Case Study Objectives Reduce freight costs while ensuring machines and parts arrive on time and undamaged Develop a transportation management organization that integrates well with the Tetra Laval group can respond quickly to customer needs and can manage the quality of delivery services Devise an Incoterm policy that both protects Sidel s reputation as a reliable provider of high quality equipment and affords customers the flexibility they need Company Overview Tetra Tetra Laval Laval Tetra DeLaval Tetra Pak Pak DeLaval Sidel Sidel Product Characteristics and Assumptions Shipments are project based rather than transactional High value shipments with a considerable amount of capital tied up in transit Time sensitive with precise synchronization required on arrival Destinations are global non repetitive Zero tolerance for damage and transit delays Installation service and sales of equipment and accessories are key aspects of operations Assumed they have similar characteristics of DeLaval products Shipments are multimodal heavily dependent on air sea road Specialized packaging and handling are required Freight Volume Required Modes 47K TEUs 50 747 chartered aircraft 12K truck loads 300K parcel shipments Logistics Spend 200M Euros on transport of 4 5MT of equipment 100M Euros on travel Objectives of Delivery Control of execution Dollars Cost Direct Costs Packaging handling Insurance Intl shipments Domestic shipments Fees import export duties Taxes VAT GST Indirect Costs Legal Execution Damages Time in transit Contractors Set up assembly Regulatory environmental compliance Risk Management Avoid Bad Debts write offs B Buyer S Seller W Water Carrier Analysis of Incoterms X Air Motor Rail and Intermodel COST OR ACTIVITY EXW FCA FAS FOB CFR CIF CPT CIP DAF DES DEQ DDU DDP Tender Goods Documents for Export B S S S S S S S S S S S S Export Clearance License B S B S S S S S S S S S S Origin Domestic Transportation B S S S S S S S S S S S S Vessel Plane Loading B B B S S S S S S S S S S Main Carriage International Transport B B B B S S S S S S S S S Transfer of Risk Cargo Insurance B B B B B S B S S S S S S Import Customs Duties Fees Taxes B B B B B B B B B B S B S Destination Foreign Transportation B B B B B B B B B B B S S Mode Applicability X X W W W W X X X W W X X Incoterms 2000 published by the international chamber of commerce icc publishing 1999 Ex Works Duty Unpaid Delivered Free Carrier Delivered Duty Paid Free Alongside Ship Free On Board Cost Freight Cost Insurance Freight Carriage Paid To Carriage Insurance paid to Delivered at Frontier Delivered Ex Ship Delivered Ex Quay Named place Premise Buyers Carrier Named Port Sellers of Destination Named Place Named Port of Destination Named Port of Shipments Named Port of Shipments Named Port of Destination Named Port of Destination Named Port of Destination Named Port of Destination Named Port of Destination Named Port of Destination Named Port of Destination Recommendations Suggest primarily using Incoterms of DDP and DDU to insure Sidle has control of quality of transport process right through to installation also allows total control over landed cost Take advantage of Tetra Paks global purchasing clout however suggest DDU as the term of choice Tetra Pak can possibly control freight directly with lines but outsource project management of job to a specialised forwarder