
Liquid Cargo Jetty: A license on BOT basis was awarded to M/s. Bharat Petroleum Corporation Limited and M/s. Indian Oil Corporation Limited in August 1999 for construction of a twin-berth liquid cargo jetty. The twin-berth liquid cargo jetty is functional from March 2002.
32
A twin berth liquid cargo jetty developed by M/S Bharat Petroleum
Corporation Limited and IOC Limited on BOT basis for handling liquid cargo
including POL products
A 300 mtrs long and 40.5 mitres. wide Jetty.
Having capacity to accommodate two vessels: of 85,000 DWT in seaside
berth & 30,000DWT on shore side berth.
The dredged draught on seaside is 13.5mtrs. and 12 mtrs. on shore side.
Three docklines are provided for White and Black Oils.
Estimate to handle 4.0 million tonnes of cargo by next 5 years.
Capacity5.5 million tonnes per annum.
Jetty is provided with six no.s of 12' marine loading and unloading arms (03
no.s on seaside and 03 no.s on shore side), fire fighting system as per OISD
156 norms and state-of-art environmental protection measures.
NSICT
Private Container terminal (NSICT):
In view of continuous growth in container traffic and meet growing demand
of business community and trade partners to have additional facilities for
handling the same, the Port took initiative for the first time in India to
33
introduce the private participation and invite global tenders for developing
new Container Terminal to augment container handling capacity of JN Port.
JN Port entered into a license agreement in July 1997 with M/s. NhavaSheva
International Container Terminal (NSICT) a consortium led by M/s. P & O
Ports, Australia, for construction, operation and management of a new 2 berth
container terminal on BOT basis for period of 30 years. The same was fully
operational from July 2000. The project comprises construction of 600 Mtrs.
quay length; reclamation of 20 hectors of area for container yards and
requisite container handling equipment along with other related facilities. The
design capacity of this new 2-berth container Terminal was considered as 7.2
Million Tonnes per year. However, this capacity is further augmented and
currently assessed as 15.6 million tonnes per year.
No of ground slots: 6222 ground slots, out of which 620 ground slots at
ICD.
600 Metres linear quay length
Rail mounted quay cranes - (RMQC)
Post Panamax - 6 numbers
Super Post Panamax - 2 numbers
Rubber tyred gantry cranes - (RTGC): 29 numbers
Rail mounted gantry cranes - (RMGC): 3 numbers.
Reefer points: 672 numbers.
Backup Area - 26 Hectares (Container Yard)
Railway Sliding for ICD - Two Tracks
Tractor Trailers - 34 numbers owned about 100 numbers hired
Reach stackers - 3 numbers.
34
Empty Handlers – 2
35
Gateway Terminals India Pvt Ltd:
Gateway Terminals India (GTI) is a joint venture between APM Terminals and the
Container Corporation of India Ltd (CONCOR). Incorporated in July 2004. GTI
operates the third container terminal at Jawaharlal Nehru Port on a build, operate
and transfer (BOT) basis for a period of 30 years. It commenced partial operations
in March 2006 and became fully opoerational from October, 2006.
THE TERMINAL WILL HAVE THE FOLLOWING EQUIPMENT:
Rail-Mounted Quay
Cranes 10 nos. (post-Panamax, 18 wide reach)
Rubber-Tyred Gantry
Cranes 40(for yard operations)
Rail-Mounted Gantry
Cranes 3 (for rail transfers)
Reach Stackers 2
Empty Handlers 2
Tractor-Trailers 90
Fork Lifts (small) 4
Twin Lift Spreaders 61 mt rated load
36
5.5 JNPT Infrastructure
JNPT currently has the largest infrastructure to handle container operations.
However these will have to be enhanced in light of the increasing traffic
while maintaining similar quality.
JNPTs berth occupancy has been between 75 – 80% which indicates
requirement of additional capacity and an absence of additional capacity
may lead to loss of traffic.
The planned extension of container berth, GTI and other planned expansions
will help in maintaining the lead in infrastructure.
JNPT should also focus on improving quality and quantity of infrastructure.
Upgradation of cranes and VTS are steps that have been initiated by JNPT in
this direction.
JNPT lacks the infrastructure for ship repairing facility and there is limited
integration of processes through use of IT. These areas may need to be
strengthened in the near future to further improve JNPTs advantage in
infrastructure.
JNPT also has a large amount of land which can serve as a source of
competitive advantage through development of value added services and
facilities.
37
5.6 SWOT ANALYSIS
1. STRENGTH
A port strengths are its resources and capabilities that can be used as a basis
for developing a competitive advantage which the port currently possesses.
Location Due to its proximity to states with strong economic activity,JNPT is well
located with a well developed captive hinterland. This has been discussed in
detail in subsequent sections.
Connected to major locations in hinterland
JNPT currently has well-established rail and road networks connecting it to
many parts of the country. JNPT has the largest number of regular trains
visiting it. However JNPT has started to face pressures on connectivity and
these have been discussed separately in threats.
Financial Position
JNPT has a healthy financial position with strong reserves and minimal
liabilities. Exhibit 4.1.5 indicates that profitability ratios have gone up over
the last few years.
2. WEAKNESS
A port weakness are resources and capabilities that the port lacks in
comparisons to its competitors currently.
Restrictions arising from limited draft
Only vessels with a maximum draft of 12.5 m can arrive at JNPT using tidal
window.
Vessels with a draft above 12.5 m cannot call at JNPT at any state of the
tide.
38
Distance from major shipping routes for transshipment–
Ships visiting JNPT require significant deviation from major shipping routes
Competitors like Salalah, Cochin and Colombo have an advantage of
significantly lesser deviation from mainline routes such as Europe Asia and
the America- far east route.
Limited space for expansion from a longtermperspective –
Elephanta island limits the sea side expansion due to its status as an
archaeological site. Sheva hill acts as a natural barrier to the expansion of
container yard operations.
The physical limit of expansion of the port will probably have been reached
after
dredging and reclamation for fourth container terminal
Customer service
With competition expanding, JNPT will need to improve its customer facing
processes through improved marketing and account management
Shortage of staff in key areas
JNPT is facing shortages of skilled staff such as marine engineers, pilots and
IT. Rise in average age of staff is also an area of concern for the port. JNPT
faces issues in retention of people owing to competition from private sector
offering larger incentives.
Infrastructural limitations for liquid cargo
Pipelines used at the liquid cargo jetty are of limited diameter and need to be
upgraded for higher flow rate
39
Absence of IT connectivity
The absence of IT connectivity in internal port operations such as between
terminals for handling mixed trains impacts port operations.
3. OPPORTUNITY
In a growing economy, there are a significant number of growth
opportunities, which a port can exploit. These were essentially categorized
into three types for an assessment at a high level.
Opportunities arising from export-import traffic:
These opportunities covered cargo opportunities that arise from the
export import trade in India. The opportunities included are
• Container
• Break Bulk
• LNG
• POL/crude
• Chemicals
• Coal
• Dry Bulk
• Cruise
Opportunities arising from Transshipment traffic:
The transshipment traffic opportunity for JNPT can arise from primarily two
routes, namely
• Europe Asia Route
• America- far east Route (via south Africa)
JNPT could evaluate opportunity to act as transshipment hub on these routes
40
Value Added Opportunities:
These opportunities covered areas that were beyond the core operations of
the port but were expected to supplement core port activities. These
included:
• Logistics Opportunities
• Other related opportunities
• Opportunities provide prospect of profit and growth. Opportunities arise
due to changes that are occurring or are expected to occur in the external
environment in which the port operates.
4. THREATS Threats are events that can lead to reduction of profit and growth.
Threats arise due to changes that are occurring or are expected to
occur in the external environment in which the port operates.
The number of trains required in JNPT is expected to go up in the future
with an increase in traffic.
