1

© 2023 Lizane Raaths LINKWAYNOW

LINKWAYNOW

CONTENTS

01 Brand Management and Merchandising 02

Supplier Selection, Sourcing,
Compliance and Negotiating

03 Planning and Forecasting

04 Production and Manufacturing
© 2023 Lizane Raaths

05 Logistics and Transportation Management

06 Warehouse and Inventory Distribution

Basic Accounting Principles in the Context

07 Reverse Logistics
08 of Supply Chain

Lessons Learned from Supply Chain Summary of Acronyms and Terminologies

09 Challenges 10 in Supply Chain

2
LINKWAYNOW

WELCOME
Let’s begin by exploring the definition
and importance of Supply Chain Management. Brand
Management
Welcome to the world of supply chain management! In this program, and Sourcing
you'll gain extensive knowledge and expertise in the field, from
procurement to inventory management. Get ready to explore logistics,
streamline operations, and conquer supply chain challenges. Let's begin Planning and
our journey by understanding the concept of Supply Chain. Forecasting
Reverse
© 2023 Lizane Raaths

Logistics and
Supply Chain Management is like the conductor of an orchestra. It brings Customer Service
together all the players from suppliers to consumers - and directs them
toward a harmonious end goal. It's not only about shipping goods
around! Furthermore, it involves planning, funding, coordination, and
good old-fashioned teamwork. And just like an excellent performance, a
well-managed supply chain delivers products to consumers with
maximum efficiency and minimal fuss. So, if you want your business to
hit all the right notes, ensure your supply chain is in tune!
Production and
Note that the information provided is accurate as of 2023 and could be Warehouse
Manufacturing
subject to change. and Inventory
Management

Logistics
and Transport

Lizane Raaths Supply Chain Specialist

3
 TOPICS 01 Brand Management
LINKWAYNOW

We will cover Examining Roles in Product Management

Sourcing and Negotiating 02
Connection Between Brand Managers and Merchandisers

Differentiating Suppliers, Manufacturers, and Trading Houses

Building and Managing Supplier Relationships
03 Planning and Forecasting Types of Trade and Their Role in Sourcing
OEM and ODM Differences
Exploring Planning and Forecasting Techniques for Optimal Inventory IncoTerms and International Trade
Optimization
Product Compliance and Safety Certificates
Gain an Understanding of Demand and the Types of Demand
Negotiation Techniques for Successful Sourcing
© 2023 Lizane Raaths

04 Production and Manufacturing

Key Elements of Manufacturing

Logistics and Transportation 05
Production Planning and Layout
Product Life Cycle
Importance of Weight and Measurements
Samples Processes, Internal Product Identifiers and Barcode Types
Diversity of Pallet Types and Types of Containers
Importance of Quality Control
Shipping Documents
Types of Packaging
Transportation in International Trade
ETD, GRD, CRD, and ETA Terminology in Logistics
Freight Forwarders and Ocean Freight Charges
EORI Number in International Trade
Importer of Record (IOR)
Cargo Insurances, Customs Inspection and Custom Clearance
ATA Carnet for Temporary Shipment
24-Hour Rule and 10+2 Requirement
Customs Duty and Taxes
Parallel Import
4
 06 Inventory Management
LINKWAYNOW

Optimizing Inventory Management

Reverse Logistics 07
Inventory Control Methods such as EOQ, JIT,
FIFO, FILO, FEFO, LSFO and ABC Analysis
Depleted Inventory and Safety Stock Navigating Reverse Logistics: Challenges and
Strategies for Effective Management
Fulfilling Methods
Last Mile Delivery
Balancing Costs for Optimal Inventory
Understanding Landed Cost Account Principles 08
Meeting Customer Expectations
© 2023 Lizane Raaths

Supply Chain and Assets, Liabilities, and Equity

Basic Accounting Principles
Net Income vs. Net Profit
Overview of Invoices, Statements, and Income Statements
09 Lean and Six Sigma
Taxes and VAT
Return on Equity (ROE)
Importance of Lean and Six Sigma: Understanding the
Methodology Return on Assets (ROA)
Explaining 'Net' and 'Gross’
Debits and Credits
Weighted Average Cost (WAC) and Cost of Goods Sold (COGS)
10 Acronyms and Terminologies Profit Margins and Gross Profit (GP)
Market Values vs. Book Values
Quick References for Acronyms and Terminologies in Costings
Supply Chain Management

5
 OPPORTUNITIES
LINKWAYNOW

Upon completing this course and guide successfully,

you can take advantage of several job opportunities,
such as:

Procurement Specialist

Inventory Specialist

Logistics Coordinator
© 2023 Lizane Raaths

Operations Specialist

Supplier Relationship Specialist

Warehouse Specialist

Distribution Centre Specialist

These roles differ in their responsibilities and required skills, but they all involve keeping the flow of goods
and services in check to ensure things run smoothly.

It’s important to know that this guide offers a broad understanding of supply chain management,
primarily focusing on non-food products across diverse industries rather than any specific sector or FMCG
(Fast-Moving Consumer Goods). However, it's essential to note that many of the principles discussed here
apply to FMCG. FMCG refers to low-cost products with a short shelf life that are regularly consumed, such Let’s Begin
as food.

Next, we'll discuss the first module, presenting the information in the order the supply chain unfolds.
6
LINKWAYNOW

Brand Management and

Merchandising

01
© 2023 Lizane Raaths

7
 BRAND MANAGEMENT
LINKWAYNOW

Unleash the power!

This is where it all starts! In the world of entrepreneurial
businesses, brand managers are the innovators who ignite
product development and innovation. They're the visionary
9 Golden Rules for Brand Managers: Shaping
minds who adapt and refine brand strategies while
Products and Brands
overseeing advertising budgets and promoting ground-
breaking products. By collaborating with designers, they Unforgettable Identity
breathe life into new ideas. 1 Carve a distinct and consistent brand identity that radiates your brand's
core values, personality, and unbeatable advantages. Every element, from
logo to colours, typography to messaging, should embody your desired
brand image.
© 2023 Lizane Raaths

Audience Connection
2
Delve deep into the minds of your target audience, unravelling their
demographics, preferences, needs, and aspirations. Tailor your
communication and marketing strategies to captivate and connect with
them on a soul-stirring level.

Stand Tall
3
Shape a magnetic brand positioning that sets your brand apart from the
competition. Showcase your value proposition with clarity, leaving
consumers with no doubt that choosing your brand is the ultimate victory.

Message Magic
4 Weave captivating brand messages that capture your brand's essence,
benefits, and irresistible selling points. Align your messaging with your
brand's values, creating a resonance that strikes a chord with your target
audience.

8
 Consistency Enchantment
LINKWAYNOW

5 Cover every brand touchpoint consistently: advertising, packaging, website,

social media, or customer service. This bond builds trust, fosters recognition,
and ignites unbreakable loyalty among consumers.

Unforgettable Journeys
6 Create extraordinary brand experiences at every turn. Make sure your brand's
promise surpasses expectations, leaving a permanent mark on the hearts of
your customers.

Market Mastery
7
Embrace the ever-changing tides by conducting continuous market research.
© 2023 Lizane Raaths

Dive into consumer trends, market dynamics, and competitor moves, utilizing
the insights gained to refine your brand strategies and reign supreme.

Brand Vigilance
8
Keep a watchful eye on your brand's performance. Harness the power of
critical metrics and customer feedback to identify areas for growth and
address any challenges or negative perceptions that may arise.

Innovation Bliss
9
Unleash boundless creativity, explore fresh ideas, and unveil inspiring products
and services that perfectly align with your brand's values and meet the evolving
needs of your consumers.

Once the brand manager and designers work their magic to create the
perfect product idea, it's time to team up with sourcing and build a range,
called range building.
9
 Merchandisers work in close collaboration with buyers,
LINKWAYNOW

marketing teams, and store managers to analyse trends,

curate product selections, establish pricing strategies,
Collaborate efficiently manage inventory, design attractive displays, and
closely monitor sales performance. By actively engaging in
these activities, they play a pivotal role in shaping the
overall shopping experience for customers.

The primary objective of merchandisers is to maximize

MERCHANDISERS Optimize and

sales and profits by effectively managing product
availability, quantities, timing, and locations. Their aim is to
How are they connected Maximize optimize these factors to ensure that the right products are
to Brand Managers? readily accessible in appropriate places, resulting in
© 2023 Lizane Raaths

enhanced revenue and financial gains.

Merchandisers and brand managers work together to

promote and sell products. Brand managers focus on
Promote developing and maintaining a brand's identity and
and Sell messaging, while merchandisers ensure effective product
showcasing in retail. They align strategies and incorporate
the brand's visual identity into displays and promotions.

Brand managers receive valuable feedback from

merchandisers regarding customer preferences, sales data,
and market trends, which in turn enhances brand strategies
Valuable
and product development. This collaborative effort between
Feedback merchandisers and brand managers contributes to
increased sales, reinforces brand visibility, and guarantees a
consistently appealing consumer experience.

10
LINKWAYNOW

Supplier Selection, Strategic

Sourcing, Compliance, and
Negotiation Techniques

02
© 2023 Lizane Raaths

11
 The differences between Suppliers , Trading Houses and Manufacturers
LINKWAYNOW

Manufacturers
Manufacturers in factories
Trading Houses
Suppliers transform raw materials into
A Trading House acts as a finished products, using
A Supplier is a company that
middleman or agent, facilitating machinery and labour. They
provides goods or services to
trade between buyers and sellers. prioritize quality and efficiency,
other businesses. They play
They specialize in connecting producing goods under their
various roles in the supply chain,
© 2023 Lizane Raaths

buyers with suppliers or brand or as contract

from sourcing raw materials to
manufacturers, managing manufacturers.
delivering finished products.
logistics, and overseeing import
Suppliers focus on sourcing and
and export processes. With their Additionally, Lot numbers are
providing specific products or
extensive networks and market unique identifiers used in supply
components their customers
knowledge, they bridge gaps chain management to track and
need, ensuring a steady supply
between different markets, trace product batches, ensuring
to meet demand.
simplifying international trade. quality control, inventory
management, and recall
management.

Supplier Assessment Factors

o Quality Assessment: For example, testing the durability and performance of a sample product.
o Capacity and Reliability: For instance, analysing production capacity to ensure the supplier can meet the required volume and
delivery deadlines also known as lead-times.
o Financial Stability: For example, reviewing the supplier's cash flow statements and profitability ratios.
o Responsiveness: For instance, assessing their response time and clarity in answering questions during initial negotiations.
12
o Long-term Partnership Potential: For example, assessing alignment in sustainability practices or shared long-term objectives.
 TYPES OF TRADE
LINKWAYNOW

Direct Trade also know as D2C which stands for Direct to Advantages Disadvantage
Consumer • Control over the trade process • Requires substantial
Manufacturers Direct Trade involves the exchange of goods and services • Strong customer relationships investment
directly between two parties without a negotiator. It typically requires • Faster responses to market • Marketing and distribution
establishing direct contacts, conducting market research, and handling demands responsibilities
logistics and shipping. • Higher profits • After-sales support
• Enhanced brand reputation requirements
Logistics and shipping also become crucial aspects of Manufacturers Direct • Ability to provide customized • Limited market insights
Trade. Manufacturers need to efficiently manage the transportation and solutions • Financial risks associated with
delivery of goods to ensure timely and secure arrival at the buyer's location. direct operations
© 2023 Lizane Raaths

Indirect Trade such as Trading Houses • Less control over the trade
• Leverages agent skills and process
Indirect trade requires the involvement of agents, such as wholesalers, networks • Lower profit margins
distributors, or agents, who facilitate the trade between the buyer and • Access to established • Potential miscommunication
seller. distribution channels between parties
• Faster market entry • Limited market insights
They handle tasks such as inventory management, order fulfilment, and • Shared risks compared to direct trade
logistics, allowing businesses to focus on their core competencies. • Reduced marketing burden • Complex trade process
involving mediators

Trusted Processing Trade • Risks of supplier

dependencies
Let’s use an example to explain Trusted Processing Trade. A clothing • Cost efficiency
• Disruptions in the supply
manufacturer in China imports raw materials, such as fabrics and buttons, • Specialization in specific chain
from Vietnam. The clothing manufacturer in China then processes and manufacturing processes
• Challenges in maintaining
manufactures garments using these imported materials. Finally, the • Access to global supply chains trademark protection
finished garments are exported and sold in various international markets. • Promotes economic growth
Factories are often located in bonded areas to mitigate the impact of and innovation
• Quality control issues
• Compliance with customs
import tariffs. We will explore bonded areas in a separate section.
regulations
13
 Tips for Successful Trade
LINKWAYNOW

Raw Materials
Procure raw materials from countries with low production costs to
reduce expenses and increase profit.

Product Details
Understand your product such as product details, price, and quality.

Market Research
Conduct market research before making purchasing decisions.
© 2023 Lizane Raaths

Trading Countries
Choose trading countries carefully, considering stability and trade
agreements.

Lead-Times
Consider transit times for distant countries.

IncoTerms
Select the correct trade transaction based on product type, target
market, and available resources.

Exchange Rates
Stay informed about exchange rate fluctuations.

Trade Regulations
Understand and comply with international trade regulations,
including trademark property, the environment, safety, and industry-
14 specific standards.
LINKWAYNOW

SOURCING AND STRATEGIES

Sourcing is about finding and securing the necessary materials, manufacturers, and suppliers to make that
idea come to life. By connecting the product idea with sourcing, the brand ensures they have everything they
need to produce the product efficiently and meet quality standards. Collaboration between the brand
© 2023 Lizane Raaths

manager, designers, and sourcing teams is the secret to transforming the product concept into a tangible
and market-ready product.

Sourcing involves several key activities, including supplier research, contract negotiation (commonly referred
to as SLA or Service Level Agreement), and fostering strong supplier relationships. The main goals of sourcing
are to optimize the supply chain, reduce expenses, and uphold consistent product quality and availability.

The sourcing process can vary depending on your industry, the complexity of your product, and your unique
business requirements. But one thing's for sure — it's a crucial function within supply chain management
that keeps the wheels turning smoothly. So, embrace the power of sourcing and watch your production or
service delivery process operate evenly!

15
 Strategies for effective Sourcing
LINKWAYNOW
© 2023 Lizane Raaths

Compare and
Evaluate
Market Research Obtain quotes from Capabilities
Requirements multiple suppliers to Additional Factors
To make informed compare pricing, lead Evaluate suppliers
Communicate your sourcing decisions, stay based on their Look beyond the initial
times, Minimum Order
needs, specifications, price and consider
updated on industry quantity (MOQ) experience, expertise,
and quality trends, supplier financial stability, factors such as
agreements, and value-
expectations to capabilities, and production capacity, transportation costs,
added services to make
potential suppliers to market dynamics. and track record. quality control, and
the best sourcing
ensure good design after-sales support to
decisions. Also known
and product. assess the total cost of
as an RFQ (request for
sourcing.
quotation).
16
 PLATFORMS
LINKWAYNOW

Popular for Sourcing and Purchasing

Let’s start with the Canton Fair, China's largest trade fair in Guangzhou, attracts professionals involved in sourcing, negotiating,
and finalizing purchase agreements. With 60,000+ booths spanning 1.1 million square meters, it offers abundant international
trade opportunities. This event showcases various industries, and the vibrant Canton culture enhances the attendee experience.

1 2 3 4 5
© 2023 Lizane Raaths

Amazon Business Alibaba AliExpress Dhgate Global Sources

A marketplace A global online A global online A China-based An online B2B
designed specifically marketplace marketplace owned by eCommerce platform platform connecting
for business purchases connecting buyers and Alibaba, allowing buyers connecting buyers with buyers and suppliers
of products and suppliers worldwide. It to purchase products Chinese suppliers. in Asia.
supplies. offers various products directly from Chinese
and services, including suppliers.
trade assurance for
secure transactions

17
 WE CHAT
LINKWAYNOW

What is WeChat and why should you use it?

WeChat, the popular messaging, social media, and mobile payment app, enhances supplier interactions,
collaboration, and procurement efficiency in the supply chain.

Instant Communication Supplier Relationship Management

WeChat offers real-time communication through Create groups, add suppliers, and establish direct
messaging, voice, and video calls, facilitating quick communication channels for closer collaboration and
information exchange, issue resolution, virtual transparency.
© 2023 Lizane Raaths

meetings, and negotiations in the supply chain.

File Sharing Mini Programs

Easily share product specifications, invoices, and WeChat's mini programs are lightweight applications
documents to streamline information transfer. that offer various functionalities, such as eCommerce
and utility tools.

Payment Integration Supplier Discovery

WeChat Pay enables secure and convenient Join industry-specific groups, follow suppliers, and use
financial transactions with suppliers. search functions to expand sourcing options.

Social Network Language Translation

Share updates, photos, and videos to build bonds The built-in translation feature overcomes language
and stay updated on industry trends. barriers for better communication with international
suppliers.

18
LINKWAYNOW

OEM & ODM

Understanding the differences

Original Equipment Manufacturer Original Design Manufacturer

OEM is a supplier that makes products according ODM is a company that manufactures and
to another company's instructions. They handle designs products. The company gives
production, while the brand company sells the general requirements, and the ODM takes
OEM products under its name. This allows brands care of the entire product development ODM
to focus on developing, promoting, and process, including design, engineering, and
© 2023 Lizane Raaths

delivering the products while OEMs manufacturing. ODMs offer customized

provide expertise in manufacturing, cost products based on market trends and their
savings, and a faster time-to-market. design capabilities.
DIFFERENCES
Let's say a fashion brand called ChicStyle
wants to create a unique line of handbags.
Imagine a tech company called TechCo
They collaborate with an ODM
that wants to release a new smartphone.
manufacturer, FashionCraft, who
They partner with an OEM
e.g., OEM manufactures and designs the handbags. e.g., ODM
manufacturer, TechPro, which produces
ChicStyle provides general requirements,
smartphones based on TechCo's
and FashionCraft handles the entire
specifications. TechCo then sells the
process, creating trendy and custom
smartphones under its brand name.
handbags based on market trends and
their design expertise.

19
 INCOTERMS
LINKWAYNOW

Understanding the different types and importance of IncoTerms

Incoterm is an abbreviation for “International Commercial Terms.” It refers to a set of standardized trade terms used in international trade
contracts to define the responsibilities of buyers and sellers for the delivery of goods. There are 11 types of Incoterms, but beginners should
focus on the first seven major ones commonly used. Each Incoterm specifies who pays for the freight and who is responsible for the goods
during different delivery stages.

EXW (Ex Works)

In this trade term, the seller’s responsibility ends at their
© 2023 Lizane Raaths

premises. The buyer takes on all costs and risks associated with
transporting the goods from the seller's location to the desired
destination.

FCA (Free Carrier) FOB (Free on Board)

With FCA, the seller is responsible for delivering the goods to a Under FOB, the seller is responsible for delivering the goods on board a
named carrier at a specified place. After the goods are handed vessel at the named port. Once the goods are on board, the buyer takes
over to the carrier, the buyer takes on all costs and risks on all costs and risks in the transportation process.
associated with further transportation.

CIF (Cost, Insurance, and Freight) CFR (Cost and Freight)

CIF is like CFR, but it also includes insurance. The seller delivers In CFR, the seller is responsible for delivering the goods on board a
the goods on board a vessel at the named port and arranges vessel at the named port and arranging the freight to the destination
freight and insurance to the destination port. The buyer is port. However, once the goods are on the vessel, the buyer takes on all
responsible for other costs and risks once the goods are on the risks and any additional costs.
vessel.

20
 DAP (Delivered at Place)
LINKWAYNOW

In DAP, the seller is responsible for delivering the goods to a named

place, but the buyer takes on all risks and costs associated with
transportation from that place to the destination.

DDP (Delivered Duty Paid) DPU (Delivered at Place Unloaded)

DDP places the responsibility on the seller to deliver the goods With DPU, the seller is responsible for delivering the goods to a
to a named place and covers all costs and taxes associated with named place and unloading them. However, the buyer takes on all
importing the goods. Once delivered, the buyer takes on all risks and costs related to the further transportation of the goods.
risks.

FAS (Free Alongside Ship) CPT (Carriage Paid To)

Under FAS, the seller brings the goods next to the ship at the CPT requires the seller to deliver the goods to a named carrier at a
© 2023 Lizane Raaths

agreed port. After delivery, the buyer is responsible for all the specified place. Once delivered, the buyer takes on all risks
costs and risks. When suppliers deliver goods alongside a associated with further transportation.
ship, they bring them directly to the vessel at the port instead
of a warehouse or storage facility. This allows the goods to be
loaded onto the vessel right away.

CIP (Carriage and Insurance Paid To)

CIP is like CPT, but it also includes insurance. The seller delivers
the goods to a named carrier at a specified place and arranges
insurance. After delivery, the buyer takes on all risks.

Choosing the right Incoterm is crucial for a successful trade and depends on various factors, such as the type of goods and delivery location. As an
importer or exporter, it's essential to be aware of the different Incoterms to avoid any misunderstandings or disputes during the transaction. It's also
vital to understand the regulations and laws that govern international trade, including trademark property violations, environmental concerns, the
handling of dangerous goods, the protection of endangered or invasive species, support for domestic industries, and compliance with safety
standards.
21
LINKWAYNOW

Understanding IncoTerms is essential for sourcing specialists for several reasons:

Clear Communication
Incoterms provide standard terms for clear communication between buyers and suppliers, ensuring
mutual understanding of responsibilities during shipping and delivery.

Cost Calculation
Incoterms define cost responsibilities, helping sourcing specialists accurately estimate and compare
costs across suppliers and shipping methods.

Risk Assessment
© 2023 Lizane Raaths

Incoterms allocate risks at different delivery stages, enabling sourcing specialists to make informed
decisions and minimize potential risks.

Supplier Selection
Sourcing specialists can choose suppliers based on their capabilities aligned with specific Incoterms,
ensuring the fulfilment of responsibilities.

Legal Compliance
Incoterms reflect international trade practices and legal obligations, supporting sourcing specialists in
complying with shipping and customs regulations.

By understanding Incoterms, sourcing specialists can negotiate better terms, calculate costs accurately, evaluate risks, select
suitable suppliers, and ensure legal compliance, enhancing their sourcing process management.

22
 PRODUCT COMPLIANCE
LINKWAYNOW

Why is it important?
Compliance, sourcing, and quality specialists collaborate in the supply chain to ensure integrity and effectiveness. They work together to achieve
standard compliance, sourcing, and quality management goals. Their roles intersect and complement each other, such as compliance specialists
relying on quality specialists for safety certificates and sourcing specialists prioritizing compliant suppliers verified by audits. This collaboration
ensures the success and integrity of the supply chain.

01 02 03 04 05
© 2023 Lizane Raaths

Regulatory Standards and Risk Supplier Documents

Framework Certifications Assessment Evaluation and Reporting
Understand Be familiar with and Mitigation Assess suppliers' Maintain
industry-specific relevant Identify risks in track records, accurate records
regulations, certifications the supply chain, certifications, of processes,
labelling (e.g., ISO 9001, conduct audits, ethical practices, inspections, and
requirements, ISO 14001) and implement and ability to certifications,
labour laws, and industry-specific quality control provide the and generate
environmental standards. measures, and necessary reports for
regulations. maintain proper documentation. stakeholders and
documentation. government
authorities.

23
LINKWAYNOW

SAFETY
CERTIFICATES
In the world of supply chain, a variety of certificates and tests exist to ensure product quality and
adherence to specific standards and regulations. These certificates encompass different areas such as
food safety, handling of hazardous materials, product testing, and knowledge of the necessary
certifications to guarantee consumer safety.
© 2023 Lizane Raaths

Certificates play a pivotal role in supply chain management as they serve as evidence that a product
meets the required standards and is suitable for the market. These certificates are typically issued by
trusted laboratories or organizations. It is the responsibility of inspection specialists to acquire and verify
these certificates, ensuring that the products meet the expected quality and regulation requirements.

Certificates play a crucial role in guaranteeing product safety and quality. They demonstrate a company's
commitment to high standards, earning consumer trust. Obtaining certificates requires careful research,
adherence to regulations, and understanding of industry standards. Possessing the appropriate
certifications reflects a company's dedication to quality and compliance. Compliance specialists rely on
safety certificates to ensure adherence to regulations throughout the supply chain. These certificates
provide documented proof of accurate testing and meeting safety standards, serving as a reference for
evaluating suppliers and meeting governing requirements.

Additionally, sourcing specialists seek out suppliers who can provide testing certificates to ensure that
the products they acquire meet the required safety and quality standards.

24
 When examining Safety Certificates, there are several important factors to consider:
LINKWAYNOW

Compliance, sourcing, and quality specialists collaborate in the supply chain to ensure integrity and effectiveness. They work together to achieve
standard compliance, sourcing, and quality management goals. Their roles intersect and complement each other, such as compliance specialists
relying on quality specialists for safety certificates and sourcing specialists prioritizing compliant suppliers verified by audits. This collaboration
ensures the success and integrity of the supply chain.

Licensed Standards and Requirements Credibility and Currency Scope of Certification

Ensure that the testing Understand the specific Check the validity period of Assess the certificate's scope
laboratory or certification body standards and requirements the certificate to ensure it is to ensure it covers all relevant
© 2023 Lizane Raaths

issuing the certificate is applicable to your industry current, as outdated aspects of product safety and
licensed and recognized for its and product, as different certificates may not accurately quality, considering materials,
expertise and fairness. products may require various reflect the product's manufacturing processes, and
certificates based on their use compliance status. applicable regulations.
and potential risks.

Transparency and Traceability Testing Methods and Protocols Testing and Safety Certificates Appropriate Certificates

Look for certificates that Evaluate the testing methods Examples of certifications Highlight the importance of
provide detailed information and protocols used during the include food safety, hazardous research to identify the
about the testing process, certification process to ensure material handling, and necessary certificates for the
including results, samples, and they align with industry product testing, each with industry and product,
any non-compliance issues, to standards and provide reliable different standards and ensuring compliance with
ensure transparency and results. requirements. regulations and consumer
credibility. safety.

25
 NEGOTIATION TECHNIQUES
LINKWAYNOW

Negotiating with suppliers or other parties requires careful preparation and effective communication to achieve mutually beneficial
agreements. Here's a step-by-step guide to help you navigate the negotiation process.

Before entering negotiations, conduct thorough research. This includes

understanding market prices, exploring alternative suppliers, and
1 assessing your bargaining power. The more information you have, the Preparation
stronger your position will be.

