TRƯỜNG ĐẠI HỌC GIAO THÔNG VẬN TẢI

THÀNH PHỐ HỒ CHÍ MINH

CHAPTER 5:
TRANSPORT MANAGEMENT

Lecturer: ThS. Nguyễn Thị Bảo Khánh

Email: [email protected]

1
 CHAPTER OUTLINE

5.1 Definition and roles of transportation in Logistics

5.2. Transportation management decisions

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 5.1 DEFINITION & ROLES OF TRANSPORTATION IN LOGISTICS

Definition:
Transport is an economic activity with a purpose to transfer the location of goods and people from
one place to another by means of transport.

Connecting the Logistics nodes

Roles of Creating time utility and Place utility

transportation

Accounts for 1/3 to 2/3 of total logistics cost in a

company

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 EXAMPLES: TRANSPORTATION IN A KIT KAT SUPPLY CHAIN

Export Company Exporting

Farmers
Port

Importing
Port

Factory Importers

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5.2 TRANSPORTATION MANAGEMENT DECISIONS

1. “IN-HOUSE” OR OUTSOURCING
SELECTION

2. MODE OF TRANSPORT SELECTION

3. CARRIERS SELECTION

4. RATES NEGOTIATIONS

5. IMPLEMENTATION & CONTROL

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 1. IN-HOUSE TRANSPORTATION OR OUTSOURCING?

IN-HOUSE OUTSOURCING

Companies invest in vehicles, facilities Companies hire outside transportation

Definitions
and equipment to serve their goods service providers to transport goods on
transportation activities their behalf

- Goods quality control - Enterprises can focus on core

- Cost saving competencies
- Proactive schedule - Some service providers have
experience in handling incidents
Advantages
Save initial investment costs
- Competitive freight rates for small
and fluctuating volumes of goods

- Service fee
- Cost of initial investment - Slower communication
Disadvantages - Requires specialized experience in - Depends on third parties.
handling problems

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Some typical transportation service providers

Shipping Lines

Airlines

2PLs
Trucking company

Railway company

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 3PLs
Forwarders NVOCC Môi giới - Brokers

a business that provides a wide A shipping company, operating as a An intermediary connecting parties
range of transportation services to shipping lines but not owning or who buy, sell or provide services for
customers. operating ships a commission.

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 How are forwarders and NVOCCs similar and different??...

Forwarders NVOCC

- Both are third parties providing services related to Logistics

- Neither owns a main means of transportation
Similarities
- Both issue House B/L

- Providing Logistics services for many - Only work on sea transportation

modes of transport services include: reservations,
- Services: diverse, from packaging, container management
loading and unloading, warehousing, - Own or rent containers
customs clearance, to shipping - Licensed to transport goods to
Differences North America
booking, ...
- No containers - Can earn revenue from ship and
- Not licensed to transport container operations
- Only service fees are charged - Act as carrier
- Acts as customer to a carrier

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 2. MODES OF TRANSPORTATION SELECTION

Mode Goods characteristics Advantages Disadvantages

Road transport

Waterway
transport

Railway
transport

Airway
transport

Pipeline
transport

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 Goods
characteristics
ROAD - Not to large volume of
TRANSPORT goods
- Short to medium
distance

Advantages Disadvantages

- High flexibility - Less volumes carried

- Services diversity compared to sea or rail
- Last-mile delivery transports
- Cost effectiveness - Traffic-jam
- Capabilities to - Risk of accidents
coordinate with other - Delays due to toll, etc
modes of transport

Some means of road transport vehicles

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 Goods characteristics

WATER - Super long, super

TRANSPORT heavy
- Low-value goods
- Bulk cargo

Advantages Disadvantages

- Low rates - Limited range of

- Large volumes of service
cargo - Low speed
- Low reliability

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 Goods
characteristics

RAIL TRANSPORT -Large weight, large

volumes of goods

Advantages Disadvantages
- Low cost compared - Fairly low flexibility
to some other - High cost with short
modes of transporting routes
transportation
- Stable cost
- High throughput
- Stable schedule Rail gauge sizes

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 Goods
characteristics
- Small-volume, high-
AIR TRANSPORT value goods
- Goods that require
short transit time

Advantages Disadvantages

- High transporting - High freight

speed - Complicated
- High cargo safety procedures
- Low chance of - Limited capacity to
delays carry goods
- Risk of terrorism
- High initial investment

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 Goods
characteristics
PIPELINE - Commodities such as:
TRANSPORT gas, crude oil, clean water,
chemicals, peat, ...