Increase in Competition
JNPT will face increasing competition in the future from private terminal
operators
The new ports will attract traffic from Northern regions in the future
41
5.7
PERFORMANCE HIGHLIGHTS DURING 2008-09 1. JN Port handled 3.95 Million TEUs of container traffic during the Financial
Year 2008-09, as compared to the previous year’s container handling of 4.06
Million TEUs, which is 2.64% less than the traffic handled during the same
period last year. Out of the total container traffic of 3.95 Million TEUs, the
shares of JNPCT, NSICT and GTIPL are 1.06, 1.43 and 1.46 Million TEUs
respectively.
2. The Port handled 57.28 Million Tonnes of total cargo during the Financial
Year 2008-09, as compared to the previous year traffic of 55.84 Million Tonnes,
which is 2.58% more than the cargo handled during the same period last year.
Out of 57.28 Million Tonnes of cargo handled, the containerized cargo was
50.59 Million Tonnes (88.32%) and liquid cargo was 5.87 Million Tonnes
(10.24%). The remaining cargo of 0.083 Million Tonnes (1.44%) was
miscellaneous types of dry bulk (i.e. Cement) and break bulk cargo.
3. The target set by the Ministry for JN Port for the year 2008-09 was
63.50 Million Tonnes. As against this, Port achieved 57.28 Million Tonnes,
42
which is 9.79% less than the target.
4. As against the target set for container traffic of 4.16 Million TEUs, Port
handled 3.95 million TEUs, which is 4.98% less than the target.
5. Since the commissioning of the Liquid Cargo Jetty in June 2002, Port
achieved for the first time, a record throughput of 5.87 Million Tonnes of liquid
cargo during the Financial Year 2008-09, which is in excess of its design
capacity of 5.5 Million Tonnes.
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CHAPTER 6
ROLE OF EXIM PROCEDURES AND
DOCUMENTATION
44
6.1 FLOW CHART OF PROCESSING AN EXPORT ORDER.
Receipt of letter/E-Mail/fax from importer
Work out price and send proforma invoice
Receipt of LC/advance payment
Scrutinize LC for discrepancies if any
Once LC is clear advise factory for production
Contact CHA/shipping agent for vessel/freight
Pre-shipment inspection if any
CHA to liaise with customs/shipping agent for container.
Proforma Invoice, Packing list for excise supervision
Container stuffing/Excise sealing at factory
Preparation of pre-shipment documents for customs
Agent prepares shipping bill for customs.
Passing of documents by customs & presenting of container to dock
customs.
Dock customs clear shipping bill and hand over to the shipping company.
Pay freight through CHA and follow up for bill of lading.
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Preparation of post shipment documents for bank
Account credit advise/Receipt of payment
Get export incentives if any.
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6.2 PRELIMINARY ACTIVITIES BEFORE STARTING EXPORT
BUSINESS
Setting up an appropriate business organization.
Choosing appropriate mode of operations
Naming the Business
Selecting the company
Making effective business correspondence
Selecting the markets
Selecting prospective buyers
Selecting channels of distribution
Negotiating with prospective buyers
Processing an export order
Entering into export contract
Export pricing and costing
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6.2.1 SETTING UP AN APPROPRIATE BUSINESS ORGANIZATION
The first and the foremost question you as a prospective exporter has to
decide is about the kind of business organisation needed for the purpose.
You have to take a crucial decision as to whether a business will be run as a
sole proprietary concern or a partnership firm or a company. The proper
selection of organisation will depend upon
Your ability to raise finance
Your capacity to bear the risk
Your desire to exercise control over the business
Nature of regulatory framework applicable to you
6.2.2 CHOOSING APPROPRIATE MODE OF OPERATION
Merchant Exporter: Buying the goods from the market or from a
manufacturer and then selling them to foreign buyers.
Manufacturer Exporter: Manufacturing the goods you self for export.
Sales Agent/Commission Agent/Indenting Agent: Acting on behalf of
the seller and charging commission.
Buying Agent: Acting on behalf of the buyer and charging
commission.
Service Provider: Providing service from India to another country.
6.2.3 NAMING THE BUSINESS
Whatever form of business organization has been finally decided, naming
the business is an essential task for every exporter. The name and style
should be soft, attractive, short and meaningful. Open a current account in
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the name of the organisation in whose name you intend to export. It is
advisable to open the account with a bank which is authorised to deal in
Foreign Exchange.
6.2.4 SELECTING A PRODUCT
The exporter has to carefully select the product to be exported. The selected
product must be in demand in the exporting country. Besides, while
exporting the product, it has to be ensured that the exporter is conversant
with Government policy and regulation in respect of the product selected for
export. He should also know the import regulations in respect of such
commodities by the importing country.
6.2.5 MAKING EFFECTIVE BUSINESS CORRESPONDENCE
The exporter should recognize the importance of business correspondence
as it is an introduction with the buyer in proxy which may clinch his
response according to the impression created by the correspondence.
6.2.6 SELECTING THE MARKET
Target market should be selected after careful consideration of various
factors like political embargo, scope of exporters selected product, demand
stability, preferential treatment to product from developing countries, market
penetration by competitive countries and products, etc.
6.2.7 SELECTING PROSPECTIVE BUYER
The exporter can collect the addresses of prospective buyers from various
sources and use them accordingly.
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6.2.8 SELECTING CHANNELS OF DISTRIBUTION
The following channels of distribution are utilized when exporting to
overseas markets.
Exports through Export Consortia.
Export through Canalizing Agencies.
Export through Other Established Merchant Exporters or Export
houses.
Direct Exports
Exports through Overseas Sales Agencies.
6.2.9 NEGOTIATING WITH PROSPECTIVE BUYERS
Whatever the channel of distribution for exporting to the overseas countries
is proposed to be is utilized, it is essential that the exporters should possess
the necessary skill for negotiating with the overseas channels of distribution.
The ability to negotiate effectively is needed for discussion with importers or
trade agents. While conducting business negotiations, the prospective
exporter should avoid conflict, controversy and criticism vis-`-vis the other
party. During conversation the attitude should be to communicate
effectively. There should be coherence, creativity, compromise, concessions,
commonality, consensus, commitment and compensation in business
negotiations. The general problem you may face is about pricing. The
buyer's contention is that prices are too high. It should be noted that though
the price is only one of the many issues that are discussed during business
negotiations, it influences the entire negotiating process.
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Submit a typewritten list, printed on the regular bond paper and laid out
simply and clearly (with at least an inch between columns and between
groupings) Prominently indicate the name of your company, its full address,
telephone and fax numbers, including the country and city codes. Fully
describe the items being quoted. Group the items logically (i.e. all the fabrics
together, the entire made-up together etc.).
Specify whether shipped by sea or by air, f.o.b. or c.i.f. and to what port.
Quote exact amount and not rounded-off figures. Mention the dates up to
which the prices quoted will remain valid.
Where there is an internal reference number which must be quoted, to keep
it short (the buyer has no interest in this detail and the more complex it is,
the greater is the risk of error).
6.2.10 PROCESSING AN EXPORT ORDER
You should not be happy merely on receiving an export order. You should
first acknowledge the export order, and then proceed to examine carefully in
respect of items, specification, pre shipment inspection, payment conditions,
special packaging, labeling and marketing requirements, shipment and
delivery date, marine insurance, documentation etc. if you are satisfied on
these aspects, a formal confirmation should be sent to the buyer, otherwise
clarification should be sought from the buyer before confirming the order.
After confirmation of the export order immediate steps should be taken for
procurement/manufacture of the export goods. In the meanwhile, you should
proceed to enter into a formal export contract with the overseas buyer.
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6.2.11 ENTERING INTO AN EXPORT CONTRACT
In order to avoid disputes, it is necessary to enter into an export contract
with the overseas buyer. For this purpose, export contract should be
carefully drafted incorporating comprehensive but in precise terms, all
relevant and important conditions of the trade deal.