Articulate your goals and desired outcomes clearly. Be specific about the
terms and conditions you find acceptable. This provides a solid foundation Clearly Define
2 for negotiation discussions and helps both parties understand each Objectives
© 2023 Lizane Raaths

other's priorities.

Communication is key during negotiations. Clearly express your needs,

concerns, and limitations. Listen actively to the other party and seek to Effective
3 understand their perspective. Effective communication builds trust and Communication
fosters collaboration.

Look for areas of agreement and shared interests. Identifying common

ground allows both parties to work towards mutually satisfying solutions. Find Common
4 Seek creative options that address the needs and interests of both Ground
parties.

Negotiation requires compromise and protecting essential interests, Flexibility,

fostering flexibility for win-win solutions and long-term relationships. After
5 reaching an agreement, documenting the terms and conditions prevents
Compromise and
misunderstandings and serves as a reference for future interactions. Documentation
26
 Convincing plays a crucial role in negotiating with suppliers, as it involves persuading them to agree to favourable terms and conditions for your
organization. Here's how convincing can impact negotiation outcomes.
LINKWAYNOW

During negotiations, it's crucial to maintain professionalism, respect,

and focus on the issues at hand rather than personal attacks, aiming for
Establishing
A collaborative solutions. Building trust and credibility with suppliers is
Credibility
key, achieved by showcasing knowledge, professionalism, and reliability,
supported by relevant data and evidence.

To convince suppliers, you need to highlight the benefits they will gain
Communicating
B from entering into a partnership with you, such as long-term business
prospects, increased volume of orders, or access to new markets. Clearly Value
articulate how your organization can add value to their business.
© 2023 Lizane Raaths

Convincing negotiation involves finding beneficial solutions. Instead

of focusing solely on your interests, strive for a win-win outcome Providing
C where both parties feel they have gained value. Present solutions or
compromises that address the supplier's concerns while meeting
Win-Win
Solutions
your company's needs.

Using persuasive techniques can be effective during negotiations.

These may include presenting logical arguments, appealing to shared Using Persuasive
D goals or interests, using data or evidence to support your position, and Techniques
effectively addressing any objections or concerns the supplier raises.

Convincing suppliers is not just about immediate negotiations; it also

involves building long-term relationships. By demonstrating fairness, Building
E professionalism, and open communication, you can foster positive Relationships
relationships that lead to smoother negotiations in the future.

27
28
© 2023 Lizane Raaths LINKWAYNOW

Planning and

03
Forecasting
 PLANNING AND FORECAST
LINKWAYNOW

Exploring planning and forecasting techniques to optimize inventory levels

The next step in the Supply Chain world is planning. We're about to dive into the exciting world of planning, where we will
explore different strategies and patterns. This is where planners must make bold decisions to meet the demands of eager
consumers.

Every planning process dances towards one goal: optimizing resources and operations for customer satisfaction and cost-
effectiveness.

What are KPIs?

To start, let's understand what KPIs (Key Performance Indicators) are. These are important tools used in different types of
© 2023 Lizane Raaths

planning to evaluate how well a company is doing and how it can improve. They help companies see if they're reaching their
goals and identify areas that need attention. KPIs are used in many areas of a company, like sales, promoting products,
managing finances, and making production and delivery more efficient. By using KPIs well, companies can make smart
decisions, keep getting better, and make progress overall.

Each company has its own set of KPIs that are customized for its specific goals, industry, and priorities. While some common
KPIs are used by many industries, like growing revenue, making a profit, and satisfying customers, the specific measurements
and targets can be different. For example, a store might focus on how many customers spend per transaction, how many people
see their advertisements, and how often people make a purchase. On the other hand, a manufacturing company might care
about how efficiently they make their products, how many defects they have, and how often they deliver on time.

Choosing the right KPIs is important because they should match the company's overall plan and give useful information about
its performance. Companies need to find the most relevant and actionable measurements that directly show if they're meeting
their objectives, whether those objectives are about money, operations, customers, or employees. Also, KPIs should be checked
and changed regularly to match the company's changing strategies, the market, and new priorities.

In summary, even though there are some common KPIs that many companies use, each company picks its own set of KPIs
based on its unique characteristics and goals. Choosing and customizing KPIs helps companies measure how well they're doing
and achieve their desired outcomes.

29
 Customer Satisfaction
Here are some of the main KPI This KPI measures the level of satisfaction customers
LINKWAYNOW

have with the products, services, or overall

descriptions that are widely used: experience provided by the company. It can be
measured through surveys, ratings, or feedback.

Revenue Conversion Rate

This KPI measures the total income generated This KPI measures the percentage of potential customers
by a company from its sales or services. It who take a desired action, such as making a purchase,
indicates the financial performance and growth signing up for a newsletter, or completing a form. It reflects
of the company. the effectiveness of marketing and sales strategies.

Profitability Customer Acquisition Cost (CAC)

This KPI assesses the profitability of the company by This KPI calculates the average cost a company
© 2023 Lizane Raaths

comparing its revenue to its expenses and calculating incurs to acquire a new customer. It helps assess
the net profit. It helps determine if the company is the effectiveness and efficiency of marketing and
making a profit or experiencing losses. sales efforts.

Employee Productivity Return on Investment (ROI)

This KPI measures the output or performance of This KPI evaluates the profitability of an investment by
employees within a specific timeframe. It can be comparing the gains or benefits achieved to the cost
quantified by metrics like sales per employee, units incurred. It helps determine the success of various
produced per hour, or customer service response investments, such as marketing campaigns or new
time. initiatives.

Sales Growth Inventory Turnover

This KPI tracks the percentage increase in sales over a This KPI assesses how quickly a company sells its
specific period. It indicates the company's ability to attract inventory within a given period. It helps manage
new customers, retain existing ones, and increase its inventory levels, identify slow-moving items, and
market share. optimize cash flow.

30
 Let’s look at two example of KPI layouts
LINKWAYNOW

Operational KPIs help companies monitor and improve their Next up is Inventory Turnover, a KPI that measures how
day-to-day activities to enhance productivity, reduce costs, and quickly your entire inventory is sold within a specific period.
optimize overall performance. It's calculated by dividing the cost of goods sold by the
average stock. This KPI is essential for efficient production
planning, process management, marketing, and sales.
Remember, a higher turnover is generally better.

Overall Projected
Progress Launch Date
Inventory Turnover

9.2
© 2023 Lizane Raaths

76% 103 Days This Year

Tuesday, March 18

Inventory Turnover ( 2020-2023 )

Open Projects

Employee Project Deadline Progress 10 9.2

8.1 7.8
Xander ERP Set-Up 2023-07-10 67% 6.9
7.5
Jess Product Design 2023-08-12 37%
5
Mike IT Set-Up 2023-08-13 88%
Shaun Q4 Planning 2023-08-17 23% 2.5
Gloria Payments 2023-08-17 14%
0
2020 2021 2022 2023

Inventory Turnover
Having grasped the concept of KPIs, let's delve into the most
general planning types that can elevate your business.
31
 DEMAND
LINKWAYNOW

Demand refers to how much of a product or service people want to buy at a certain price and time. In the
Supply Chain Industry, you will often come across different types of demand, such as:

04
02
06

D E M A N D
© 2023 Lizane Raaths

01 03
05

Seasonal Joint Demand Direct Demand Indirect Demand Competitive Composite

Demand When the demand When the number of When consumers make a Demand Demand
When the number for two or more consumers wanting to purchase, factors beyond When there are two When a product is
of consumers things that go purchase something is personal preferences come or more things that wanted for many
wanting to buy together is directly affected by the into play. Stores and their can be used in the reasons. For
something connected. For person who will actually use sales strategies can also same way, if more example, corn can
fluctuates because instance, the it. For example, the influence consumer people want one be used for eating,
of things like the demand for cars demand for smartphones is demand. For example, in a thing, they will want feeding animals, or
time of year or and gasoline. driven by people who want supermarket, the demand less of the other. For making other goods
popular trends. to use them talking to for groceries is influenced instance, the in industries.
others, having fun, or going not only by customer demand for butter
online. If many people wish preferences but also by and margarine.
to use smartphones, it factors such as effective
means many individuals are stock management,
interested in using them for promotions, and pricing
their own reasons. strategies.
32
LINKWAYNOW

Demand Patterns

Trend Pattern Random Pattern

Long-term fluctuations in consumer demand for a particular product or Unpredictable and irregular changes in demand without a clear
service. pattern or consistency.

e.g., fashion trends gaining and losing popularity over time. e.g., the demand for rare collector's items influenced by factors like
rarity and market trends.

Seasonal Pattern Mixed Pattern

© 2023 Lizane Raaths

Predictable variations in demand that follow specific times of the Demand exhibiting a combination of long-term trends and seasonal
year. ups and downs.

e.g., increased demand for swimsuits during summer and e.g., ice cream demand increasing overall during summer but with
decreased demand during winter. temporary fluctuations within each week or month.

Cyclical Pattern Growth Pattern

Demand changes influenced by economic cycles, such as periods Consistent and continuous increase in demand over time without
of growth and downturns. significant fluctuations.

e.g., luxury goods experiencing fluctuations tied to economic e.g., increasing demand for smartphones as more people rely on
expansions and recessions. them.

33
LINKWAYNOW

Decline Pattern Life Cycle Pattern

Continuous and consistent decrease in demand over time without Changes in demand over time as a product or service goes through
significant recoveries. different stages: introduction, growth, maturity, and decline.

e.g., declining demand for fax machines due to the emergence of e.g., demand for a new video game peaking during maturity and
newer communication technologies. declining as new games are released.

Step Pattern Irregular Pattern

© 2023 Lizane Raaths

Sudden and noticeable shifts in demand levels caused by factors like Unpredictable fluctuations in demand that do not follow a specific
new rules, technology advances, or significant events. trend or seasonal pattern.

e.g., increased demand for smartphones when a new model is e.g., irregular demand for umbrellas during a rainy season.
released.

By understanding these different patterns, companies can make better decisions about when to introduce new products, how to market them,
and when to adapt their strategies to meet changing demand.

34
 Why is forecasting important?
LINKWAYNOW

A forecast is a prediction or estimate of what is expected to happen in the future. It helps us anticipate and plan for what might come next,
specifically for sales of a product. Forecasting involves using data, patterns, and various methods to make educated guesses about what is
likely to occur in the future.

Qualitative
Forecasting
TECHNIQUES Quantitative
© 2023 Lizane Raaths

used for forecasting Forecasting

Techniques Techniques
demand

Market Research Time Series Analysis

This means gathering information by asking people This means looking at information from the past to see if
questions in surveys, interviews, and group there are any patterns or trends in how demand has
discussions. We do this to understand what people changed over time. By understanding these patterns, we
like and what they plan to buy in the future. can make predictions about future demand.

Expert Opinion Regression Analysis

This means asking people who know a lot about the This is a way to use math and statistics to find connections
industry for their advice. These experts have lots of between demand and other factors like price or how
experience and knowledge, so they can give us much money is spent on advertising. By studying these
insights and predictions about what might happen relationships, we can estimate how changes in these
in the future. factors might affect demand in the future.
35
 Forecast error and how to deal with it?
LINKWAYNOW

Forecast error is the difference between the actual demand and the predicted
demand. There are different ways to measure this error, like mean absolute error,
mean squared error, and root mean squared error. Forecast errors can happen
because of wrong data, unexpected changes in the market, or limitations in the
forecasting methods.

To handle forecast errors well, consider these things:

o Keep an eye on the forecast accuracy and regularly check if it's right.
Look for any patterns or reasons for errors that you can find.
o If you find any errors, adjust the way you make forecasts. Try different Remember these important
methods or models based on what you learned from analysing the errors. things when doing a forecast:
o Use strong inventory management strategies to minimize the impact of
forecast errors. This can include having extra stock for unexpected
•
© 2023 Lizane Raaths

situations or adjusting when you place orders. Know what affects demand and how
o Work together with your supply chain partners. Share information and they might change over time.
ideas to improve the accuracy of your forecasts as a team. • Use accurate and relevant data to make
o Keep getting better at collecting data and making forecasts. By your predictions.
continuously improving the process, you can make fewer errors over time • Think about the impact of outside
and have more accurate forecasts. things, like the economy or natural
disasters.
There are a few specific types of forecast errors to watch out for: • Use different methods to forecast to get
a more accurate picture.
o Bias error: This happens when the forecast is consistently too high or too • Keep checking and updating the
forecast as needed.
low because of mistakes in the forecasting model or distorted data.
o Outliers: These are very extreme data points that don't fit the normal
pattern. They can mess up the accuracy of the forecast and need to be
looked at separately.
o Volatility error: This is when the forecast doesn't catch big and sudden
changes in demand, like during times of market instability or unexpected
events.
o Seasonality error: This is when the forecast doesn't get the timing or size of
the seasonal demand right. It can be because there's not enough good
data, the way the forecast is done isn't right, or the seasonal patterns are
36 different from usual.
LINKWAYNOW
© 2023 Lizane Raaths

Now, let’s explore some of the different categories of

planning and demand…

37
 DEMAND PLANNING To do demand planning, companies use
LINKWAYNOW

Demand planning is when a company wants to predict how much of a different methods such as:
product or service customers will want in the future. They look at past sales,
market trends, and other factors to make accurate predictions. The goal is to Data Collection
meet customer needs, keep inventory costs low, and make customers happy. Gathering sales data, market research, customer feedback,
and relevant information.

Demand Forecasting
Using statistical methods and predictions to guess how many
consumers will want to purchase in the future by looking at
what they have bought before and what is happening in the
market.
© 2023 Lizane Raaths

Demand Review
Analysing and reviewing the forecasted demand, considering
factors like seasonality, promotions, market conditions, and
upcoming events.

Demand Adjustment
Fine-tuning the forecasted demand based on input from
sales teams, marketing teams, and stakeholders.

Demand Validation
Comparing the demand forecast with actual sales data,
Demand planning is vital for companies' supply chains, preventing stock issues
refining accuracy, and making necessary adjustments.
and satisfying customers, leading to profitability.

e.g, a toy store prepares for the holiday season by looking at how many of a
certain toy they have sold in the past. They predict that they will sell 1,000 of Demand Management
those toys this year, so they order more from the supplier to make sure they Companies use consumer demand predictions to plan
have enough. They also schedule extra workers to help consumers and make production, procurement, inventory, capacity planning,
sure they have a good shopping experience during the holidays. and resource allocation for maximum profit.
38
 SUPPLY PLANNING
LINKWAYNOW

Supply planning involves deciding on the most effective ways to produce or purchase products to meet the expected demand. It considers factors such
as available stock, how long it takes to find and produce products, how much can be produced, and what resources are available. It includes planning for
how to find and use the materials and resources needed for production or service delivery.

The main steps involved in supply planning are as follows:

Demand Forecasting Inventory Analysis Production Capacity Evaluation Materials Requirement

Analysing historical data, Assessing current inventory Evaluating the available production Planning
market trends, and customer levels and analysing inventory capacity to ensure it aligns with the Determining the materials
demand patterns to estimate turnover to determine if any forecasted demand. This includes and components needed
© 2023 Lizane Raaths

future demand. adjustments are necessary. considering factors such as for production based on
machinery, labour, and facility the demand forecast and
restrictions. available inventory levels.

Supplier Management Production Scheduling Risk Management Performance Monitoring

Identifying and engaging Creating a production schedule Identifying potential risks and Supply planning
with suppliers to procure the that efficiently utilizes resources, developing alternative plans to improvement involves
required materials and minimizes downtime, and reduce disruptions in the supply ongoing evaluation of
negotiating pricing, terms, ensures timely delivery of chain, such as supplier delays or metrics, proactive
and delivery schedules. products or services. unexpected events. enhancements, and efficient
implementation of changes.

By following these steps, supply planning aims to ensure that the correct quantity of products or services is produced at the right time and in the right
amounts, enabling effective supply chain management and efficiently meeting customer demands.

e.g, a Home Store sells excellent blenders. The supply planner looks at past sales to predict how many blenders will be needed in the future. They work
together with the procurement team to make sure they have enough blender parts like motors and blades. They also coordinate with the production
team to plan the production process and put the blenders together in the best way. If they know there will be promotions or special events, the supply
39 planner will prepare for extra production or find faster ways to ship the blenders.
 SALES AND OPERATIONS
Here are the main steps in the S&OP process:
LINKWAYNOW

PLANNING
Demand Planning
Sales and Operations Planning (S&OP) is a process that assists Forecasting future demand based on historical data, market
different departments in a company to work together. It's about trends, and customer insights.
making the best decisions by finding the right balance between
what consumers want and what the company can provide. It also
assists in making better predictions about future demand and
using resources in the best way. Supply Planning
Assessing the company’s capacity and ability to meet the
forecasted demand.

Supply Review Pre-S&OP Meeting

© 2023 Lizane Raaths

Evaluating the potential of the supply plan, considering Bringing together all the important people in a meeting to talk about the
factors like production capacity, inventory levels, and plans for what consumers want and what the company can provide. They
supplier proficiency. look for any differences between what's needed and what's available, and
try to repair any problems they find.
Demand Review Executive S&OP Meeting
Assessing the accuracy of the demand plan and making Gathering the company's top leaders to discuss and decide on the plans for
necessary adjustments based on new information or market what consumers want and what the company can provide. They make
dynamics. choices considering different factors and set essential goals for the company.

Integrated Reconciliation Management Business Review

Aligning the demand and supply plans, resolving conflicts, Presenting the integrated plan to senior management for
and identifying potential risks or opportunities. approval, ensuring alignment with overall business goals.

Performance Measurement
Overall, S&OP enables companies to synchronize their Tracking key performance metrics, evaluating the effectiveness of the S&OP
activities, improve cross-functional teamwork, and achieve process, and making continuous improvements.
better operational efficiency, leading to enhanced consumer
satisfaction and increased profitability.
40
 INVENTORY PLANNING
LINKWAYNOW

Inventory planning is the process of determining the levels of inventory to have on hand to meet consumer demand while minimizing costs and
maximizing efficiency. It involves analysing various factors such as sales data, lead times, demand patterns, and production capacity to determine
the correct inventory quantity.

The main steps involved in inventory planning are as follows:

Demand Forecasting Lead Time Reviews Performance Analysis Replenishment

Analysing sales data and market Determining the time between Evaluating inventory planning Replenishment (Replen)
trends to forecast future placing orders and receiving effectiveness through KPI is a process that involves
© 2023 Lizane Raaths

consumer demand. inventory from suppliers. analysis. regularly examining

inventory levels and placing
orders when necessary to
maintain good stock levels.

Reorder Point Calculation Safety Stock Determination Economic Order Quantity (EOQ) Inventory Classification
Calculating the inventory level Calculating additional inventory Analysis Classifying inventory based
at which a new order should be to buffer against unexpected Calculating the maximum order on factors like value, demand
placed. fluctuations. quantity to minimize costs. volume, and lead time.

By following these steps, inventory planning aims to ensure that the right quantity of inventory is available at the right time to meet customer
demand, minimize stock outs and excess inventory, and improve costs and operational efficiency.

e.g., a water sports retailer plans for summer by ordering more trendy pool towels. They use past sales and market trends to predict high
demand. By stocking up on the towels, they ensure they have enough in supply to meet consumer needs. This proactive approach helps the
retailer maximize sales during the peak season and avoid running out of stock.

41
 PRODUCTION PLANNING Here are the usual steps in production planning:
LINKWAYNOW

Production planning is an important part and focuses on Forecasting

finding the best way to manage the production of products or Analysing data to estimate future demand for goods or services.
delivering services, using resources wisely and keeping costs
low. The goal is to meet what consumers want and make sure
everything runs as it should. Sales and Operations Planning (S&OP)
Balancing forecasted demand with sales and production
capabilities.

Resource Allocation
Allocating necessary resources for plan execution, such as materials,
labour, and equipment.
© 2023 Lizane Raaths

Master Production Scheduling (MPS)

Creating specific schedules for products based on the production
plan.

Material Requirements Planning (MRP)

Determining materials and components needed for production.

Capacity Planning
Evaluating and adjusting production capacity to meet demand.

Sequencing and Scheduling

By following these steps, production planning helps companies Finalizing the order and schedule of production activities.
improve their resources, improve efficiency, minimize costs,
and deliver products or services in a timely manner to meet
consumer demands.
Monitoring and Control
Tracking progress, identifying issues, and taking corrective actions.

42
LINKWAYNOW

DISTRIBUTION PLANNING
Distribution planning is the process of designing an efficient and effective distribution network to deliver products
from the manufacturer or supplier to the end consumers. It involves determining the best distribution channels,
warehouse locations, transportation methods, and inventory levels to meet consumer's demand while minimizing
costs and maximizing service levels. Distribution planning involves several activities and factors, such as:

Network Design Channel Selection Inventory Management Transportation Planning

Examining different factors to Identifying suitable channels Optimizing inventory levels to Planning product
© 2023 Lizane Raaths

identify the best way to set up for product distribution. balance availability and costs. transportation and improving
the distribution network. costs and delivery times.

Customer Service Performance Measurement

Order Fulfilment Technology and Systems
Considerations and Continuous Improvement

Efficiently processing orders Addressing consumer Utilizing technology for Monitoring KPIs and
and ensuring accurate and expectations and satisfaction. efficient distribution improving efficiency.
timely delivery. operations.

The purpose of distribution planning is to efficiently deliver products to consumers while minimizing costs and ensuring timely availability.

e.g., a Footwear Store uses distribution planning to ensure that each store receives the right amount of shoes and sizes based on demand and
inventory levels.

43
LINKWAYNOW

CAPACITY PLANNING Demand Forecasting

Analysing data to estimate future demand for products or services.

Capacity planning is the process of evaluating

and adjusting a company's production Capacity Assessment
capacity to align with the demand for its Evaluating existing production capacity and resource fulfilment levels.
products or services. It involves determining
the maximum level of resources, such as
labour, equipment, facilities, and technology,
required to meet the desired production levels Gap Analysis
efficiently. Comparing forecasted demand with current capacity to identify discrepancies.
© 2023 Lizane Raaths

By following these steps, companies can

effectively plan and adjust their production Adjusting Capacity
capacity to align with customer demands, Making decisions to improve resource fulfilment or increase capacity.
improve resource fulfilment, improve
operational efficiency, and maintain a
competitive edge in the market. Cost Analysis
Assessing financial implications of capacity adjustments.
e.g., picture a leading online outdoor retailer
preparing for the bustling holiday season.
They carefully plan their capacity to
Implementation
accommodate the influx of orders,
Executing changes such as obtaining equipment, hiring staff, or expanding facilities.
guaranteeing a seamless flow within their
warehouse and a hassle-free journey to their
customers' door-step.
Evaluation and Monitoring
Continuously tracking performance indicators to identify issues.

Continuous Improvement
Consistently refining capacity planning strategies based on market changes.

44
 STRATEGIC PLANNING
LINKWAYNOW

Strategic planning is a systematic and forward-thinking process that companies undertake to set their long-term goals, define their direction, and
develop strategies to achieve those goals. It involves analysing internal and external factors, considering the company's mission and vision, and aligning
resources and actions to create a roadmap for success. Strategic planning provides a framework for decision-making and guides the company's actions
and resource allocation over an extended period, typically three to five years.

The key components and steps involved in strategic planning are as follows:

Mission and Vision Environmental Analysis SWOT Analysis Goal Setting

Defining the company's Assessing internal and external Evaluating strengths, weaknesses, Establishing specific,
© 2023 Lizane Raaths

purpose and desired future factors impacting operations. opportunities, and threats. measurable, achievable,
state. relevant, and time-
bound (SMART) goals.

Strategy Development Implementation and Performance Monitoring Review and Adaptation

Identifying and engaging with Execution Tracking and evaluating progress Continuously reviewing
Formulating approaches, action Putting strategies into action against goals and metrics and adjusting plans to
plans, and initiatives. through effective plans. align with changes.

Strategic planning provides companies with a proactive and structured approach to navigate complex environments, take advantage of
opportunities, reduce risks, and achieve sustainable success. It helps align the efforts of individuals and departments, fosters effective resource
allocation, and provides a roadmap for growth and development.

e.g., a tech company creates a strategic plan to expand their business into new international markets over the next five years.
The types of planning needed in a supply chain vary based on the characteristics of the company and the products it offers. In all cases,
forecasting plays a vital role in determining specific requirements. Forecasting involves the analysis of historical and current data to predict
future demand levels and determine the appropriate inventory levels.
45
LINKWAYNOW

PURCHASE ORDER
After the brand managers and sourcing specialists have
identified and developed the product, and the planners
have finalized the forecast, the forecast is forwarded to a
designated factory. At the factory, they review and
© 2023 Lizane Raaths

validate the quantities, costs, and other relevant details.

Subsequently, the buyer proceeds to raise an official
purchase order (PO) with the selected supplier.

Upon receiving the purchase order, the supplier will

acknowledge its receipt and confirm the order's accuracy.
They will then prepare and provide a Proforma invoice
that aligns with the confirmed details, unless any changes
are necessary. This Proforma invoice (PI) serves as a
preliminary billing document and helps ensure that both
parties agree before the final invoice and goods are sent.

46
LINKWAYNOW

PROFORMA INVOICE
A proforma invoice (PI) is an initial document provided by
© 2023 Lizane Raaths

the seller to the buyer before the actual sale is concluded.

It serves as a quotation or estimate of the costs involved in
a potential transaction, including the price, terms, and
conditions.

Proforma invoices are often used for contract

negotiations, or when goods are not yet available for
shipment.

It's essential to understand that each company employs

a distinct layout for their internal documents.

47
LINKWAYNOW

Production and
Manufacturing

04
© 2023 Lizane Raaths

48
 KEY ELEMENTS FOR MANUFACTURING
LINKWAYNOW

Manufacturing refers to the process of converting raw materials or components into finished products through various
production methods and operations. It involves a range of activities, technologies, and resources to create tangible goods.

Production Supply Chain

Raw Materials Quality Control
Equipment Management
Manufacturing starts Manufacturing involves
Manufacturing facilities Coordinating the flow of
with sourcing and attentive quality control
are equipped with materials, components,
procuring raw materials, measures to ensure that
© 2023 Lizane Raaths

machinery, tools, and and finished goods

which are transformed products meet set
equipment that enable throughout the
into the desired specifications and
various production manufacturing process
product. standards.
processes. for timely delivery.

Key Methods for Manufacturing:

Lean Batch Continuous Job or Custom
Manufacturing Manufacturing Manufacturing Manufacturing
Focuses on minimizing Involves producing Involves producing Involves producing
waste, optimizing efficiency, a fixed quantity of products without unique or customized
and continuously improving products in a series interruption, typically in products based on labour
processes to enhance of production runs. large volumes and high- customer requirements.
productivity and reduce speed production lines.
costs.
49
LINKWAYNOW

Technological Advancements
Manufacturing has significantly benefited from
technological advancements such as automation,
robotics, and computerized systems.

