Creating a Logistics Plan for International Transport and Warehousing of Goods
Strategic Logistics Management, Inc. (SLM) is a U.S.-based third party company whose primary business is to deliver logistics services. Currently, SLM manages several warehouses in Los Angeles and the New York/New Jersey area. SLM provides expertise in air and ocean shipping, customs clearance, forwarding, warehousing, and ground transportation. Over the past five years, SLM has built a successful logistics information system (LIS) that includes personnel, equipment, and technology. The decision-support systems included in the LIS are a transportation management system (TMS) and a warehouse management system (WMS).
SLM employs experienced personnel in the United States to handle a wide range of logistics activities and provide customized logistics solutions and services. The company is considering expanding their global operations to provide the same range of services in Australia, including:
Imports: A network of offices and trade connections to support import consolidation, provide warehousing of goods prior to customs clearance, and manage import documentation for customs formalities.
Door-to-door services: Cargo pickup from supplier locations and transportation of goods directly to the customer, as well as freight bookings with airlines and ocean lines to handle cargo exports from both the United States and Australia.
Exports: Handling of various types of cargo exports by ocean and by air, ensuring the timely movement of goods at the most competitive rates. Complete export documentation is provided.
SLM is working to secure two contracts in Australia that will go into effect next year. The first contract is with Greer Wire Company in Melbourne, Australia, to transport two million pounds of stainless steel brushfire mesh used in protecting homes in brushfire prone areas. This cargo will be shipped to Los Angeles, California. The stainless steel wire mesh is supplied in five-meter rolls with an outside diameter of 500 mm, and each roll weighs 50 kg.
The second contract is with Brooks Brothers, a clothing company located in New York City, for warehousing and transportation of clothing in various sizes of cardboard boxes that easily assemble in one unit load on a 48-inch by 40-inch pallet. The goods will be shipped from New York, New York, to Sydney, Australia. For the purpose of this assignment you can make reasonable assumptions about the weight of the boxes.
SLM will manage a rapid flow of goods to and from Australia. The proposed warehouses in Australia will be located in proximity to two large metropolitan areas, Sydney and Melbourne. In the first year of its operations in Australia, SLM plans to handle an average of 200 20-foot equivalent units (TEUs) of imports and exports between the United States and Australia every month.
You are a Logistics Manager at SLM. As part of the company’s goal to strengthen its competitiveness in the global marketplace, the CEO has asked you to design a logistics plan for the proposed warehouse operations in Australia and transportation of goods between Australia and the United States.
In your report (allowing for reasonable assumptions when necessary),
Select one of the two SLM contracts described above.
Analyze the product’s physical properties, volume, and quantities to determine if the product’s shipment size is small (150 to 500 pounds) or a larger (consolidated) shipment (at least one TEU).
Evaluate at least two modes of transportation that best support the organization’s supply chain for shipping the product from one country to another, door-to-door, in a multimodal shipment. Explain your reasoning.
Identify the type of warehouses that SLM should employ in Australia to ensure a rapid movement of goods. Recommend either public, private, or contract warehousing and explain how your recommendation supports SLM’s supply chain management.
List and describe the necessary commercial, banking, and shipping documents that comply with export and import procedures in the United States. These may include a commercial invoice, certificate of origin, shipper’s export declaration, shipper’s letter of instruction, bill of lading, freight bill, and letter of credit.
Determine the appropriate Incoterms® 2010 rule, depending on the shipment mode and buyers’ and sellers’ responsibilities.
Select a process (Lean, Six Sigma, Just-in-Time, or Kanban) and explain how the process can be implemented to ensure effective and efficient warehouse operations techniques are in place that support the company’s supply chain design.
List a minimum of four additional budget line items in the table below with a rationale to ensure smooth warehouse operations in Australia. Support your rationale by including various logistics activity measures, cost drivers, profit models, and the role of inventory and how they influence SLM’s financial outcomes.
Budget line item
Cost savings management
Warehouse safety and security
Efficient and safe warehouse operations
Order management, customer relationship management, and load-planning for a truck trailer.
The Final Paper
Must be 2,400 to 3,000 words (not including title and references pages), double-spaced, and formatted according to APA style as outlined in the Ashford Writing Center. Contextual (Level One) headings must be used to organize your paper and your thoughts.
Must include a title page with the following:
Title of paper
Course name and number
Must address the topic of the paper with critical thought.
Must include and integrate supporting information and reasoning from at least five scholarly, peer-reviewed, or other credible business sources in addition to the course text (see Ashford Writing Center’s Integrating Research for assistance).
