LOGISTICS

Management

S L Ganapathi
Managing Director
Shelka Marketing Services Pvt. Ltd
and
Chairman
Symatec Associates Pvt. Ltd
New Delhi

S K Nandi
Faculty
ICFAI Business School (IBS)
Pune

OXFORD
UNIVERSITY PRESS

DETAILED CONTENTS
Foreword v
Preface vi
Acknowledgements x
Features of the Book xii
Brief Contents xiv
List ofExhibits and Case Studies xxii
PART I: LOGISTICS INTRODUCTION AND INTEGRATION
n to Logistics
Introduction
Logistics and Supply Chain Management
Logistics ManagementBoundaries
and Relationships
Factors Impacting Logistics
Transportation Elements in Logistics
Ocean Transport 11
Air Transport 12
Road Transport 13
Rail Transport 16
Inland Waterways 16
Pipeline Transportation 16
Other Elements of Logistics
Packaging and Materials Handling 19
Interface with Other Functions 19
Information Flow 19
Integrative Nature of Logistics 20
Logistics Growth Drivers
Logistics in IndiaCurrent Context
2. Logistics in Supply Chain Context
Supply Chain Management

3
3
4
5
8
11

18

21
22
27
31

Globalization and International

Business
32
Economic Globalization 33
Financial Globalization 34
Cultural Globalization 34
Globalization and Growth in
International Trade
37
Logistics and Supply Chain
Management in a Globalized World
39
Key Issues in Supply Chain Management 40
Network Configuration 41
Supply Chain Integration and Strategie
Partnerships 42
Information Technology 42
Innovations in Logistics and Importance
of Logistics in Supply Chains
42
Design for Logistics Optimization
fapanese Hybrid Cubical Melons and
Knocked-down Furniture 42
Manufacturing Postponement to
Capture Larger Markets through
Smart Logistics 43
International Raw Material Linkage
Enabled by Logistics Strategy 44

PART II: LOGISTICS DELIVERY AND FULFILMENT

3. Unitization, Palletization, and
Containerization
Unitization
Pre-slinging 55
Advantages of Unitization 5 7
Palletization
Classification of Pallets 58
Green Pallets 59

53
54

58

51

Standards in Palletization 59
Stackability of Pallets 61
Bracing of Goods on Pallets 63
Phytosanitary Compliance and International
Plant Protection Convention (IPCC) 64
Palletization and India Supply Chain 64
Unitization of Free-flowing Bulk
CargoesJumbo Bags
65

xvi DETAILED CONTENTS

Bulk Liquid Unitization 66
Packing for Various Modes of
Transport 68
Containerization
69
Sizes of Containers and Standardization 70
Advantages of Containers 71
Materials of Construction and Design of
Containers 73
Identifying a ContainerContainer
Unique Number 73
Container Safety Convention Plating 75
Types of Containers and Cargo Profiles 76
Ownership of Containers 81
Securing of Containers 82
Container Lashing 86
Container Flaws 86
Empty Generation and Innovative
Practices Arising Out of Repositioning
Opportunities 87
Last Voyage Containers 88
Benefits of Containerization
90
Container Terminology
91
Twenty-foot Equivalent Unit 91
Fll Container Load 91
Less than Container Load 91
Container Freight Station 91
Container Yard 92
Container Movements-designations 92
4. Marine Transportation
International Maritime History
India's Maritime History
Terms Associated with Ships
Classification Societies and Registries
of Shipping 107
Vessel Ownership 108
Types of Ships
Categorization Based on the Nature
of Cargo 110
Classification of Ships by Sizes 113
Types of Shipping Services 114
Voyage Charters 115
Factors that must be kept in Mind white
Chartering Ships 115
Time Charter 116
Trip-time Charter 117
Bareboat Charter 117

99
100
101
104

110

Contract of Affreightment 117

Chartering BrokersImportant
Channel Partnership
118
Broad Categories of Broker 118
Balde Exchange
119
Liner and Container Shipping 120
Consortia Operations 121
Six Generations of Container ships 121
Service Routes
124
Hub and Spoke Approach
125
Consolidators and Less than
Container Load Services
125
Impact of IT and ITES on Container
Shipping
126
Ship Owner StrategyVertical
Integration
126
Container Logistics, Cabotage, and
Leasing
127
Container and Liner Shipping Tariff
127
Freight Structure for Less than
Container Load and Break-bulk
129
Cargoes
Fll Container Load Freight Rates 130
Terminal Handling Charges 130
Freight Rates for Special Containers 130
Surcharges 131
Role of Various Entities in Shipping
Business
132
Role of the Agent 133
Modern-day Shipping Organizations 133
Stevedores 134
Role of Surveyors 134
Duties and Responsibilities of a
Surveyor 135
Changing Landscape of Shipping
135
5. Air Transportation
Choice of Air Transportation
Classification of Aircraft
Moving Shipments by Air
Labelling and Marking 169
Unit-load Devices 170
Dangerous Goods and Regulation
of Carriage 170
Primary Cost Comparison with
Other Modes
Indian Air Cargo Industry