Automation improves efficiency, accuracy, and

speed of production processes, reducing the need
for manual labour.
© 2023 Lizane Raaths

Robotics is increasingly used for tasks like assembly,

material handling, and quality control, leading to
increased productivity and precision.

Computerized systems, such as enterprise resource

planning (ERP) and manufacturing execution
systems (MES), streamline operations and enable real-
time monitoring, planning, and control. Then there is
also the SPS Commerce platform, which also includes
features for inventory management, order fulfilment,
demand planning, and analytics. It integrates with
various enterprise resource planning (ERP) systems
and eCommerce platforms, allowing companies to
synchronize their data and workflows across different
systems.

50
 Importance and Economic Impact
LINKWAYNOW

It contributes to Gross Domestic

© 2023 Lizane Raaths

Product (GDP) growth, export

Manufacturing industries Manufacturing
opportunities, and technological
Manufacturing plays a often have backward and capabilities are essential
advancements.
vital role in the economy forward connections, for a country's self-
by creating jobs, leading to the sufficiency in producing
GDP growth refers to the total value of
generating revenue, development of goods, reducing
all goods and services produced within
and driving innovation. supporting industries reliance on imports, and
a country's borders during a specific
and supply chains. promoting industrial
period, typically a year.
development.

51
 Efficient Production Planning and Control for Meeting Customer Demands
LINKWAYNOW

Efficient production planning and control are essential components of successful businesses, enabling them to meet customer
demands, optimize resource utilization, and ensure timely delivery of products. Now, we will explore the next crucial steps in this
process, to gain a comprehensive understanding of how companies effectively manage their production operations.

Resource
1 Production Planning 2 Requirements
Planning (RRP)
3 Master Production
Schedule (MPS)
© 2023 Lizane Raaths

The MPS specifies the quantity

and timing of final product
Production planning involves
manufacturing. It considers
efficiently creating products to RRP ensures sufficient capacity
customer orders, demand
meet customer demands. It for our production plan by
forecasts, and inventory levels
includes analysing forecasts, assessing workforce, machinery,
to guide production planning,
setting production goals, and materials, and workspaces. It
material requirements, and
optimizing resource allocation. identifies resource constraints
capacity needs. PAB (Projected
Factors to consider include and enables adjustments to the
Available Balance) is an essential
aligning production quantities production plan if needed to
tool for MPS creation, as it
with customer preferences, overcome limitations and
calculates inventory levels by
managing inventory levels, and achieve our goals.
considering current stock,
ensuring timely delivery.
planned production, customer
orders, and material lead times.

52
 Capacity Requirements
LINKWAYNOW

Manufacturing Lead-
4 Time and Production
Activity Control
5 Planning (CRP) and
Material Requirements 6 Bill of Materials (BOM)
Planning (MRP)

Manufacturing lead-time is the

duration from production
initiation to product completion. It
involves tasks like material CRP ensures sufficient capacity A BOM is a detailed list
acquisition, production, quality to meet MRP requirements by specifying components, parts,
checks, assembly, and packaging. comparing needed capacity with and quantities needed to
Controlling lead times is vital for available resources. It identifies complete a product. It enables
limitations, facilitates workload accurate material planning and
© 2023 Lizane Raaths

planning and ensuring timely

product delivery. Lead-time balancing, and optimizes provides a clear layout of how
offsetting adjusts requirements resource planning and parts fit together for the final
based on component production scheduling. product.
timelines, while lead-time
exploding ensures continuous MRP (Material Requirements By following this systematic flow,
material flow and prevents stock Planning) is a system that from production planning to
shortages. manages and plans materials for resource management,
manufacturing based on the scheduling, and material
Production Activity Control (PAC) MPS (Master Production planning, a company can
implements and monitors the Schedule), bill of materials, and optimize its production process,
production plan, overseeing job lead time. MRP ensures timely meet customer demands
scheduling, progress tracking, availability of correct materials, efficiently, and ensure timely
collaboration across departments, avoiding excessive inventory or delivery of high-quality products.
and issue management. Its aim is production delays.
to ensure adherence to the plan
and promptly address any
deviations or challenges.

53
LINKWAYNOW

Summary of Manufacturing
Planning and Control
Manufacturing planning and control encompasses
activities such as production planning, resource
allocation, scheduling, materials management, and
quality assurance to achieve cost-effective and timely
production while meeting customer demands.

Batch Continuous
© 2023 Lizane Raaths

Production Production
Ideal for moderate-volume Suited for high-volume,
products with standardized standardized products with
designs. Items are consistent demand.
processed collectively in Mass Production Job Shop Production is continuous
batches. Efficient use of without breaks. Specialized
labour and equipment. Applied to high-volume Suitable for low-volume, equipment and
Examples: baked goods, products with customized products automation are used.
pharmaceuticals. standardized designs with unique Examples: oil refining,
and stable demand. specifications. Workers mass-produced consumer
Production lines and handle different tasks, goods.
automated processes and the equipment is
achieve high efficiency. adaptable. Examples:
Examples: cars, custom furniture,
electronic devices. specialized machinery.

54
 Why are manufacturing layouts important?
LINKWAYNOW

Choosing the right manufacturing process and layout depends on things like product features, production volume,
customization, market demand, and cost factors. The aim is to choose a combination that boosts productivity, quality,
and efficiency while satisfying customer needs.

Organizes facility based on similar

processes/equipment, suitable for job shops or Process
1 low-volume production with diverse product Layout
requirements.
© 2023 Lizane Raaths

Arranges facility in linear flow for assembly line

Product
2 efficiency, suitable for mass production of
standardized products. Layout

Groups machines into self-contained cells for

3 improved coordination, suitable for batch
Cellular
production with fluctuating demand. Layout

Centralizes workers/equipment for large or Fixed

4 complex products, observed in shipbuilding, Position
construction, or aerospace. Layout

55
 PRODUCT LIFE CYCLE
LINKWAYNOW

The Product Life Cycle (PLC) is a concept that describes the stages a product goes through from its introduction to the market
until its eventual decline. Understanding the PLC is crucial for developing an effective manufacturing strategy.

Here's an overview of the PLC and its influence on manufacturing strategy:

Introduction Stage Growth Stage

When the product is first brought to the As the product becomes increasingly
market, not many people know about it or popular, demand for it rises rapidly. To meet this
have bought it yet. The plan is to focus on higher demand, the manufacturing plan

1
saving money, being able to change easily, and concentrates on expanding production capacity. It

2
© 2023 Lizane Raaths

being able to produce more if demand goes also becomes essential to reduce production costs to
up. At first, not many products are produced, save money and increase profitability. Ensuring
and the way they are produced might change product quality is crucial to maintaining a good
as they try to improve the product. reputation and keeping customers satisfied.

Decline Stage Maturity Stage

As the market becomes saturated, technology The product reaches its peak demand, and the
advances, or consumer preferences change, the
demand for the product starts to decrease. The
manufacturing strategy may involve controlling
4 3
possibility of market value emerges. The
manufacturing strategy places emphasis on
improving efficiency, cost reduction, and product
costs, making operations more efficient, and quality. Methods such as process improvement,
adjusting production capacity. To prolong the automation, and lean manufacturing techniques are
product's life cycle, strategies such as expanding implemented to enhance productivity and minimize
the range of products, entering new markets, or waste. Effective supply chain management plays a
highlighting product uniqueness may be critical role in ensuring timely delivery and sourcing
employed. at competitive costs.

Companies must employ adaptive strategies throughout the product life cycle, incorporating innovation, cost optimization, and effective marketing to
maintain competitiveness, while understanding the duration and dynamics of each stage to inform decision-making.
56
 SAMPLES
LINKWAYNOW

Samples are of utmost importance in the realm of Supply Chain Management for several key reasons:
Quality Assurance
o Samples determine product quality at different production stages, identifying defects and ensuring products meet required
standards.

Performance Evaluation
o Samples test prototypes to evaluate factors like functionality and user experience, enabling necessary adjustments for best
performance.

Design Refinement
© 2023 Lizane Raaths

o Samples aid in refining product designs through testing, feedback gathering, and necessary adjustments before mass
production.

Risk Mitigation
o A thorough sample examination helps identify potential issues in the supply chain, allowing proactive problem-solving to
avoid mistakes and delays.

Customer Satisfaction
o Samples ensure products meet or exceed customer expectations by identifying and resolving quality or performance issues
prior to delivery.

Cost Efficiency
o Samples help identify and rectify design or manufacturing flaws early on, optimizing production processes and reducing
waste and costs.

Compliance and Standards

o Samples undergo diligent testing to ensure adherence to industry regulations, certifications, and safety requirements.
57
 Let’s explore the different types of samples and significance in the Supply Chain
LINKWAYNOW

CAD design uses software to create

digital models of products, components, A fully functional product for
and manufacturing processes. It display and marketing,
improves product quality, reduces costs, Showroom showcasing it to potential
and streamlines development while customers and aiding their
CAD Design Sample
adhering to standards. purchasing decisions.
© 2023 Lizane Raaths

Small batches of products

Prototypes or early versions of a produced before mass production
product used for testing, refining to test the manufacturing process,
Development design and functionality before mass Pre-Production verify standards, and resolve
production. Ensures desired quality issues. Prevents mistakes and
Sample and performance standards.
Sample (PPS) increases efficiency.

Large quantities of finished

Representative samples produced products from mass production
during mass production to verify to validate consistent quality and
Production quality and ensure the meet standards. Ensures
manufacturing process is correct. customer satisfaction and aids
Sample (PS) Helps identify defects before delivery.
Bulk Sample quality control.

58
 It is important to understand the difference between production samples and bulk samples. While both production samples and bulk samples
play significant roles in quality control, they differ in quantity and purpose. Production samples are smaller batches used for quality control
LINKWAYNOW

inspections, while bulk samples represent large quantities of finished products for quality assurance and overall consistency.

In addition to the above, various sample types and terms are used, including:

Development and
• Engineering samples: Verify product design specifications.
Showroom Sample

• Tooling samples: Test production tooling functionality.

• Process validation samples: Ensure correct manufacturing processes.
• Pilot run samples: Test manufacturing process capability.
•
© 2023 Lizane Raaths

Pre-production Confirmation samples: Verify successful execution of design or process changes.

Samples (PPS) • Red Seal Sample: Verify product specifications and quality before shipment.
• Blue Seal Sample: Ensure fabric or dye meets required standards.
• Green Seal Sample: Verify compliance with colour fastness and other quality standards.
• Initial Samples: First samples produced to verify quality and performance.
• Golden Sample: Set the standard for final product quality.

• First-off Production Samples: First products produced during mass production.

Production (PS) • In-process Production Samples: Verify quality at various stages of production.
• Final Production Samples: Represent completed production run quality.

Bulk Samples • Retained Production Samples: Kept as reference in case of issues or disputes.

It's important to note that the difference between pre-production samples and production samples can vary depending on the industry and
59
context. The same sample type may serve different purposes in different scenarios.
 INTERNAL PRODUCT IDENTIFIERS
LINKWAYNOW

There are various terminologies used to refer to different product identifiers and barcodes.
First, let's delve into internal product identifiers, which play a crucial role in the identification of various products.

The following are the most used product identifiers:

A Merchant SKU (Stock Keeping Unit) is a unique identifier assigned by a seller to a product in their inventory. It helps them track and manage
their products internally for inventory, order fulfilment, and sales tracking purposes. SKUs or Product IDs as some would call it, are not standard
across different sellers or marketplaces and are used for internal inventory management.

The following are additional Barcode-Related terms

© 2023 Lizane Raaths

PARENT MSKU
MSKU stands for Master Stock Keeping Unit, which is a higher-level identifier that groups together related SKUs. It helps categorize
products or items that share common characteristics, making inventory management and analysis more efficient.

VENDOR / PARENT SKU

This is a code assigned by a seller to keep track of their store's inventory and manage their products.

CHILD SKU
It refers to a specific item that is associated with a parent item and has its own unique SKU code. It helps
identify variations or specific versions of a product.

SHADOW SKU
It is a SKU used to list a product in multiple categories or sections within a store's inventory. It allows the product to be easily found
and accessed from different sections.

60
 Let's examine an example that incorporates all these SKUs using a
LINKWAYNOW

Deluxe Gaming Console.

Parent MSKU: "Deluxe Gaming Console"

Parent SKU: "Deluxe Gaming Console"

Child SKU: "Deluxe Gaming Console - Black Edition"

Shadow SKU: "Deluxe Gaming Console - Limited Time Offer"

The Parent MSKU and Parent SKU, both "Deluxe Gaming Console," represent the main product offering.
The Child SKU, "Deluxe Gaming Console - Black Edition," is a variant of the parent SKU, indicating a specific
© 2023 Lizane Raaths

colour option. It has its own unique SKU. The Shadow SKU, "Deluxe Gaming Console - Limited Time Offer,"
refers to a temporary promotional version of the parent SKU. It allows the product to be listed in multiple
categories or sections and may have exclusive bundled items or discounted pricing.

These different product identifier types serve various purposes within supply chain
ecosystem
A SKU can be written in various formats depending on the specific system or retailer. The format of a SKU
can vary, but it commonly consists of a combination of letters, numbers, or both.

For example, a SKU for a product could be written as:

ABC123

12345-RED

XYZ789-20L

Deluxe Gaming Console

61
 Before we proceed to discuss barcodes, let's first explore three frequently used product identifiers across retailers
LINKWAYNOW

and online platforms. Additionally, we will look at three specific identifiers that are commonly used on Amazon.
Understanding these identifiers is essential as they play a crucial role in product tracking, inventory management, and retail operations.

02
01 03
© 2023 Lizane Raaths

ISBN GTIN
(International Standard SERIAL NUMBER (Global Trade Item
Number)
Book Number) The number of digits in a serial
number can vary depending on the This is a 14 digits
This is a unique 13-digit
specific system or manufacturer. It standardized
numerical identifier
typically ranges from 6 to 12 digits, numerical identifier
assigned to every
but it can be depending on the used to track
published book or
context and purpose. products in the
book-like product, used
A serial number is used for unique supply chain.
to identify books and
their editions. identification and tracking of
individual items for purposes such as
inventory management, warranty
tracking, and traceability.

62
 ASIN CHILD ASIN
LINKWAYNOW

(Amazon Standard Identification Number) This is a unique code given to different variations of a
It refers to a special code given to a product product on Amazon. For example, if a t-shirt is available in
when it's added to Amazon's catalogue. It's a different sizes (small, medium, large), each size will have its
ten-digit alphanumeric code that helps own child ASIN. These child ASINs are linked to a parent
identify the product uniquely. ASIN, which represents the main product listing. This
helps organize and group together variations of the same
AMAZON product.
The ASIN is a 10-digit alphanumeric code
assigned to a product in Amazon's catalogue. BARCODES
The child ASIN follows the same format as the parent
ASIN, so it is also a 10-digit alphanumeric code.

FNSKU
© 2023 Lizane Raaths

e.g., Let's say you're selling a set of coloured (Fulfilment Network Stock Keeping Unit)
markers on Amazon. The main product listing This is another identifier used by Amazon. It helps identify
(parent ASIN) would represent the overall set, a specific product as belonging to a particular seller. It's
and each individual colour option (e.g., red, primarily used for inventory management and tracking
blue, green) would have its own child ASIN. purposes within Amazon's fulfilment network.
The FNSKU would be used to track and
The FNSKU is also a 10-digit alphanumeric code used by
identify each individual set of markers within
Amazon to identify a specific product within its fulfilment
your inventory as a seller.
network.

Moreover, in addition to the widely recognized barcodes like UPC and EAN, which enable easy scanning of product information for any retailer
and e-commerce platform, Amazon also employs these barcode systems, along with SKUs and ISBNs. These standardized product identifiers play
a crucial role in facilitating efficient inventory management and smooth transactions across Amazon's platform and other retail environments.

UPC (Universal Product Code)

This is a 12-digit universal product code used to identify products in retail.

EAN (European Article Number)

This is a 13 digits barcode used internationally to identify products at retail.
63
 It can be easy to get confused when it comes to barcodes. Let's explore some key differences:
LINKWAYNOW

ASIN vs. SKU

Summary: ASIN is a universal identifier for a product, while SKU is a seller-specific code used to manage inventory.

Product Listing: A detailed online page showcasing a specific product, including its description, features, images, pricing, and other relevant
information on an eCommerce platform.

e.g., The ASIN, "B0123456789," represents a product on Amazon. Each seller offering that product assigns their own SKU. Seller A uses the SKU
"ABC123," while Seller B uses the SKU "XYZ789." Both SKUs connect to the ASIN, allowing each seller to track and manage their inventory
within the product listing.
© 2023 Lizane Raaths

ASIN vs. UPC

Summary: A UPC barcode is a special type of barcode used in stores for product identification and inventory tracking, while ASIN is a unique code
assigned by Amazon to each of their sold products.

e.g., To sell the toy "Super Robot," the manufacturer assigns a UPC barcode (e.g., 1234567890). The store scans the barcode to track inventory.
When selling the toy on Amazon, the store uses the UPC in the product listing, and Amazon generates a unique ASIN (e.g., ASIN1234) to
manage the product on its platform.

ASIN vs. FNSKU

Summary: ASIN is the unique identifier assigned to a product on Amazon's platform, while FNSKU is the unique identifier assigned by Amazon to
each individual item within its fulfilment network.

e.g., "The Adventures of Alice" book is listed on Amazon with ASIN1234. Amazon assigns an FNSKU (e.g., FNSKU5678) to each book in the
publisher's shipment. When a customer orders the book, Amazon uses the FNSKU to locate the specific copy within its warehouse.

64
LINKWAYNOW

SCANNABLE AND SCANNABLE BARCODES

NON-SCANNABLE BARCODES
Barcodes need accurate measurements, digits, and lines from GS1 system. Companies
use scanners to verify them. Platforms like GS1 offer guidance. For price tags (swing
tags), FastTrak is a reputable choice known for speed and reliability. Check below info
for barcode colour tips.
© 2023 Lizane Raaths

NON-SCANNABLE BARCODES

65
 Here's the essential information you should know
LINKWAYNOW

to perform Supply Chain Inspections effectively:

Inspection Techniques
1 Demonstrating expertise in a variety of inspection techniques,
encompassing visual assessments, precise measurements, and conducting
specific tests relevant to the product. Proficiently utilizing inspection tools
and equipment.

Documentation and Reporting

QUALITY CONTROL 2 Recognizing the significance of thorough documentation, accurately
© 2023 Lizane Raaths

recording data, and creating comprehensive reports. Effectively

Quality inspection in the supply chain is a crucial communicating inspection results to relevant stakeholders.
process that involves assessing and verifying product
quality and compliance at different stages, including
production, packaging, and shipping. By conducting
inspections and tests, professionals ensure that
products meet required quality standards, Supply Chain Management
specifications, and official requirements.
Comprehending the intricacies of supply chain processes, logistics, and
3 nurturing supplier relationships. Being mindful of lead times, inventory
management, and recognizing the impact of quality on overall
performance.

Problem-solving and Decision-making

Exhibiting strong problem-solving skills based on inspection findings.
Addressing any shipment delays resulting from rejected inspections
4 promptly and ensuring timely resolution to facilitate smooth shipments.
Engaging in collaborative efforts with suppliers and stakeholders to
address quality concerns effectively.

66
 Regulatory Compliance
LINKWAYNOW

Being aware of relevant regulations, safety standards, and labelling

requirements is crucial during inspections. For instance, in food product
5 inspections, understanding food handling, storage, and labelling
regulations, including allergen labelling, nutrition information, and
expiration date requirements, ensures compliance with safety guidelines.
Additionally, industry certifications and compliance programs play a
significant role in maintaining quality standards and demonstrating
commitment to best practices.

Product Specifications
6 Knowing product requirements, quality standards, and performance
criteria is vital. For electronic device inspections, understanding
© 2023 Lizane Raaths

functionality, safety features, and acceptable defect levels is crucial.

Equally important is awareness of dimensions, materials, and relevant
regulations or industry standards.

Quality Control Methods

Knowing quality control techniques like sampling and defect
7 classification is crucial. Effective sampling involves selecting a
representative sample of products for evaluation in manufacturing
processes. By comparing it to established standards, discrepancies can
be swiftly identified, enabling necessary corrective actions to maintain
desired quality.

Manufacturing Processes
Comprehending the product's specific manufacturing processes is essential.
8 This includes understanding how raw materials are transformed into finished
products through steps like casting, machining, assembly, and packaging.

Additionally, knowing about common defects, production steps, and critical

control points is vital for ensuring product quality and efficiency.
67
LINKWAYNOW Understanding the two types of Cartons and the purpose of Polybags
Polybags are lightweight, durable, transparent, and cost-effective plastic packaging shielding products from moisture, dirt, and staining, with growing
interest in eco-friendly alternatives, while inner and outer cartons in the supply chain serve as crucial packaging components with distinct roles.

INNER CARTONS OUTER CARTONS

Added protection and organization within Key packaging for product protection during
larger shipping containers. Made of cardboard storage, transport, and distribution. Made of sturdy
or corrugated material. materials, like corrugated cardboard, available in
various sizes and designs for diverse shipping needs.
Inner cartons make handling, distribution, and
retail display of multiple product units easier, Crucial for secure delivery and supporting logistical
serving various purposes like: operations, including:

Product Protection Protection

© 2023 Lizane Raaths

Inner cartons shield items from damage Outer cartons offer a sturdy and protective
during transit. enclosure for contained products.

Unitization Consolidation & Unitization

Inner cartons consolidate Outer cartons group product units for efficient
product units for efficient handling & storage.
handling.

Retail Display Identification & Labelling

Inner cartons in retail are Outer cartons have designated space for labels &
designed for convenient barcodes, ensuring accurate tracking & inventory
shelving and branding. management.

Organization and Grouping Stackability & Stability

Inner cartons facilitate organization and Outer cartons maximize storage & transportation
68 easy identification of different variations. capacity while preventing shifting or toppling.
 CARTON MARKINGS
LINKWAYNOW

Accurate carton markings are vital in the supply chain as they provide necessary information for identifying, handling, and tracking cartons. Correct
carton markings are crucial for efficient logistics operations, preventing issues such as misidentification, damaged products, shipment errors, non-
compliance, and tracking problems.

Standard Markings
o Shipper: e.g., XYZ Supplier
o Consignee: e.g., Linkway
o Destination: e.g., Long Beach, USA
o Item Name: e.g., Sunglasses
o Purchase Order No.: e.g., 00495 Shipper: XYZ Supplier
© 2023 Lizane Raaths

Consignee: Linkway

o CTN No.: e.g., 15/230 Destination: Long Beach, USA

Item Name: Sunglasses
Purchase Order No.: 00495

o Inner Packing: e.g., 6 PCS CTN No.: 15/230

Inner Packing: 6 PCS
Master Packing: 48 PCS/CTN
N.W: 14.2kg
o Master Packing: e.g., 48 PCS/CTN G.W: 16.4kg
Specs: 14.2 x 13.7 x 9.3cm
Made in China
Shipper: XYZ Supplier
Consignee: Linkway

o N.W: e.g., 14.2kg Destination: Long Beach, USA

ItemName: Sunglasses
Purchase Order No.: 00495
CTN No.: 15/230
Inner Packing: 6 PCS

o G.W: e.g., 16.4kg Master Packing: 48 PCS/CTN

N.W: 14.2kg
G.W: 16.4kg
Specs: 14.2 x 13.7 x 9.3cm

o Specs: e.g., 14.2 x 13.7 x 9.3cm Shipper: XYZ Supplier

Consignee: Linkway
Shipper: XYZ Supplier
Consignee: Linkway
Made in China

o Made in China Destination: Long Beach, USA

Item Name: Sunglasses
Purchase Order No.: 00495
CTN No.: 15/230
Destination: Long Beach, USA
Item Name: Sunglasses
Purchase Order No.: 00495
CTN No.: 15/230
Inner Packing: 6 PCS Inner Packing: 6 PCS Shipper: XYZ Supplier
Consignee: Linkway
Master Packing: 48 PCS/CTN Master Packing: 48 PCS/CTN Destination: Long Beach, USA
N.W: 14.2kg N.W: 14.2kg ItemName: Sunglasses
G.W: 16.4kg G.W: 16.4kg Purchase Order No.: 00495
CTN No.: 15/230
Specs: 14.2 x 13.7 x 9.3cm Specs: 14.2 x 13.7 x 9.3cm Inner Packing: 6 PCS
Made in China Made in China Master Packing: 48 PCS/CTN

Additional Markings
N.W: 14.2kg
G.W: 16.4kg
Specs: 14.2 x 13.7 x 9.3cm
Made in China

• UN Number Specification (for Shipper: XYZ Supplier Shipper: XYZ Supplier

Dangerous Goods): Four-digit UN

Consignee: Linkway Consignee: Linkway
Destination: Long Beach, USA Destination: Long Beach, USA Shipper: XYZ Supplier
Item Name: Sunglasses Item Name: Sunglasses Consignee: Linkway
Purchase Order No.: 00495 Purchase Order No.: 00495 Destination: Long Beach, USA

number for hazardous materials CTN No.: 15/230

Inner Packing: 6 PCS
CTN No.: 15/230
Inner Packing: 6 PCS
ItemName: Sunglasses
Purchase Order No.: 00495
CTN No.: 15/230
Inner Packing: 6 PCS
Master Packing: 48 PCS/CTN Master Packing: 48 PCS/CTN
identification.
Master Packing: 48 PCS/CTN
N.W: 14.2kg N.W: 14.2kg N.W: 14.2kg
G.W: 16.4kg G.W: 16.4kg G.W: 16.4kg

•
Specs: 14.2 x 13.7 x 9.3cm
Specs: 14.2 x 13.7 x 9.3cm Specs: 14.2 x 13.7 x 9.3cm Made in China

Barcode or Tracking Information: Made in China Made in China

Enables automated package

tracking during transit.

69
 Common Packaging Symbols: Essential Instructions for Safe Handling
LINKWAYNOW

These symbols represent some of the most frequently used pictograms found on packaging to provide important instructions and information about
the contents. While there are many more symbols used for different purposes, these are the most common ones found on carton markings and labels.
Understanding these symbols helps ensure proper handling, transportation, and compliance with safety regulations.