The Scholarly, Peer Reviewed, and Other Credible Sources table offers additional guidance on appropriate source types. If you have questions about whether a specific source is appropriate for this assignment, please contact your instructor. Your instructor has the final say about the appropriateness of a specific source for a particular assignment.
Must document all sources in APA style as outlined in the Ashford Writing Center.
Must include a separate references page that is formatted according to APA style as outlined in the Ashford
Company background and Introduction
Strategic Logistics Management Inc (SLM) is an organization based in United States (US) that offers logistics facilities. The company manages and coordinates many warehouses in New York City in the US and Los Angeles. SLM has entered into a business contract with Brook Brothers Company which deals in selling of clothes, and its location is in New York. The business in the contract includes services such as warehousing and logistics services for clothes packed in cardboard boxes of different sizes. The cardboard boxes are assembled in unit loads measuring 40 inches by 48Inch pallets. The recently signed contract requires SLM to plan logistics for Brook Brothers’ packages from New York in the US to Sydney in Australia. SLM Inc will arrange for transportation of the clothes to and from Australia (Bacharach, 1989). It has also targeted transport units tantamount to 200 20-foot (TEU) of exports and imports every month. Henceforth, this paper focuses on a logistics plan that SLM would use to reinforce its competitiveness in Australian markets.
Physical Properties of the Products
The cardboard boxes are assembled and packaged; the measurements of a single box are 48inches or 4foot by 40inches or 3.3 foot. The longer side of the pallet measures 4 foot which is equal to 0.2 TEU on division by 20. The total weight altogether intended for shipping totals to two hundred foot which is equal to 20 TEU. It is composed of a wooden boxes, during shipment the boxes will be put in one container which measures 4 foot by 3.3 foot wide and 3.5-foot height. The total volume of the container will be 46 square foot. The quantity per shipment of the load is less than 1 TEU, and these are classified as a small consignment. Small consignments are light and can be moved easily with no need for heavy transport. Contrary, large consignments will be greater than 1TEU, and these require relatively heavy transport depending on the size. Mode of transport
Selecting the mode of transport is critical for any logistics company since it helps to ensure profitability, reduce expenses, and ensure the effectiveness of the work. In other words, selecting a suitable mode of transport will ensure cost-saving and meet the customers’ demands and each point of the transaction. When a poor transportation mode is selected, for instance, a company chooses to use the road to transport goods overseas will lead to more expenses that can be minimized when a suitable mode of transport is selected. When transporting a more decadent good, it is essential to use a mode of transport that can support bulky goods, to avoid damaging the transporting medium. If there are two modes of transport that can suitably perform the function, it is essential to select a mode of transport that will minimize wastefulness, and meet the importer demands within the required time.
The mode of transport must be carefully planned for this will affect SLM’s effectiveness and service delivery. Among the factors to put into consideration consists of the shipment cost, worthiness for the items, size and weight and urgency of delivery. The boxes packed as one load prior to transportation to their destination. In this scenario, the consignment is lesser, which imply that if could be moved with ease. In addition, clothes are long-lasting and don’t need to be transported with urgency. This means the combined characteristics of low weight and non-urgency will reduce the value and priority for one shipment. Transportation decisions can be made by leadership considering all factors that affect their choices.
There are four modes of transportation that SLM can opt for, and these include multimodal, water, air, road, and rail. The distance between the two nations is over thousands of kilometers which dictates sea and air transport to be the ideal modes of transport considering, costs, and time is taken to deliver the shipment. The two continents are separated by water between them, and this disqualifies rail or road transport because the infrastructure does not support these two modes.
The goods in question clothes can only be moved by air transport or sea transport. Given these two modes of transport, they are equally convenient though it will be much ideal to use air transport because of the small load weight, the cost and nature of the products, and durable clothes. Also, its ships are designed for large loads and this option is likely to be costly and extravagant to SLM.
Despite the geographical barriers that prevent the use of rail and road transport, the two are still needed by SLM to move clothes locally in the US or in Australia. This points at the relevance of multimodal transport system. Multimodal transportation refers to a transportation mode where a chain of actors supply transport service under one operator. This means if air transport delivers goods to an airport or a sea transport delivers goods to a Dock, then another mode of transport can be used, such as the road to deliver the goods to the destination. Among the benefit that SLM will accrue from multimodal shipping include the following:
• Easier communication between concerned parties and stakeholders
• Help in saving cost and time hence improved productivity.