160
161
163
168

177
178

DETAILED CONTENTS XV
International Air Transport
Association and its Role
Air Cargo Distribution Channels
General Sales Agents 180
IATA Accredited Agents 181
Subagents 181
Air Cargo Integrators and their
Penetration into India
Air Cargo Freight Rates and Structure
Unit of Freight 183
Currency of Airfreight 184
Structure of Airfreight 184
Rate Structure with Respect
to Commodities 185
The Air Cargo Tariff
Surekarges 186
Consolidation and House Air Waybills
Market Conditions for Air Cargo
in India
6. Surface TransportRoad
Introduction
Types of Road Transport Vehicles
Three-wheeled Delivery Vans
Loadability Below 500Kgs 191
One Tonners/Sub-one Tonners 198
Light Commercial Vehicles
Heavy Commercial Vehicles
Rigid Multi-axle Vehicles 202
Semi-articulated Tractor Trailers 202
Full-tow Tracks 204
Specialty Vehicles 204
High-cube Vehicles Built-on Bus Chassis
for White and Light Goods 205
Bulk-cement Carrier 206
Heavy-lift Transport by Hydraulic Axles
and Air-cushioned Trailers 206
Transportation Services and Structure
of the IndustryTransport Contracts
Attached Trucks 211
Types of Services on Offer
Parcel Service 211
Surface Express 211
Fll truckload Services 212
Project and Heavy Lift Transport 213
Advantages of Road Transport Over
Other Modes 215

179
180

182
183

186
188
188
194
195
197

198
200

207
211

Regulatory Needs of Road Transport

Economics of Road Transport
Cost of Vehicle Financing 219
Employee Costs 219
Capital Depletion or Replacement
Recapture 219
Standing Charges 220
Price vs Costs 220
Pricing Strategy
Cost-plus Pricing 220
Value of Service Strategy 222
Combination Strategy 222
Goods Consignment Notes
Carriage of Goods across International
BorderCMR Convention
CMR Convention 224
TIR Convention 224
Road Transport Industry in India
and its Problems

216
218

220

222
224

225

7. Surface TransportRail
235
Introduction
235
Indian Railways Freight Infrastructure
237
Important Elements of Indian Railways 23 7
Gauge in Indian Railways 239
Locomotion 239
Freight Cars 240
Types of Services Offered by Indian
Railways
245
Containerization in Indian Railways
247
Containerized Cargo Commodities 248
Privatization Efforts in Railways
249
Privatuation for Port Linkages 249
Containerization and Effect on
Indian Railways 250
Automobile Freight Train Operator
Scheme 250
Railway Freight Tariff and Comparison
with Containers and Road
251
Dedicated Freight Corridors 251
Multimodal TransportSome
Unique Models in US
256
Container on Freight Car 256
Trailer on Freight Car 256
Road-railer Wagons 257
Suggestions for Optimal Use of Railway
Mode Logistics Managers 258

XVi DETAILED CONTENTS

8. Ports, Harbours, Docks,
and Terminals
Introduction
General Description of Harbour,
Port, and Docks
Harbour 267
fW 267
Dock 268
Dry Docks 269
Important Features of a Port
Drafi 269
Dredging 270
Channel 271
Towage 271
Hinterland 271
Lighthouse 272
Facilities Inside Docks
Marine Terminals 272
Bulk Terminals 273
Bulk Terminal Storage 273
Bulk Yards 275
General Cargo or Multi-purpose
Terminals 276
OilBerths 277
Terminal Warehouse and Storage
Areas 278
Bulk Material Handling Systems in Port
Terminals 278
Bulk Cargo Ship Loading 279