Advantages Disadvantages

- High service reliability - Low speed

- Low chance of loss - High investment
and damage
- Large capacity
- Less interruption,
affected by external
circumstances

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 CRITERIA FOR SELECTION OF MODE OF TRANSPORTATION

Criteria Road Air Rail Water Pipeline

Accessibility 1 3 2 4 5
Transit time 2 1 3 4 5
Reliability 2 3 4 5 1
Safety 3 2 4 5 1
Cost 4 5 3 2 1
*1 = highest– 5= lowest
**1 = Lowest cost– 5=Highest cost

(Source: Edward J, Bardi, PhD)

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 (Source: Bureau of Statistics)

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 (Nguồn: Tổng cục thống kê)

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 MULTIMODAL TRANSPORT
• Single mode of transports
• One or more carriers
Unimodal • One set of BL through the whole route
Transport

• Different modes of transport

• Different carriers
Intermodal • Multiple single contracts of carriage
Transport

• From 2 or more modes of transport

• One contract of carriage only
Multimodal • Executed by one Multimodal Transport Operators - MTO
Transport

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- Definition: the involvement of different modes of transport and on the basis of a
single contract of carriage.
- Different types of multimodal transport services:

Rail Air

Road

Sea Pipeline

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 Determine the mode of transport in the following two situations:

1. Company A has 3x40'HC Bac Giang lychees exported to Japan by sea, from Hai
Phong port to Tokyo port. To transport this shipment, A hired a container truck service
from Bac Giang to Hai Phong port of Binh Minh transport company. At the same time,
the company hires a sea freight service, taking bookings from the MSC shipping
company to move the shipment from Hai Phong port to Tokyo port.
Intermodal Transport

2. Company B has a shipment of 5 tons of Cao Lanh mangoes exported from Vietnam to
Korea. To transport the shipment, the company hires a transportation service from
DACO Logistics and signs a single forwarding service contract with DACO Logistics for
the entire journey. Accordingly, DACO Logistics will carry out domestic transportation
from Dong Thap to Tan Son Nhat international airport and transport by air to Korea.

Multimodal Transport

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 3. CARRIER SELECTION

Factors to select a carrier

ü Transport costs

ü Transport time

ü Reliability

ü Capability

ü Accessibility

ü Security

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 4. RATES NEGOTIATION

- To develop an effective logistics strategy, it is necessary to understand the

elements and characteristics of transportation
- Successful contract of carriage negotiation requires a full understanding of
transport economics
- The overall transport economics and transportation service prices include 3
groups of factors:
+ Factors affecting the transportation cost;
+ Pricing strategy of carriers;
+ Rates and rating.

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 Factors affecting the
Pricing strategy of carriers Rates & Rating
transportation cost
- Distance of transport - Cost of service - The price is calculated in the
- Load size, or load weight amount per unit of goods, for
- Value of service
- Product density example: USD/MT, USD/TEU,
- Stowability - Combination pricing strategy: USD/unit, USD/M3
- Handling equipment Price is set at the average
between minimum service - Classification of products:
- Liabilities: protection of cargo; when transported, products
liability for compensation,… cost and maximum service
value: the logistics manager are classified according to their
- Market: supply and demand, characteristics, their packaging,
returned route cargo, material should know the price range in
cost, fuel costs, … order to be able to negotiate or their money value

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 5. IMPLEMENTATION & CONTROL

5.1. Selecting delivery terms

v Purposes:
- Create a set of rules widely used in international trade
- Negotiate quickly
- The basis for determining contract price is based on cost and risk division
- Limit disputes
v Development process:
1936 → 1953 → 1967 → 1976 → 1980 → 2000 → 2010 → 2020
v Main contents
- Buyer & seller’s obligations
- The party pays the costs
- Point of transfer of risks related to goods

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TS Lê Phúc Hòa, Ths Nguyễn Thị Bảo Khánh 26
TS Lê Phúc Hòa, Ths Nguyễn Thị Bảo Khánh 27
 INCOTERMS 2000
Group E Giao tại xưởng
1- EXW- Ex Work (… named place)
Group F Main Carriage unpaid
2-FCA- Free Carrier (… named place)
3-FAS- Free Alongside Ship (… named port of shipment)
4-FOB- Free On Board (…named port of shipment)

Group C Main carriage paid

5-CFR- Cost and Freight (… named port of destination)
6-CIF- Cost, Insurance and Freight (…named port of destination)
7-CPT- Carriage Paid To (… named place of destination)
8-CIP- Carriage and Insurance Paid to (.. named place of destination)