There should not be any ambiguity regarding the exact specifications of
goods and terms of sale including export price, mode of payment, storage
and distribution methods, type of packaging, port of shipment, delivery
schedule etc. The different aspects of an export contract are enumerated as
under:
Product, Standards and Specifications
Quantity
Inspection
Total Value of Contract
Terms of Delivery
Taxes, Duties and Charges
Period of Delivery/Shipment
Packing, Labeling and Marking
Terms of Payment-- Amount/Mode & Currency
Discounts and Commissions
Licenses and Permits
Insurance
Documentary Requirements
Guarantee
Force Majeure of Excuse for Non-performance of contract
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Remedies
Arbitration It will not be out of place to mention here the importance
of arbitration clause in an export contract Court proceedings do not
offer a satisfactory method for settlement of commercial disputes, as
they involve inevitable delays, costs and technicalities. On the other
hand, arbitration provides an economic, expeditious and informal
remedy for settlement of commercial disputes. Arbitration
proceedings are conducted in privacy and the awards are kept
confidential. The Arbitrator is usually an expert in the subject matter
of the dispute. The dates for arbitration meetings are fixed with the
convenience of all concerned. Thus, arbitration is the most suitable
way for settlements of commercial disputes and it may invariably be
used by businessmen in their commercial dealings.
6.2.12 EXPORT PRICING AND COSTING
Export pricing is the most important tool for promoting sales and facing
international competition. The price has to be realistically worked out
taking into consideration all export benefits and expenses.
Your prices will be determined by the following factors:
o Range of products offered
o Prompt deliveries and continuity in supply
o After-sales service in products like machine tools, consumer
durables
o Product differentiation and brand image
o Frequency of purchase
o Presumed relationship between quality and price
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o Specialty value goods and gift items
o Credit offered
o Preference or prejudice for products originating from a
particular source
o Aggressive marketing and sales promotion
o Prompt acceptance and settlement of claims
o Unique value goods and gift items
Export Costing is basically Cost Accountant's job .As regards quoting
the prices to the overseas buyer, the same are quoted in the following
internationally accepted terms:
Ex-Works, Free on Rail(FOR), Free Alongside Ship (FAS), Free on
Board (FOB), Cost and Freight (C&F), Cost Insurance Freight (CIF),
Freight or Carriage Paid (DCP), EXS/EX-Ship, EXQ/Ex-Quay,
Delivered at Frontier (DAF), Delivery Duty Paid (DDP), FAO/FOB
Airport, Free Carrier (Named Point) FRC, Freight Carriage and
Insurance Paid (CIP)
1. EX-WORKS:
The seller makes the goods available to the buyer at seller’s works.
2. FOR/FOT (Free on Rail/Free on Truck):
The seller’s responsibility ceases as soon as he loads the goods on
rail or truck at the specified point.
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3. FAS (Free Alongside Ship):
The seller’s responsibility ceases as soon as the goods are
placed/delivered alongside the ship.
4. FOB (Free On Board):
The seller’s responsibility is completed as soon as the cargo is
loaded on Board the steamer.
5. C & F (cost & Freight):
The seller’s responsibility ends after he selects the steamer,
negotiates the freight & delivers the goods at the destination port.
The freight is paid by the seller.
6. CIF (Cost Insurance & Freight):
In addition to cost and freight the seller has to arrange the
insurance at his cost.
7. DAF(Delivered at Frontier):
The seller’s obligation is fulfilled when the goods have arrived at
the frontier but before the customs border of the country.
8. FOA:
This is similar to FOB but used in cases of air shipment.
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6.2.13 REGISTRATION
REGISTRATION WITH THE REGIONAL LISCENSING
AUTHORITIES: (OBTAINING IEC NUMBER)
The Customs Authorities will now allow the exporter to export or import
goods into or from India unless he holds a valid IEC number. Before
applying for IEC number it is necessary to open a bank account in the name
of the company with any commercial bank authorized to deal in foreign
exchange. The duly signed application form should be supported by the
following documents.
Bank receipt ( in duplicate ) / Demand Draft for payment of the fees
of Rs. 1000/-
Certificate from the banker of the applicant firm as per Annexure 1 to
the form given.
One copy of PAN number issued by Income Tax Authorities duty
attested by the applicant.
One copy of Passport Size photographs of the applicant duly attested
by the banker to the applicant.
Declaration by the applicant that the proprietor/partners/directors as
the case may be of the applicant company, are not associated as
proprietor/partners/directors in any other firm, which has been
caution, listed by the RBI. Where the applicant declares that they are
associated as proprietor/partners/directors in any other firm, which has
been caution, listed by the RBI, they will be allotted IEC No. but with
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an additional condition that they can export only with RBI’s prior
approval and they should approach RBI for the purpose.
Each importer/exporter shall be required to file importer/exporter
profile once with the licensing authority shall enter the information
furnished in Appendix 2 in their database so as to dispense with
changes in the information given in Appendix-2, importer/exporter
shall intimate the same to the licensing authority.
6.2.14 REGISTRATION WITH EXPORT PROMOTION COUNCILS
In order to enable the exporter to obtain benefits/concessions under the
Foreign Trade Policy, the exporter is required to register himself with an
appropriate export promotion agency by obtaining registration-cum-
membership certificate. (RCMC). If the export product is that it is not
covered by any EPC, RCMC in respect thereof may be issued by FIEO.
An application for registration should be accompanied by a self certified
copy of the Importer-Exporter Code number issued by the regional licensing
authority concerned and bank certificate in support of the applicants
financial soundness. The RCMC shall be valid for 5 years ending 31st
March of the licensing year.
6.2.15 REGISTRATION WITH SALES TAX AUTHORITIES:
Goods that are to be shipped out of the country for export are eligible for
exemptions from both Sales Tax and Central Sales Tax. For this purpose,
exporter should get himself registered with the Sale Tax Authority of is state
after following the procedures prescribed under the Sales Tax Act applicable
to his state.
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6.2.15 REGISTRATION WITH EXCISE AUTHORITIES:
Goods meant for exports are exempt from Excise duty. For this purpose, the
manufacturer and merchant exporter have two options. Either they can
deposit excise duty at the time of clearance from factory and later on take
refund or avail the procedure for export of goods without payment of duty.
POST SHIPMENT FINANCE
Post-shipment finance is the finance provided against shipping documents. It
is also provided against duty drawback claims. It is provided in the
following forms:
Purchase of Export Documents drawn under Export Order
Purchase or discount facilities in respect of export bills drawn under
confirmed export order are generally granted to the customers who are
enjoying Bill Purchase/Discounting limits from the Bank. As in case of
purchase or discounting of export documents drawn under export order, the
security offered under L/C by way of substitution of credit-worthiness of the
buyer by the issuing bank is not available, the bank financing is totally
dependent upon the credit worthiness of the buyer, i.e. the importer, as well
as that of the exporter or the beneficiary. The documents dawn on DP basis
are parted with through foreign correspondent only when payment is
received while in case of DA bills documents (including that of title to the
goods) are passed on to the overseas importer against the acceptance of the
draft to make payment on maturity. DA bills are thus unsecured. The bank
financing against export bills is open to the risk of non-payment. Banks, in
order to enhance security, generally opt for ECGC policies and guarantees
58
which are issued in favor of the exporter/banks to protect their interest on
percentage basis in case of non-payment or delayed payment which is not on
account of mischief, mistake or negligence on the part of exporter. Within
the total limit of policy issued to the customer, drawee-wise limits are
generally fixed for individual customers. At the time of purchasing the bill
bank has to ascertain that this drawee limit is not exceeded so as to make the
bank ineligible for claim in case of non-payment.