CE Marking: Certifies that a product has

met EU health, safety, and environmental
requirements, which ensure consumer
safety.
© 2023 Lizane Raaths

Handle With Keep Dry Radiation Fragile CE Marking

Care Hazard

Be Recycled: This symbol indicates that a

product can be recycled, but not
necessarily that it has been itself produced
from recycled materials.

Food This Way Flammable Temperature Be Recycled

Up Hazard Sensitive

The effects of incorrect or missing Carton Markings

• Misidentification: Confusion and errors in contents, quantity, and handling.
• Damaged Products: Lack of fragility markings leads to increased risk of damage.
• Shipment Errors: Incorrect info causes delays and supply chain disruptions.
• Regulatory Non-Compliance: Missing safety data can result in penalties.
70 • Tracking and Traceability Issues: Inaccurate details hinder inventory management and recalls.
 VARIOUS PACKING METHODS
LINKWAYNOW

In the supply chain and packaging, various methods are employed to efficiently pack and organize products.

Let's explore some of these methods in more detail:

Pre-pack Assorted Packing Assorted Pre-pack Nested Packing

Preparation of products in Packaging different products Packaging a variety of Placing smaller items or
advance, in suitable or variants together in a products together in specific cartons inside larger ones to
quantities for retail sale, single package, offering quantities for retail sale, save space and enhance
ensuring efficient convenience and variety to offering convenience and packaging efficiency.
© 2023 Lizane Raaths

distribution and accessibility consumers. variety to consumers.

to consumers.

Stacked Packing Solid Packing Bulk Packing KD Packing

Securing cartons on top of Packaging items without Packaging products in large KD (Knocked Down) Packing
each other to create stable voids or empty spaces, quantities without individual refers to the process of
and space-efficient maximizing product density separation or containment, dismantling packaging into
packaging units. and reducing movement suitable for non-individually separate components,
during transportation. packaged goods. enabling more efficient
shipping and simplified
handling.

By utilizing these diverse packing techniques, companies can optimize their packaging procedures, improve efficiency, and improve overall
supply chain operations. Each method has distinct purposes based on product and distribution requirements.
71
LINKWAYNOW

Packaging Considerations for Air and Sea Cargo: Ensuring Safe and Efficient Transportation
This chapter focuses on packaging considerations for air and sea cargo. Various factors come into play when it comes to cargo packaging,
depending on the mode of transportation. We will explore the packaging requirements for both air and sea cargo.

Sea Cargo Packing Air Cargo Packing

© 2023 Lizane Raaths

Sea cargo packaging requires durability to Air cargo packaging commonly utilizes
withstand ocean challenges and protect goods lightweight materials like double-walled or tri-
from water, humidity, and external threats. wall cartons to reduce shipment weight, ensuring
Optimal space usage for LCL cargo may involve cost-effective transportation. For fragile items,
double stacking to prevent damage during sturdy wooden crates are employed to offer
handling. Preventive measures, like moisture- maximum protection against impact during air
resistant barrier packaging and absorbent agents, transport. These crates are designed to withstand
maintain cargo integrity during transit. Versatile air cargo handling, minimizing the risk of
options such as closed/open crates, damage. Calculations for air cargo packaging
plastic/wooden pallets, and skid packaging consider weight or volume, whichever is higher,
accommodate various cargo types and sizes. to determine suitable package size and weight
Embracing returnable packaging fosters eco- limits, optimizing aircraft cargo space usage.
friendliness and sustainability in the supply chain.

Following specific packaging guidelines for air and sea cargo ensures safe and efficient transportation, minimizes damage risk, and
optimizes transportation resources.

72
 Understanding the terminology of GRD, CRD, ETD and ETA
LINKWAYNOW

In the upcoming module, we will delve into the topic of logistics. However, prior to that, it is crucial to understand
the importance of certain terms commonly used in both production and logistics, namely ETD, GRD, CRD and ETA.

GRD (Goods Ready Date)

GRD represents the date when goods or products are expected to be ready for shipment or delivery. It is a

1 crucial milestone in production and logistics planning. The GRD is determined based on various factors such
as production lead time, quality control checks, packaging, and other necessary preparations.

CRD (Cargo Ready Date)

© 2023 Lizane Raaths

CRD refers to the date when the cargo or goods are received or made available for shipment. It indicates the

2
point in time when the cargo is ready to be loaded onto the transportation vehicle or container for delivery
to its destination. The CRD is a significant milestone in logistics as it helps in coordinating shipping
schedules, arranging transport, and ensuring smooth logistics operations.

ETD (Estimated Time of Departure)

ETD refers to the anticipated or projected time at which a shipment or transportation vehicle is expected to
3 depart from its origin. This information is crucial for production planning as it helps coordinate the timing of
raw material deliveries or finished goods transportation.

ETA (Estimated Time of Arrival)

ETA is the estimated time of a shipment's or vehicle's arrival at its destination. It is crucial in logistics for

4 scheduling, inventory management, and customer satisfaction. Companies use ETA for tracking goods and
gaining visibility throughout the arrival process.

It is important to note that the exact terminology may vary depending on the specific industry or context, but the concepts remain the
same.
73
LINKWAYNOW

Let's consider a scenario involving a company manufacturing and shipping electronic

devices to illustrate the use of ETD, GRD, CRD and ETA:
Let's say a company is preparing to ship a batch of electronic devices. They have set the Estimated Time of Departure (ETD) as June
30th, which is when the shipment is scheduled to leave their manufacturing facility.

The transportation provider estimates that it will take 20 days for the shipment to reach its destination. Based on this estimation,
the Estimated Time of Arrival (ETA) is calculated as July 20th, representing the expected arrival time at the customer's location.
© 2023 Lizane Raaths

To ensure the goods are ready for shipment, the company sets the Goods Ready Date (GRD) as June 28th. This signifies the date
when the electronic devices will be fully prepared, packed, and ready to leave the manufacturing facility.

In preparation for the shipment, the company sets the Cargo Receipt Date (CRD) as June 28th as well, indicating the date when the
goods will be received or made available for shipment. This will then be loaded on a truck or in a container and then be moved to
the port.

By coordinating the ETD, ETA, GRD, and CRD, the company ensures efficient production and logistics operations. The GRD ensures
that the goods are ready for shipment by June 28th, aligning with the CRD for availability. The ETD of June 30th ensures timely
departure, while the ETA of July 20th estimates the arrival time at the customer's location.

This coordination of dates enables the company to effectively manage production, logistics, and customer expectations, ensuring
timely delivery of the electronic devices.
Regenerate response

74
LINKWAYNOW

Having an EORI number is

EORI stands for Economic
mandatory for companies and
Operator Registration and
individuals engaged in cross-
Identification. It's a unique
border trade within the
number used in the supply
European Union (EU) and
chain and international trade.
European Free Trade
Think of it as an ID for
Association (EFTA) countries. It
companies and individuals
helps customs authorities keep
involved in importing and
track of goods and ensures
exporting goods.
smooth customs processes.

EORI
© 2023 Lizane Raaths

Essential for Cross-Border

Trade in EU and EFTA
To obtain an EORI number,
you need to register with the Getting an EORI number is
customs authorities in the an important step in
country where you are based complying with customs
or operate. Each EU member regulations and facilitating
state or EFTA country has its your import and export
own customs authority activities. It allows you to
responsible for issuing EORI easily identify and track
numbers. You can usually goods as they move across
apply for an EORI number borders, making customs
online through the customs procedures more efficient
authority's website or by and ensuring smooth trade
submitting an application operations.
form.

75
LINKWAYNOW

Logistics and Transportation

Management

05
© 2023 Lizane Raaths

76
 WEIGHTS AND MEASUREMENTS
LINKWAYNOW

Let's begin by gaining a clear understanding of net and gross measurements, which play a crucial role in international shipping. These measurements
are essential for precise calculations and efficient utilization of available space. Below, we'll explore the concepts of net weight and gross weight:

Net Weight (N.W.) refers to the actual weight or mass of a product without its packaging. It gives us insight into the precise weight of the goods
themselves, excluding any additional materials used for packaging.

On the other hand, Gross Weight (G.W.) represents the total weight of a product, including both the goods and their packaging. This measurement
includes not only the weight of the items being shipped but also factors in the containers, crates, or any other packaging materials used to secure the
products.

CBM (Cubic Meter/m³)

© 2023 Lizane Raaths

CBF (Cubic Feet/ft³)

CBM is a way to measure how much space cartons take up when they are CBF is a way to measure how much space a product or carton
shipped internationally. It helps us calculate how much room goods will takes up. It tells us how much room is inside an object or a
need in containers or on ships. This helps us plan better and use given area, using a standard unit for volume measurement.
transportation resources efficiently. CBM is a unit itself that represents the
volume of a three-dimensional space. When calculating CBM, you measure
the length, width, and height of an object or a shipment and multiply them
together to get the volume in cubic meters.

Let's consider a carton that measures 60 cm in length, 40 cm in

width, and 30 cm in height. In this case, the CBF (Cubic Feet) of
the carton would be calculated as 4.24 cubic feet (60 cm ÷ 30.48
Here's an example: Let's consider a carton that measures 30 cm in length, = 1.97 feet, 40 cm ÷ 30.48 = 1.31 feet, 30 cm ÷ 30.48 = 0.98 feet, 1.97
20 cm in width, and 10cm height. In this case, the CBM of the carton would feet x 1.31 feet x 0.98 feet ≈ 4.24 cubic feet). This means that the
be calculated as 0.006 cubic meters (0.3 x 0.2 x 0.1 = 0.006 cubic meters). carton holds a space of approximately 4.24 cubic feet.

CBM and CBF are vital in international trade and logistics, enabling accurate weight and space calculations, leading to efficient container usage and
reduced shipping costs. Standardized measurements promote effective communication among trade participants.
77
LINKWAYNOW

To convert between volume measurements, the following conversion factors are used:
Let's use an example to understand the conversion of volume measurements. Assume we have a carton with dimensions of 40cm length, 20cm
width, and 10cm height. When it comes to measurements, you will also come across the term UOM, which stands for unit of measure.

To find the volume of the carton, multiply the length, width, and height: Volume = length × width × height Volume = 40 cm × 20 cm × 10 cm = 6000
cubic centimetres (cm³).

Now, let's explore different methods of converting between volume units using this example, starting with the conversion from cubic centimetres
(cm³) to cubic meters (m³/CBM), which is widely used in logistics determination.
© 2023 Lizane Raaths

Calculate Carton Volume cm³ to m³/CBM cm³ to in³ in³ to m³/CBM

40 cm x 20 cm x 10 cm = 8000 cubic centimeters (cm³)
Most Popular Cubic centimetres (cm³) to Cubic centimetres (cm³) Cubic inches (in³) to
CBM: 8000 (cm³) /. 1,000,000 = 0.008 CBM (m³) cubic meters (m³/CBM) by to cubic inches (in³) using cubic meters (m³) by
dividing the volume by the conversion factor of dividing the volume by
1,000,000: Volume in cubic 0.061024: 8000 cm³ * 61.024: 488.19 in³ / 61.024
meters = 8000 cm³ / 0.061024 ≈ 488.19 in³ ≈ 0.008 m³
cm
20 1,000,000 = 0.008 m³
40
cm
m³/CBM to ft³ ft³ to in³ ft³ to cm³

Cubic meters (m³) to cubic Cubic feet (ft³) to cubic Cubic feet (ft³) to cubic
feet (ft³) by multiplying the inches (in³) by multiplying centimetres (cm³) by
10cm

volume by 35.3147: 0.008 the volume by 1728: 0.2825 multiplying the volume
m³ * 35.3146667 ≈ 0.2825 ft³ ft³ * 1728 ≈ 488.19 in³ by 28,316.8: 0.2825 ft³ *
28,316.8 ≈ 7985.34 cm³.

78
 PALLETS Wooden Pallet Sizes for Each Region
LINKWAYNOW

There are several types of pallets used for storing

o US & Canada: 48" x 40”
and transporting goods. Some common types o UK: 1200mm x 1000mm
of pallets are: o Europe: 800mm x 1200mm
o Asia: 1100mm x 1100mm
o India: 1200mm x 1000mm
Wooden Pallets
These pallets are the most used type of pallets. They are durable, cost-effective, and can be reused or

1
recycled.
Plastic Pallets
These pallets are lightweight, durable, and resistant to moisture, chemicals, and bacteria. They
© 2023 Lizane Raaths

2 are often used in industries that require high hygiene standards.

Metal Pallets
Made from steel or aluminium, these pallets are strong, durable, and fire-resistant. They are

3 commonly used in heavy-duty applications or for storing and transporting high-value goods.

Hybrid Pallets
Made from a combination of materials such as wood and plastic, these pallets offer the

4 benefits of both materials, such as durability and moisture resistance.

Presswood Pallets
Made from recycled wood, these pallets are lightweight and can be easily recycled. They are
5 often used in industries that require a single-use or disposable option.

6
Paper Pallets
Made from compressed paper, these pallets are lightweight and can be easily recycled. They are
often used in industries that require a single-use or disposable option.
79
 Dry Container
The most common
LINKWAYNOW

container in the market

and mainly used for
general cargo.
Dangerous Goods Depending on the
Container Flat Rack Container
class, a dry container is
DG containers ensure secure also used for DG cargo. A dry container with no
handling of hazardous materials. sealing or side walls used
They have specialized Size: 20ft, 40ft & 40ft for cargo wider than the dry
construction, ventilation, robust HC container. Ocean freight is
sealing, clear labelling, and more expensive for flat rack
comply with regulations. These containers as it uses extra
features promote safe container space on both
transportation, protecting the sides and the top when
loaded on a vessel.
© 2023 Lizane Raaths

environment and individuals. ISO Tank Container

Sizes: 20ft, 40ft, & custom-built Used for liquid Size: 20ft & 40ft
sizes materials.
Size: Estimate 9.5KL -
26 KL

Open Top Container

CONTAINERS A dry container without

sealing used for high
Reefer Container cargo.
In the following section, we will delve into an in-
depth exploration of container types, ranging from A temperature-controlled Size: 20ft & 40ft
standard dry containers to specialized units tailored container that can adjust
for specific cargo. We will examine their distinct temperature from -30ºC to
features, sizes, and their purpose. +30ºC. Reefer containers
are used for food or DG
cargo that requires
temperature control.
Size: 20ft & 40ft
80
 Let's delve into the topic of determining the number of
LINKWAYNOW

pallets that can fit into a container.

The number of pallets that can fit into a container depends on the size and type
of container, as well as the size of the pallets being used. Here are some common
container sizes and their approximate pallet capacity:

20-foot Standard Container

o This container size can typically accommodate up to 10 standard pallets,
assuming they are loaded efficiently and arranged in a single stack (5
pallets per row, 2 rows).
o Estimate volume in cubic meters: 25-28 CBM
o Estimate maximum cargo weight in kilograms: 16,400 KG
© 2023 Lizane Raaths

40-foot Standard Container

o A standard 40-foot container can generally hold up to 20 standard pallets
in a similar configuration as the 20-foot container (10 pallets per row, 2
rows). It's important to note that these figures are estimates, and the
o Estimate volume in cubic meters: 55-57 CBM actual number of pallets that can fit into a container may vary
o Estimate maximum cargo weight in kilograms: 20,800 KG based on various factors such as pallet type, pallet size, weight,
loading configuration, and any restrictions or regulations specific
to the transportation route or container type.
40-foot High Cube Container
o The high cube variant of the 40-foot container offers additional vertical Additionally, other container types, such as open-top or flat-rack
space. It can hold around 22 to 24 standard pallets, depending on factors containers, may have different pallet capacity due to their unique
such as the pallet height and any height restrictions within the container. design and loading capabilities.
o Estimate volume in cubic meters: 62-65 CBM
o Estimate maximum cargo weight in kilograms: 20,200 KG To determine the exact pallet capacity for a specific container and
pallet type, it is advisable to consult with the container provider,
45-foot High Cube Container freight forwarder, or logistics expert who can consider the specific
dimensions and requirements of the shipment to provide a more
o This larger container size can typically accommodate around 26 to 28 accurate estimate.
standard pallets, again considering the same factors mentioned above.
o Estimate volume in cubic meters: 70-73 CBM Stay tuned for the upcoming section where we will explore various
81
o Estimate maximum cargo weight in kilograms: 20,000 KG types of containers in further detail.
 What are Container Grades and Types?
LINKWAYNOW

Containers are categorized into different grades (A, B, and C) based on their condition. A container depot cleans and
sorts containers to determine their grade.

A GRADE
When importing food or medicine, a
container with Grade A is required.
A B GRADE
A B-grade container can be used for general
cargo that does not require a high level of
© 2023 Lizane Raaths

cleanliness or structural integrity, such as

B
building materials or non-perishable goods.

C GRADE

C
Grade C containers are only suitable
for transporting scrap material and
steel.

82
 SHIPPING METHODS
LINKWAYNOW

Comparing the Two Most Common Shipping Methods in International Trade: FCL and LCL

Less Than Container Load (LCL) Full Container Load (FCL)

LCL is used when goods do not fill an FCL indicates that the shipment's
entire container. Freight forwarders volume or weight is enough to
consolidate multiple shipments for the occupy the entire container space,

LCL FCL
same destination to optimize space and without the need for consolidation
save costs, benefiting both forwarders with other cargo.
and shippers.
© 2023 Lizane Raaths

Comparing LCL and FCL Costs: Key Considerations

Ocean Freight (OF) Difference: FCL involves a fixed cost per container (USD per container), while LCL charges are
based on cargo volume (USD per cubic meter - USD/CBM).

Terminal Handling Charge (THC): Both LCL and FCL shipments incur THC, covering handling costs from the Port of
Loading (POL) to the Port of Discharge (POD).

Container Freight Station (CFS) Cost: CFS cost is associated with LCL shipments for consolidating cargo in a
container. FCL shipments don't have this cost as they're directly loaded at the shipper's facility.

Calculation Methods: FCL costs are calculated per container, irrespective of cargo weight or size. For LCL, costs can
be weight-based (USD per container) or measurement-based (USD per truckload or W/M).

To decide between LCL and FCL, consider the break-even point. Note that customs clearance and documentation fees are not included
in these cost calculations.
83
LINKWAYNOW

The most common problems when sending by LCL and FCL are:
o Delays, which can occur due to a variety of reasons such as congestion at ports or customs
inspections.
o Damages, which can occur during transportation, handling, or loading/unloading.
o Additional charges, which can be incurred due to incorrect documentation, container demurrage, or
© 2023 Lizane Raaths

unexpected fees at ports. (Demurrage is a term used in logistics and shipping to refer to the charges
or fees imposed on the consignee or importer for the delay in returning shipping containers or cargo
to the designated location within the agreed timeframe)

To avoid these problems, it is Important to:

o Work with reliable freight forwarders.
o Properly package and label goods.
o Ensure accurate documentation is provided.
o Communicate and plan to minimize the risk of these issues.

84
 CONTAINER OWNERSHIP PATTERNS
LINKWAYNOW

Shipping lines are companies that operate vessels and have their own or rented containers called COC containers (Container Owner's Certificate).
Clients who need to transport their goods have their own or rented containers called SOC containers (Shipper Owned Container).

COC vs. SOC Containers: Key Points

COC containers are owned and managed
The cost of COC containers is included in
by shipping lines, while SOC containers
are owned and managed by shippers and
freight forwarders.
1 2 transportation costs, while SOC containers
require an initial purchase investment.
© 2023 Lizane Raaths

COC containers are managed by shipping Detention charges may apply to COC containers
lines or leasing companies, alleviating if not returned promptly, but SOC containers do
concerns about empty container logistics. not incur detention charges as they do not need
With SOC containers, shippers must handle
container management tasks themselves,
3 4 to be returned. Detention charges are imposed
when containers are held beyond the agreed-
including storage, inventory control, and upon free time, encouraging timely use.
maintenance.

Advantages of SOC Containers Disadvantages of SOC Advantages of COC Containers Disadvantages of COC
o Cargo can be stored inside the Containers o General shippers can use them
Containers
container. o Initial investment required for in trading. o Transportation costs increase if
o Use of high-quality containers container purchase. o Potential cost reduction with container numbers are
for cargo safety. o Container management is time- surplus containers. unbalanced.
o No detention charges as consuming and incurs costs. o No need to manage empty o Detention charges may apply.
containers are not returned. containers.
o Shippers can manage
85 containers themselves.
LINKWAYNOW

In the realm of shipping, several global companies have earned a reputation for their services.
Some notable names in the shipping industry include:
© 2023 Lizane Raaths

1 2 3 4 5 6 7

A.P Moller MSC CMA CGM Cosco Hapag-Lloyd Evergreen Ocean

Maersk Group Shipping Marine Network
Line Express
(ONE)

86
LINKWAYNOW

Shipping documents, such as the Commodity codes and tariff codes are related terms used in
invoice, packing list, certificate of international trade and customs regulations. Commodity
origin, and Bill of Lading (B/L), are codes, known as HS codes, are internationally standardized
essential for transporting goods. numerical codes used for customs classification, categorizing
Consistency in the information goods based on nature and intended use. Tariff codes, a subset
Shipping among these documents is vital to of commodity codes, determine duty rates when products
documents and avoid delays and additional costs. cross borders, and each country maintains national tariff
schedules listing duty rates for various product categories.
their role in
For example, importing a laptop computer involves classifying
logistics it under HS code 8471.30, indicating portable automatic data
processing machines weighing not more than 10 kilograms.
© 2023 Lizane Raaths

The tariff code further refines the classification, such as tariff

Key elements include the container code 8471.30.10, which specifies a screen size of 14 inches or
seal number for security and the ASN smaller. Commodity and tariff codes can vary by country and
ID for tracking goods in the supply may be subject to updates in the harmonized system.
chain, ensuring efficiency and
reliability.

HS codes are crucial for accurate documentation in

international shipments, along with other mandatory details.
The consignee, who receives the They are a six-digit classification system used globally for
goods, may require a consignee import and export items. Duty rates depend on the product's
number based on shipping origin and destination and are determined based on the HS
procedures and customs regulations, code. In the United States, the Harmonized Tariff Schedule
but its necessity varies depending on (HTS) refines the HS code with ten digits for more specific
specific factors and shipping context. tariff classifications.

87
LINKWAYNOW

Next, exploring key elements of various shipping documents

© 2023 Lizane Raaths

It's essential to recognize that shipping documents can vary significantly among
different companies. For accurate examples of specific layouts, it's recommended to
search for examples from each company using Google or other resources. Please
keep in mind that the layouts presented here are merely examples demonstrating
the information typically found in such documents, and they are designed for
instructional purposes in this course.

88
LINKWAYNOW

COMMERCIAL INVOICE
The difference between a commercial invoice (CI) and a
proforma invoice is that a commercial invoice is issued
after the sale has occurred, while a proforma invoice is
© 2023 Lizane Raaths

provided before the sale is finalized. The commercial

invoice is a formal payment request, representing the
actual value of the goods or services sold, and is used for
customs clearance and import duties determination.

Both invoices are requested because the proforma invoice

helps the buyer understand the estimated costs and terms
before committing to the purchase, while the commercial
invoice provides the final details for payment and serves as
an official record of the completed transaction which will
also be used for customs. As a result, these invoices often
look very similar or the same.

89
 PACKING LIST
LINKWAYNOW

The packing list (PL) is essential for tracking cargo volume, packaging methods, and carton markings.
It serves as a valuable reference during transportation and customs processes, verifying contents and aiding in efficient delivery. It's like an invoice
template, focusing on cases and units per case, but excluding units and total value.

Note: It is crucial to ensure that PCS/CTN is divisible by the outer CTN to achieve a perfect fit of individual items inside the larger carton, maximizing
container efficiency and minimizing the risk of damage during transportation. (e.g., if PCS/CTN is 10 and the outer CTN can hold 50 PCS, it allows for five
complete cartons without any leftover items.)

Additional Information
such as:
© 2023 Lizane Raaths

o Incoterms
o Loading and Discharge
Port
o HS code details.
o Method of packaging (e.g.,
cartons, pallets, crates)

Typically, you receive the

commercial invoice and
packing list before the
shipment when the goods
are ready to be shipped.

90
LINKWAYNOW

SHIPPING INSTRUCTION
Shipping Instruction (S.I) is a crucial document that
contains important information required by the
carrier or shipping line to transport goods from the
origin to the destination.

A shipping instruction is typically requested by the

shipping company or freight forwarder once the
cargo is ready for transportation.

What is an Export Declaration Number?

© 2023 Lizane Raaths

o The Export Declaration Number (ECN) is a unique

identifier assigned to an export declaration filed
with customs, tracking exports, ensuring
compliance, and providing data for trade
statistics.

What is a Cargo Tracking Number?

o The CTN Number (Cargo Tracking Number) on a
shipping instruction is an identifier used to track
and monitor cargo during transportation in some
countries for security and trade analysis
purposes.

Freight collect is a shipping arrangement where the

recipient pays for shipping charges upon delivery,
while freight prepaid is a shipping arrangement
where the sender has already paid for the
transportation charges in advance. In upcoming
modules, we will explore freight charges in greater
detail.
91
 BILL OF LADING
LINKWAYNOW

The Bill of Lading (B/L or BOL) is a vital document in shipping,

proving ownership of cargo during transportation. It establishes
the contract of carriage between the shipper and the carrier and
contains essential details about the goods and the terms of
shipment.

To understand the relationship between a shipping instruction

and a bill of lading, it's important to note that a shipping instruction
provides transportation instructions and information, while a bill
of lading acknowledges the receipt of goods and acts as a legal
X
contract for their carriage.

What is an NMFC code?

© 2023 Lizane Raaths

o NMFC (National Motor Freight Classification) is a standardized

code system used in the transportation industry to classify
commodities based on their characteristics and determine freight
rates and handling requirements for shipments. (if applicable)

What is Freight Class?

o Freight class is a standardized system used to categorize goods
based on their characteristics for shipping. It determines pricing,
handling, and packaging requirements, ensuring fair rates for
different cargo types. The classification, consisting of 18 classes
ranging from Class 50 to 500, considers factors like density,
stowability, and liability. Online tools are available to calculate the
freight class quickly and simplify the shipping process. In
upcoming modules, we will explore freight class in greater detail.

Distinction from Master Air Waybill (MAWB) vs B/L

An MAWB is specifically used for air cargo shipments via aircraft. On
the other hand, a B/L is used for ocean freight shipments through
92 ship vessels.
LINKWAYNOW

TELEX RELEASE
A "Telex Release" is an electronic message issued by the

E
carrier to the destination agent or consignee, confirming
that the goods can be released to the consignee without

S
the need for presenting the physical original Bill of
Lading. Instead, the carrier provides a reference number

A
or release code that authorizes the release of the cargo.

