Transportation &

Distribution
Management
LOGS215
The Role of
Transport
• Transport involves the movement of goods from
supplier to user with the objective of ensuring delivery
in good time, in good condition and at minimum cost.
• Transport is involved in all links of the Supply Chain
and provides the link between producers and
consumers.
• Handling the movement of raw materials to
production, as well as the distribution of the finished
product to customers.
• Movements can be both national and international,
The role of transport is to connect the source of goods
with the destination.
• The source and destination may be in different
countries requiring international movement, or they
may be in the same country.
Importance
of Transport
• As Supply Chains have become
increasingly fragmented and longer
because of the global economy, the
distance between Supply Chain
participants has increased.
• Spanning this geographical gap has
resulted in transportation costs increasing.
• Further, covering the distance also
requires time, which leads to an overall
increase in Supply Chain lead times that
often results in greater inventory.
• Transportation involves the physical movement of
goods from their origin to their destination.
• The transportation system links geographically
separated facilities in a company’s supply chain.
• Transportation facilitates the creation of time and
place utility.
• Transportation also has a major economic impact
on the financial performance of businesses.
• Transportation is a key supply chain process that
must be included in supply chain strategy
development, network design, and total cost
management.
• Transportation provides the critical links between
supply chain partners, permitting goods to flow
between their facilities.
• Transportation service availability is critical to
demand fulfillment in the supply chain.
• Transportation efficiency promotes the
competitiveness of a supply chain
 Supply chain complexity

Competing goals among supply chain partners

Challenges
to Changing customer requirements

carrying Limited information availability

out
Synchronizing transportation with other supply chain activities
transporta
tion’s Transportation capacity constraints and rising transportation rates

role Changing governmental requirements that affect cost and service

Growing safety and environmental regulation

Modes of
Transportati
on
• truck
• rail
• air
• water
• pipeline
• multimodal transportation
Multimodal
Transportation
• Movement of goods (in the same loading unit)
through successive modes of transport without further
handling
• Use the best features of different modes
• Expands accessibility
• Facilitates global trade
• Standardized containers promote multimodal growth
• Serves as an effective bridge for rail system gaps
• Disjointed rail network
• Break of gauge
Modal Characteristics
Accessibility

Motor transportation has advantage over air, rail, and water

Transit Time

Air and motor transportation has advantage over rail, water, and pipeline

Reliability

Motor carriers and air carriers are generally more reliable than water carriers and rail carriers

Product Safety

Goods suffered less damage when transported by air and motor, as compared to rail and water

Cost

Motor and air transportation are more expensive than rail and water transportation
Modal • Cost

Selection • Speed
• Durability of cargo
Criteria • Cargo value
• Route
• Cargo security and safety
• Equipment availability
• Cargo characteristics (e.g., oversize, dangerous goods)
• Difference in border management process (e.g., rail
shipments generally have less cross border delays)
Carrier
Selection
Trend
• Core carrier concept
• Long term relations with a small number of
carriers
• Leverage purchasing dollars to drive down
transport cost and secure capacity and
service quality commitments from carrier
• Reduce carrier management cost and
optimize dock space usage
• Improve IT connection, get better track
and traceability
Transport
Planning
Transport Network
Designs
• The design of a transport network affects the performance of a Supply Chain

• Companies are considering moving production closer to the customer

market due to rising energy costs with respect to sourcing. by
establishing the infrastructure within which operational transportation
decisions are made.