265
265
267

269

272

Bulk Cargo Ship Unloading Systems 279

Container Terminals 279
RO-RO Terminals 280
Single-buoy Moorings 281
Container Handling and
Transportation Equipments
282
Equipment Required for Effkient
Container Terminal Operations
284
Ship Loading Cranes 284
Yard Cranes and Shifting and Lifting
Equipment 285
Yard GantriesRubber-tyred/Railmounted 285
Lifting and Moving 285
Importance of Software For Yard and
Terminal Operations 288
Indian Ports and Development
288
Indian Ports 289
Container TerminalsBuild-Own
Operate-Transfer or Build-OperateTransfer System of Operations 290
Indian Port Traffic 292
Benchmarking Global Ports vs
Indian Ports 295
Issues of Drafts in Indian Ports 296
Tariff in Indian Ports and Tariff
Authority for Major Ports 297
Role of Inland Container Depots
and Container Freight Stations
298

PART III: LOGISTICS DOCUMENTATION AND PROCESSESALIGNING

TO NATIONAL AND INTERNATIONAL TRADE
9. Role of Customs in Regulating
International Trade
Role of Customs in India's
International Trade
Role of Carriers in Customs
Process 311
Import General Manifests 311
Manifest and Security 313
Inland Container Depots and
Sub-manifests 314
Consolidation Manifests 314
Flight Check 315
Export General Manifests 315
Role of Custodians 315

309
309

307

Customs House Agents 316

Declarations and Averments
by Merchants 318
Indian Customs Automation 318
Harmonized System of Commodity
Classification or HS Codes 320
Construction of HS Codes 322
Principles of Classification 323
Customs Process through Indian Customs
and Excise Gateway 324
Export Clearance 324
Clearance Process for Imports 327
Import Clearance Process at Customs
through Electronic Data Interchange 328

DETAILED CONTENTS XIX

Some Critical Factors in
Customs Clearance 330
Methods of Valuation 331
Customs Clearance and
Foreign Exchange 333
Accredited Clients Programme 333
Authorized Economic Operator
Programme 334
Customs Tariff and Structure 334
Import Duty 334
Export Tariff 339
Miscellaneous Acts and Rules Affecting
Customs Clearance 339
Appeal Procedures 340
10. International Trade
Documentation and International
Finance
Importance of Documentation in
Logistics
Indian Foreign Trade Policy and
Procedures
Foreign Trade Policy
Duty Remissions and Exemption
Schemes
Duty Remission Scheme 354
Duty Exemption Scheme 354
Standard Input-Output Norms 355
Export Promotion Capital Goods
Scheme 355
Tax Free or Concession Enclaves 355
Logistics Process and Export Promotion
Status Holders 357
International Commercial Terms
Decision Alternatives Regarding
Incoterms
Precautions while Choosing
INCOTERMS and Agreeing with
Seilers about the Choice 361
Variations 361
Transport Documentation
Issuer of Transport Document 363
Functions of Transport Document 363
Bill of Lading and Sea Waybills 364
Format and Construction of the Bill of
Lading 364
Said to Contain 364

350
350
351
352
353

356
358
360

362

On-board Bill of Lading 365

Clean or Claused Bill of Lading 365
Types of Bills of LadingCommercial
Applications 366
Variation of Sea Carriage Documents 367
Forwarders Cargo Receipt 369
Minimizing Transaction Costs through
Simple Forms of Ocean Transport
Documents 370
Number of Bills of Lading
371
BIMCO Paramount Clause General 371
Terms and Conditions of Carriage 371
Contours of the Conventions or Acts 373
Carriers' Legal Liability and Limits 373
Need for Limitation of Liability 373
SpecialDrawing Rights and its need 373
Freight Payment 374
Delivery 374
Lien 374
Claims 375
Definition ofPackage 375
Charter Party Bill of Lading 375
House Bill of Ladings and Master Bills
ofLadings 375
Air Waybills 376
Consignee or Notify Party 377
Limitation of Liability for Air
Shipment 377
House and Master Airwaybills 378
CMRDocument Covering
International Transport by Road 379
International Transport of Goods
by Rail
381
Payment Methods in International
Transportation and UCP 600
383
Documentary Payments 383
Letter of Credits and UCP 600 385
SWIFT 386
Types of Letters of Credits 386
Irreuocable Letter of Credit 386
Confirmed Letter of Credit 386
Transferable Letter of Credits 387
Revolving Letter of Credit or Standby
Letter of Credit 387
Back-to-Back Letter of Credit 387
Export Financing in India
388
Factoring and Forfeiting
388

XX DETAILED CONTENTS
History of Insurance
Lloyd's of London 423
Lloyd's Agency 423
London Market 423
Insurance
Need for Insurance 424
Insurance Process 425
Perils at Sea
Functions of Insurance
Types of Insurance
Seif Insurance
Underlying Principles of Insurance
Claim and Claim Notice 433
Open Policy and Open Cover 433
Claim Settlement
Warehouse or Storage Insurance
Insurance Companies and
Regulation in India
Insurance Regulatory and
Development Authority
Reinsurance
Carriers' Legal Liability Insurance
General Average
Example of General Average 438
Adjustment and Claim Settlement