For a Telex Release to occur, certain

L E
© 2023 Lizane Raaths

conditions need to be met:

o The shipper (or exporter) must request the carrier to

o
issue a Telex Release instead of a physical Bill of
Lading.
The carrier must agree to issue the Telex Release and
R E
X
may impose certain requirements or conditions for
doing so.

E
o The destination agent or consignee must be willing to
accept a Telex Release and comply with the carrier's

L
requirements.

It's important to note that the acceptance of Telex

Release may vary depending on the parties involved and
the specific terms and conditions of the shipment. Some
transactions may still require the traditional exchange of
physical documents. T E
93
LINKWAYNOW

IMPORT DELIVERY ORDER

The Delivery Order (D/O) is a very important document
in shipping. It proves that the cargo has been delivered.
Importers need to ask for the Bill of Lading (B/L) to get
the D/O. When they have the D/O, they can take their
goods when the ship arrives at the destination.
© 2023 Lizane Raaths

The D/O is issued by the shipping company or carrier

responsible for transporting the goods. To comply with
customs requirements and facilitate a smooth customs
clearance process, the D/O contains vital information
that customs officials use to verify and process the
shipment efficiently.

Exchanging the Bill of Lading (B/L) for the Delivery

Order (D/O) is a very important step for importers. It
helps them get their shipment. This process also makes
sure exporters get paid before the goods are shipped.
Using Standard Carrier Alpha Codes (SCAC codes) helps
identify the carriers responsible for transportation in
documents like bills of lading.

94
LINKWAYNOW

Understanding the different types of Bill of Lading and

reissuing of B/Ls
A Bill of Lading (B/L) can turn into two types: House Bill of Lading (HBL) and Master Bill of Lading
(MBL). HBL is issued by a freight forwarder when combining multiple shipments into one, while
MBL is issued by a shipping line when receiving multiple HBLs. Both contain important cargo
© 2023 Lizane Raaths

information.

Reissuing B/L and Risk Prevention

Reissuing a B/L is a complex task that should be done accurately to prevent loss. To effectively
reduce this risk, a total of three duplicates of the original B/L are generated.

B/L Endorsement
B/L endorsement is a common practice in ocean freight forwarding. It entails placing a signature
on the back of the Bill of Lading (B/L). This endorsement serves to transfer the ownership rights
from the exporter to the importer. By endorsing the B/L, the importer grants the freight forwarder
the authority to act as their agent for the purpose of collecting the shipment.

95
 MANIFEST
LINKWAYNOW

A Manifest is obtained by the shipping company or carrier before the vessel departs on a voyage. It is typically provided by the shipper or freight
forwarder who has organized the cargo for shipment. The Manifest serves as a crucial document for managing and tracking shipments during
transportation. On the following page, we will delve into the components of a Manifest and explore its significance.
© 2023 Lizane Raaths

96
 Manifest Elements Explained
LINKWAYNOW

o Recapitulation: Recapitulation provides a summary of all the cargo on the manifest, including quantities, weights, and other important
information.
o Summary: The summary section includes essential information about the manifest, such as the total number of items, cargo types, or
any significant highlights of the shipments.
o Heavy Lifts: This section lists items on the manifest that are exceptionally heavy or large, requiring special handling and attention
during transportation.
o Outsized Dimension: Outsized dimension refers to the external measurements of cargo items, such as length, width, and height, which
are crucial for efficient stowing and loading on the vessel.
o Commodity Category: The commodity category classifies different types of cargo into specific groups based on their nature, facilitating
proper handling and documentation.
o Self SUS (Self Sustaining): Self SUS indicates cargo units that can stand on their own and do not require additional support or
packaging to be loaded and transported.
o NON-S.S (Non-Steel Strapping): NON-S.S refers to cargo secured with strapping materials other than steel, ensuring secure fastening
© 2023 Lizane Raaths

during transit.
o VES (Vessel): VES provides details about the vessel used for transporting the cargo, such as its name or identification number.
o CGO (Cargo): CGO is used to identify and track individual cargo units throughout the transportation process.
o Stow Location: Stow location indicates where each item is placed on the vessel to ensure efficient loading and unloading and maintain
stability during the voyage.
o Transportation ACCT Code: The Transportation ACCT Code is a unique identifier used for accounting and billing purposes to trace
transportation expenses related to specific cargo.
o On Dock: This section provides information about the physical location of the cargo at the dock before loading onto the vessel.
o No. of Units POV (Privately Owned Vehicle) Small or Other: This part indicates the number of privately owned vehicles being shipped
and categorizes them as small or other.
o SVC (Service): SVC indicates the type of service or transportation arrangement for the cargo, specifying the level of handling and
delivery.
o Long Tons: Long tons are a unit of weight used to quantify the cargo's mass, which is essential for calculating loading capacities and
balancing the vessel.
o Measurement Tons: Measurement tons refer to the cargo's volume, helping determine the space it occupies on the vessel.
o Square Feet: Square feet are used to measure the surface area of cargo items, useful for arranging and utilizing space on the vessel
effectively.
o Grade or Rank: This section designates the cargo's priority level or rank, indicating its importance for loading and unloading sequences.
o Name and Mailing Address of Preparing Activity: This part includes the name and mailing address of the organization or entity
responsible for preparing the manifest document.
97
 ENTRY SUMMARY
LINKWAYNOW

An entry summary is a vital document used in international trade when goods are brought into a country from another place. It contains all the
important details about the imported shipment, making it a crucial part of the customs clearance process. This document is submitted to the customs
authorities of the country where the goods are being brought.

Here are a few unfamiliar points found on the

entry summary. On the next slide, we'll delve into
more detail about some of these points.
o Entry type: How the imported goods are classified for
customs purposes.
o Bond type: The type of security provided to ensure import
© 2023 Lizane Raaths

duties and taxes are paid.

o Surety No.: Identification number for the party providing the
bond.
o I.T No.: Identification number for the importer.
o HTSUS no: Harmonized Tariff Schedule of the United States
number, indicating the product category.
o ADA/CVD no: Antidumping Duty (ADA) and Countervailing
Duty (CVD) identification numbers for specific goods.
o CHGS: Charges related to the import process.
o Relationship: The connection between parties involved in the
import.
o IRC Rate: Rate of Importer's Risk Coverage.
o I.R Tax: Importer's Risk Tax.
o LIQ Code: Liquidation Code indicating the status of customs
processing.
o Reason CODE: Reason for the import.
o Ascertained Duty, Tax and Other: Now, let's say there's a
specific task within your overall duty that involves checking
the expiration dates of perishable items like milk and bread.
This task of checking expiration dates

98
LINKWAYNOW

Entry Summary Elements Explained

o Bond type: The type of security provided to ensure import duties and taxes are paid. The most common bond types used in importing are:

• Single Entry Bond: Guarantees duties, taxes, and compliance for one import shipment.
• Continuous Bond: Covers multiple shipments over a period, providing ongoing compliance assurance.
• Carnet Bond: Used for temporary imports of goods like exhibitions, allowing duty-free entry.
• Informal Entry Bond: Covers low-value, non-commercial imports with reduced documentation.
• Importer Security Filing (ISF) Bond: Ensures accurate pre-arrival filing of import data.
• Warehouse Bond: Permits goods to be stored in a bonded warehouse before duties are paid.
• Foreign Trade Zone (FTZ) Bond: Enables duty postponement for goods in a foreign trade zone.
•
© 2023 Lizane Raaths

International Carrier Bond: Covers carriers transporting goods to the U.S.

• Drawback Bond: Facilitates refunds of duties for exported or unused goods.
• Temporary Importation Bond: Used for goods entering a country temporarily without duty payment.

o Surety No.: Identification number for the party providing the bond. The surety number is provided by the company or entity that offers the
bond to secure the import duties and taxes. This could be an insurance company or a financial institution.
o I.T No.: The importer's identification number is typically assigned by the customs authorities of the importing country.
o ADA/CVD no: The Antidumping Duty (ADA) and Countervailing Duty (CVD) identification numbers are assigned by the customs authorities to
specific goods that are subject to these duties. It's a tax imposed on imported goods to offset the advantage given to foreign manufacturers
through subsidies, ensuring fair competition and protecting domestic industries.
o IRC Rate: The Importer's Risk Coverage rate is set by the customs authority and is associated with the level of risk coverage provided by the
importer or their bond.
o I.R Tax: The Importer's Risk Tax. It's a tax that is calculated based on the assessed risk associated with the import. This can vary depending on
factors such as the nature of the goods, the country of origin, and the importing party.
o LIQ Code: The Customs Liquidation status code, assigned by the customs authority, shows the stage of customs processing for a specific
shipment. This code reflects if customs assessment is done, import is completed, or other relevant statuses.
o Reason CODE: The Reason for import code is usually provided by the importer and indicates the purpose or nature of the import, such as
"commercial sale" or "personal use."

99
 ARRIVAL NOTICE
LINKWAYNOW

An arrival notice is a vital document for cargo pickup. It's issued by the shipping company before the cargo arrives in the importing country, notifying
the importer and allowing them to prepare for pickup.

The notice, abbreviated as "A/N," enables the importer to proceed with pickup through a forwarder. The timing of the notice varies, and it's typically
sent when the shipment is ready for pickup or delivery. After receiving the notice, the relevant parties are informed, and if applicable, the forwarder
checks billing information and makes payment to the shipping company.

The notice does not include ocean freight as it's prepaid. Once payment is confirmed, the shipping company issues a Delivery Order (D/O) for cargo
pickup in the bonded area. Forwarders receive import permits from customs and pass the D/O to the shipping company. The shipping company then
picks up the cargo from the bonded area and delivers it to the importer's specified destination.

This organized process ensures a smooth cargo pickup

and considers relevant taxes and duties depending on
© 2023 Lizane Raaths

the country's regulations and trade agreements.

o A "Customs Clear LOC #" on an arrival notice is a

number that identifies where customs
clearance for imported goods will occur.
o IT Date: In Transit Date
o "IB haulage" refers to the transportation of
goods from an inland location (like a factory) to
a port for shipping. It's like moving the goods by
truck or train to the place where they'll be
loaded onto a ship for export.
o Ascertained Duty, Tax and Other: Now, let's say
there's a specific task within your overall duty
that involves checking the expiration dates of
perishable items like milk and bread. This task
of checking expiration dates becomes an
"ascertained duty" within your broader duty as a
cashier.

100
 LINKWAYNOW

FREIGHT INVOICE
A freight invoice is a document issued by a transportation
company or freight carrier to the shipper or consignee of
goods. It serves as a billing statement for the transportation
services provided, including the cost of shipping the goods
from one location to another.

The freight invoice contains detailed information about the

shipment, such as the shipment date, description of the
goods, weight, dimensions, origin, destination, and any
additional services availed during transportation.
© 2023 Lizane Raaths

When you receive a freight invoice then it depends on the

terms and conditions agreed upon with the transportation
company. In most cases, the invoice is provided after the
shipment has been delivered to its destination.

Just to reiterate the importance of understanding: that

each company, whether it operates as a shipping line,
freight forwarding and transport company, or any other
type of business, maintains its individualized document
layouts.

Nevertheless, in the supply chain industry, certain standard

documents are widely recognized and frequently used,
such as the bill of lading, entry summary, delivery order,
arrival notice, telex release, manifest, and shipping
instruction. Being familiar with these standard documents
can greatly facilitate efficient operations within the supply
chain.

101
 LINKWAYNOW

Understanding tax laws in international trade is crucial.

Shipping documents must comply with each country's
regulations to ensure proper tax payment for imported
or exported goods. In the upcoming chapters, we'll
explore tax laws in the supply chain.

When dealing with cross-border trade payments, careful

consideration is vital. In the following modules, we'll
extensively discuss taxes and relevant accounting
principles.

A bank guarantee in the supply chain requires specific

documentation, information, and potential insurance or
© 2023 Lizane Raaths

collateral. It assures financial responsibility for the buyer

Navigating Tax Laws or seller. If issues arise, the beneficiary can claim the
guarantee, and the bank fulfils its obligation by making
and Bank Guarantees the necessary payment. This reduces risks and instils
in International Trade confidence in all parties involved.

Example of a Bank Guarantee

Let's say Company A is importing goods from Company
B in a different country. To ensure the payment's
security and delivery of the goods, Company B requests
a bank guarantee from Company A's bank. Company A's
bank issues the guarantee, assuring Company B that if
any issues arise with the transaction, the bank will take
financial responsibility and make the necessary
payment on behalf of Company A. This arrangement
provides peace of mind to both Company A and
Company B, reducing the risk of non-payment or non-
performance.

102
 LETTER OF CREDIT
LINKWAYNOW

In supply chain documentation and customs processes, the term "Letter of Credit" (L/C) frequently comes up.

A Letter of Credit is a crucial document issued by the buyer's bank to the seller's bank, ensuring payment for goods in trade transactions. Understanding
the contents, benefits, considerations, and possible challenges associated with L/Cs is vital for facilitating seamless and successful transactions.

Advantages
Issuing Bank Currency Code and Amount
o Risk Reduction: L/Cs play a vital The buyer's bank that Specified with typically 10%
role in mitigating various trade issues the L/C. flexibility.
risks, such as ensuring the receipt
of goods, collecting payments, and
managing financial obligations.
o Trust and Security: By using L/Cs, Negotiation Bank Latest Date for Shipment
both exporters and importers gain
© 2023 Lizane Raaths

Pays the beneficiary Final loading day to avoid

a sense of trust and security in their based on L/C terms. issues.
transactions, as the involvement of
banks acts as a reliable
intermediary. Key
Notifying Bank Date and Place of Expiry
By understanding these aspects of Informs the exporter
Elements
Valid period when payment
L/C, exporters and importers can about the L/C. Included in is guaranteed.
navigate trade transactions more a L/C
effectively, ensuring smoother
processes and reducing potential
issues. Applicant Partial Shipments
The buyer's company Indicates split shipments
To summarize, when importing name and address. allowed.
goods, the essential documents
needed include the commercial
invoice, bill of lading, packing list,
customs declaration/form, import Beneficiary Documents Required
license or permit, certificate of origin, The seller's company Lists essential shipping
and insurance certificate. name and address. documents and copies.

103
 LINKWAYNOW

Payment Terms and Receipts: Ensuring Clarity and Security in Transactions

Suppliers have the flexibility to provide varied payment terms for their goods. Among the available options are a 20%
deposit followed by an 80% balance, or a 10% initial payment with the remaining 90% due upon completion. However,
the two most prevalent payment terms are 100% upfront or upon delivery, and a split payment of 30% upfront with the
remaining 70% to be settled upon completion.
© 2023 Lizane Raaths

When making a payment, it is customary to request a proof of payment (POP), a Swift copy, or a TT copy as a receipt of
the transaction. SWIFT, short for the Society for Worldwide Interbank Financial Telecommunication, is a secure
messaging network utilized by banks and financial institutions globally. Its purpose is to enable secure and efficient
communication and processing of financial transactions.

A SWIFT code, also known as a Bank Identifier Code (BIC), is a unique identification code assigned to each bank or
financial institution participating in the SWIFT network. This code helps identify specific banks or branches involved in
international financial transactions, ensuring smoother cross-border payments.

By using these payment terms and receipts, both the buyer and the seller agree on when and how the payment will
happen. This makes the transaction clear and safe for everyone involved.

104
 Understanding Weight Rules in Logistics and Calculating Chargeable Weight
LINKWAYNOW

Let's first understand weight rules in logistics before exploring freight forwarders and transportation methods. In logistics, two types of
weight matter: actual weight and volume weight. Let's delve into these concepts and key points to remember.

Transporting goods involves two weight measurements: actual weight, which is the straightforward weight of the cargo, and volume weight,
which considers the cargo's weight based on its size.

To calculate the cost of transportation, the chargeable weight is determined. This weight 40
cm cm
is based on the greater value between the actual weight and the volume weight. Larger 20
and heavier items take up more space and incur higher transportation costs.

For example, shipping a large but light item like a pillow can cost more because of its
size. Cotton takes up more space than water bottles, even if they weigh the same.
© 2023 Lizane Raaths

In marine shipments, the chargeable weight is determined by comparing actual weight

and volume weight, with the higher of the two used for cost calculation.

10cm
Let’s look at an instance where we calculating chargeable weight for
a 20 x 20 x 20 cm box
Consider a 20 x 20 x 20 cm box. Its volume is 0.008 CBM. To find the volume weight, we
multiply the CBM value by a divisor. With a divisor of 6000, the volume weight is 0.008
CBM * 6000 = 48 kg. If the divisor is 5000, the volume weight would be 0.008 CBM * 5000
= 40 kg.

Let's assume the actual weight of the box is 14 kg. Comparing the actual weight with the
volume weight, we find that the volume weight is significantly higher. Consequently, the
chargeable weight for calculating the transportation cost would be 48 kg or 40 kg, Actual Weight of Box 14kg
depending on the divisor used.
Volume Weight of Box
Considering the higher value between actual weight and volume weight accounts for
space and cost implications of larger or heavier items in transportation. 40kg
105
 Full Truck Load (FTL), Couriers and Express Mail Service
LINKWAYNOW

Full Truck Load (FTL) is a logistics mode for large shipments that fill an entire truck or trailer. Shipper's book and cover expenses for the entire vehicle,
regardless of cargo size. FTL offers benefits such as increased efficiency, reduced handling, and enhanced security. It is preferred for transporting
sizable shipments over long distances, ensuring dedicated transportation and minimizing damage risks. FTL allows precise scheduling and faster
transit times, making it ideal for time-sensitive or valuable shipments.

The number of pallets that can fit in a truck

depends on several factors, including the size and
capacity of the truck, the size of the pallets, and
how they are loaded.

There are different types of trucks with different

© 2023 Lizane Raaths

sizes and configurations. The most common type

of truck used for transporting palletized goods is a
standard 53-foot (16.15-meter) truck.

In general, a standard 53-foot trailer can

accommodate up to 26 standard-sized pallets (40
inches by 48 inches or 1 meter by 1.2 meters)
placed side by side.

Couriers are international delivery services provided by

private enterprises like DHL, FedEx, and UPS. They offer fast
transportation, simplified customs clearance for goods
under $2000, and easy online or call centre arrangements.
However, they have restrictions on transporting large,
hazardous, or fresh items and can be costly for big cargo.

EMS (Express Mail Service) is a similar international delivery

option, processed as postal goods, and managed by
companies with postal business connections and part of the
"universal postal union."
106
 LINKWAYNOW

Let’s explore transit times for various modes of transportation including ocean, air, road, and rail:

Short-haul routes (e.g.,

Domestic or regional
regional shipments) Domestic or regional
Ocean Freight

International air freight shipments

• 1-2 weeks.

Road Freight
shipments
• 2-7 days, depending on • 2-7 days, depending on

Rail Freight
Air Freight
the distance and direct
• 1-5 days, depending on the distance and rail
Medium-haul routes (e.g., the distance and road
or indirect routing. network.
© 2023 Lizane Raaths

cross-continental conditions.
shipments)
Expedited or express air Cross-border shipments
• 3-5 weeks. freight
Cross-border shipments
• 7-14 days, influenced by
• 1-3 days, offering faster • 1-10 days, subject to customs processes and
Long-haul routes (e.g., customs clearance
delivery international
international shipments) procedures.
connections.
• 4-8 weeks or more.

It's important to remember that these transit times are estimated and can vary based on multiple factors. Additionally, certain shipping services
may offer advance or time-definite options for faster delivery at a higher cost.

Once you grasp the concepts of transport methods and transit times, we can delve into the realm of Freight Forwarding and explore its
relationship with transportation.

107
 FREIGHT FORWARDER
LINKWAYNOW

Until now, we've extensively covered the role of freight forwarders. Now, let's delve deeper into
their responsibilities, the process of requesting quotes from them, and the criteria for selecting
the most suitable one for your business.

For a global product-selling business, securing a reliable carrier to transport goods is paramount.
This is where freight forwarders come into play, serving as proficient shipping experts who take
charge of the entire logistics and coordination process on your behalf. Their main tasks include
identifying appropriate carriers, skillfully negotiating rates, managing all necessary
documentation, and ensuring a seamless customs clearance process. By relying on freight
forwarders, you optimize shipping and enjoy a hassle-free experience.
© 2023 Lizane Raaths

Warehousing and Storage

Consolidation and Deconsolidation

Transportation Coordination

Documentation and Customs

Cargo Insurance

Forwarders assist Forwarders handle Forwarders Forwarders Forwarders

in arranging cargo all necessary arrange optimize costs provide
insurance to paperwork for transportation and efficiency temporary
safeguard against international using various by consolidating warehousing
damage, loss, or shipments and modes, negotiate smaller solutions for
theft during assist with customs contracts with shipments and goods and
transportation. clearance. carriers, and breaking down facilitate
manage shipment larger ones for distribution
movement. distribution. preparations.

108
 Although freight forwarders don't own transportation assets like
ships or planes, they possess deep industry knowledge, extensive
LINKWAYNOW

connections, and expertise in international trade regulations. They

offer efficient logistics solutions, ensuring hassle-free shipping for
clients.
Communication and Customer Service
Choose a responsive forwarder who provides
When choosing a freight forwarder for timely updates.
international shipments, keep these points in mind:

Experience and Expertise Price and Value

Find a forwarder familiar with your
Consider competitive pricing along with service
destination's regulations and shipping
quality and reliability.
requirements.
© 2023 Lizane Raaths

Services Offered
Licenses and Certifications
Ensure they provide the necessary services
Verify they have the required licenses and
like customs clearance, warehousing,
certifications.
insurance, and documentation.

Reputation and References Sustainability

Check their reputation through reviews and Look for a forwarder committed to sustainability and
ask for references from past clients. environmental responsibility.

109
 LINKWAYNOW

Type of Transportation
Specify whether you
require air, ocean, or
truck transportation.
Incoterms
Commodity
Clearly state the
Provide a detailed
agreed-upon
description of the
Incoterms (e.g., EXW,
cargo you want to
FOB, CIF) for the
ship.
shipment.

When requesting a quotation from

freight forwarders, make sure to Cargo Size and Pick-up and Delivery
© 2023 Lizane Raaths

include the following information: Weight Address

Provide the cargo's Provide the collection
By including these details when requesting a
quotation, freight forwarders will be able to
dimensions (length,
width, and height) or KEY ELEMENTS and delivery addresses,
along with the agreed-
its CBM, along with its upon terms (e.g., door-
provide you with accurate and tailored pricing weight in kilograms
information for your specific shipping needs. to-door, door-to-port).
or pounds.

Frequency of Loading Point

Transportation Indicate the specific
Specify the shipment's port or airport
recurring frequency for where the cargo will
potential cost benefits. be loaded onto the
Packing Type transportation
Describe the type mode.
of packaging used
for the cargo (e.g.,
palletized, boxed,
bulk).

110
 LINKWAYNOW

In the world of logistics, there are two important concepts to understand:

freight brokers and freight classification
Freight Broker

A freight broker acts as a matchmaker between shippers and carriers, organizing and arranging shipments. They find the
best transportation options for their clients' needs and charge a fee or commission. On the other hand, freight forwarders
offer comprehensive logistics services for the entire shipping process.

Freight Class
© 2023 Lizane Raaths

Earlier, we discussed freight class, which is a standardized system used to categorize different types of cargo in the freight
industry. It evaluates cargo based on factors like weight and fragility, assigning a class number ranging from 50 to 500. This
classification plays a crucial role in determining shipping rates and helps indicate how the cargo should be handled and
the risk of damage during transport. Now, let's go through the categories to better understand the classifications.

Freight class ratings range from low to high based on density, handling ease, and liability.
Class 50 to Class 55: Low-density, easy-to-handle cargo.

Class 60 to Class 65: Moderate density, moderately easy-to-handle freight.

Class 70 to Class 85: Moderate density, may have specific handling requirements.

Class 90 to Class 150: Higher-density, more difficult-to-handle cargo.

Class 175 to Class 500: Very dense, bulky, and challenging-to-handle freight.

111
 FREIGHT PREPAID AND FREIGHT COLLECT
LINKWAYNOW

Let's delve into freight prepaid and freight collect, payment responsibilities for transportation fees, and their importance in shipping
communication, including B/L (Bill of Lading) or HAWB (House Airway Bill), House B/L, and Master B/L. "Freight" refers to the shipment's
transportation fee, generated by the responsible party such as a freight forwarder, manufacturer, or supplier.

What is the difference between Freight Prepaid and Freight Collect?

In relation to Incoterms, the terms Freight Prepaid and Freight Collect are closely connected and provide clear information about
different costs, including transportation fees, and who is responsible for paying them. The choice between these terms depends on the
specific Incoterms agreed upon by the parties involved.
© 2023 Lizane Raaths

Freight "Freight prepaid" means the exporter is responsible for transportation fees, commonly used
in EXW or FOB terms, where the importer pays ocean freight. In such cases, both the master
Prepaid and house B/L indicate "Freight Prepaid.”

"Freight collect" means the importer is responsible for transportation fees. Freight Collect
Freight
applies to terms like CFR, CIF, DAP, DDP, where the exporter covers ocean freight. Both
Collect master and house B/L will state "Freight Collect.”

It is essential to remember that even if the seller holds responsibility for the freight, the consignee details in the bills of lading (B/L) will
still be the buyer. On the next slide, we will discuss the importance of both Freight Collect and Freight Prepaid in the context of B/L and
HWAB.

112
 Forwarder Arrangements
LINKWAYNOW

The involvement of a forwarder in shipping goods is reflected in both the master and house bills of lading (B/Ls), which detail the handling of freight.

o The Master B/L indicates "Freight Prepaid" because the shipper has paid for the transportation upfront.
o The House B/L shows "Freight Collect" because the recipient will pay for the shipping fees upon receiving the goods.
Understanding the proper handling and payment of freight in overseas shipping, along with incoterms and forwarder arrangements, is crucial for
accurate documentation and smooth international shipping.

Before we move on to the upcoming example, let's briefly revisit the definitions of the bill of lading, master bill, and
house bill to refresh your memory and provide a better understanding of the context.
© 2023 Lizane Raaths

Bill of Lading (B/L)

The document that proves the agreement between the shipper and the carrier, containing
1 shipment details.

Master Bill of Lading (MBL)

Issued by the shipping line to the forwarder, it covers the entire shipment, but customers don't
2 see it.

House Bill of Lading (HBL)

Issued by the forwarder to the shipper, it covers specific goods consolidated and loaded into a
3 container or unit for that part of the shipment.