• A well-designed transportation network allows a Supply Chain to achieve

the desired degree of responsiveness at a low cost.
• The following design options may be implemented between any two stages in
a Supply Chain:
• Direct Delivery
• Distribution Centre Network
• Multi-Drop Network
• Supplier Milk Run
• Cross Docking Network
Direct Delivery
• They are used in situations where product
shelf life is short and the demand at each
location is relatively high and consistent.
• The routing of each shipment is specified
and the transport manager only needs to
decide on the quantity to be shipped and
the mode that will be used.
• This decision will involve a trade-off
between inventory and transport costs.
• The major advantage of a direct
delivery network is :
• the elimination of intermediate
warehouses
• simplicity of operation and control.
• the transport time between locations
is short because the shipment is
going direct.
Distribution
Centre
Network
• Direct delivery would ideally move a full
truckload of product to each demand
point.
• Since it might take some time for the
demand point to utilize a full truck load of
product, they would incur high
inventory and storage costs.
• Consequently, the network for this type of
product includes several intermediary
stops on the way
• Typically, such a network might include a supplier’s
warehouse and a customer’s own warehouse. to
enable them to consolidate several of their
products together to make a full load for shipment
to the next Supply Chain stage.
• In turn the customer uses their warehouse to
breakdown the bulk product shipments from
many suppliers and to consolidate small volumes
of several products together for shipment to each
demand point.
 Multi-Drop
Network
• since the destination volume might be too small,
even if smaller trucks are used.
• In such cases multi-drop transport can be used
• The route the truck takes is carefully planned to
minimize total distance travelled
• And ensure that the entire product is delivered.
• This minimizes the expense of providing field
warehouses but the cost of transport
increases as each stop incurs additional time.
Supplier Milk
Run
• The supplier milk run network mirrors the concept
of multi-drop deliveries but applies it to
• suppliers.
• It is so called because it is the way that milk is
collected from farms
• Companies are considering moving production
closer to the customer market due to rising energy
costs with respect to sourcing
• The total picked up from all suppliers makes a full
truckload
• Applying milk-run concept can improve supply
chain throughput.
The advantages
of milk runs
are:
• Inventory is reduced.
• Predictable replenishment times.
• Better inventory visibility.
• Improved supplier communication.
Cross Docking
Network
• As trucks arrive from the suppliers they
could be unloaded, immediately sorted
and loaded onto trucks for dispatch to
demand points.
• Product literally crosses the unloading
and loading dock without being held in
stock.
• The method of storage used when there
is a space shortage problem at a
receiver’s warehouse is In-transit storage
• The shipping business is essential to the
development of economic activities
• International trade needs ships to transport cargoes
from place of production to place of
• consumption
• Shipping is concerned with the transport of cargo
between seaports by ships
• Terminals are locations where carriers load and
unload goods to and from vehicles.
• Shipping is one of world’s most internationalized
industries and provide cost-effective means
to transport large volume of cargo around the world .
• The early focus of logistics was physical distribution
• Without shipping, it would simply not be
possible to conduct intercontinental trade,
• the bulk transport of raw materials or the
import/ export of affordable food and
manufactured goods – half the world would
starve, and the other half would freeze!
• Ships are technically sophisticated, high
value assets (the largest hi-tech vessels can
cost over US $180 million to build)
• The operation of merchant ships generates
an estimated annual income approaching
US$500 billion in freight rates, representing
about 5% of the total global economy.
• Shipping is highly regulated at the
global level, notably by the United
Nations International Maritime
Organization (IMO), which is
responsible for :
• Safety of life at sea,
• Maritime security and
• The protection of the marine
environment.
• Shipping - a service industry
• Lifeline of international trade
• Due to the morphology of our
planet, 90% of international trade
takes place by sea
• Technological developments in ship
design and construction, and the
ensuing economies of scale of
larger ships - promoted trade of
developing nations
• capital intensive,
• cyclical,
• volatile,
• seasonal and
• exposed to the
international business
environment
• .
Tramp Market & Liner Market
Tramp market
• Tramp ships go from place to place depending upon where they
can find cargoes
• A charter ship is provided by ships that are hired for a specific
voyage or amount of time.
• Mainly carries only one commodity at a time, usually carries
cargoes from one shipper
• Freight rates , terms and conditions are negotiated usually on a
case-by-case basis
• Tramp ships carry dry bulk cargoes that are used by many
industries
• Bulk cargoes can be classified into dry bulk and liquid bulk.
• A break bulk ship handles only bulk cargo would require that
shipments be packed for handling
A liner service
• Is a fleet of ships, with a common ownership or
management, which provide a fixed service, at
regular intervals, between named ports, and
• Offer transport to any goods in the catchment area
served by those ports and ready for transit
by their sailing dates.
• A fixed itinerary, inclusion in a regular
service, and the obligation to accept cargo
from all comers and to sail, whether filled or
not, on the date fixed by a published
schedule
• Cargoes are transported through regular
routes and with a regular schedule;
• Operate according to a schedule of ports of
loading and discharge;
• Usually adhering to a published timetable;
• Different consignments from different
shippers;
• Cargo mainly made up of manufactured or
partly manufactured goods;
• Majority is carried in containers
• The construction and operational costs are
higher than tramp
• In the liner business quality of service
is often the focus of competition.
• In practice there are six aspects of the
freight service which shippers consider
to be important:
• Freight cost.
• Frequency of sailings.
• Transit time door-to-door.
• Reliability of timekeeping.
• Reliability of administration.
• Space availability.
• Reliability in transportation is defined
as: consistency of transit time
Elasticity of demand
(Characteristics):
• Demand for sea transport is a derived demand