Advances against Export Bills Sent on Collection
It may sometimes be possible to avail advance against export bills sent on
collection. In such cases the export bills are sent by the bank on collection
basis as against their purchase/discounting by the bank. Advance against
such bills is granted by way of a 'separate loan' usually termed as 'post-
shipment loan'. This facility is, in fact, another form of post- shipment
advance and is sanctioned by the bank on the same terms and conditions as
applicable to the facility of Negotiation/Purchase/Discount of export bills. A
margin of 10 to 25% is, however, stipulated in such cases. The rates of
interest etc., chargeable on this facility are also governed by the same rules.
This type of facility is, however, not very popular and most of the advances
against export bills are made by the bank by way of
negotiation/purchase/discount.
Advance against Goods Sent on Consignment Basis
When the goods are exported on consignment basis at the risk of the
exporter for sale and eventual remittance of sale proceeds to him by the
agent/consignee, bank may finance against such transaction subject to the
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customer enjoying specific limit to that effect. However, the bank should
ensure while forwarding shipping documents to its overseas
branch/correspondent to instruct the latter to deliver the document only
against Trust Receipt/Undertaking to deliver the sale proceeds by specified
date, which should be within the prescribed date even if according to the
practice in certain trades a bill for part of the estimated value is drawn in
advance against the exports.
Advance against Undrawn Balance
In certain lines of export it is the trade practice that bills are not to be drawn
for the full invoice value of the goods but to leave small part undrawn for
payment after adjustment due to difference in rates, weight, quality etc. to be
ascertained after approval and inspection of the goods. Banks do finance
against the undrawn balance if undrawn balance is in conformity with the
normal level of balance left undrawn in the particular line of export subject
to a maximum of 10% of the value of export and an undertaking is obtained
from the exporter that he will, within 6 months from due date of payment or
the date of shipment of the goods, whichever is earlier surrender balance
proceeds of the shipment. Against the specific prior approval from Reserve
Bank of India the percentage of undrawn balance can be enhanced by the
exporter and the finance can be made available accordingly at higher rate.
Since the actual amount to be realised out of the undrawn balance, may be
less than the undrawn balance, it is necessary to keep a margin on such
advance.
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Advance against Retention Money
Banks also grant advances against retention money, which is payable within
one year from the date of shipment, at a concessional rate of interest up to 90
days. If such advances extend beyond one year, they are treated as deferred
payment advances which are also eligible for concessional rate of interest.
Advances against Claims of Duty Drawback
Duty Drawback is permitted against exports of different categories of goods
under the 'Customs and Central Excise Duty Drawback Rules, 1995'.
Drawback in relation to goods manufactured in India and exported means a
rebate of duties chargeable on any imported materials or excisable materials
used in manufacture of such goods in India or rebate on excise duty
chargeable under Central Excises Act, 1944 on certain specified goods. The
Duty Drawback Scheme is administered by Directorate of Duty Drawback in
the Ministry of Finance. The claims of duty drawback are settled by Custom
House at the rates determined and notified by the Directorate. As per the
present procedure, no separate claim of duty drawback is to be filed by the
exporter. A copy of the shipping bill presented by the exporter at the time of
making shipment of goods serves the purpose of claim of duty drawback as
well. This claim is provisionally accepted by the customs at the time of
shipment and the shipping bill is duly verified. The claim is settled by
customs office later. As a further incentive to exporters, Customs Houses at
Delhi, Mumbai, Calcutta, Chennai, Chandigarh, Hyderabad have evolved a
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simplified procedure under which claims of duty drawback are settled
immediately after shipment and no funds of exporter are blocked.
However, where settlement is not possible under the simplified procedure
exporters may obtain advances against claims of duty drawback as
provisionally certified by customs.
Negotiation of Export documents Drawn under L/C
This aspect has been discussed in the chapter on Special Care for negotiation
of Export Documents under Letter of Credit.
6.3 NEW EXCISE PROCEDURE
All excisable goods exported out of India are exempt from payment of
Central Excise Duties, for which two different procedures have been
approved
6.3.1 REBATE OF DUTY ON GOODS EXPORT PROCEDURE
Under the first procedure, known as 'Rebate of duty on Goods Export. The
manufacturer has first to pay the excise duty on goods meant for export and
then claim refund of the same after exportation of such goods to countries
except Nepal and Bhutan. This is done under Rule 12 of Central Excise
Rules. Under this rule, rebate of duty is granted for the finished stage as well
as input stage. Rebate of duty in respect of the excisable materials used in
the manufacture of the exported goods shall not be allowed if the exporter
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avails of the drawback allowed under the Customs and Central Excise Duties
Drawback Rules, 1995 or Modvat. The following procedure should be
followed while exporting under the rebate of duty. Removal of goods under
claim of rebate from a factory or warehouse without examination by the
Central Excise Officers. The exporters are allowed to remove the goods for
export on their own without getting the goods examined by the Central
Excise Officers. Form AR4 in such cases should be prepared in sixtuplicate,
giving all particulars and declarations. The exporter shall deliver triplicate,
and quadruplicate, quintuplicate and six tuplicate copies of AR4 to the
Superintendent of Central Excise having jurisdiction over the factory or the
warehouse, within 24 hours of the removal of the consignment and would
retain the original and duplicate copies for presenting along with the
consignment to the Customs Officer at the point of export. The jurisdictional
superintendent of Central Excise examines the information contained in AR4
and verifies the facts of payment of duty and other certificates/declarations
made by the exporter. After he is satisfied that the information contained in
the AR4 is true, he signs at appropriate places in the four copies of AR4
submitted to him and plus his stamp with his name and designation below
his signature. He would then dispose of the triplicate, quadruplicate,
quintuplicate and six tuplicate copies of AR4 as under:-
i. Triplicate: To there bate sanctioning authority viz. Maritime
Commissioner of Central Excise or the assistant commissioner of
Central Excise declared by the exporter on the AR4. This copy on the
request of exporter may be sealed and handed over to the exporter /
his authorized agent for presenting to the rebate sanctioning authority.
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ii. Quadruplicate: To the Chief Accounts Officer in the
Commissionerate Headquarters.
iii. Quintuplicate: Office copy to be retained by the Central Excise
Officer.
iv. Sixtuplicate: To be given to the exporter.
6.3.2 PROCEDURE FOR EXPORTS UNDER CENTRAL EXCISE
SEAL
Where the exporter desires the sealing of the goods by the Central Excise
Officers so that the export goods may not be examined by the Customs
Officers at the Port/Airport of shipment, he should present an AR4
application in sixtuplicate to the Superintendent of Central Excise having
jurisdiction over the factory/warehouse at least 24 hours before the intended
removal of the export goods from the factory/warehouse. The
Superintendent of Central Excise may depute an Inspector of Central Excise
or may himself go for sealing and examination of the export consignment.
Where the AR4 indicates that the export is in discharge of an export
obligation under a Quantity-based advance License or a Value-based
Advance License issued under the Duty Exemption Scheme, in such cases
the consignment is invariably examined and sealed by the Superintendent of
Central Excise himself. The Central Excise Officer examining the
consignment would draw samples wherever necessary in triplicate. He
would hand over two sets of samples, duly sealed, to the exporter or his
authorized agent, for delivering to the Customs Officers at the point of
export. He would retain the third set for his records. The export consignment
is carefully examined vis-`-vis the description of goods, their value and other
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particulars/declarations on the AR4. The Central Excise Officer verifies the
facts of payment of duty and other certificates/declarations made by the
exporter. After he is satisfied that the information contained in the AR4 is
true he would allow the clearances and also sign all the six copies of the
AR4 at appropriate places and put his stamp with his name and designation
below his signature. The copies of AR4 are disposed of as under:
Original and Duplicate: To the exporter for presenting to Customs Officer
at the point of export along with the export consignment.