Example
Let's say a manufacturer in China wants to ship goods to a buyer in the United States. They hire a forwarder in China who arranges the transportation.
If the forwarder can secure vessel space, the master B/L would state "Freight Prepaid" because the manufacturer paid for the shipping upfront.
However, if the forwarder faces difficulties securing space and needs to collaborate with an import-side forwarder in the United States, the master B/L
would indicate "Freight Collect" because the buyer will be responsible for paying the shipping fees upon receipt of the goods.
113
 AIR WAYBILL
LINKWAYNOW

Rates, Charges, and Classes

An air waybill is an important document used in air cargo transportation. It comes in two types.

MAWB Both types follow IATA

(International Air Transport
The Master Air Waybill
Association) guidelines. The
(MAWB) issued by the
air waybill includes crucial
airline to the forwarder
© 2023 Lizane Raaths

information like names and

locations of the shipper,
HAWB exporter, consignee, and
The House Air Waybill importer, along with
(HAWB) issued by the product details, weight, and
forwarder to the shipper. associated air freight and
transport fees.

Key points about how air freight charges are calculated based on weight and volume, consider the following bullet
points:
o Air freight charges depend on cargo weight and volume. The rate class (M, N, or Q) is assigned based on weight. The air freight cost is
calculated using either the total weight or volume weight, whichever is higher.

o Higher volume cargo gets lower air freight rates. The "other charge" includes fees like fuel and security charges, contributing to the overall
transportation cost.

In summary, an air waybill serves as both a delivery note and an invoice for air cargo transportation.
114
 General CARGO CLASSES Oversized
LINKWAYNOW

Cargo The air waybill specifies the cargo

or Heavy
class, crucial for determining the Cargo
applicable rate. Factors like contents,
size, weight, and volume of the goods
determine the cargo class.

Regular items not Cargo exceeding

needing specific Perishable Valuable or standard size or
handling or storage weight limitations,
conditions.
Cargo High-Value needing special
Cargo handling
© 2023 Lizane Raaths

equipment.
Dangerous
Goods

Goods with limited Items of high

shelf life, requiring capital value
temperature- requiring
controlled storage additional security
and transportation. measures.

Hazardous items
subject to strict
regulations and
safety protocols.
115
 OCEAN FREIGHT CHARGES
LINKWAYNOW

Ocean freight charges vary due to factors like the shipment's origin and destination, cargo dimensions and weight, container type, chosen
shipping route, and additional services. In our previous discussion, we covered general freight charges, which include the cost of transporting
goods using different modes like air, road, rail, and ocean.

It's important to understand the components that contribute to the overall ocean charges:

Ocean Terminal Inland

Fuel Handling Haulage Admin Additional
Freight
Surcharge Charges Charges Fees Services
Rate
© 2023 Lizane Raaths

(THC) (IHC)

The basic cost of Fuel surcharges THC covers IHC cover Covers admin Additional charges
transportation is are additional container handling transporting cargo costs of processing may apply for
determined by percentages expenses at port between inland shipping services like
container count added to the terminals, which locations and ports documents, such customs clearance,
(TEU) or weight ocean freight rate. vary by port and via trucks or trains, as bills of lading cargo insurance, or
and covers port-to- They are are quoted per including fees for and customs inland
port travel. A TEU implemented to container. trucking, fuel, declarations. transportation,
represents one compensate for handling, depending on your
twenty-foot the unpredictable documentation, agreement with
container; a 5,000 changes in fuel and other inland the shipper.
TEU container ship costs. transportation
can carry 5,000 expenses.
such containers.

116
 Additional Charges:
LINKWAYNOW

It's worth noting that ocean freight charges are subject to market conditions, such as supply and demand, fuel prices, and external factors like
geopolitical events or weather disruptions.

Custom
Pier Pass Handling Trucking Chassis ISF
Clearance
Fee Charge Charge Charge Charge
Fee
© 2023 Lizane Raaths

Port Congestion Handling Service Cost of transporting Chassis Charge are Charged by ISF Charge are
Fee is added at Los Fee are imposed goods by truck, applied by shipping customs brokers or related to the
Angeles and Long by service calculated based on carriers or terminal freight forwarders Importer Security
Beach ports in the providers for distance, weight, operators for using for handling the Filing (ISF) program
U.S. to reduce processing goods cargo volume, type specialized trailers customs clearance by U.S. Customs and
congestion and or services, of goods, additional (chassis) to transport process, including Border Protection,
truck traffic during covering labour, services, and fuel containers, covering documentation, applied by customs
peak times, equipment, and surcharge. ownership, duties, taxes, tariff brokers or freight
charged per administrative maintenance, and classification, forwarders to cover
container for pick- tasks across management costs. compliance, and administrative costs
up or delivery. various industries. communication. for providing cargo
information to
authorities.

It is important to consult relevant authorities, customs brokers, or freight forwarders for exact information about fees and charges that apply to
specific shipments, countries, and programs.
117
 LINKWAYNOW

Understanding Containers Free Time and Low Sulphur Surcharge in Shipping

In the shipping industry, "Containers Free Time" refers to the period during which imported cargo can be stored free
of charge, typically lasting about one week. However, this duration varies among shipping companies. After this free
time, if the cargo or shipping containers are not returned within the agreed timeframe, demurrage or excess storage
© 2023 Lizane Raaths

fees will be charged to the consignee or importer.

Another aspect of shipping charges is the "Low Sulphur Surcharge" (LSS) or "Low Sulphur Fuel Surcharge" (LSF). This
additional fee is implemented by shipping companies to compensate for the higher costs associated with using fuel
that contains less sulphur. The introduction of the LSS is aimed at reducing the environmental impact of shipping, as
low sulphur fuel helps minimize sulphur emissions, leading to improved air quality.

The LSS is factored into the total shipping price and can vary depending on factors like the specific shipping route,
vessel type, and prevailing fuel costs. By incorporating the LSS, shipping companies can cover the expenses of using
low sulphur fuel and actively contribute to sustainable practices and global efforts to reduce air pollution levels.

118
 BONDED AREAS
LINKWAYNOW

A bonded area is a location where imported or exported goods can be temporarily stored without customs clearance or duty payment. It
provides flexibility and streamlines international trade processes. There are five types of bonded areas:

1 2 3 4 5
Bonded and Non- Bonded Comprehensive
Bonded Area Bonded Exhibition Place Bonded Area Bonded Factory
Allows temporary Warehouses Temporary storage Integrated zone for Authorized for
storage of goods require immediate for goods used in foreign trade, bonded manufacturing
without customs inspection and tax exhibitions and sales warehousing, bonded goods for
© 2023 Lizane Raaths

clearance, payment, while events, ensuring processing, and export, operating

facilitating import bonded warehouses compliance with logistics, promoting under tax release
and export allow goods to be customs regulations. efficiency and policies.
procedures. held until duties centralizing
and inspections are international trade
addressed. activities.

Bonded areas are vital for international trade, offering temporary storage, customs flexibility, and tax benefits. They optimize supply chains and ensure
smooth cross-border movement of goods. Understanding different types of bonded areas helps companies manage inventory, comply with regulations,
and cut delays and costs.

Bonded transportation moves foreign cargo from bonded areas to warehouses, particularly crucial when customs clearance is pending. By using bonded
transportation, demurrage fees from lengthy customs inspections are minimized, as cargo remains under bonded status until inspection is completed,
ensuring smooth import customs clearance.

Consolidated cargo, also known as LCL, is brought into a container freight station (CFS), which serves as a bonded warehouse. From there, it is loaded into
containers and transported through bonded transportation to a designated bonded area at the port. This process ensures efficient handling and
compliance with regulations in international trade.
119
 IMPORTER OF RECORD (IOR) AND FREIGHT TRADE ZONE (FTZ)
LINKWAYNOW

Understanding the Importer of Record (IOR) is crucial for importing goods. The IOR is responsible for customs and import regulation
compliance for the imported goods.

Key points about IOR include:

The IOR is responsible The IOR can be the

for paying taxes, consignee or a third-
duties, and fees related party acting on behalf of
to the import. the consignee.
© 2023 Lizane Raaths

Shipping documents,
including the CI, PL, and
B/L or AWB, require the
company name and
consignee details.

Foreign Trade Zones (FTZs) are designated areas that offer businesses the benefit of storing, processing, or assembling goods without the immediate
payment of certain customs duties or taxes. This arrangement allows for duty postponement, providing advantages to companies engaged in
international trade. If the goods are later exported, no duties are paid, but if they are sold within the country, duties are paid at that point. While having
an FTZ number is not mandatory for importing goods, it is assigned to companies operating within or applying for FTZ access.

Example
Company Z imports raw materials to produce electronic gadgets into an FTZ. As the Importer of Record (IOR) using the FTZ, they can bring
the raw materials into the zone without paying import duties upfront, enabling duty postponement. They then process and manufacture
the electronic gadgets within the FTZ, benefiting from this deferred duty arrangement for cost savings. If the final gadgets are later
exported to another country, no duties are paid on them, resulting in significant cost savings for Company Z.

Please be aware that specific regulations and procedures may vary between countries.
120
 CARGO 1 2 3
LINKWAYNOW

INSURANCE
Insurance Premiums War & S.R.C.C Rate Insured Amount
Cargo insurance protects goods
Insurance premiums secure In some regions affected by Cargo insurance is usually set
shipped internationally from
cargo insurance coverage and war or strikes, an additional at 110% of the CIF price, which
unexpected accidents, preventing
are calculated by multiplying premium called the War & includes the cost of goods,
financial losses along the supply chain.
the insured amount by the S.R.C.C (Strikes, Riots, and Civil insurance, and freight charges
It covers water damage during shipping
premium rate, which ranges Commotions) rate may apply. listed on the invoice. This way,
on ships, including rough seas, leaks, or
from 0.3% to 0.5%. Rates vary This charge helps manage the it covers not only the goods'
accidents. It also safeguards against
based on factors like high risks in such situations, cost but also the extra charges
damages during container transfer
transportation route and ensuring cargo protection for insurance and freight.
from ship to trucks.
goods' nature. throughout the journey.
© 2023 Lizane Raaths

Cargo Insurance Terms

Let's now delve into two common types of available insurance.

Total Loss
Total loss coverage applies when cargo is completely
damaged and unusable. Insurance compensates the
policyholder for the full value of the damaged cargo.
Partial Loss
Partial loss coverage applies when some of the cargo
is damaged, but the rest remains intact. Insurance
compensates for the specific damaged part, helping
the policyholder recover some financial losses.
121
 DANGEROUD GOODS The Orange Book assigns UN numbers to DG cargoes
LINKWAYNOW

and classifies them into nine risk-based classes.

Dangerous goods, or DG cargo, include items like car engines, lithium batteries,
spray cans, and more. International rules for their transportation are outlined in Class 1
the Orange Book (United Nations).
Explosive Materials (e.g., fireworks, smoke candles)
Not all DG cargo can be transported by shipping lines and airlines because each
company and country has different rules. It's essential to check in advance and Class 2
consider weight limits. Airlines are usually stricter. The UN number identifies Gas (e.g., fire extinguishers, burners)
eligible cargo.

The Safety Data Sheet (SDS) or Material Safety Data Sheet (MSDS) issued with Class 3
chemical products contains the UN number and hazard class. It's necessary for Flammable Liquids (e.g., adhesives, paints)
international transport and provides handling instructions, containment methods,
© 2023 Lizane Raaths

and hazard details. Class 4

Flammable Solids (e.g., active carbon, matches)
The SDS has 16 sections in total, with the most critical ones for
Class 5
international transport being: Oxidizing Substances and Organic Pesticides
(e.g., leaching agents)
Section 9
o Physical and Chemical Characteristics (highlights the ignition point) Class 6
Toxic and Infectious Substances (e.g., pesticides,
disinfectants)
Section 10
o Stability and Reactivity (highlights chemical reactions) Class 7
Radioactive Materials (e.g., nuclear fuels)
Section 14
o Transportation Information (contains the UN number and the DG class) Class 8
Corrosive Substances (e.g., mercury, muriatic acids)
Handling DG cargo requires following different countries' regulations. It should be
stored in a specific DG warehouse. To ensure safe handling, the SDS and DG cargo
declarations are sent to the shipping line, yard, port, and customs broker. Specific Class 9
rules govern cargo labelling, case marking, and packing containers. Miscellaneous DG Cargo (e.g., lithium batteries, dry ice)

122
 LINKWAYNOW

Customs authorities conduct various inspections such as:

Samples Part
Inspection Designated Whole
CUSTOMS INSPECTION Customs verifies Inspection Inspection
contents and
AND CLEARANCE correct HS code
Customs inspects
one carton for
Customs
thoroughly inspects
usage without quantity and all declared cargo.
Import customs clearance safeguards the country quantity check. contents.
and collects taxes on imports. The process involves
© 2023 Lizane Raaths

verifying tax accuracy and completing legal

procedures. Goods undergo mandatory customs
inspection to detect illegal items, ensure accurate
declarations, and comply with legal standards.

Additional Costs Customs inspection location depends on cargo nature and size:
Customs inspection from the container yard may
incur additional costs: shift fees, truck costs,
drainage costs, labour, process costs, and storage X-ray used for
Sample and part
costs. Drainage cost refers to managing material whole inspection
designated On-site inspection
flow in the supply chain from suppliers to of FCL. Quick
inspections at for large cargo,
customers. process, but
customs conducted at suspicious items
inspection area bonded area or may require full,
where cargo warehouse.
devanning
arrives.
inspection.

123
 ATA CARNET There are two main types of Carnets
LINKWAYNOW

An ATA Carnet acts as a passport for goods, enabling temporary importation into
foreign countries without complex customs procedures. It's beneficial for job-
related tools or product samples. ATA Carnet SCC
(Single Country
(Temporary Admission)
For instance, a company preparing for a trade show in France with 100 product Convention) Carnet
samples can use an ATA Carnet to avoid import duties and customs complexities. It facilitates duty-free
Specifically designed for
They can bring in the samples without extra costs or delays. After the trade show, clearance for temporary
temporary imports
they can re-export any remaining samples, adjusting the quantity within the imports among
between Taiwan and
approximately 100
specified time (normally within a year) for temporary importation. This flexibility is a Japan.
member countries
significant advantage of the ATA Carnet.
worldwide.
© 2023 Lizane Raaths

Using an ATA Carnet

To use an ATA Carnet, apply to the relevant agency in your country for issuance. Once registered and issued, submit the ATA Carnet
to customs for import and export declaration. Goods re-exported within the specified period are tax-free. ATA Carnet is suitable for
exhibitions, international events, conferences, occupational tools, and trade fairs.

Applying for ATA Carnet

When applying for an ATA Carnet, pay an issuance fee and provide insurance coverage with an associated fee. Insurance facilitates
tax exemption. If unforeseen circumstances lead to delayed re-exportation and import taxes are imposed, the issuing association
assumes responsibility for payment.

Importing to Japan using ATA Carnet

Submit the Carnet to customs for an import permission note. For tools, show the Carnet to customs. A customs agent can handle
separate goods clearance. Return the ATA Carnet to the Japan Commercial Arbitration Association; only the security fee is
refunded.

By understanding and using ATA Carnet, importers can enjoy the benefits of simplified customs procedures, duty-free temporary imports, and
124 smoother international trade transactions.
 24 HOUR RULE AND THE 10+2 REQUIREMENT
LINKWAYNOW

Here's an easy-to-understand explanation of the 24-hour rule and the 10+2 requirement, along
with their reasons and where they are applicable:

Imported goods must be declared The 10+2 requirement (ISF) applies

to customs authorities within 24 to U.S.-bound ocean shipments.
hours of their arrival, according to Importers or agents must submit
© 2023 Lizane Raaths

customs regulations. cargo details to U.S. authorities.

The reason behind this requirement is to The reason is to enhance marine

ensure precise information for customs 24-Hour Rule security through advanced cargo
enforcement, duty collection, as well as and the information, risk assessments, and
safety and security measures. threat detection.
10 + 2 Requirement

The applicability of these The 10+2 requirement is specific to

regulations varies by country, so it U.S. ocean shipments, not
is essential to adhere to the specific applicable to other modes or
rules set by the importing country. foreign destinations.

125
 LINKWAYNOW

What is the meaning behind the “10” and the “2”?

The 10+2 requirement is named as such because it consists of 10 data elements provided by the importer and
2 data elements provided by the carrier. Here's a breakdown of what the "10" and "2" represent:

"10" refers to the ten data elements provided by the importer:

1. Manufacturer (or supplier) name and address
2. Seller (or owner) name and address
3. Buyer (or owner) name and address
4. Ship-to name and address
© 2023 Lizane Raaths

5. Container loading location

6. Consolidator (loading) name and address
7. Importer of record number and a FTZ number if you are using FTZ
8. Consignee number(s)
9. Country of origin of the goods
10. Commodity Harmonized System (HS) code (6-digit level)

"2" refers to the two data elements provided by the carrier:

1. A vessel stow plan (also known as a loading plan, it provides a detailed overview of how the cargo
will be loaded and positioned on the vessel)
2. Container status messages (CSMs)

Note that data elements and requirements can change, so consult CBP's official guidelines to ensure
compliance with current regulations.

126
 CUSTOMS DUTIES
LINKWAYNOW

Tips to Avoid Being

AND TAXES Overcharged for Duties
When importing goods, consider customs duty and
tax. Customs duty is a tax on imports based on value, Check the Harmonized
quantity, or weight, aimed at protecting domestic Tariff Schedule (HTS) code
industries. Duty rates vary by product and country, for accurate duty rates.
determined by the Harmonized System (HS) code.

Importers may also pay Value Added Tax (VAT) or

Goods and Services Tax (GST) on imported goods.
VAT or GST is charged on the goods' value, including
© 2023 Lizane Raaths

customs duty, at each production and distribution Determine the

stage. product's country of Engage a customs
origin to understand broker for expert
Both customs duty and VAT or GST are separate applicable rules and assistance with
charges paid during customs clearance. Stay regulations. customs regulations.
updated on rates and regulations to ensure
compliance and avoid issues or penalties.

The terms "customs duty" and "tax" are often used

interchangeably in this context, referring to charges Research free trade agreements
on imported goods. that may reduce or eliminate
duty charges for specific imports.
For example, when importing goods, you pay
"customs duty," which is essentially a tax on the
imported items. Some countries may use the term
"customs duty" to cover both duty and taxes, while Be prepared for additional
in others, they are separate charges. fees related to customs
clearance, inspections, and
administrative tasks.

127
 LINKWAYNOW

Basic Tax Rate

1 Standard tax rate for all products as per the customs tariff schedule.
Example: 10% customs duty on imported electronic devices.

Provisional Tax
Tax Rate Types 2 Temporary tax imposed on specific products during a comprehensive
assessment. Example: Additional 5% tax on imported steel for six
months during assessment.
Note that custom
© 2023 Lizane Raaths

duty and tax terms

may vary, so refer to
specific regulations
and guidelines of the

3
customs authority for Preferential Tax Rate
accurate details on Reduced or discounted duty rates for specific products or countries to
duty rates and tax promote trade preferences or protect developing country industries.
classifications

Conventional Tax

4 Reduced duty rates in Economic Partnership Agreements (EPAs) for

economic cooperation. Example: 2% customs duty on agricultural products
from Country A under an EPA, compared to the standard 10% for others.

128
 LINKWAYNOW

Understanding the Difference Between Customs Duty and Import Duty

"Customs duty" and "import duty" are terms that are sometimes used interchangeably, causing confusion. However, they
have slight differences in their meanings:

Customs Duty
o Customs duty is a general term for taxes or fees charged on goods when they are brought into or taken out of a
country.
© 2023 Lizane Raaths

o Governments levy these taxes to generate revenue, protect local industries, and regulate international trade.
o It applies to both imports (goods coming into a country) and exports (goods going out of a country).

Import Duty
• Import duty is a specific type of customs duty that focuses only on taxes imposed on goods coming into a country
from other countries.
• It includes various taxes, such as basic customs duty, countervailing duty, anti-dumping duty, and other charges
that apply to imported goods.
• To put it simply, customs duty covers taxes on goods crossing international borders, while import duty deals
specifically with taxes on goods entering a country from abroad.

Note that data elements and requirements can change, so consult an agent for official guidelines to ensure compliance
with current regulations.

129
 Custom and
LINKWAYNOW

Duty Charges Custom duty

charges can include
the below

Basic Customs Duty Import duty

The standard tax rate applied to all products as outlined in the
charges can include
customs tariff schedule. the below
Additional Customs Duty (CVD) or Countervailing Duty (CVD)
Basic Customs Duty
This charge is collected to balance any local taxes or grants on
similar domestic products. For example, if a country, Country A, The standard tax rate for all products as per the customs tariff schedule.
© 2023 Lizane Raaths

produces a certain type of electronic device and imposes an

Additional Customs Duty on imported electronic devices of the Sales Tax or Value Added Tax (VAT)
same kind to protect its domestic industry and ensure fair
A consumption tax charged on the value of goods and services at each
competition.
stage of production and distribution.
Special Additional Duty (SAD)
Like CVD, SAD is collected to balance local taxes or grants, but it is
applied on imported goods and not domestically produced items. VAT & GST charges
can include the
(if applicable) below
Anti-dumping Duty
This duty is imposed to protect domestic industries from unfairly
priced imports that may harm the local market. For instance, if Value Added Tax (VAT)
Country B exports shoes to Country C at extremely low prices, lower
A consumption tax charged on the value of goods and services at each
than the cost of production, this could create an unfair advantage
stage of production and distribution.
for Country B's shoes and potentially cause harm to the domestic
shoe industry in Country C. To protect its local industry, Country C
Goods and Services Tax (GST)
may impose an Anti-dumping Duty on shoe imports from Country
B. A consumption tax similar to VAT, imposed on the supply of goods and
services.
130
 LINKWAYNOW

PARALLEL IMPORT
Parallel importing is the unauthorized practice of importing and selling branded
products from another country, without the permission of the intellectual property
owner, even when authorized distributors already distribute the product in the
destination country.
© 2023 Lizane Raaths

The regulations on parallel importation vary between countries, and consulting a legal
professional specializing in intellectual property and international trade laws is
recommended.

To sell items from brands like Disney, LEGO, and Star Wars, a licensing agreement with
these companies is necessary, granting permission to produce, distribute, and sell
merchandise associated with their brands.

Respecting authorized distributors' branding is crucial, and offering better aftercare

services, providing resources to customers, and carefully considering pricing can
enhance the parallel importing experience.

131
 LINKWAYNOW

Warehouse and
Inventory Distribution

06
© 2023 Lizane Raaths

132
 LINKWAYNOW

WAREHOUSE
AND DISTRIBUTION
MANAGEMENT
To lay a strong foundation for inventory management,
understanding warehouses, distribution, and their connection to
inventory is crucial.

A warehouse serves as a centralized facility for storing goods

© 2023 Lizane Raaths

before they are sold or distributed to customers, enabling

effective inventory organization.

Distribution involves efficiently moving goods from the

warehouse to their destinations, which can include
retail stores, wholesalers, or direct delivery to
customers. This process includes logistics and
transportation arrangements to ensure timely
delivery.

To achieve effective inventory management,

adopting Lean inventory principles is essential.
This approach focuses on reducing inventory
while meeting customer demand, avoiding issues
like excessive stock that ties up money and leads to waste and
outdated products.

Companies use various inventory control methods to achieve these

objectives, which we'll explore in detail on the next slide.

133
 INVENTORY CONTROL METHODS
LINKWAYNOW

Economic Order Quantity (EOQ) Just-in-Time (JIT) Inventory Reorder point (ROP)
One way to find the best quantity to order is JIT aims to minimize or eliminate inventory by The reorder point (ROP) is the inventory level at which
by using a method called Economic Order receiving and producing goods exactly when a new order should be placed to replenish stock before
Quantity (EOQ). EOQ helps us figure out the needed. JIT relies on close coordination with running out. It indicates when to initiate the process of
right balance between the costs of keeping suppliers and streamlined production ordering more inventory to meet future demand and
inventory and the costs of placing orders. By processes to reduce waste, improve efficiency, avoid stock outs.
considering things like how much we sell, the and decrease carrying costs.
costs of ordering, the costs of keeping items
in stock, and how long it takes to get new
items, we can calculate the EOQ.
Last In, First Out (LIFO)
First In, First Out (FIFO)
© 2023 Lizane Raaths

This concept involves utilizing or selling the most

This principle entails utilizing or selling the recently added inventory items before the older ones.
oldest inventory items before the newer ones.
Example Last Ship, First Out (LSFO)
Let's say we have a small shop that sells pens. First-Expiry, First-Out(FEFO)
This strategy dictates using or selling the items from
We want to make sure we order enough pens This is a supply chain method for prioritizing the most recent shipment before those from previous
to meet customer demand without wasting the distribution and sale of products based shipments. It is particularly applicable when dealing
money on holding too many pens in stock. By on their expiration dates. with bulk quantities of interchangeable items.
using EOQ, we can calculate the ideal order
quantity that minimizes our costs while
ensuring we always have enough pens to sell.
Demand Forecasting
Carrying costs are vital in inventory control, Supplier Collaboration
impacting the total cost of holding inventory. Accurate demand forecasting is crucial in
This includes storage expenses and the risk of lean inventory management. By analysing Collaborating closely with suppliers ensures timely
inventory becoming outdated or damaged. historical data, market trends, and customer deliveries, minimizes lead times, and maintains a steady
Balancing inventory levels is crucial to behaviour, companies can adjust inventory flow of inventory.
minimize these costs and optimize inventory levels, avoiding over stock and shortages.
management.
134
 LINKWAYNOW

ABC ANALYSIS
Additionally, ABC Analysis categorizes inventory items
based on their importance and value into three
categories: A, B, and C.

This allows businesses to prioritize their management

efforts and allocate resources effectively.

Pareto’s Law A B C
© 2023 Lizane Raaths

Let's explore Pareto's Law, also known as the 80/20 rule.

This rule suggests that a large proportion of companies'
sales are generated by only a small portion of inventory
items. In other words, approximately 80% of the Category A Category B Category C
company's sales come from just 20% of the inventory
items. Items classified as Items These items are of
A are considered categorized as B low value and
For example, let's say a company sells 100 different the most valuable have moderate importance, with
products. According to Pareto's Law, approximately and important to value and minimal impact
80% of the company's sales or profits would be the company. importance. on inventory value
generated from only 20 of those different products. or sales revenue.
These 20 products are considered the "vital few" that
have a major impact on the business's overall
performance.