• The elasticity of demand for sea transport depends on

the elasticity of consumer demand for the goods
shipped by sea
• The lower the cost of sea transport as a proportion
of the total cost of the final goods , the more
inelastic the demand for sea transport will be
• The demand for sea transport will be more elastic
if it can be easily substituted by another mode of
transport
Supply of sea
transport
• Supply of sea transport measured in terms of the
supply of tonnage .
• Which refers to the available capacity for carrying
cargo from one or more ports by sea.
• Total shipping supply = Active shipping supply
(trading vessels)+ available shipping supply (laid-up
tonnage).
• To estimate the supply of shipping service , both the
cargo-carrying-capacity and the distance of the
voyage must be considered.
• Shipping supply can be increased by building more-
efficient ships or can be reduced by scrapping old
ones
Rigidity of
supply
• Shipping is a capital – intensive industry
• The costs of increasing or decreasing the
fleet size are high
• 1-4 years delivery time of new ships.
• Significant risk in ship investment and no
order until a definite trend for increased
demand is assured
What is Transit
Time
• The number of sailing days on a port-
to-port basis or …
• Total time on a door-to-door basis
which includes dwell time at
terminals and the time needed
for pre-carriage at the port of loading
and on-carriage from the port of
discharge
The purpose of
Inco terms is
• To provide a set of international rules to
facilitate the interpretation of the most
commonly used trade terms in foreign
trade .

• Deal with several identified obligations

imposed on the parties and the
distribution of risk between the parties
What Are • Incoterms are an internationally recognized set of terms that define the
responsibilities and obligations of the parties involved in the transport of goods.
Incoterms?
• Incoterms are used to clearly communicate the division of the cost of
carriage and risks associated with the international transportation and
delivery of goods between the seller to the buyer.
• Incoterms were first introduced in 1936 by the International Chamber of
Commerce (ICC) as different practices and legal interpretations between
traders around the world necessitated a common set of rules and guidelines for
interpreting the most used terms in foreign trade.
• Incoterms are revised periodically, roughly every 10 years, by the ICC to
conform to changing trade practices.
• What Incoterms Do

• It is important to note that the Incoterms of a contract for

sale pertain only to the delivery terms (carriage freight
costs) and insurability of the product.
• Incoterms define the respective obligations, costs and risks
involved in the delivery of goods.
• What Incoterms Do Not Do
• Incoterms by themselves do not:
• Specify the amount of the contract or the terms of financing
• Supersede the law governing the contract
• Address the transfer of ownership of the goods
• Determine when revenue is recognized
• Address the consequences of a breach of contract or
exemptions of liability
• These items are defined by the terms of the sales contract
and the governing law.
.
Group E: Departure

• EXW – Ex Works
• This term represents the seller’s minimum
obligation, as the seller only must make the
goods available at its location.
• The seller does not load the goods on the
collecting vehicle and does not clear the
goods for export.
• The buyer bears all the costs for
transportation, export and import duties,
and cargo insurance, as well as the risks of
bringing the goods to their destination.
• The buyer also carries out all customs
formalities.
Group F: Pre Carriage