• Reduce loss of time at trans-shipment points.
• Providing swift transit of the goods under transportation
• Reduces the burden of documentation and formalities
• Ensures that only one agency is dealt with.
• Reduced smaller loads through consolidation.
The relevance of multimodal transport for SLM in Australia and the USA
Multimodal transport scores as the best option for the company as this will mean that if Air transport is used to transport clothes to airports, then a road transport for example trucks will be used to deliver goods to the final destination for the door to door delivery service. This is because of the flexibility of road transport. Also, from docks, road transport will give exactly the advantages, making multimodal transport mode very relevant for SLM locally in US or Australia.
Though rail transport can also be used in place of road transport for local logistics, ground transportation is not flexible in the door to door delivery, thus leaving road transport as the ideal option because a means of rail transport is designed for bulky goods the consignment is light.
Warehouses that SLM can employ for rapid movement of goods
The type of warehouse chosen will determine how fast it will be in distributing goods. To allow rapid distribution of clothes, SLM can use the following types of warehouses.
• Distribution warehouses and distribution centers
This warehouse has a large capacity or space, which facilitates quick movement of large quantities of goods within a short time. They naturally act as points in the supply channel where items are purchased from providers and manufacturers and then swiftly be transported to clients. These provide computerized controls and systems which allow the fastest movement, loading and offloading of the goods. Not only, does this enable fats movement, it also enables excellent communication with stakeholders involved.
• Private warehouses.
These warehouses are not owned by the government but by private members. They are either owned by a company, rented or leased. Owning or renting a private warehouse has the advantage of the firm retaining full control and management of the warehouse, unlike public warehouses controlled by the government. Depending on the management needs, they can opt for private warehouses if they need full control. However, if the SLM is worried about cost, then public warehouses will be better warehouses to choose.
Import and Export Documents
Documentation is a very important aspect of the transport and logistics industry because it ensures all parties involved, such as the transporting company, the seller and buyer. The parties involved are required to have proper documentation in order to ease the process of exporting and importing goods into the US (Stahbock & Veb, 2007). This part will discuss the common documents used in the logistics business, the ones and that are required when exporting and those required during importing. The types of documents required in this exercise are affected by the specific requirements of the exporting and the importing countries. When a document is improperly prepared the package in transport will face a lot of challenges throughout its journey to the final destination. The first challenge is the shipment will face difficulties clearing at US custom border, there will also be a problem in processing payments via a letter of credit which may lead to delays attracting discrepancy charges, and the shipper will also encounter challenges in the clearance process of the goods on arrival. On the other hand, the destination country’s customs department can also seize the shipment and all parties involved in the transaction. When importing and exporting goods between the US and America, as well as transporting goods, the following documents are required:
• Commercial invoice,
It describes the entire export transactions from the beginning to the end of the transaction, and it includes shipping terms. It contains in it critical information on all parties like the buyer, delight forwarder, banks, carriers and import brokers; these are not correctly done, in US fees are incurred, or delays are possible.
• Bill of lading,
This is the most common document in international trade and is used between the owner of the goods and the carrier. It is prepared by the carrier who issues it to the shipper detailing the type of goods transported, the quantity of the goods and the destination of the goods. This document must always accompany the shipment on arrival. The “Bill of lading” could as well be used as a “shipment receipt” when the package arrives at its destination. Hence it will be used between Brook Brothers and SLM. It states where goods are going, and where they are coming from.
• Certificate of origin,
This is an international document which certifies that products in an export transaction were manufactured or produced in a certain nation. They are needed for customs, tax clearance and import tariff concessions. To prove the products were made in United States this is needed and for Australian companies also.
• Insurance Certificate
It certifies that the goods exported have been insured against in order to know that the goods are covered from risks. This certificate is important, especially for goods transported on the sea. When the goods get damaged or stolen when in transit, the insurance company will shoulder all expenses of the goods. The function of the insurance cover is to shoulder all risks associated with the goods.
• Shippers’ export declaration,
This is mandatory in the US. It is used for compiling export statistics and is used in controlling exports.
• Shippers’ letter of instruction,
A Shipper’s Letter of Instruction form is for multiple purposes: for transportation and documentation
• Freight bill
This is a binding document between a carrier and a consignor. It outlines who is responsible for payment. It also talks about who will pay the carrier bill for shipping services.
• Packing lists.
Explains how the goods are arranged and numbered. Help authorities calculate tax and other expenses.
