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

4

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.

43

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.

45

Preparation of post shipment documents for bank

Account credit advise/Receipt of payment

Get export incentives if any.

46

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

47

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

48

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.

49

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.

50

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.

51

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

52

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

53

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.

54

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.

55

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

56

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.

57

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

59

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.

60

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

61

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

62

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.

63

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

64

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

65

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

66

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.

67

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.

68

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.

70

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.

71

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.

72

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

74

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

75

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.

76

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.

78

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.

79

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

80

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

81

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.

82

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.

84

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.

85

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.

88

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.

89

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

90

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.

92

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

95

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.

97

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.

98

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

101

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/