• FCA – Free Carrier

• The seller delivers the goods to the carrier and
clears the goods for export.
• Once the goods have been delivered to the carrier,
the buyer takes over all the costs and risks.
• The buyer is responsible for
procuring and paying for cargo
insurance and all import formalities.
• FCA is the most commonly used Incoterm – it is used
in ~40% of all international shipments.
• FCA is one of the most favorable terms for the buyer
who wants to have control over costs at origin and
international transportation through a nominated
freight forwarder.
• FAS – Free Alongside Ship
• The seller delivers the goods alongside the vessel at
the named port of shipment and is required to clear
the goods for export.
• The risk of loss of or damage to the goods passes to
the buyer when the goods are alongside the vessel.
• The buyer bears all costs from that moment forward,
including loading the cargo on board the vessel, and
is responsible for procuring the cargo insurance and
carrying out all import formalities.
• This term can only be used for ocean and inland
waterway transportation.
FOB – Free On
Board
• The seller delivers the goods to the vessel
nominated by the buyer, loads the goods on
board the ship and clears the goods for export.
• The risk of loss of or damage to the goods passes
when the goods are on board the vessel, and the
buyer bears all costs from that moment onward,
including cargo insurance.
• The buyer is responsible for all import formalities.
• This term can only be used for ocean and inland
waterway transportation.
• The FCA term was changed to allow the parties to
agree to issue a Bill of Lading (BOL) to the seller
once the goods arrive at the port.
Group C Main
Carriage
• CFR – Cost and Freight
• The seller arranges transportation and pays for
the goods to be delivered to the final port of
destination.
• The seller is responsible for clearing the goods
for export. As the risk of loss of or damage to
the goods passes to the buyer when the goods
are loaded on board the vessel, the buyer is
responsible for procuring and paying for the
cargo insurance.
• The buyer is responsible for all import formalities.
• This term can only be used for ocean and inland
waterway transportation.
• CIF – Cost, Insurance and Freight
• The seller clears the goods for export and covers the costs
of insurance (to at least the port of destination) and main
carriage while in transit to the port of destination named in
the sales contract.
• The risk of loss of or damage to the goods passes to the
buyer when the goods are loaded on board the vessel.
• The buyer is responsible for on carriage costs, all import
formalities, and unloading costs.
• The buyer should note that the seller is only required to
procure the “minimum” insurance coverage.
• This term can only be used for ocean and inland waterway
transportation.
• CPT – Carriage Paid To
• The seller clears the goods for export and pays for
pre carriage and main carriage to named place of
destination.
• The seller may pay on carriage costs, which should
be noted in the contract.
• The buyer is responsible for procuring cargo
insurance and handling all import formalities.
• This term has 2 critical points because risk passes
and costs are transferred at different places:
• 1) risk passes once the goods have been delivered
to the nominated carrier at the agreed
• place of shipment at origin, and
• 2) the named place of destination to which the seller
must contract the carriage.
• CIP – Carriage and Insurance Paid
• The seller clears the goods for export and pays
pre carriage and main carriage to the named
place of destination.
• The seller may pay on carriage costs, which
should be noted in the contact.
• This term has been updated to require the seller to
purchase “nearly maximum” insurance
• coverage that is equivalent to Clause A (Institute
of Cargo Clauses).
• The risk passes to the buyer when the goods are
loaded on the first truck.
• The buyer is responsible for all import formalities.
Group D:On
Carriage
• DAP – Delivered At Place
• The seller pays for carriage to the named place of
destination and assumes all risks until the goods
are ready for unloading by the buyer.
• The buyer is responsible for all costs related to
import clearance.
• Unloading is the responsibility of the buyer.
• DPU – Delivered at Place Unloaded
• DPU replaces the DAT term.
• The seller clears the goods for export and pays for
pre carriage, main carriage and on carriage costs.
• The buyer is responsible for all import clearance
formalities.
• DPU is the only Incoterm explicitly tasking the
seller with unloading.
• DDP – Delivered Duty Paid
• This terms represents the maximum obligation to
the seller.
• The seller is responsible for delivering the goods
to the named place of destination.
• The seller bears all the costs and risks involved in
bringing the goods to the place of destination
and has an obligation to clear the goods for
export and import and to carry out all customs
formalities, including the payment of all duties,
taxes and customs fees.
• The parties are advised not to use DDP if the
seller is unable to directly or indirectly obtain
import clearance.
 Containerization
• Containerization is a system of intermodal freight