Triplicate: To the rebate sanctioning authority i.e. Maritime Commissioner
of Central Excise or the jurisdictional Assistant Commissioner of Central
Excise, as declared by the exporter on the AR4. The Central Excise officer
may handover this copy under the sealed cover on exporter's request.
Quadruplicate: To the Chief Accounts Officer at his Commissionerate
Headquarters.
Quintuplicate: To be retained for records.
6.3.3 EXPORT UNDER BOND PROCEDURE
Under the second procedure known as "Exports Under Bond" goods can be
exported out of India except to Nepal or Bhutan without prior payment of
duty subject to the execution of the Bond with security / security for a sum
equivalent to the duty chargeable on the goods to be exported. This is done
under Rule 13 of Central Excise Rules which deals with export of goods in
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Bond as well as utilisation of raw materials etc. without payment of duty for
manufacture and export of excisable goods. The following procedure has
been prescribed in this regard
6.3.4 MARINE INSURANCE OF EXPORT CARGO
When the goods are ready for dispatch, the exporter should apply to the
Insurance company for its insurance in the prescribed “Declaration form”
available with the Insurance Company.
In the declaration form, the exporter has to declare the description of goods,
marks and No.s, Number and kinds of packages, its value, transportation
from the place to its destination, addresses of the exporter and importer and
the risks to be covered for insurance.
After the completion of all the formalities for insurance cover, the exporter
has to produce the Bill of Lading and the name of the ship.
The insurance company will issue the Insurance certificate as per the
declaration given by the exporter and send three copies of the same to the
exporter.
The exporter will submit Original Policy to the Bank with his other
documents.
The second copy of the policy will be sent by the importer by him along
with necessary documents.
The exporter keeps the third copy in his record for his own information
6.4 CUSTOMS AND EXPORT PROCEDURES
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PROCEDURES BY PERSON IN CHARGE OF CONVEYANCE – Any
new airline, shipping line, steamer agent should be registered in Customs
Systems for electronic processing of shipping bills etc.
The ‘person in charge of conveyance’ has to follow prescribed procedures.
ENTRY OUTWARD - The vessel should be granted ‘Entry Outward’.
Loading can start only after entry outward is granted. (section 39 of Customs
Act). Steamer Agents can file ‘application for entry outwards’ 14 days in
advance so that intending exporters can start submitting ‘Shipping Bills’.
This ensures that formalities are completed as quickly as possible and
loading in ship starts quickly.
LOADING WITH PERMISSION - Export goods can be loaded only after
Shipping Bill or Bill of Export, duly passed by Customs Officer is handed
over by Exporter to the person-in-charge of conveyance. In case of baggage
and mail bags, shipping bill is not necessary, but permission of Customs
Officer is required (section 40).
EXPORT MANIFEST - As per section 41, an Export Manifest/Export
Report in prescribed form should be submitted before departure. [The report
is popularly called as ‘Export General Manifest’ - EGM]. The details
required are similar to import manifest. Such manifest/report can be
amended or supplemented with permission, if there was no fraudulent
intention. Such report should be declared as true by the person-in-charge
signing the export manifest. This report is not required if the conveyance is
carrying only luggage of occupants.
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Exporter has to submit ‘shipping bill’ for export by sea or air and ‘bill of
export’ for export by road. Goods have to be assessed for duty, even if no
duty is payable for most of exports, as ‘Nil Duty’ assessment is also an
assessment.
6.4.1 SHIPPING BILL TO BE SUBMITTED BY EXPORTER –
Shipping Bill and Bill of Export Regulations prescribe form of shipping
bills. It should be submitted in quadruplicate. If drawback claim is to be
made, one additional copy should be submitted. There are five forms : (a)
Shipping Bill for export of goods under claim for duty drawback - these
should be in Green colour (b) Shipping Bill for export of dutiable goods -
this should be yellow colour (c) shipping bill for export of duty free goods -
it should be white colour (d) shipping bill for export of duty free goods ex-
bond - i.e. from bonded store room - it should be pink colour (e) Shipping
Bill for export under DEPB scheme - Blue colour.
The shipping bill form requires details like name of exporter, consignee,
Invoice Number, details of packing, description of goods, quantity, FOB
Value etc. Appropriate form of shipping bill should be used.
Relevant documents i.e. copies of packing list, invoices, export contract,
letter of credit etc. are also to be submitted. In case of excisable goods, from
ARE-1 prepared at the time of clearance from factory should also be
submitted.
Customs authorities give serial number (called 'Thoka Number') to shipping
bill, when it is presented.
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6.4.2 EXCISE FORMALITIES AT THE TIME OF EXPORT –
If the goods are cleared by manufacturer for export, the goods are
accompanied by ARE-1 (earlier AR-4). This form should be submitted to
customs authorities. The Customs Officer certifies that the goods under this
form have indeed been exported. This form has then to be submitted to
Maritime Commissioner for obtaining ‘proof of export’. The bond executed
by Manufacturer-exporter with excise authorities is released only when
‘proof of export’ is accepted by Maritime Commissioner or Assistant
Commissioner, where bond was executed.
6.4.3 DUTY DRAWBACK FORMALITIES –
If the exporter intends to claim duty drawback on his exports, he has to
follow prescribed procedures and submit necessary papers. The procedures
are discussed in the chapter on ‘Export Incentives'. He has to make
endorsement of shipping bill that claim for duty drawback is being made. If
he fails to do so due to genuine reasons, Commissioner of Customs can grant
exemption from this provision. [provision to rule 12(1)(a) of Duty Drawback
Rules].
6.4.4 G R / SDF / SOFTEX FORM UNDER FEMA –
Reserve Bank of India has prescribed GR / SDF form under FEMA. “G R”
stands for ‘Guaranteed Receipt’ form, while SDF stands for 'Statutory
Declaration Form’). SDF form is to be used where shipping bills are
69
processed electronically in customs house, while GR form is used when
shipping bills are processed manually in customs house.
6.4.5 OTHER DOCUMENTS REQUIRED FOR EXPORT –
Exporter also has to prepare other documents like (a) Four copies of
Commercial Invoice (b) Four copies of Packing List (c) Certificate of Origin
or pre-shipment inspection where required (d) Insurance policy. (e) Letter of
Credit (f) Declaration of Value (g) Excise ARE-1/ARE-2 form as applicable
(h) GR / SDF form prescribed by RBI in duplicate (i) Letter showing BIN
Number.
TYPES OS INVOICES:
a) PROFORMA INVOICE:
1. Quotation to exporter to importer.
2. Similar to commercial invoice add ‘proforma’
3. It means the buyer has accepted the terms and conditions of
sale
4. For obtaining import license and opening of LOC/reservation
of foreign exchange.
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b) COMMERCIAL INVOICE:
1. Documents of contents.
2. It generally contains all the information required for other
documents.
3. All details regarding consignments.
4. The main use of commercial invoice is to check whether the
proper merchandise is shipped at the agree price by the shipper.
c) CONSULAR INVOICE:
1. Special type of invoice which is required by countries like
Philippines & South America.
2. It is an invoice which is consularised by an appropriate
notation by the consular of the country of the destination of the
goods.
3. Fixing of duties in importers country correctly.
d) CUSTOMS INVOICE:
1. It is generally required by countries like USA/CANADA
etc.
2. Specific form is to be supplied by the consular office of the
importing country.
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3. These facilitates entry of merchandise into importers
country at preferential tariff rates etc.
e) LEGALISED INVOICE:
1. It is also called as vised invoice.
2. Legalised by the council of the importer’s country’s
consulate in India duly attested and stamped.
3. This type of invoice is required by Middle East countries.
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CHAPTER 7
LOGISTICS MARKETING
73
7.1 CONCEPTUAL MODEL AND STATEMENT OF PURPOSE
The logistics system provides the means for moving goods from their point
of origin to their point of consumption.