Incoterms 2020 Rule
• Incoterms 2020 Free Alongside Ship (FAS) – Allocation of costs
Used when goods are delivered by sea. This outlines who is responsible for the risk of the goods when they are placed alongside a ship. It states that the sellers are responsible for the cost of export formalities, cost of providing buyers that goods have been delivered, costs of control activities. On the other hand, buyers will be responsible for the cost of import and transit, cost of obtaining contract of carriage, additional cost and cost related to conclusion and fulfilment of obligations.
• Incoterms Free on Board, Free Alongside Ship, CFR, and CIF
• Incoterms Delivered Duty Paid (DDP). States that the buyer is responsible for customs, taxes, and transport -from door to door
• Incoterms Free on Board. Costs will be split between buyer and seller and 50/50 sharing of risks and costs.
Just-In-Time management system (JIT)
This is a stock control system where supplies, stocks or inventory are delivered with production and fulfilment schedule. They are delivered only when they are needed in production. It involves implementing levels of automation, cloud communication and barcoding technologies. This principle is mostly used by many organizations as the backbone and the pillar of their competitiveness (Singh & Singh, 2013).
The implementation involves adapting the three technologies cloud technologies, barcoding and automation. These will help in optimization stock levels and controlling the level of stocks in a warehouse to prevent overstocking or understocking. To successfully implement this inventory control method, excellent and effective communication must exist between concerned parties. This allows supplies to be delivered quickly by air transport on an as-needed basis, thus eliminating unnecessary cost and increasing efficiency and effectiveness (Gyampah & Gargeya, 2001).
Just in time stock control in a warehouse ensure that stock levels are kept at optimal levels. This prevents overstocking or understocking. With advanced technologies and effective communication backed by reliable air transport, this can be possible and will go a long way in achieving effectiveness. This will allow the effective use of warehouse space and help cut on stockholding cost and security cost.
Budget line items
Budget line item Rationale
Shipment consolidation Cost savings management
Warehouse safety and security Efficient and safe operations
Software implementation Order management, customer relationship management, load planning
Inventory control Optimal stock levels
Logistical packaging Damage protection, Quality assurance
Equipment acquisition Day to day operations
Communication and information systems and transportation Transporting goods, communication, transport mode determination
Shipment consolidation plays a critical role in ensuring that the cost of a business is effectively managed and controlled. This helps in minimizing cost, maximizing revenue, and profitability. This entails that inventories will be kept at levels that will trigger minimum cost and maximize profits (Hausman & Subramaniam, 2012). This even impacts the mode of transport that a firm uses.
Warehouse security and safety is a major requirement which helps in eliminating risks of theft and losing customer goods. This means ensuring that risk action and behaviours are tracked and eliminated. This will result in efficient and safe operations, which will result in a better financial outcome for SLM.
Logistical packaging is a different form of packaging, and this is done to ensure that goods on board are kept safe from deterioration and damage (Mehta, 2014). This will maintain the quality of goods, which will result in improved SLM image and improved profitability.
Equipment acquisition is one of the cost drivers. This includes the purchasing of computers and other IT-related equipment that promotes effective communication and good material handling into and out of warehouses. IT equipment is also needed if JIT is to be used or any other inventory management system.
Inventory control is one of the crucial budget line items. This is a critical aspect which ensures that there is no overstocking or understocking, which will then lead to reduced stock holding cost. SLM will greatly benefit from the economic advantage of holding optimal amounts of stock.
Communication, information management and transportation is an important item. This coordinates all communication processes and information flow between various stakeholders within the “logistics and supply chain”. It also aids in the arrangements of modes of transport.
Bacharach, SB. (1989). Organizational theories: Some criteria for evaluation. Academy of Management Review 14: 496–515.
Gyampah, K., & Gargeya, V. (2001). Just-in-Time manufacturing in Ghana. Industrial Management & Data Systems, 101(3), 106-113.
Hausman, W., & Subramaniam, U. (2012). The impact of logistics performance on trade, Production and Operations Management. Canadian Heritage
Mehta, P. (2014, December 1). Air Transport: Advantages and Disadvantages. Retrieved December 25, 2020, from Economics Discussion website: https://www.economicsdiscussion.net/articles/air-transport-advantages-and-disadvantages/2179
Singh, C. Mand, J. S., & Singh, S. (2013). The application of lean and JIT principles in supply chain management. International Journal of Management Research and Business Strategy, 2(1)
Stahbock, R., & Veb, S. (2007). Operation research at container terminals: a literature update. Spectrum, 30, 1–52