transport using intermodal containers (also
• called shipping containers and ISO containers).
• The containers have standardized dimensions.
• They can be loaded and unloaded, stacked,
transported efficiently over long distances, and
transferred from one mode of transport to another—
container ships, rail transport flatcars, and semi-
trailer trucks—without being opened.
• The handling system is completely mechanized so
that all handling is done with cranes and
special forklift trucks.
• All containers are numbered and tracked using
computerized systems.
• Container capacity is often expressed in twenty-
foot equivalent units (TEU, or sometimes teu).
• An equivalent unit is a measure of containerized
cargo capacity equal to one standard 20 ft.
• (6.10 m) (length) × 8 ft. (2.44 m) (width)
container.
Container • Full container load
• A full container load (FCL) is an ISO standard
loading container that is loaded and unloaded under the
risk and account of one shipper and only one
consignee.
• In practice, it means that the whole container is
intended for one consignee.
• FCL in practice on ocean freight does not
always mean a full payload or capacity -
many companies will prefer to keep a
'mostly' full container as a single container
load to simplify logistics and increase
security compared to sharing a container
with other goods.
• Less-than-container load
• Less-than-container load (LCL) is a shipment that is
not large enough to fill a standard cargo
• container.
• LCL is A quantity of cargo less than that which fills
the visible or rated capacity of an inter-
• modal container.
• It can also be defined as "a consignment
of cargo which is inefficient to fill a
shipping container.
• It is grouped with other consignments for the same
destination in a container at a container freight
station.
The Container
• A container is an internationally
standardized packing box for cargoes ,
which can be safely stowed , stored , and
transported
• Designed for the efficient use of space
and for any type of transport by road , rail ,
or sea ; Weatherproof ,made of steel or
similar materials ;
participation in
container
interchange
• Container owner : (ocean carrier or container leasing
company).
• Ocean carrier : a shipping line that operates
container ships (may own or lease containers) and
provide the empties to shippers .
• Container terminal : an area designed for stowing
loaded containers , empty containers , and chassis .
• Accessible for truck , rail and ships where containers
are picked up , dropped off , maintained , and stored.
• Container Yard : a materials handing and/or
storage facility used for unitized loads in loaded or
• empty containers.
• Container depot operator : an entity that
operates container depots where
containers are stored and repaired.
• Motor Carrier : a drayage firm that takes
responsibility for picking up and returning
containers .
• Rail Intermodal : use rail to
support movement of containers.
• Container Repairers : repair
service can be offered by marine
terminal operator , container
• depot operator or independent
contractors .
• Container Surveyor : a firm
specialized in marine container
inspection of containers that are
• on-hired , off-hired , or received in
damaged conditions
• Third Party : they may include customs brokers ,
consolidators or freight forwarders
• 3pl is considered an external supplier who performs
part or all logistics functions that are not performed by
an in-house logistics department?
• Freight forwarder considered as a for-profit
business that takes small shipments from a
variety of customers and combines then into one
bulk shipment for transport
• 4PLs usually do not own logistics assets and perform
physical activities in the logistics system such as
transportation
.
Types of
containers
• Ventilated container : designed to allow air
exchange between the interior of the
container and the outside atmosphere
Refrigerated and
heated
containers
• A thermal container served by a refrigerating or heat-
producing appliance from -25c to 25c
• A refrigerated container, often called a "reefer
container," is a type of shipping container equipped
with a cooling system.
• These containers are used to transport or store
temperature-sensitive items. Unlike regular
containers, reefers maintain a constant temperature,
which can be adjusted according to the cargo’s
needs.
• They can maintain temperatures ranging from -30°F
to 85°F, depending on the design.
• This makes them ideal for transporting fruits,
vegetables, seafood, dairy, pharmaceuticals, and
chemicals.
Open-top
container
• Open top shipping containers are
specialized cargo-hauling units designed
without a fixed roof.
• Instead, they feature a removable
tarpaulin or hard top cover and are
typically constructed with durable steel
frames.
• It has no rigid roof but may have a flexible
and movable or removable cover
Bulk
Container
• Bulk container can hold-free-flowing dry
cargo such as cement, grains, and ores.
It is loaded from the top and discharged
from the bottom.
• Bulk containers are used for transporting
bulk cargo, such as grain, feedstuffs, and
spices. However, they may also be used
for transporting general cargo.
Half-Height Containers