INFORMATION SYSTEMS
MATERIALS MANAGEMENT
INVENTORY
WAREHOUSING
TRANSPORTATION
CUSTOMER SERVICE
LOGISTICS MANAGEMENT
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7.2 THE MARKETING/LOGISTICS PARTNERSHIP
7.2.1 INTRODUCTION:
As a part of their marketing strategy, managers must develop what is known
as a channel of distribution that links the organization with their customers.
Based on the channel design selected, the logistics system is then structured
to support that channel.
PRODUCT
PLACE
PROMOTION PRICE
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7.2.2 MARKETING & LOGISTICS:
Logistics decisions cannot be made until management has decided on an
appropriate marketing strategy for the organization. Far-sighted managers
realize that they must first determine what their customers need and want,
then develop an integrated marketing strategy that will satisfy those desires
better than the competition.
Once a marketing strategy has been developed, managers utilize a mix of
four key variables to implement it. As shown in the above fig. these
variables are referred to as firms marketing mix. The most fundamental of
these elements is the product or service being offered to the customers.
Based on the product management must develop a price
Communicate the value of their goods or service to the market(Promotion)
and deliver the product to the consumer(Place)
The component of the marketing mix of greatest concern in the
marketing/logistics partnership is place because it encompasses logistics
decisions regarding how to best supply the product to the customer. Because
the firms logistics strategy must support its overall marketing plan, it cannot
by definition be formulated until marketing objectives have been
established. After the fundamental marketing goals have been developed
management can then address issues pertaining to logistics.
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7.3 MAKING TRADE OFFS IN LOGISTICS IS IMPORTANT
It is important to understand that a central goal of an organisation is to
maximize long term profitability or effective use of assets in the public or
nonprofit sectors. One of the key ways to accomplish that as shown in fig
below is through examining trade offs among alternatives, thereby reducing
the overall total cost of activities within a system. To better understand the
sections below explore the manner in which each of the major elements of
the marketing mix interact and are affected by logistics operations.
1. PRODUCT:
Product refers to the set of characteristics that a customer receives as a result
of a purchase. In an effort to lower price, management may decide to reduce
product quality, eliminate product features, reduce the breadth of product
offerings, reduce customer service or warranty service, or increase the time
between model changes. However any of these actions may reduce the
attraction of the product for consumers, creating a loss of customers is
thereby reducing in long term profits. To avoid making poor decisions,
management needs to understand the trade off and interrelationships
between logistics and other marketing activities.
2. PRICE:
Price is the amount of money that a customer pays for the product or service
offering. Some of the items that should be factored into price include
discounts for buying in quantities or for belonging to a certain class of
customers, discount for prompt payment, rebates, whether inventory is
77
offered on consignment and who pays delivery costs. A supplier may
attempt to increase sales by reducing the price of its product, changing the
terms or service offering. Unless the item in question is very price
sensitive(ie, sales change dramatically due to changes in price) such strategy
may create higher unit sales, but not enough to offset the lower price,
yielding lower profit. This is particularly true in mature industries where
customer demand is relatively fixed and the competition may follow the
price decrease. The sales and the profitability of the entire industry suffer.
3. PROMOTION:
Promotion of a product or service encompases both selling and advertising.
Whereas increasing advertising expenditures or the size of the direct sales
force can have a positive impact on sales, ther is a point of diminishing
returns. A point exist where the extra money spent does not yield sufficiently
high increases in sales or profits to justify the added expense. It is important
for organizations to understand when they reach that point, so that they can
avoid misallocating funds. A more prudent idea may be to try to use those
fundsmore effectively, perhaps training the sales force to provide more value
added services to the customer, or make the customer more aware of the
value added it currently provides through superior logistics service.
4. PLACE:
Place is the key element of the marketing mix with which logistics interfaces
directly. Place expenditures support the levels of customer service provided
by the organization. This includes on time delivery, high order fill rates,
consistent transit times, and similar issues.
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7.4 TOTAL COST CONCEPT
The total cost concept is the key to effectively managing logistics processes.
The goal of the organization should be to reduce the total cost of logistics
activities, rather than focusing on each activity in isolation. Reducing costs
in one area, such as transportation, may drive up inventory carrying costs as
more inventory is required to cover longer transit items, or to balance against
greater uncertainty in transit times.
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Marketing Objective: Allocate resources to the marketing mix to maximize the long run
profitability of the firm.
Logistics Objective: Minimize the total costs given the customer service objective share:
Total costs = Transportation costs+Warehousing costs+order processing and information
costs+lot quantity costs+inventory carrying costs.
PRODUCT
PLACE/CUSTOMER SERVICE LEVELS
PROMOTION PRICE
WAREHOUSING COST
TRANSPORTATION COST
ORDER PROCESSING AND INFORMATION COST
INVENTORY CARRYING COST
LOT QUANTITY COST
Marketing
LOGISTICS
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7.4.1 KEY LOGISTICS ACTIVITIES
Major Logistics Activities
a) Customer service
b) Demand forecasting/planning
c) Inventory management
d) Logistics communications
e) Material handling
a) Customer Service:
Customer service has been defined as “a customer oriented
philosophy which integrates and manages all elements of the customer
interface within a predetermined optimum cost service mix.”
Customer service is the output of the logistics system. It involves
getting the right product to the right customer at the right place, in the
right condition and at the right time, at the lowest total cost possible.
Good customer service supports customer satisfaction, which is the
output of the entire marketing process.
b) Demand forecasting/Planning:
There are many types of demand forecasts. Marketing forecasts
customer demand based on promotions, pricing, competition, and so
on. Manufacturing forecasts production requirements based on
marketing’s sales demand forecasts and current inventory levels.
Logistics usually becomes involved in forecating in terms of how
much should be ordered from its suppliers (through purchasing) and
how much of finished product should be be transported or held in each
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market that the organization serves. In some organizations, logistics
may even plan production. Thus, logistics needs to be linked to both
marketing and manufacturing forecasting and planning.
c) Inventory management:
Inventory management involves trading off the level of inventory held
to achieve high customer service levels with the cost of handling
inventory, including capital tied up in inventory, variable storage
costs. These cost can range from 14 to over 50 percent of the value of
inventory on an annual basis.
d) Logistics communications:
Communications are becoming increasingly automated, complex, and
rapid. Logistics interfaces with a wide array of functions and
organizations in its communication processes. Commmunication must
occur between:
i. The organization and its suppliers and customers.
ii. The major functions within the organization, such as logistics,
engineering, accounting, marketing and production.
iii. The various logistics activities
iv. The various aspects of logistics activity, such as coordinating
warehousing of material, work in pricess and finished goods.
v. Various memebers of supply chain such as intermediaries and
secondary customers or supliers who may not be directly linked
to the firm.
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e) Materials handling:
Materials handling is a broad area that encompasses virtually all
aspects movements of raw materials, work in process, or finished
goods within a plant or warehouse. Because an organization incurs
costs without adding value each time an item moves or is handled, a
primary objective of materials management is to eliminate handling
wherever possible. That includes minimizing travel distance,
bottlenecks, inventory levels, and loss due to waste, mishandling and
damage. Thus by carefully analyzing material flows, materials
management can save the organization significant amounts of money.
7.4.2 THE RELATIONSHIP OF LOGISTICS ACTIVITIES TO
LOGISTICS COSTS
Logistics costs are driven or created by the activities that support the
logistics process. Each of the major cost categories- transportation,
warehousing, order processing and information, lot quantity and inventory
carrying are discussed below:
a) Transportation costs:
The activity of transporting goods drives transportation costs.
Expenditures that support transportation can be viewed in many
different ways, depending on the unit of analysis. Costs can be
categorized by customer, product line, type of channel such as
inbound versus outbound etc. costs vary considerably with volume of
shipment(cube), weight of shipment, distance, and point of origin and
destination. Costs and service also vary with the mode of
transportation chosen.