422

PART IV: LOGISTICS STRATEGYAND SUPPLY CHAIN MANAGEMENT

463

11. Documentation for Domestic

Transport and Compliance
400
Principle of Value-added Tax and
Logistics
401
Documents Accompanying Trucks
for Border Clearances
405
Entry Taxes in States and Impact
on Logistics 405
Road Permits 405
Mumbai or Maharashtra Octroi
406
Octroi Issues and Mumbai as an
Entry Port or Airport for the
Nation 407
Value-added Tax and Inter state
Procedures
408
Central Excise and Logistics 408
Service Tax on Transporters 408
Goods and Services Tax 409
Goods and Services Tax and Logistics 409
Goods Consignment Note and
Carriage of Goods by Road Act 2007 411
12. Insurance and Risk Management
in Logistics
Introduction

421
421

424

426
427
427
428
428

434
434
435
436
436
437
437
438

13. Logistics Strategy, Systems

Achieving Excellence in Global
Logistics Operations 479
Flanning, and Implementation
465
Significance of Logistics in
Measuring Supply Chain
Performance
480
Strategie Decisions
466
Logistics as Backbone of Business
484
Proposition
468 14. Warehousing
Introduction
484
IT Reselling 468
Maintenance, Repair, and Overhaul
Evolution of Warehousing
485
Supplies 469
Role and Functions of Warehousing 486
Lean Manufacturing Strategy and
Storage 488
Logistics Services 469
Product Mixing 491
Logistics Strategy in a Globalized
Cross Docking 491
Assembly and Product Postponement 492
World
470
Transit Storage and Duty Deferment 493
Uniqueness of Global Operations
472
Types
of Warehouses
493
Integration of Operations
474
Classification
of
Warehouses
Based
Elements of Supply Chain Design
475
on Ownership 493
Procurement 475
Classification of Warehouses Based
Logistics Network Design 477
Logistics Strategy and Planning 478
on Material Stored
497

DETAILED CONTENTS XXI

Food Grain Warehouses 497
Consumer Products Warehouses 497
Refrigerated Warehouses 498
Chemical or Hazardous Material
Warehouses 499
Tankage
499
Warehouse Operations
500
Receiving 500
Put-away and Storage 501
Order Picking 501
Checking and Packing 502
Shipping 502
Warehouse Location Decisions
502
Design and Layout Decisions
504
Information Technology in Modern
Warehousing
506
Trends in Modern Warehousing
507
Modern Warehouse Construction 507
Automation in Material Handling 508
Contract Logistics and Warehouses 511
15. Inventory Management
515
Need for Inventory
515
Types of Inventory
516
Functions of Inventory
517
Decisions Involved in Inventory
Management
518
Functional Classification of Inventory 519
Classification Based on Usage
520
Cost Considerations in Inventory
Management
520
Unit Cost or Price of Items 520
Ordering Costs 521
Inventory Holding or Carrying Costs 521
Stock-out Costs 522
Inventory Data System Costs 522
Other Important Considerations
522
Demand Patterns 522
Replenishment Lead time 523
Inventory Management Under
Different Conditions
523
Lot Sizing Models When Demand
is Constant 524
Lot Sizing Models for Time Varying
Demand 528
Index 575
About the Authors

583

Lot Sizing Models for Probabilistic

Demand 529
Some Modern Techniques of
Inventory Management
16. Technology in Logistics
Role of Information Technology
in Logistics
Logistics Information System
Enterprise Resource Planning 538
Electronic Data Interchange 538
Barcoding 541
Radio Frequency Identification 543
Global Positioning System
Warehouse Management System and
Automated Storage and Retrieval
System

531
535
536
537

545

546

17. Logistics Services and

Intermediaries, Service Providers,
and Outsourcing in Logistics
550
Logistics Services
550
Road Transport 552
Rail Transport 552
Warehousing and Contract Logistics 553
International and Cross-border Logistics
Services Providers 554
Listing of Logistics Players and
Characteristics
554
Logistics Services and Third-party
Logistics 554
Profile of Outsourced Services under
Third-party Logistics 557
Third-party logistics in India 557
Some Disadvantages of Third-party
Logistics System 559
Fourth-party Logistics 559
Lead Logistics Service Providers
563
Integrators
563
Fourth-party Logistics and India
563
LogisticsService Quality Indices,
Service Level Agreements, and
Deliverables
565
Logistics Service Contracts
567