• These containers are called “half-height”

because their height is shorter than a
standard dry shipping container by half.
Half-height containers are ideal for moving
heavy goods with low-volume cargo.
• They are used to transport pipes, tools,
chains, hooks, anchors, and sometimes
even vehicles. Half-height containers are
often used in locations with height
restrictions, such as mines or underground
construction sites. Hence, these
containers are also used to transport items
such as coal, sand, and gravel.
Platform
Container
• Shipping container platforms are flat or open
containers without sidewalls, end walls, or a roof.
• They often resemble a flatbed trailer, and their design
allows for easy loading and unloading of cargo from
the sides or from the top.
• The absence of walls and roof makes them suitable
for carrying items that exceed the dimensions of
regular containers, such as machinery, vehicles,
construction equipment, or large, bulky items.
• They are often used to transport goods on small
cargo vessels or ferries.
• You can either hire or purchase our shipping
container platforms with either wooden or steel floors,
depending on the size and weight of your cargo
Flat-rack
container
• A flat rack container is a piece of equipment
used for international shipping when the
cargo is too large for a conventional
container.
• A flat rack has no walls or support posts in
the middle, allowing goods to be loaded from
the top and/or sides. Flat rack container
transport is most common among
international heavy equipment shipments.
• Dedicated to the carriage of heavy ,bulky and
over-width and/or over height
Tank
Container
• A tank container or tanktainer is an
intermodal container for the transport of
liquids, gases and powders as bulk cargo.
• It is built to the ISO standards, making it
suitable for different modes of
transportation; as such, it is also called an
ISO tank. Both hazardous and non-
hazardous products can be transported in
tank containers.
• Tank container : include two basic elements
:
• The tank
• The framework
Container
stacking
forklift
• A container stacking forklift, also
known as a container handler or reach
stacker, is a specialized type of forklift
designed for lifting, transporting, and
stacking shipping containers.
• These machines are essential in ports,
freight yards, and logistics operations
for efficiently handling and storing
containers.
Ocean
Freight
Calcula
tion
Full Container load
calculations and surcharges
• Freight rates are simply the price at which a
certain cargo is delivered from one point to
another
• Freight rates for containers are based on the
container as a unit of freight irrespective of the
commodity or commodities loaded therein, (FAK)
Freight All Kinds.
• The shipping lines quote per box (container)
either a six- or twelve-meter container.
• A shipping line cannot predict the movement of
the US Dollar or the sudden increase of the
international oil price
• A freight quotation is a summary of charges
levied by a carrier for the movement of cargo from
Point A to Point B.
• In addition, the quote is typically a combination
of multimodal costs such as ocean freight
rates, surcharges, fees, various adjustment
factors, rules, exceptions and exclusions as per
the tariffs set out by the carrier.
• A freight quotation may be divided into 3 groups
as below:
• Pre-Carriage
• Carriage
• On-Carriage
Ocean Freight Surcharges List
• Pre-Carriage
• Pre-Carriage – is the term given to any inland
movement that takes place prior to the container
being loaded at a port of loading.
• Such activity can take place at the same location
as the port of loading, or at a location close to the
port of loading.