83
b) Warehousing costs:
Warehousing costs are created by warehousing and storage activities,
and by the plant and warehouse site selection process.
c) Order processing/Infromation Systems cost:
This category includes costs related to activities such as order
processing, distribution communications, and forecasting demand.
Order processing and information costs are an extremely important
investment to support good customer service levels and control costs.
Order processing costs include costs such as order transmittal, order
entry, processing the order and related internal and external costs such
as notifying carriers and customers of shipping information and
product availability. Shippers have invested a great deal in improving
their information systems, to include technology such as electronic
data interchange(EDI), satellite data intermission, and bar coding and
scanning shipments and sales.
d) Lot quantity costs:
The major logistics lot quantity costs are due to procurement and
production quantities. Lot quantity costs are purchasing or production
related costs that vary with changes in order size or frequency and
include:
1. Set up costs:
i. Time required setting up a line or locating a supplier and
placing an order.
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ii. Operating inefficiency as the line begins to run or as a new
supplier is brought on board.
2. Materials handling, scheduling.
3. Price differentials due to buying in different quantities.
4. Order costs associated with order placement and handling.
e) Inventory carrying costs:
The logistics activity that makes up inventory carrying costs include
inventory control, packaging, and scrap disposal. Inventory carrying
costs are made up of many elements. For decision making purposes
the only relevant inventory costs to consider are those that vary with
the amount of inventory stored. The four major categories of
inventory cost are:
1. Capital cost or opportunity cost which is the return that the
company could make on the money that it has tied up in inventory.
2. Storage space cost which includes those warehousing space
related costs which change with the level of inventory.
3. Inventory risk cost including obsolescence, pilferage, relocation
within the inventory system and damage.
4. Inventory service cost which includes insurance and taxes on
inventory.
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CHAPTER 8
RESEARCH DESIGN
86
8.1 DATA ANALYSIS
1. What are the growth trends in the logistics industry in India? What
kind of impact has the recent slowdown had on this sector?
India's logistics sector is valued at 3.6 trillion rupees. Further, it is predicted
to grow at a Compound Annual Growth Rate (CAGR) of approximately 8%
over the next three to five years. (CII). There has been a considerable
increase in domestic and international trade volumes over the past few years
as a result of the strong economic growth and liberalisation. Consequently,
the requirement for transportation, handling and warehousing is growing at a
robust pace and is driving the demand for integrated logistics solutions.
Even in recessionary times, India as a growth market is expected to achieve
high GDP growth this year, after raking in over US$1 trillion in GDP in
2008. Internationally, the logistics sector has faced a downturn in terms of
export-imports but on the domestic front, it has been quite resilient.
2.Companies that were earlier managing logistics in-house now feel the
need to outsource these services. What kind of impact has this had on
the sector?
One of the major problems in the Indian logistics industry is high costs.
Logistics cost in India is equal to 13 per cent of the Gross Domestic Product
(GDP), which is significantly higher than those of the developed countries,
where it equates to only around ten per cent. Outsourcing of logistics to third
parties will cut down the costs and make the industry more competitive.
87
3.The recent attack on Mumbai and the usual of sea route is a cause of
concern for the coastal port as well as a threat to India. What are the
precautionary measures JNPT has taken so far
JNPT has tightened the security by adding manpower, surveillance
equipments, CCTV system, additional X-Ray machine, etc. Other essential
steps by way of educating the stakeholders, employees and people in the
neighboring areas are underway.
JNPT already has a dog squad and are going for a bomb detection and
Disposal Squad. They have a large unit of 550 CISF personnel to take care
of the security of the port and the cargo passing through it. The port had also
sent a proposal to ministry for marine commando unit. They have speed
boats for patrolling and are going to acquire one more speed boat very soon.
They have installed 2 scanners for security purpose. The ministry of
shipping started initiative to install more scanners inside the port.
4.In what extent the other govt agencies like CIDCO, NHAI, CONCOR,
and state govt are interested for the betterment of port?
CIDCO is the planning authority for the area in which the port is located.
They have also developed a dedicated area called “Dronagiri node” to cater
to the requirements of port related activities like cargo aggregation and
distribution by road/rail network, CFS, Empty container yard, and other
supporting facilities like Warehousing in large areas.
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CONCOR has also increased their frequency from 10/12 rakes to 22/25
rakes per day in an average. There is the hope that with proper hinterland
linkage everybody will forget the world congestion.
They have already floated a JV company to take care of the road
developments in the area and the said JV Co.(Mumbai-JNPT port road
company) has already completed four laning of the approach roads leading
to the national road networks.
Various future plans are under way like the dedicated Freight Corridor and
continuous coordination with NHAI, CONCOR, the state/central Govt
authorities etc for speedy implementation of various infrastructure facilities.
5.JNPT still face shortage on its infrastructure than the latest terminals.
What is your thinking? Is there any plan to upgrade its existing
infrastructure?
JNPT admits to a shortage in their infrastructure, caused by the fact that their
equipments are old. The economic life span of their QCs is 20 years and
therefore 3 of RMQCs are due for replacement.
Our plan for up gradation is to have 9 RMQCs in the main berth and
mechanise the shallow water berth by placing 2 RMCQCs there. For this
purpose, global tendering is underway for purchase of 4 new RMQCs and
Govt approval for purchase of 3 new RMQCs awaited. The new RMQCs
should be in place in 24 months, as per plan.
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6. What kind of changes do you foresee in this sector in future and how
should present and potential employees brace themselves for the same?
With supply chains getting more and more complex, the Indian logistics
sector needs to realise that, optimisation of their resources through strategic
alliances and partnerships will help reduce their overheads, costs and
improve efficiency and service delivery. Globalization coupled with
advancements in technology are increasingly compelling companies across
verticals to concentrate on their core competencies.
The present and potential employees must aim for increased awareness,
through seminars, workshops, exhibitions, bringing together the logistics
users, service providers and government. Integrated logistics solutions and
ERP will lead to faster information sharing and employees will have to be
sound with IT systems and agile enough to learn things quickly.
7.How the upcoming SEZ will help you out to reduce marketing cost?
The upcoming Special economic zone will reduce the Transportation cost as
it will be located near JNPT port area.
8. What are the primary objectives that JNPT needs to complete?
Low costs, expansion strategy, increasing traffic are the primary objectives.
9.Where do you feel the logistics providers can do cost cutting?
Transportation cost
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10.What are the problems faced in handling Documentation?
Documentation is a lengthy process and hence is quiet difficult to handle it
manually. Automate compliance processes is required to speed the cycle
times associated with tasks being performed manually, such as document
preparation and eliminate the associated errors.
Another example would be that LTL (Less than Truckload) shipments cost
more than FTL (Full Truckload) shipments. Now, when a shipper books a
LTL shipment, it has no idea about the status of its shipment after it leaves
the warehouse at the origin and before it reaches the warehouse at the
destination. The service provider may still convert this LTL shipment into a
FTL shipment at its own warehouse before delivering at the destination. So,
the shipper ends up paying LTL rates for a FTL shipment. Had there been
visibility during delivery, this problem would not have occurred.
11.What are the employment trends in this industry?
Logistics sector is the second largest source of employment in India after
agriculture with almost 23 per cent of the Indian workforce. There is ample
opportunity in this industry, both in the service provider and user segments.
Some of the common job roles are in the logistics services user domain, for
example, logistics managers and import export managers responsible for
overall coordination with service providers. Roles in warehousing include
planning and storing issues. On the Logistics Service Provider front, there
are jobs in transport, shipping, air cargo, custom clearing, etc. Again, these
91
have multiple branch offices within which there is scope for a wide range of
professionals from accounting to operations managers. On an average a
graduate who has just joined can expect a starting salary of 12000-15000 per
month.
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8.2 FINDINGS The following problems existing in the Indian logistics industry make it
unattractive for investments and also create entry barriers.