Focus on important items and use efficient methods to manage inventory. Implement strategies like EOQ, JIT, ABC Analysis,
and Pareto's Law to save costs. Good inventory management is essential to avoid losses and damages for the company.

135
 Let's delve deeper into the topic of inventory movement.
LINKWAYNOW

Upon shipment arrival at the warehouse, inventory is checked using barcodes and a receiving report (also known as POD, proof of delivery).
Shrinkage, caused by factors like theft or errors, can occur in the supply chain. Warehouses have set shrinkage percentages, managing any
losses beyond this. Implementing practices like audits and security measures helps minimize shrinkage and ensures accurate inventory levels.

Effective inventory management includes:

Regular Physical Counts

Inventory Visibility and Tracking
Identifying variances and taking
Real-time monitoring through corrective action.
barcodes or software.

Vendor Management and Proper Storage

Supply Chain Collaboration
© 2023 Lizane Raaths

Ensuring inventory is stored

Strong supplier relationships to appropriately to prevent damage.
optimize lead times.

Continuous Improvement and Efficient Movement

Monitoring Streamlining processes for smooth
Reviewing KPIs for improvement. and safe inventory transit.

Regular Inventory Audits Forecasting and Planning

Verifying accuracy and reconciling Using demand forecasting to optimize
discrepancies. inventory movement.

Proper Documentation
Automation
Maintaining accurate inventory
Implementing inventory management
records.
systems for accuracy and efficiency.

By considering these factors, adapting to changing demands, and utilizing proof of delivery (POD), companies can improve inventory
movement's efficiency, accuracy, and control.
136
 DEPLETED INVENTORY
LINKWAYNOW

Depleted inventory known as stock out and out-of-stock, this situation occurs when a company or retailer does not have enough inventory to fulfil
customer demand for a specific product or item. It means that the item is temporarily unavailable and cannot be purchased or obtained at that time.

In a stock out situation, several factors

come into play:

Unmet Customer
1 Demand
© 2023 Lizane Raaths

2 Potential Sales Loss

Negative Customer
3 Experience

There are various causes for stock outs, including

inaccurate demand forecasting, supply chain
disruptions, poor inventory management, or
production issues.

To mitigate stock outs, companies should focus on

effective inventory management practices, safety stock
planning, demand forecasting accuracy, supply chain
visibility, and responsive replenishment processes.
137
 SAFETY STOCK
LINKWAYNOW

Buffer stock is crucial for efficient inventory management and directly impacts customer service. It refers to extra
inventory held beyond regular stock levels to cushion against supply chain uncertainties and disruptions. This
protective measure ensures products are readily available to meet customer demands and maintain excellent service.

Another common practice is using a base quantity, which represents the minimum amount of a product or material
that must always be in inventory. This base quantity serves as a reference level, helping maintain stock levels and
safeguarding against supply and demand uncertainties. It acts as a buffer, protecting against unexpected changes,
ensuring a consistent supply, minimizing stockouts, and ultimately boosting customer satisfaction.

The following are five essential points highlighting the significance of buffer stock for customer service:
© 2023 Lizane Raaths

Buffer stock
enables
Improving adaptability
Lead Time to fluctuating
Improving Reliability demand.
Product
Fulfilling Availability
Customer
Minimizing Demands
Stock Outs

138
 Different Methods of fulfilling Orders for Retailers and the eCommerce Industry
LINKWAYNOW

Electronic commerce (eCommerce), is the online buying and selling of goods and services. It has various business models,
including Business-to-Consumer (B2C), Business-to-Business (B2B), and Consumer-to-Consumer (C2C).

B2C B2B C2C

Businesses sell Companies sell to Individuals sell to
© 2023 Lizane Raaths

directly to individual other businesses each other on

consumers on online through platforms platforms like eBay,
platforms like like Alibaba, Shopify Airbnb, and
Amazon, ASOS, and Plus, and Amazon Facebook, engaging
Netflix. Business, facilitating in P2P(person to
bulk orders and person) transactions
long-term for used items,
relationships. services, and rentals.

These eCommerce models transform commercial transactions, serving specific markets, empowering entrepreneurs, offering
diverse products and facilitating global trade online.

Regardless of the type of selling model, successful sales strategies must be customer-centric and focused on understanding and
addressing the specific requirements of the customers involved in the transaction. The most common thread is the emphasis on
delivering value and meeting the expectations of the end-users, businesses, or individual consumers involved.
139
 Dropshipping is an eCommerce approach
Drop- where sellers avoid stocking products. Instead,
LINKWAYNOW

shipping they purchase items from suppliers who

directly ship them to customers, making it a
low-risk business model to start.

Exploring Key Fulfilment

3PL, or Third-Party Logistics, is an
Methods in eCommerce outsourced service where experts handle
3PL
Businesses warehousing, packaging, shipping, and
customer service on behalf of sellers.
Now, let's examine some of the most widely
used fulfilment methods employed by
businesses in the eCommerce realm. When FBM (Fulfilled by Merchant) Sellers take
deciding on shipping and fulfilment care of all aspects, including packaging and
approaches, it's crucial for eCommerce
FBM shipping. While they retain control, they
© 2023 Lizane Raaths

businesses to carefully assess their individual must handle inventory management and
requirements, available resources, and customer support.
objectives.
FBA (Fulfilled by Amazon) enables
The industry is constantly evolving, driven by Amazon to manage storage, shipping,
technological advancements and evolving FBA and customer service for sellers on its
consumer preferences, leading to the platform. This service provides faster
emergence of new methods. shipping and access to Prime customers.

One popular approach is COD (Cash on

Self-Fulfilment sellers handle all
Delivery), which grants customers the
Self- operations in-house, including inventory
opportunity to inspect the goods before
Fulfilment management and shipping. This grants
making the payment. Additionally, we'll delve
them full control, but they require their
into the concept of pre-orders, a distinctive
own storage and resources.
strategy that can prove advantageous for
small start-ups.
Hybrid Models involve sellers combining
Hybrid various methods as needed, blending
self-fulfilment, 3PL, or FBA to tailor their
Models approach according to their business
requirements.
140
 PREORDERING
LINKWAYNOW

Preordering is a popular and effective strategy employed by companies to gauge customer demand before initiating production or procurement of
goods. By allowing customers to place orders for products that are not yet available, businesses can anticipate demand and adjust their production
schedules, accordingly, reducing the risk of overproduction or stockouts.

For preordering to be successful, effective management is crucial. Companies must maintain clear communication with customers, providing
accurate information about the expected delivery dates and any potential delays. Transparent refund policies also play a significant role in ensuring
a positive customer experience, as it imprint confidence in buyers who might be hesitant to commit to a purchase before receiving the product.

Local companies can benefit from the advantages of preordering. By utilizing this approach, they can efficiently manage demand and optimize their
supply chains. This method not only helps in avoiding excess inventory costs but also minimizes the chances of stock shortages that could lead to
customer dissatisfaction.
© 2023 Lizane Raaths

Customer engagement Improve cash flow with advance

aims to create exclusivity payments or deposits while
and anticipation among planning production schedules
customers. based on pre-orders received.

It offers several
benefits, such as:

Demand validation involves Supply Chain optimization

assessing customer interest focuses on optimizing the
for new or limited edition supply chain by coordinating
products. with suppliers and logistics
partners.

141
 LINKWAYNOW

LAST MILE DELIVERY

Last Mile Delivery is the crucial and expensive final stage of product delivery,
transporting goods to the customer's doorstep. It significantly impacts customer
© 2023 Lizane Raaths

satisfaction and plays a vital role in the rise of eCommerce. Efficient route planning
and various transportation modes, including vans, bicycles, motorcycles, and drones,
improve speed and reduce costs.

Technology like GPS tracking enhances visibility with real-time updates, while facing
challenges like traffic, limited parking, and efficient parcel handling.

Innovative solutions such as lockers, local store pickups, and crowd shipping are
employed, and sustainability practices like electric vehicles and optimized routes are
gaining importance.

142
 LINKWAYNOW

LANDED COST
Landed cost (LC) is essential in the supply
chain to accurately determine the total
cost of a product, including all expenses
incurred from the point of origin to the
buyer's location. It helps businesses make Important factors to consider: To calculate the landed cost of
informed decisions about pricing,
a product, follow these steps:
inventory management, and international • Impact on Pricing: Evaluate how LC affects
trade, ensuring profitability and efficiency product pricing to stay competitive and o Calculate freight costs, including shipping,
© 2023 Lizane Raaths

in their operations. profitable. transportation, and handling fees.

Later in this course, we'll use a costing file • Planning: Optimize shipping routes and o Determine the purchase price and factor in
logistics to minimize costs and delays. insurance costs if applicable.
template, with landed costs as an example.
The file includes various components like • Currency Exchange Rates: Fluctuations o Account for customs duties and taxes.
product, qty, duties, freight, ROE, and affect final cost, so consider them in
associated costs. Landed costs are calculations. o Include other fees and charges related to
integrated into the calculations, providing product delivery, such as storage fees.
a comprehensive view of total expenses in
• Verify Invoices: Review supplier, freight,
and customs invoices for accuracy. o Consider currency exchange rates.
procurement and transportation.
• Accurate Record-Keeping: Track all o Sum up all costs to get the total landed
We'll also explore ROE and basic shipment costs and allocate expenses cost, ensuring all relevant expenses are
accounting principles, helping us correctly. accounted for.
understand a product's overall cost from
supplier to consumer in supply chain
management.

143
 LINKWAYNOW

CUSTOMER EXPECTATIONS
Meeting customer expectations in the supply chain means delivering products
or services that meet customer requirements.

Here's an explanation of how meeting customer expectations

is crucial in the supply chain:

Product Availability
Fulfilling orders promptly to avoid disappointment.
© 2023 Lizane Raaths

Timely Delivery
Enhancing satisfaction, trust, and repeat purchases.

Order Accuracy
Providing correct products in the right quantities.

Transparency and Communication

Clear updates, shipment tracking, and proactive notifications.

After-Sales Support
Enhancing loyalty and satisfaction with responsive support.

Meeting customer expectations in the supply chain requires coordination

among stakeholders, including suppliers, manufacturers, logistics providers,
and customer service teams. It involves effective inventory management and
streamlined processes with accurate information sharing.

144
 LINKWAYNOW

Managing Reverse
Logistics

07
© 2023 Lizane Raaths

145
 REVERSE LOGISTICS
LINKWAYNOW

Reverse Logistics includes a range of activities that involve managing the flow of products, materials, or equipment from the point of consumption
back to the point of origin. This process addresses various scenarios such as returns, repairs, damages, recycling, spoilage, disposals and warranty
claims.

When warehouses encounter damaged items, defects, or issues with products, they undertake specific actions to
handle these situations effectively:

Damaged Items Returns

Warehouses assess damage for repair,
1 2 RMA stands for "Return Merchandise Authorization,"
© 2023 Lizane Raaths

recovery, or disposal. They coordinate with allowing customers to return defective products,
suppliers for replacements or refunds. and warehouses follow procedures for identification,
correction, or disposal. The number tracks and
authorizes the return, ensuring appropriate
handling and resolution.

Recycling Spoilage or Expired Items

Warehouses recycle end-of-life or Warehouses handle fragile or time-sensitive
unrepairable products, collaborating with
recycling facilities for proper disposal. 3 4 products, disposing of them to prevent
distribution to customers.

Reverse logistics is about reducing waste and environmental impact while making the most of returned products. Teams analyse returns to improve
customer satisfaction and product quality. Technology helps track returns and comply with regulations. Businesses must evaluate returned product
value and disposition strategies carefully because it can be cost-intensive.
146
 LINKWAYNOW

Basic Accounting
Principles In the
Context of
Supply Chain
© 2023 Lizane Raaths

147
08
 LINKWAYNOW

IMPORTANCE OF
BASIC ACCOUNTING
PRINCIPLES IN SUPPLY
CHAIN MANAGMENT
© 2023 Lizane Raaths

Understanding basic accounting principles is of

utmost importance in supply chain
management. As financial transactions and
data play a vital role in the supply chain, these
principles form the bedrock for effective
decision-making, budgeting, asset
management, risk assessment, and
compliance. Accurate financial reporting
through these principles enables stakeholders
to assess performance, evaluate profitability,
and optimize resource allocation, leading to the
overall success and sustainability of the supply
chain.

148
 Supply Chain and its connection
LINKWAYNOW

with Assets, Liabilities, and Equity

Let's start by grasping accounting principles and terms,
such as assets, liabilities, and equity. They'll be crucial for
our costing file, covering freight, landed costs, and
additional expenses.

ASSETS
_ LIABILITIES = EQUITY

Assets, liabilities, and equity are closely

connected to the supply chain in the following ways:
© 2023 Lizane Raaths

ASSETS LIABILITIES EQUITY

Assets are vital in the supply chain for Liabilities impact the supply chain Equity is the owner's investment and retained
production, distribution, and delivery. Physical through financial obligations. Short-term earnings in a business. In the supply chain, it
assets like inventory and machinery manage liabilities, like accounts payable to funds projects, expansion, and technology
goods flow, while financial assets fund suppliers, require timely payment for a upgrades. Equity reflects a company's financial
operations and infrastructure. continuous input supply. Long-term health, impacting investor attraction and loan
liabilities, such as loans, fund supply chain opportunities.
Example
expansion and infrastructure investment.
Example
In a manufacturing supply chain, inventory
Example
represents an asset. Raw materials, work-in- A company that wants to improve its supply
progress goods, and finished goods inventory If a company fails to pay its suppliers on chain infrastructure by building new
are necessary to meet production and time due to cash flow issues, it may lead warehouses or implementing advanced
customer demands. Effective inventory to disruptions in the supply chain. technologies may raise equity capital by
management prevents stockouts and excess Suppliers may withhold deliveries or issuing new shares or attracting investors.
inventory, optimizing cash flow and prioritize other customers, affecting Equity funds enhance supply chain efficiency
operations. production and customer satisfaction. and effectiveness.

149
 LINKWAYNOW

Shareholders are specific partners owning shares in a

company with financial interests. Stakeholders are a
broader group with interests extending beyond
finances. Shareholders are a subgroup of stakeholders.

Example of Shareholders
In "Pizza Palace," the "Pizza Lovers Club" invests in the
© 2023 Lizane Raaths

restaurant, eagerly anticipating profits. They attend

meetings and provide input on toppings and menu
Shareholders and items.

Stakeholders Example of Stakeholders

In "Rad Skate Co.," stakeholders include "Skateboard
Enthusiasts" who ride their boards, "Skate Shop Owners"
selling the products, the "Local Skateboarding
Community" benefiting from the skateboarding
culture's growth, and the "Rad Skate Co. Team Riders"
offering product feedback and representing the brand.
These stakeholders have diverse interests in the
business.

150
 LINKWAYNOW

Accrual Principle

1 Record expenses and liabilities when goods are received, even if the
payment is made later. (e.g., recording a December expense for raw
materials received, even if payment is made in January).

ACCOUNTING Matching Principle

PRINCIPLES 2 Match expenses with revenues in the same period. Record the cost of
goods sold when related products are sold. (e.g., recognizing the cost of
inventory when it is sold to match with the revenue from the sale).
© 2023 Lizane Raaths

Now that you have grasped the

meaning of Assets, Liability, and
Equity, we can delve further into the
fundamental accounting principles
as they apply to the supply chain.
Cost Principle
Understanding and applying these
principles help manage finances
and make better decisions in the
3 Record assets at their historical cost. (e.g., recording the purchase of a
machine at its original cost, even if the market value has changed).

supply chain.

Materiality Principle

4 Report financial information that could impact decision-making.

Exclude or combine immaterial costs. (e.g., not separately disclosing
the cost of packaging materials if it is insignificant).

151
 LINKWAYNOW

Understanding "Net"
and "Gross" in Finance
Gross Net
vs
Knowing the difference between
net and gross values is vital for
financial tasks, such as analysis,
profitability, expense
management, taxes, negotiations,
investments, and effective
ns
communication. It empowers Deductio
smart decision-making.
© 2023 Lizane Raaths

Gross Income and Revenue Net Income and Profit

Gross income is total earnings before deductions like taxes Net income and profit both refer to the remaining funds after
and retirement contributions. For companies, gross revenue deducting expenses. Net income considers all expenses, while net
is overall earnings before subtracting expenses and costs. profit focuses solely on operating expenses.

Examples of Gross Income Examples of Net Income (for individuals)

o Salary o Net Salary
o Rental Income o Net Rental Income
o Sales Commission o Net Investment Income
o Gross Profit o Net Business Income
o Interest Income o Net Royalties
Examples of Revenue Examples of Net Profit (for businesses)
o Sales Revenue o Net Profit from Sales
o Advertising Revenue o Net Profit Margin
o Subscription Revenue o Net Income from Rental Properties
o Licensing Revenue o Net Profit from Projects
o Rental Revenue o Net Profit from Investments
152
 Using an example of a running supply store, we'll illustrate the concepts of Gross Profit, Net Profit, and Net Income.
LINKWAYNOW

Keep in mind that real-world scenarios may involve more complex calculations and additional expenses.
© 2023 Lizane Raaths

TOTAL COGS • TOTAL REVENUE GROSS PROFIT NET PROFIT NET INCOME
• COGS includes • Total Revenue is derived • Gross Profit is • Net Profit is calculated • Net Income
production, freight, and from the sale of 50 calculated by by subtracting matches the Net
duties. bottles. subtracting COGS operating expenses Profit since there
• Production cost is $125 • Retail Selling Price (RSP) from Total Revenue. from Gross Profit. are no additional
(50 bottles x $2.50). of each bottle is $10. • Gross Profit • Operating expenses expenses like taxes,
• Freight and duties cost • Sales calculation: 50 calculation: $500 amount to $100 (e.g., interest, or
is $75 (50 bottles x bottles x $10.00 = (Total Revenue) - store rent, utilities, depreciation to

•
$1.50).
$500. $200 (COGS) =
•
employee wages).
•
consider.

•
COGS per unit is $4.
Total Cost of Goods Sold $300. Net Profit calculation:
$300 (Gross Profit) -
Therefore, Net
Income is also
(COGS) is $125 + $75 = $100 (Operating
Expenses) = $200.
$200.
$200.
153
 LINKWAYNOW

The Invoice, Statement and Income Statement: Overview of Revenue, Expenses, and Profitability

Having covered proforma and

commercial invoices in the
shipping documents module, it's Invoice Statement Income Statement
crucial to distinguish between
invoices and statements, as they
An invoice is a A statement summarizes The income statement
serve different purposes.
payment request transactions between (profit and loss
Understanding these financial
for goods or services parties over a specific statement/P&L)
documents empowers
provided in a period, giving an overview summarizes a company's
companies to manage finances
© 2023 Lizane Raaths

transaction. It of the account balance, revenues and expenses

effectively, evaluate
contains seller and outstanding payments, over a period to determine
performance, make informed
buyer info, item and activity during that profitability. It includes
decisions, comply with
details, quantities, time. It includes various revenues, cost of goods
regulations, and maintain strong
prices, and the total types like bank sold, operating expenses,
business relationships. Below is a
amount due. statements, account and other income or
summary of the differences and
statements, or vendor expenses.
essential information for each:
statements.

Additional Information Mandatory information on Mandatory information on an

o We've already discussed the shipping a statement may include: income statement typically
invoice details, but it's essential to highlight o Account holder details includes:
the "miscellaneous fee" (misc fee). This fee o Account number or identifier
includes additional charges for handling,
o Revenues or sales
o Summary of transactions o Cost of goods sold
administrative tasks, packaging, and more, o Opening and closing balances
all grouped together as the "total
o Operating expenses
o Outstanding amounts or o Non-operating income or expenses
miscellaneous fee on the invoice." payments due
154 o Net income or loss for the period
 Delving Deeper into Taxes and VAT Indirect Tax
LINKWAYNOW

In the supply chain, governments levy taxes at Indirect taxes are charged on goods and services, not on
different stages for public revenue and governance. companies, and are included in the product/service price,
These taxes are classified as direct and indirect. paid by the end consumer. Examples are sales tax, value-
added tax (VAT), excise tax, and customs duties.
Direct Tax
Direct taxes are imposed on companies based on
their income, profits, or assets and are filed and paid Sales Tax
directly by the company entity. Examples include Sales tax is imposed at the point of sale and
corporate income tax, capital gains tax on business calculated as a percentage of the purchase
assets, and property tax on owned facilities or land. price, paid by the end consumer.
© 2023 Lizane Raaths

Corporate Income Tax VAT (Consumption Tax)

Corporate income tax is charged on a VAT is a consumption tax levied at each stage
company's profits, requiring a percentage of of production and distribution, ultimately paid
their net income to be paid to the government. by the end consumer.

Property Tax Excise Tax

Property tax is imposed on real estate owners,
Excise tax is imposed on specific goods like
including businesses with facilities like
tobacco, alcohol, etc., paid by the
manufacturing or warehouses. It is a regular expense
manufacturer or importer.
paid based on property value to the government.

Capital Gains Tax Custom Duties or Tariffs

Capital gains tax is levied on the profit made Customs duties, also known as tariffs, are imposed on
from selling certain assets like stocks, real imports/exports, paid by the importer/exporter as a
155 estate, or business assets. percentage of the goods' value.
 RETURN ON EQUITY (ROE)
LINKWAYNOW

Evaluating Shareholder Returns

Return on Equity (ROE) is a measure used to evaluate how profitable a company is. It compares the company's net income to the amount of money
invested by shareholders and is expressed as a percentage. To determine the Return on Equity (ROE), follow these steps:

1
Find the Net Income
Let’s look at an example:
Refer to the company's income statement to identify the net income,
which represents the profit earned over a specific period, typically a year. Consider Company XYZ with a net
income of $1 million and shareholders'
equity of $10 million. To calculate the
ROE, divide $1 million by $10 million,
© 2023 Lizane Raaths

resulting in 10%. This indicates a 10%

Determine the Shareholder’s Equity

2
return on shareholders' equity,
Examine the company's balance sheet to locate the shareholder's equity, signifying profitability.
calculated as the value of assets minus the value of liabilities.
While ROE is not directly related to
the supply chain, it reflects overall
company efficiency, including supply
chain operations. A high ROE

3
Divide the Net Income by Shareholder’s Equity suggests a well-managed supply
chain, while a low ROE may indicate
Take the net income and divide it by the shareholder's equity. This
the need for supply chain
computation provides the ROE.
improvements.

Remember, factors like debt,

expenses, and taxes can also impact
ROE, so they should be considered

4
Express as a percentage
when evaluating a company's
The result of the calculation will be a percentage, allowing for comparison financial performance.
of the company's performance with others in the same industry.

156
 RETURN ON ASSETS (ROA)
LINKWAYNOW

Assessing Profitability and Efficiency

Return on Assets (ROA) is a financial ratio that measures a company's profitability by evaluating how efficiently it uses its assets to generate earnings. It is
calculated by dividing the company's net income by its total assets.

ROA is tied to the supply chain, reflecting asset management in production and distribution. An efficient supply chain can boost ROA by optimizing
inventory, operations, cutting costs, and satisfying customers.

Here's an easy example to understand the connection between ROA and the supply chain:
Consider "Playful Toys," a toy manufacturing company. With total assets worth $1,000,000 and a net income of $200,000, we can calculate its ROA using the
formula:
© 2023 Lizane Raaths

÷ =

÷ = $0.20 or 20%
Net Income Total Assets ROA
$200,000 $1,000,000
In this example, Playful Toys has an ROA of 20%, indicating that it generates 20 cents in net income for every dollar of assets.

Now, let's explore the supply chain's impact on ROA:

Efficient supply chain management benefits Playful Toys by optimizing inventory, reducing costs, and improving cash flow, positively impacting the asset
turnover ratio in ROA. Strengthening supplier relationships and streamlining processes minimize waste, enhance customer satisfaction, and increase profit
157 margins. Effective supply chain management leads to optimized asset utilization and a higher ROA.
 DEBITS AND CREDITS
LINKWAYNOW

Foundations of Financial Recording

Before we dive deeper into debits and credits, let's discuss the different types of accounts where transactions are recorded in accounting.
Let’s look at some accounts in Accounting:

Asset Account
Companies can effectively manage their financial position, income,
Represents valuable resources owned or controlled
by a company, such as cash, inventory, buildings, and expenses, leading to better financial decision-making.
and equipment.
Debits and credits are vital in accounting, like heads and tails of a
coin. They track the flow of "Economic Benefit" in transactions,
Liability Account impacting a company's cash flow. In the supply chain, they record
© 2023 Lizane Raaths

Represents obligations or debts the company exchanges of economic benefits for goods and services, helping
owes to external parties, like loans and manage inventory, cash flow, and overall financial health.
amounts owed to suppliers.

Equity Account
Shows the ownership interest in the company,
including owner's shares and profits.
DEBIT vs CREDIT
Consider this example: within a company, when they buy raw
Revenue Account materials from a supplier, they receive the materials (an asset) in
Records income generated from the company's exchange for paying the supplier (a liability).
primary business activities, such as sales revenue
from goods or services. This is recorded as a debit to the asset account and a credit to
the liability account. It shows that the economic benefit (raw
materials) flows into the company as an asset, while the source of
Expenses Account the benefit (the payment to the supplier) is recorded as a liability.
Tracks costs incurred in the company's
operations, like salaries, rent, and utilities.

158
 LINKWAYNOW

WEIGHTED AVERAGE COST (WAC) vs

COST OF GOODS SOLD (COGS)

Weighted Average Cost (WAC, also known as WAVC) is a way to find the average cost of
WAC inventory considering both the quantity and cost of each item. It helps determine the
overall average price of all items in stock, especially when bought at different prices.
© 2023 Lizane Raaths

Let's refresh your memory about the meaning of it since we've already discussed it a couple of
COGS times. Cost of Goods Sold (COGS) refers to the direct costs a company incurs in producing the
goods it sells, including materials, labour, and other production-related expenses. COGS is
vital for assessing profitability and understanding operation costs.

In the upcoming slides, we'll learn to calculate two important aspects: Cost of Goods Sold (COGS) and Weighted Average Cost (WAC).

To find the WAC, consider both the quantity and cost of each inventory unit, and then divide the total value by the total quantity of units
to get the average cost per unit. For COGS, subtract the starting inventory from the purchases and then subtract the ending inventory to
accurately evaluate financial performance and manage inventory effectively. Ending inventory, also known as closing inventory, refers to
the value of goods and materials that a business still has on hand at the end of an accounting period, typically a month, quarter, or year.

These calculations provide valuable insights for optimizing profitability and inventory strategies.