• Many activities happen in a containerized

shipment prior to the container being delivered
at the port for export.
These activities
include (but not
limited to)

• Chassis utilization surcharge - A fee

imposed for the use of a chassis in
conjunction with the shipping container
to facilitate overland transportation from
the shipper’s door to port.
• Fuel Surcharge - Fuel Surcharge
applicable for the transport.
• Packing charges - A fee that may be charged by
a third-party warehouse for the packing of the
cargo into the container at their premises. If
cargo is packed directly at the shipper’s
premises, then this charge will not be applicable
in this contract.
• Customs Clearance - A fee paid to the customs
broker for arranging your customs clearance.
• Wharfage - A Charge assessed by a pier or dock
owner against freight handled over the pier or
dock or against a steamship company using the
pier or dock.
• Documentation charges - Charges that may be
applicable for the preparation of export
documentation such as Certificate of Origin,
Export Permits, and Licenses and such.
• The pre-carriage activity may be carried out
either by the carrier using road or rail modes
(Carrier Haulage) or by the merchant using
road or rail modes (Merchant Haulage).
Carriage-
• Is the term given to the actual movement of the cargo on sea by
the shipping line from the port of load to the port of discharge
• There are literally hundreds of carriers around the world offering
services globally.
• Depending on the contract of carriage and the service type
mutually agreed between the carrier and the shipper, each
carrier will have their own applicable charges in their shipping
service pricelist.
• Ocean Freight Rate - Basic freight charge for movement of
container from Port A to Port B
• BAF - Abbreviation for “Bunker Adjustment Factor.” Used to
compensate steamship lines for fluctuating fuel costs.
Sometimes called “Fuel Adjustment Factor” or FAF.
• ISPS - International Security Port Surcharge that relates to
charges for security of the vessel and container while at the port
• Low Sulphur Surcharge - Charged for the use of fuel that has lower emission
• Terminal Handling Service - Origin - THC charged for the export move
• BL Fee - Bill of Lading Fee. A fee charged by the shipping line for the
processing of the bill of lading on behalf of the client.
• Export Service - Service fees that maybe charged by the agent
• EBS - Abbreviation for “Emergency Bunker Surcharge.” A surcharge added
to the cost of freight to cover fuel costs.
• EIS - Abbreviation for “Equipment Imbalance Surcharge.” A surcharge on an
ocean freight rate, imposed by shipping lines, to recover costs related to
removing large quantities of empty containers from a country or countries
where there is no export use for those containers that had been previously
imported into those places.
• The charge is usually a flat rate per container, and it is not necessarily
always applied in all trades or, rather it is only applied when such trade
imbalances necessitate large expenditure on shifting empty containers from
one place to another.
• ERR - Abbreviation for “Emergency Rate
Restoration.” A surcharge added to the cost of
freight
• to cover increases in shipping costs.
• ERS - Abbreviation for “Equipment Repositioning
Surcharge.” A fee imposed when a shipper
requests that the carrier make empty containers
available that must be moved from one
location to another.
• GAS - Abbreviation for “Gulf of Aden Surcharge.”
Used to compensate shipping lines for
• additional costs incurred due to transiting the Gulf
of Aden.
• GRI - Abbreviation for “General Rate Increase.”
Used to describe an across–the–board tariff rate
increase implemented by conference members and
applied to base rates.
• Hazardous Surcharge - A surcharge imposed for
shipping hazardous materials or goods.
• ISF - Abbreviation for “Importer Security Filing” A
US Customs and Border Protection (CBP)
regulation requiring importers and vessel
carriers to provide data electronically to CBP for in-
bound ocean shipments.
• Ocean Rate - The cost of shipping a container from one point to another.
Rates fluctuate frequently based on several different factors.
• OWS - Abbreviation for “Overweight Surcharge.”
• Piracy Surcharge - A charge assessed to compensate shipping companies for
increased costs associated with avoiding piracy and hijacking.
• PSS - Abbreviation for “Peak Season Surcharge.”
• SCS - Abbreviation for “Suez Canal Surcharge.” Used to compensate
shipping companies for additional costs incurred due to transiting the Suez
Canal.
• SES - Abbreviation for “Special Equipment Surcharge.”
• THC Destination - Terminal Handling Charges incurred at the destination port.