Group D Arrival
9-DAF- Delivered At Frontier (…named place)- [DAP]
10-DES-Delivered Ex Ship (… named port of destination)- [DAP]
11-DEQ-Delivered Ex Quay (… named port of destination)- [DAT]
12-DDU-Delivered Duty Unpaid (…named place of destination)- [DAP]
13-DDP-Delivered Duty paid (…named place of destination)

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 INCOTERMS 2010
Group 1: Applied to all modes of transport
1. EXW- Ex Works
2. FCA-Free Carrier
3. CPT-Carriage Paid To
4. CIP-Carriage and Insurance Paid to
5. DAT-Delivered At Terminal (DEQ)
6. DAP-Delivered At Place (DAF; DES; DDU)
7. DDP-Delivered Duty Paid
Group 2: Applied to sea and inland waterway transport
1. FAS- Free Alongside Ship
2. FOB-Free On Board
3. CFR-Cost And Freight
4. CIF-Cost Insurance and Freight

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Two new terms

DAT – Delivered At Terminal DAP – Delivered At Place

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 BUYER & SELLER’S OBLIGATIONS IN INCOTERMS-2010

E F C C D D D F F C C
Obligations X C P I A A D A O F I
W A T P T P P S B R F
1-Exportation custom declaration B S S S S S S S S S S
2-Custom fee for exportation B S S S S S S S S S S
3-Importation custom declaration B B B B B B S B B B B
4-Custom fee for importation B B B B B B S B B B B
5-Insurance O O O S O O O O O O S
6-Booking transportation O B S S S S S B B S S
7-Cargo risk during transit time B B B B S S S B B B B
8-Loading responsibility & cost B S S S S S S B S S S
9-Unloading responsibility & cost B B B B S B B B B B B

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 INCOTERMS 2020

(Nguồn: International Chamber of Commerce)

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v New features of Incoterms 2020 compared to Incoterms 2010 :

- Terms:
+ DAT (2010) → DPU (2020)
- Rearrange the order of the Buyer and Seller obligations list: increase the
importance of 'Delivery' (A4/B4 → A2/B2) and 'Risk' (A5/B5 → A3/B3)
- Clearly divide costs, all types of costs are listed in section A9/B9
- Incoterms conditions are explained clearly and in more detail: “Guidance
Notes” → “Explanatory Notes”

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v Incoterms conditions apply to sea and inland waterway transport

FOB + port of shipment

SELLER BUYER
Seller delivers the goods to the buyer on Taking delivery.
Delivery board the vessel nominated by the buyer at
the named port of shipment.
The seller bears all risks of loss or The buyer bears the risk of loss, or damage to the
damage to the goods until the goods are goods from the time the goods are delivered.
delivered, except in the cases as + The buyer fails to notify in accordance with
described below by the buyer. regulations on transportation security, ship name,
Transfer of Risk loading location and delivery time (if agreed)
+ The vessel nominated by the buyer fails to
arrive on time to receive the goods or does not
receive the goods or stops loading before the
time announced for sale.

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 SELLER BUYER
Carriage Seller has no obligation to the buyer to make a The buyer must contract at its own cost for the
contract of carriage. However, if agreed, the carriage of the goods from the named port of
seller must contract for carriage on the usual shipment
terms at the buyer’s risks and costs.
Insurance No No
Customs clearance Implement and bear all costs related to export Carry out and bear all costs related to import
customs clearance formalities. customs clearance formalities.
Checking, packaging, Yes No
marking

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 FAS + port of shipment

SELLER BUYER
Seller delivers the goods to the buyer by Taking delivery.
Delivery placing them alongside the vessel nominated
by the buyer at the named port of shipment.
The seller bears all risks of loss or The buyer bears the risk of loss, or damage to the
damage to the goods until the goods are goods from the time the goods are delivered.
delivered, except in the cases as + The buyer fails to notify in accordance with
described below by the buyer. regulations on transportation security, ship name,
Transfer of Risk loading location and delivery time (if agreed)
+ The vessel nominated by the buyer fails to
arrive on time to receive the goods or does not
receive the goods or stops loading before the
time announced for sale.
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 SELLER BUYER
Carriage Seller has no obligation to the buyer to make a The buyer must contract at its own cost for the
contract of carriage. However, if agreed, the carriage of the goods from the named port of
seller must contract for carriage on the usual shipment
terms at the buyer’s risks and costs.
Insurance No No
Customs clearance Implement and bear all costs related to export Carry out and bear all costs related to import
customs clearance formalities. customs clearance formalities.
Checking, packaging, Yes No
marking