159
 LINKWAYNOW

Now, let's examine an example that demonstrates how to calculate the total COGS for a product:

Beginning Inventory
+ Purchases
- Ending Inventory
= $8000
Total COGS sold in this month
© 2023 Lizane Raaths

100 gadgets x $50 = 200 gadgets x $60 = 150 gadgets x $60 =

$5,000 $12,000 $9,000

To calculate the Cost of Goods Sold (COGS) per unit, you would divide the total COGS by the number of units sold.
Let's assume that the company sold 250 gadgets during the month.

$8000 ÷ 250 = $32

Total COGS Total units sold COGS sold
per unit

160
 Let's consider an example to demonstrate the calculation of Weighted Average Cost (WAC)
LINKWAYNOW

Suppose a company purchases a certain product at different prices over a period. Here's a table showing the quantity purchased and the
corresponding unit prices:

Purchase Date Quantity Purchased Unit Price

Jan 1, 2023 100 units $10

Feb 1, 2023 200 units $12

© 2023 Lizane Raaths

Mar 1, 2023 150 units $15

To calculate the WAC, we need to find the average cost per unit based on the quantity and cost of each purchase.

Step 1: Calculate the total cost for each purchase

o Jan 1, 2023: 100 units * $10 = $1,000
o Feb 1, 2023: 200 units * $12 = $2,400
o Mar 1, 2023: 150 units * $15 = $2,250 $12.56
Therefore, the Weighted Average Cost
Step 2: Sum up the total costs and the total quantity purchased (WAC) for the product in this example is
o Total Cost: $1,000 + $2,400 + $2,250 = $5,650 approximately $12.56 per unit. This means
o Total Quantity: 100 units + 200 units + 150 units = 450 units that, on average, each unit of the product
costs $12.56 based on the different
Step 3: Calculate the Weighted Average Cost purchase prices and quantities.
o WAC = Total Cost / Total Quantity
o WAC = $5,650 / 450 units
o WAC = $12.56 per unit (rounded to two decimal places)
161
 When a new shipment arrives, and you want to calculate the new Weighted Average Cost (WAC),
LINKWAYNOW

you can use the following formula:

Let's walk through an example with specific quantities and costs to calculate the new Weighted Average Cost (WAC).

SOH (Stock on hand) Inbound Shipment

Current Qty on Hand: 200 units You receive a new shipment with a total landed
with a current WAC of $15. cost of $3000 for 100 units ($30 LC/unit).
© 2023 Lizane Raaths

To calculate the new WAC, we can apply the formula:

We will incorporate all these various components into a costing file at a later stage.

(200 x $15 + $30 x 100) ÷ (200 + 100)

Units on Hand Current WAC LC/unit New Units Old Units New Units

$6000 ÷ 300
=
$20
New WAVC/unit
162
 LINKWAYNOW

Understanding the difference between Landed Cost and Weighted Average

Cost
Landed Cost involves the overall expenses incurred in procuring and transporting goods, encompassing various supplementary
charges linked to international trade or transportation.

On the other hand, Weighted Average Cost refers to the mean cost of inventory items and is utilized for valuation purposes within a
business's accounting and inventory management systems.
© 2023 Lizane Raaths

These two concepts serve distinct purposes and find application in different contexts within business operations. Let’s look at an
example below:

Landed Cost
A company purchases electronic components from a supplier in another country. The Landed Cost will include the actual cost of the
components, shipping fees, customs duties, taxes, and any other expenses required to bring the components to the company's
warehouse.

Weighted Average Cost

A retail store sells identical shirts with different purchase prices due to varying suppliers and discounts. To determine the average
cost of inventory, the store calculates the Weighted Average Cost based on the quantity of each shirt and its corresponding cost,
considering all purchases made. This valuation method helps the store monitor inventory value accurately.

163
 PROFIT MARGINS AND GROSS PROFIT
LINKWAYNOW

In the context of supply chain, the profit mark-up over the cost price. In other words, the factor of 1.4 accounts for a profit margin of 40%. Also
known as GP turnover. By using this factor, you ensure that you achieve the desired level of profitability and cover your costs while setting the
selling price for your product.

Here's an example to further illustrate the calculation of margin and the factor in the supply chain context:
Let's say you have a product with a cost price of $2.10. To determine the selling price and margin, you can use the factor of 1.4. Different companies
use different factors, such as 1.6 or 1.2, to decide how they set their retail selling prices (RSP).

$2.10 x 1.40 = $2.94

Cost Price Factor of 40% RSP
© 2023 Lizane Raaths

To calculate the profit, you can use the formula: Margin = (Selling price - Cost price) / Selling price.

($2.94 – $2.10) ÷ $2.94 = 0.286

RSP Cost Price RSP Profit

To convert 0.286 to a percentage, you can use the formula 0.286 * 100 = 28.6%.

0.286 x 100 = 28.6%

Alternatively, if we incorporate the conversion directly into the original formula, we have:
Margin = ($2.94 - $2.10) / $2.94 * 100 = $0.84 / $2.94 * 100 = 0.286 * 100 = 28.6%
164
 Here are three examples of margin calculations in different contexts:
LINKWAYNOW

These examples demonstrate how different margin calculations can be used to assess various aspects of a company's profitability and
financial performance.

Company A has a total revenue of $500,000 and a cost of goods sold (COGS) of
Gross Profit $350,000. The gross profit margin would be calculated as follows:
Margin Gross Profit Margin = (Revenue - COGS) / Revenue = ($500,000 - $350,000) /
$500,000 = $150,000 / $500,000 = 0.3 = 30%
© 2023 Lizane Raaths

Company B has operating income of $200,000 and revenue of $1,000,000.

Operating The operating margin would be calculated as follows:
Margin Operating Margin = Operating Income / Revenue = $200,000 / $1,000,000
= 0.2 = 20%

Company C has a net income of $50,000 and revenue of $300,000. The net profit
Net Profit margin would be calculated as follows:
Margin
Net Profit Margin = Net Income / Revenue = $50,000 / $300,000 = 0.1667 ≈ 16.67%

165
 LINKWAYNOW

MARKET VALUES vs BOOK VALUES

Evaluating Asset Worth
Market value is like checking how much your “used phone” is worth if you sell it today. Book value is like knowing how much you paid for it
when you bought it. In business, we use these values to set prices and manage inventory. Balancing them helps us make smart decisions that
keep our finances stable.

Before we reach the end of accounting, it's also important to understand that 'Rolling
forward' and 'Rolling back' inventory are terms often used in accounting and financial
management. Here's what they mean, along with two examples:
© 2023 Lizane Raaths

Rolling Forward Inventory:

Imagine you run a small retail store. At the end of the month, you have 100 widgets in your inventory. During the next month, you purchase 50
more widgets and sell 30. To 'roll forward' your inventory for the next month, add the new purchases (50) and subtract the items sold (30) from
the previous month's balance (100). The inventory balance at the end of the month is 120 widgets (100 + 50 - 30).

Rolling Back Inventory:

Now, let's consider a scenario where you discover an error in your inventory count. You believed you had 100 widgets in stock, but a recount
shows that you actually have 110. To correct this error and 'roll back' your inventory, reduce the inventory balance by the difference between
the recounted amount and the previously recorded amount. In this case, you would subtract 10 widgets (110 - 100) to correct your inventory
balance to the accurate count of 100 widgets.

Rolling back inventory is necessary when errors or discrepancies are found to ensure that your inventory records accurately reflect the actual
physical inventory on hand.

166
 LINKWAYNOW

Cost Fluctuations and Currency Now, let's connect inflation

Value: Understanding the Impact and deflation with devaluation
on Expenses and revaluation:
When creating costing files, it's crucial to consider cost Devaluation and Inflation: When a country
fluctuations like deflation, inflation, devaluation, and intentionally lowers its currency value
© 2023 Lizane Raaths

revaluation, as they can significantly impact overall (devaluation), imports become more expensive.
expenses. This can lead to inflation as businesses pass on
higher costs to consumers. On the positive side,
Devaluation occurs when a country intentionally reduces devaluation can boost exports and stimulate
the value of its currency compared to others, boosting economic activity, potentially counteracting
exports and competitiveness. Revaluation, on the other inflationary effects.
hand, makes a currency more valuable, aiming to control
inflation or attract investment.
Revaluation and Deflation: Strengthening a
Inflation is a sustained increase in overall price levels, country's currency through revaluation makes
reducing the purchasing power of a currency. It leads to imports cheaper. This can put downward pressure
higher prices for goods and services. In contrast, deflation on prices, possibly leading to deflation. However, a
is a sustained decrease in price levels, increasing the strong currency may also harm export
purchasing power of a currency, resulting in lower prices competitiveness and affect economic growth.
for goods and services.

167
 COSTINGS
LINKWAYNOW

Costing is a crucial process that involves determining the total cost associated with a product or service. It goes beyond simply adding up expenses
and requires considering both direct and indirect costs incurred during the production or provision process.

Indirect Costs
On the other hand, indirect costs (also
Direct Costs known as overhead costs) are expenses
Direct costs are expenses that can be that are not directly tied to a specific
specifically attributed to the production of product or service but are necessary for
© 2023 Lizane Raaths

a product or service. These costs directly the overall operation of a business. These
contribute to the creation or delivery of costs are incurred to support the
the product or service. production process but cannot be easily
allocated to a product or service.
Examples of direct costs include
raw materials, direct labour (wages Examples of indirect costs include
of workers involved in production), rent, utilities, administrative
and any specific equipment or salaries, maintenance expenses,
machinery used exclusively for the and general supplies.
production process.

Now, to put our supply chain course learnings into practice, let's delve into a costing file template. This template will serve as a comprehensive tool to
guide us through the process. It will include sections covering various aspects such as material costs, labour expenses, overhead costs, transportation
charges, and any other relevant factors we have learned about in our supply chain course.

This template helps us gather and analyse all the necessary factors that determine the cost of a product or service. It allows us to make informed
decisions and improve our supply chain operations. Please remember that every company has its own way of creating a costing file.
168
 COSTING FILE
LINKWAYNOW
© 2023 Lizane Raaths

This is a simplified version of the costing file. If you need the complete version, kindly reach out to Linkway. We will gladly
provide the example costing file for your reference. Due to its size, it cannot be included on a single page.
169
 LINKWAYNOW

Lessons Learned from Supply

Chain Challenges

09
© 2023 Lizane Raaths

170
 Lean Principles
LINKWAYNOW

Identify Value
Focus on customer needs and eliminate waste.

Value Stream Mapping

Analyse processes for optimization.

Waste Reduction
Use lean tools to eliminate waste and streamline processes.

LEAN AND SIX SIGMA Continuous Flow

Design processes for smooth flow and reduced cycle times.
© 2023 Lizane Raaths

Lean and Six Sigma are two complementary

methodologies that can be applied to supply chain Pull System
management to drive improvement and enhance Implement a pull-based system for responsiveness and inventory reduction,
overall efficiency. Here's how Lean and Six Sigma such as Just-in-Time (JIT)..
principles can be used in supply chain improvement:
Standardized Work
Establish consistent procedures for productivity.

Visual Management
Use visual tools for communication and process visibility.

Cross-Functional Collaboration
Encourage collaboration to streamline processes.

Continuous Improvement
Foster a culture of ongoing enhancements.

Total Employee Involvement

Engage employees in improvement initiatives.
171
 Six Sigma Principles
LINKWAYNOW

Define
Communicate improvement goals and metrics.

Measure
Collect data to identify variations and establish baselines.

Analyse
Use statistical analysis to uncover improvement opportunities.
Why is the Lean and Six Sigma Improve
Principles Important Develop and implement solutions using structured problem-
solving.
© 2023 Lizane Raaths

Both Lean and Six Sigma were developed to

address different aspects of process Control
improvement in different settings. Lean aimed Establish control mechanisms and monitor performance.
to streamline manufacturing processes and
reduce waste, while Six Sigma focused on Data-Driven Decision-Making
reducing defects and improving product or Use data for informed decisions.
service quality through statistical analysis. Over
time, these methodologies have been widely
adopted in various industries to achieve higher Supplier Quality Management
efficiency, quality, and customer satisfaction. Apply Six Sigma principles to supplier activities.

Variation Reduction
Minimize process variation for predictability.

Customer Focus
Incorporate customer requirements into improvements.

Leadership Support
Obtain leadership commitment and resources.
172
 Lesson 1
LINKWAYNOW

Predicting Demand
Matters Knowing
what customers will
Lesson 8 want is essential for
managing inventory
Lesson 2
Continuous
Improvement and well. Mastering Inventory
Adaptation In this ever- Control Learning
changing field, inventory control
continuous improvement techniques helps
and adaptability are maintain the right
essential. stock levels.

Lesson 3
Lessons learned from Supply Chain Lesson 7
© 2023 Lizane Raaths

Communication and
Balancing Cost and
Challenges and Successes. Service Finding the
Teamwork Working

LESSONS
together and
right balance
communicating
These lessons provide a foundation for supply chain between costs and
effectively keeps
specialists, juniors and beginners to develop their service levels is crucial
everything running
skills and knowledge in supply chain management for success.
smoothly.
and contribute effectively to the field.

Lesson 6 Lesson 4
Technology for Planning and
Efficiency Using Customer Happiness
technology and data Timeframes for orders
helps make better affect planning and
decisions and work how happy customers
Lesson 5
more efficiently. are.
Dealing with Risks
Being prepared for
potential supply
chain issues ensures
a steady operation.

173
 LINKWAYNOW

Acronyms and Terminologies

10
© 2023 Lizane Raaths

174
 Acronyms and Terminologies in the Context of Supply Chain
LINKWAYNOW

01 LOT NUMBER: Unique identifier for a batch of products. 12 CIF: Cost, Insurance, and Freight. Seller delivers goods to the port
(Example: LOT1234) of destination, including insurance.

02 D2C: Direct-to-Consumer. Selling products directly to end 13 DAP: Delivered at Place. Seller delivers goods to the buyer at a
consumers. named place of destination.

03 MOQ: Minimum Order Quantity. Minimum quantity 14 DDP: Delivered Duty Paid. Seller delivers goods to the buyer,
required for a purchase. including all costs and duties.

04 RFQ: Request for Quotation. Soliciting price quotes from 15 DPU: Delivered at Place Unloaded. Seller delivers goods to the
suppliers. buyer, unloaded at destination.
© 2023 Lizane Raaths

05 B2B: Business-to-Business. Transactions between 16 FAS: Free Alongside Ship. Seller delivers goods alongside the vessel
businesses rather than consumers. at the port of shipment.

06 OEM: Original Equipment Manufacturer. Producing 17 CPT: Carriage Paid To. Seller delivers goods to a specified place,
components for other companies' products. paying transportation.

07 ODM: Original Design Manufacturer. Manufacturing 18 CIP: Carriage and Insurance Paid To. Seller delivers goods to a
products based on other companies' specifications. specified place, paying transportation and insurance.

08 EXW: Ex-Works. Seller makes goods available, buyer 19 KPI: Key Performance Indicator. Measurable value indicating
handles transportation. performance against objectives.

09 FOB: Free on Board. Seller delivers goods to the port of 20 CAC: Customer Acquisition Cost. Cost of acquiring a new
shipment. customer.

10 FCA: Free Carrier. Seller delivers goods to a carrier or 21 ROI: Return on Investment. Measure of profitability from an
designated location. investment.

11 CFR: Cost and Freight. Seller delivers goods to the port of 22 S&OP: Sales and Operations Planning. Aligning sales and
destination. operational strategies.
175
 Acronyms and Terminologies in the Context of Supply Chain
LINKWAYNOW

23 EOQ: Economic Order Quantity. Optimal quantity to 34 BOM: Bill of Materials. List of components needed
minimize inventory costs. for production.

24 MPS: Master Production Schedule. Plan specifying 35 CRP: Capacity Requirements Planning. Determining resources
production quantities and timings. required for production.

25 MRP: Material Requirements Planning. Determining 36 PLC: Product Life Cycle. Stages of a product from introduction to
materials needed for production. decline.

26 ERP: Enterprise Resource Planning. Integrated software 37 CAD: Computer-Aided Design. Software for designing and
managing business processes. drafting.
© 2023 Lizane Raaths

27 MES: Manufacturing Execution System. Software 38 PPS: Production Planning System. System for managing
managing shop floor operations. production schedules.

28 SPS: Sales and Purchase System. System for managing 39 PS: Product SKU. Unique identifier for a specific product.
sales and procurement activities.

29 GDP: Gross Domestic Product. Measure of a country's 40 SKU: Stock Keeping Unit. Unique identifier for an inventory
economic output. item.

30 RRP: Recommended Retail Price. Suggested selling price 41 CHILD SKU: Variant or child of a main SKU.
for a product.

31 PAB: Product Availability Buffer. Reserve stock to ensure 42 SHADOW SKU: Representation of an unavailable or discontinued
product availability. SKU.

32 RCCP: Rough-Cut Capacity Planning. Estimating 43 MSKU: Master SKU. Parent SKU that encompasses related child
resources needed for production. SKUs.

33 ATP: Available-to-Promise. Inventory is available for 44 ASIN: Amazon Standard Identification Number. Unique identifier
customer orders. for products on Amazon.
176
 Acronyms and Terminologies in the Context of Supply Chain
LINKWAYNOW

45 CHILD ASIN: Variant or child of a main ASIN. 56 FCL: Full Container Load. Shipping term for cargo filling a
complete container.

46 FNSKU: fulfilment Network SKU. Amazon's unique 57 MFG Date: Manufacturing date.
identifier for products in their fulfilment network.

47 UPC: Universal Product Code. Barcode used for product 58 ETD: Estimated Time of Departure. The expected departure time
identification. of a shipment.

48 GTIN: Global Trade Item Number. Unique identifier used 59 GRD: Goods Receipt Date. Date when goods are received.
globally for products.
© 2023 Lizane Raaths

49 EAN: European Article Number. Barcode standard used in 60 CRD: Customer Requested Date. Date requested by the customer
Europe. for delivery.

50 ISBN: International Standard Book Number. Unique 61 ETA: Estimated Time of Arrival. Expected arrival time of a
identifier for books. shipment.

51 CTN: Carton. Standard packaging unit for products. 62 EORI: Economic Operator Registration and Identification. Unique
identification number for importers and exporters.

52 PCS/CTN: Pieces per Carton. Number of individual items in 63 EFTA: European Free Trade Association. Organization promoting
a carton. free trade among member countries.

53 UN NUMBER: United Nations Number. Code for hazardous 64 N.W.: Net Weight. Weight of the product without packaging.
materials identification.

54 KD PACKING: Knocked Down Packing. Disassembled or 65 G.W.: Gross Weight. Weight of the product with packaging.
flattened packaging.

55 LCL: Less than Container Load. Shipping term for smaller 66 CBM: Cubic Meter. Unit of measurement for the volume of
cargo not filling a full container. goods.
177
 Acronyms and Terminologies in the Context of Supply Chain
LINKWAYNOW

67 CBF: Cubic Foot. Unit of measurement for the volume of 78 BOL: Bill of Lading. Another term for a document acknowledging the
goods. receipt and shipment of goods.

68 DG CARGO: Dangerous Goods Cargo. Goods classified as 79 MBL: Master Bill of Lading. Document issued by the main carrier for a
hazardous or dangerous. consolidated shipment.

69 OF: Ocean Freight. Cost of shipping goods by sea. 80 HBL: House Bill of Lading. Document issued by a freight forwarder or
consolidator for a consolidated shipment.

70 THC: Terminal Handling Charge. Fee for handling cargo at 81 MAWB: Master Airway Bill. Document issued by the main carrier for
a port terminal. air cargo shipments.
© 2023 Lizane Raaths

71 POL: Port of Loading. Port where cargo is loaded onto a 82 HAWB: House Airway Bill. Document issued by a freight forwarder for
vessel. air cargo shipments.

72 POD: Port of Discharge. Port where cargo is unloaded 83 ASN ID: Advance Shipment Notice Identification. Unique identifier for
from a vessel. an advance shipping notification.

73 CFS: Container Freight Station. Facility for consolidating 84 HS CODE / HTS: Harmonized System Code. Classification codes for
and deconsolidating containerized cargo. products used in international trade.

74 W/M: Weight/Measurement. Charging method based on 85 PO: Purchase Order. Document issued by a buyer to a seller to initiate
either weight or volume, whichever is higher. a purchase.

75 COC: Certificate of Conformance. Document certifying 86 PI: Proforma Invoice. Preliminary invoice sent before the actual sale.
compliance with specified standards.

76 SOC: Shipper's Own Container. Container owned and 87 CI: Commercial Invoice. Invoice issued by the seller to the buyer for
provided by the shipper. the goods purchased.

77 B/L: Bill of Lading. Document acknowledging the receipt 88 S.I: Shipping Instruction. Instructions provided to a carrier for
and shipment of goods. shipment handling.
178
 Acronyms and Terminologies in the Context of Supply Chain
LINKWAYNOW

89 D/O: Delivery Order. Document authorizing the release of 100 FF: Freight Forwarder. Company arranging shipping and logistics
goods from a carrier. services.

90 SCAC: Standard Carrier Alpha Code. Unique code 101 IATA: International Air Transport Association. Trade association for the
identifying transportation companies. airline industry.

91 A/N: Arrival Notice. Notification of the arrival of goods. 102 FTL: Full Truckload. Shipping term for a truckload of goods.

92 CY: Container Yard. Storage area for shipping containers. 103 EMS: Express Mail Service. Expedited postal service for international
shipments.
© 2023 Lizane Raaths

93 CFS: Container Freight Station. Facility for consolidating 104 TEU: Twenty-foot Equivalent Unit. Standard measurement for
and deconsolidating containerized cargo. container capacity.

94 A/N: Advice Note. Document providing advice or 105 IHC: Inland Haulage Charge. Fee for transportation of goods between
information. inland locations and port terminals.

95 POP: Proof of Purchase. Document serving as evidence of 106 ISF: Importer Security Filing. Information required by the US Customs
a purchase. and Border Protection for imports.

96 SWIFT: Society for Worldwide Interbank Financial 107 IOR: Importer of Record. Entity responsible for customs duties and
Telecommunication. Network for secure transactions. compliance for imported goods.

97 TT COPY: Telegraphic Transfer Copy. Document 108 FTZ: Free Trade Zone. Designated area with relaxed customs
evidencing a telegraphic transfer payment. regulations. WAR &

98 BIC: Bank Identifier Code. Unique identification code for 109 S.R.C.C: War and Strikes Clauses. Insurance coverage for damages due
banks. to war or strikes.

99 L/C: Letter of Credit. Financial document guaranteeing 110 MSDS: Material Safety Data Sheet. Document providing information
payment to a seller. on the safety and handling of hazardous materials.
179
 Acronyms and Terminologies in the Context of Supply Chain
LINKWAYNOW

111 SDS: Safety Data Sheet. Updated version of MSDS. 122 FIFO: First-In, First-Out. Method of inventory management
where the oldest stock is sold first.

112 ATA CARNET: Admission Temporaire/Temporary Admission 123 LSFO: Last Ship, First Out. Sell/use recent shipment items first,
Carnet. Document for duty-free temporary importation. ideal for bulk interchangeable items.

113 SCC CARNET: Special Customs Control Carnet. Document 124 FILO: First-In, Last-Out is a structure or algorithm where the last
for the temporary exportation and re-importation of goods. item inserted is the first item to be removed, resembling a stack.

114 CBP: Customs and Border Protection. US agency 125 FEFO: First-Expiry, First-Out. Selling products with the closest
responsible for border control and customs enforcement. expiration dates first to avoid waste.
© 2023 Lizane Raaths

115 CSM: Customer Service Manager. Individual responsible for 126 ROP: Reorder Point. Inventory level at which new orders are
managing customer relationships. placed.

116 VAT: Value Added Tax. Consumption tax applied to the 127 B2C: Business-to-Consumer. Transactions between businesses and
value added at each stage of production or distribution. individual consumers.

117 TAX: General term for various types of taxes. 128 B2B: Business-to-Business. Transactions between businesses.

118 GST: Goods and Services Tax. Indirect tax levied on the 129 C2C: Consumer-to-Consumer. Transactions between individual
supply of goods and services. consumers.

119 CVD: Countervailing Duty. Additional import duty imposed 130 P2P: Peer-to-Peer. Direct transactions between individuals without
to offset subsidies in the exporting country. intermediaries.

120 POD: Proof of Delivery. Document confirming delivery of 131 FBM: fulfilled by Merchant. Products fulfilled by the seller or
goods or services. merchant.

121 JIT: Just-in-Time. Inventory management approach with 132 FBA: fulfilled by Amazon. Products fulfilled by Amazon's fulfilment
minimal stock on hand. centres.
180
 Acronyms and Terminologies in the Context of Supply Chain
LINKWAYNOW

133 3PL: Third-Party Logistics. Outsourcing logistics services 144 WAC: Weighted Average Cost. Average cost of inventory items
to a third-party provider. based on their weighted proportions.

134 COD: Cash on Delivery. Payment method where goods 145 COGS: Cost of Goods Sold. Cost of producing or acquiring goods
are paid for upon delivery. sold.

135 LC Landed Cost: Total cost of a product including 146 GP: Gross Profit. Revenue minus the cost of goods sold.
purchase price and associated expenses.

136 ROE: Return on Equity. Measure of profitability relative 147 RSP: Recommended Selling Price. Suggested price for selling a
to shareholders' equity. product.
© 2023 Lizane Raaths

137 ROA: Return on Assets. Measure of profitability relative 148 RMA: Return Merchandise Authorization, enabling customers to
to total assets. return or exchange products with suppliers or manufacturers.

138 LOC #: Customs Clear LOC # is a number that identifies 149 LIQ Code: Liquidation. Code indicating the status of customs
where customs clearance for imported goods will occur. processing.

139 ADA: Antidumping Duty. Tax against foreign 150 CHGS: Stands for Charges. Charges related to the import
manufacturers' unfair pricing. process.

140 CVD: Countervailing Duty. Tax levied on imports to 151 HTSUS: Harmonized Tariff Schedule of the United States.
counter subsidies granted to foreign producers. Classification code for imported goods.

141 I.R Tax: Importer's Risk Tax. Tax related to the importer's 152 IRC Rate: Importer's Risk Coverage Rate. Rate of coverage for
assumed level of risk. potential importer risk.

142 IB Haulage: Transporting goods from a factory to a port 153 IT Date: In Transit Date. Date when goods are in transit.
by truck or train before shipping them abroad.

143 SAD: Single Administrative Document. Customs

declaration form used in the European Union.
181
 LINKWAYNOW
© 2023 Lizane Raaths

Congratulations on completing this guide!

182