Logistics is a high-cost, low-margin business.
Economies of scale are absent in the Indian logistics industry. Even
the organized sector that contributes slightly more than 1% of the
logistics cost, is highly fragmented. Existence of the differential sales
tax structure also brought in diseconomies of scale. Though VAT
(Value Added Tax) has been implemented since April 1, 2005, failure
in implementation of a uniform VAT structure across different states
has let the problem persist even today.
Indian freight forwarders face stiff competition from multi-national
freight forwarders for international freight movement. MNCs,
because of their size and operations in many countries, are able to
offer low freight rates and extend credit for long periods. Indian
freight forwarders, on the other hand, because of their smaller size
and lack of access to cheap capital, are not able to match the same.
Moreover, clients of MNCs often want to deal with a single service
provider and especially for FOB (Free on Board) shipments specify
the freight forwarders, which most of the time happen to be the multi-
national freight forwarders. This is sort of a non-tariff barrier
imposed on Indian freight forwarders.
93
Poor infrastructure is another deterrent to attracting investments in the
logistics sector. Road transportation accounts for more than 60% of
inland transportation of goods, and highways that constitute 1.4% of
the total road network, carry 40% of the freight movement by
roadways. Slow movement of cargo due to bad road conditions,
multiple check posts and documentation requirements, congestion at
seaports due to inadequate infrastructure, bureaucracy, and delay in
government clearances, coupled with unreliable power supply and
slow banking transactions, make it difficult for exporters to meet the
deadlines for their international customers. To expedite shipments,
they have to book as airfreight, rather than sea freight, which adds to
the costs of shipments making them uncompetitive in international
markets. Moreover, many large shipping liners avoid Indian ports for
long turnaround times due to delays in loading/unloading and hence
Indian exporters have to resort to transhipments at ports such as
Singapore, Dubai and Colombo, which adds to the costs of shipments
and also delays delivery.
Low penetration of IT and lack of proper communications
infrastructure also result in delays, and lack of visibility and real-time
tracking ability. Unavailability and absence of a seamless flow of
information among the constituents of LSPs creates a lot of
uncertainty, unnecessary paperwork and delays, and lack of
transparency in terms of cost structures and service delivery. For
example, a shipper has to pay a higher freight rate if it cannot ensure
return load. At present, there is no real time process by which a
94
shipper may know about the availability of trucks and going rates at
the destination market. Therefore, it has to pay more. Had the market
information been available to both the shipper and the service
provider, the service provider’s cost structure would have been
transparent to the shipper and it would have ended paying the actual
market rate. Another example would be that LTL (Less than
Truckload) shipments cost more than FTL (Full Truckload)
shipments. Now, when a shipper books a LTL shipment, it has no
idea about the status of its shipment after it leaves the warehouse at
the origin and before it reaches the warehouse at the destination. The
service provider may still convert this LTL shipment into a FTL
shipment at its own warehouse before delivering at the destination.
So, the shipper ends up paying LTL rates for a FTL shipment. Had
there been visibility during delivery, this problem would not have
occurred.
There is lack of skilled and knowledgeable manpower in the logistics
sector. Management graduates do not consider logistics as a prime
job. To improve the status of the industry, service providers have to
move beyond the level of brokers and truckers to attract and retain
talent
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CHAPTER 9
RECOMMENDATION AND
SUGGESTIONS
96
RECOMMENDATIONS AND SUGGESTIONS:
1. Conversion of road traffic to rail traffic:
Setting up of ICD at a location where consolidation of all cargo to and
from Gurgoan is required.
The logistics providers can tie up with JNPT port, where a dedicated
Container terminal can be planned to be constructed for car traffic that
is carried from the ICD to the port.
2. Organizational improvements:
Training for double moves
Training for managerial staff
3. The cost cutting in logistics can be done in
Transportation costs as mentioned earlier
Minimum time should be used by the customs clearance
The middle chain should be followed properly for timely deliveries
4. JNPT should carefully evaluate the trans-shipment opportunity
5. Implement mechanism to IT enable activities at the port to largest extent
6. Need for EXIM based logistics infrastructure. Number of ICDs needed
would be doubled in next 5 to 10 years.
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7. There is a need for air cargo processing space, in light of cargo
capacity enhancement at airports and arrival of wide bodied jets capable
of carrying substantial cargo at economical costs. Current capacity is
50000 sq.m. And the total processing space required is 200000 sq.m. 8. At least 40 to 50 new rail/ road ICDs/ CFS across the country needed to handle the projected traffic in next 5 –10 years.
9. Cost management
To ensure that its commercial strategy is effective, JNPT would need to
effectively manage its costs. These cost savings could directly translate into
value offerings that could help in attracting customers. Cost management
could be attempted at two broad levels –
Operational Efficiency towards low costs: JNPT will continuously
strive to improve its operational efficiency levels. This could translate
into substantial operational cost savings.
Contracts with Suppliers: JNPT would ensure preparation of
detailed specifications for all contracts and orders to ensure that
quantities and goods and services procured are fit for purpose using
industry standards as the norm. Focus would be on optimal match of
requirements with order quantities. An example of cost management
in internal processes could be the introduction of automation between
CFS operators and terminal gates. A different illustration of cost
management could be training of RMQC operators for carrying out
double moves. This could translate into significant improvements in
operational efficiency and translate into long term cost savings.
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CHAPTER 10
ANNEXURE
99
10.1 QUESTIONNAIRE:
1. What are the growth trends in the logistics industry in India? What
kind of impact has the recent slowdown had on this sector?
2. What kind of changes do you foresee in this sector in future and how
should present and potential employees brace themselves for the
same?
3. Companies that were earlier managing logistics in-house now feel
the need to outsource these services. What kind of impact has this had
on the sector?
4. The recent attack on Mumbai and the usual of sea route is a cause of
concern for the coastal port as well as a threat to India. What are the
precautionary measures JNPT has taken so far
5. In what extent the other govt agencies like CIDCO, NHAI, CONCOR,
and state govt are interested for the betterment of port
6. JNPT still face shortage on its infrastructure than the latest terminals.
What is your thinking? Is there any plan to upgrade its existing
infrastructure?
7. How the upcoming SEZ will help you out to reduce marketing cost?
8. What are the primary objectives that JNPT needs to complete?
9. Where do you feel the logistics providers can do cost cutting?
10. What are the employment trends in this industry?
11. What are the problems faced in handling documentation?
100
10.2 BIBLIOGRAPHY
1. Ajay kumar garg, Nabhi’s How to Export, 17 revised edition, Nabhi
publications, September 2009.
2. Ajay kumar garg, Nabhi’s How to Import, 17 revised edition, Nabhi
publications, September 2009.
3.Donald J. Bowersox, David J. Closs, Logistics Management-The
Integrated Supply Chain Process, Ninth Edition, Tata Mc-Graw Hill
publishing.
4. By Dr.Khushpal. S. Jain EXPORT IMPORT PROCEDURES &
DOCUMENTATION Sixth Edition Himalaya publishing house 2008.
5. By: James.R Stock & Douglas M Lambert Strategic Logistics
Management Fourth edition Mc Graw Hill Irwin 2001
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10.3 WEBLIOGRAPHY
1. www.wikipedia.com
2. www.google.com
3. http://books.google.co.in/books?id=UCT71JORUPoC&pg=PP3&dq=international+logistics+problem+in+export-import+in+India#v=onepage&q=&f=false
4. http://books.google.co.in/books?id=bQ-
04WIqkl8C&pg=PA268&dq=international+logistics+problem+in+export-import+in+India#v=onepage&q=&f=false
5. (http://ezinearticles.com/?Logistics-Cost-Reduction---Best-Practices&id=814237)
6. http://www.scmlowdown.com/2009/05/how-to-reduce-supply-chain-logistics-costs/