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 CIF + port of destination

SELLER BUYER
Seller delivers the goods to the buyer on Taking delivery.
Delivery board the vessel nominated by the buyer at
the named port of shipment.
The seller bears all risks of loss or The buyer bears the risk of loss, or damage to the
damage to the goods until the goods are goods from the time the goods are delivered.
delivered, except in the cases as + The buyer fails to notify in accordance with
described below by the buyer. regulations on transportation security, ship name,
Transfer of Risk loading location and delivery time (if agreed)
+ The vessel nominated by the buyer fails to
arrive on time to receive the goods or does not
receive the goods or stops loading before the
time announced for sale.
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 SELLER BUYER
Carriage Seller must contract or procure a contract for The buyer has no obligation to seller to make a
carriage from the agreed point of delivery, if contract of carriage
any, at the place of delivery to the named port
of destination or, if agreed, any point at that
port.
Insurance Unless otherwise agreed or customary in the No
particular trade, the seller must obtain, at its
own cost, cargo insurance complying with the
cover provided by Clauses © of the Institute
Cargo Clauses (LMA/IUA) or any similar
clauses
Customs clearance Implement and bear all costs related to export Carry out and bear all costs related to import
customs clearance formalities. customs clearance formalities.
Checking, packaging, Yes No
marking

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 CFR + port of destination

SELLER BUYER
Seller delivers the goods to the buyer on Taking delivery.
Delivery board the vessel nominated by the buyer at
the named port of shipment.
The seller bears all risks of loss or The buyer bears the risk of loss, or damage to the
damage to the goods until the goods are goods from the time the goods are delivered.
delivered, except in the cases as + The buyer fails to notify in accordance with
described below by the buyer. regulations on transportation security, ship name,
Transfer of Risk loading location and delivery time (if agreed)
+ The vessel nominated by the buyer fails to
arrive on time to receive the goods or does not
receive the goods or stops loading before the
time announced for sale.
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 SELLER BUYER
Carriage Seller must contract or procure a contract for The buyer has no obligation to seller to make a
carriage from the agreed point of delivery, if contract of carriage
any, at the place of delivery to the named port
of destination or, if agreed, any point at that
port.
Insurance No No
Customs clearance Implement and bear all costs related to export Carry out and bear all costs related to import
customs clearance formalities. customs clearance formalities.
Checking, packaging, Yes No
marking

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 EXERCISE: CHOOSE APPROPRIATE INCOTERMS
1. A rice exporter in Ho Chi Minh City wants to export rice to customers in Korea. The destination
port is Busan port, Korea. The cargo is rice 8,000 MTS. The seller suggests that after completing
export procedures, delivering the goods to the ship at Cat Lai port is no longer responsible.

A. FOB
B. CIF
C. CFR
D. FAS

2. A steel enterprise in Ho Chi Minh City wants to export 10,000MTS of steel to customers in Japan.
The destination port is Osaka port, Japan. The seller suggests that after completing export
procedures, delivering the goods to the ship at Cat Lai port is no longer responsible. The buyer agrees
to ask the seller to rent a ship, pay freight and buy insurance for the goods.
A. FOB
B. CIF
C. CFR
D. FAS

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3. A cashew export business in the city wants to export 5,000MTS of cashew kernels to customers in
the Netherlands. The destination port is the port of Rotterdam, Netherlands. The seller, after
completing export procedures, rents a means of transport and pays the freight to transport the goods
to the destination port. Risk in the goods is transferred from the seller to the buyer after the goods
are delivered and loaded onto the ship in the exporting country.
A. FOB
B. CIF
C. FAS
D. CFR
4. A cashew export business in the city wants to export 5,000MTS of cashew kernels to customers in
the Netherlands. The destination port is the port of Rotterdam, Netherlands. The seller, after
completing export procedures, signs a charter contract and shipping costs are borne by the buyer.
Risk in the goods is transferred from the seller to the buyer after the goods are delivered and loaded
onto the ship in the exporting country..
A. FOB
B. CIF
C. FAS
D. CFR
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5.2. TYPES OF TRANSPORTATION DOCUMENTS

BY ROAD

- Vehicle documents
- Vehicle owner’s documents
- Driver’s document
- Contract of carriage
- Travel document
- Receipt
- Delivery note

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 BY SEA

- Custom docs
- Shipping instruction
- Mate’s receipt
- Bill of lading
- Cargo manifest
- Tally sheet
- Cargo plan
- Other docs (C/O, packing list,
insurance policy, v.v….)

Bill of Lading
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 BY AIR

- Airway bill
- Commercial Invoice
- Packing list
- A/N
- D/O

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