• War Risk Surcharge - A surcharge on goods
transiting the Gulf of Aden used to compensate
shippers for additional costs including crew risk
compensation, cancellation of economical speed,
and redeployment of vessels.
• AI - Abbreviation for “All Inclusive.” The total price to
move cargo from origin to destination, inclusive of all
charges (limited to transportation costs).
• CAF - Abbreviation for “Currency Adjustment Factor.” A
charge, expressed as a percentage of a base rate that is
applied to compensate ocean carriers of currency
fluctuations.
• Detention - A penalty charge against shippers or
consignees for delaying carrier’s equipment beyond
allowed time.
• Demurrage applies to cargo; detention applies to
equipment.
• If you store a container at the port beyond free
days, then demurrage and detention applies.
• If you keep a container for too long on any other
premise (not on the port’s premises), then only
detention applies
On-Carriage –
• Is the term given to any inland movement that takes
place after the container is discharged at a port of
discharge.
• Such activity can take place at the same location as the
port of discharge, or at a location close to the port of
discharge.
• It may be carried out either by the carrier using road or
rail modes (Carrier Haulage) or by the
• merchant using road or rail modes (Merchant Haulage).
• Like the pre-carriage, a few activities happen in a
containerized shipment after the container has been
discharged from the ship.
• Chassis utilization surcharge - A fee
imposed for the use of a chassis in
conjunction with the shipping container to
facilitate overland transportation from the
port to the consignee’s door.
• Fuel Surcharge - Fuel Surcharge applicable
for the transport.
• Unpacking charges - A fee that maybe
charged by a third-party warehouse for the
unpacking of the cargo from the container
at their premises. If cargo is unpacked
directly at the consignee’s premises, then
this charge will not be applicable in this
contract.
• Customs Clearance - A fee paid to the
customs broker for arranging your
customs clearance, which may include the
payment of any Customs Duty, VAT and
other charges relating to Customs.
• Wharfage - A Charge assessed by a
pier or dock owner against freight handled
over the pier or dock or against a
steamship company using the pier or
dock.
• Documentation charges - Charges that
may be applicable for the preparation of
import documentation such as Permits,
Licenses and such.
Consolidation services
• The consolidator or groupage operator hires a container
from a shipping line and then sells that space to his
clients/exporters. The benefit for the exporter is that small
quantities which, would not fill a full container load, can be
shipped by sea freight in a shipping container as an
alternative to air freighting the goods.
• LCL is an individual shipment that is too small to be
shipped as a full container
• The consolidator would charge per metric ton or cubic
meter, which ever yields the greatest.
• Freight forwarder : for-profit business that takes small
shipments from a variety of customers and combines then
into one bulk shipment for transport (consolidator)
 Bill Of Lading in
Shipping: Importance,
Purpose, And Types
• the meaning of the term “bill”, it is defined as a printed
or written statement of the cost for the goods or
services delivered or to be delivered.
• The term “ lade” means to put the cargo onto a ship or
other form of goods carrier.
• Thus, a bill of lading in shipping is a record of the
traded goods which have been received on board.
• It is a document that establishes an agreement
between a shipper and a transportation company for
the transportation of goods.
• Transportation Company (carrier) issues these records
to the shipper.
 • Negotiable bill of lading: In this type of bill, a clear
instruction is provided to make the delivery of the
goods to anyone having the possession of the original
copy of the bill, which itself signifies the title and
control of the freight.
• In this type of bill, the buyer/ receiver or his/her agent
must acquire and present an original copy of the bill of
lading at the discharge port.
• In the absence of original bill copy, the freight will not
Negotiable be released.
• Non-negotiable bill: This type of bill of lading fixes a
and Non- specific consignee/name of the receiver to whom the
freights will be shipped and delivered. It, however,

negotiable does not itself serve the ownership of the goods.

• Under this type of bill, the assigned receiver/ buyers

bill of can claim the cargo by confirming their identity.

lading
• 1) Evidence of Contract of Carriage – emphasis
on the term “Evidence“. The contract between
a shipper and the carrier was already
established when the shipper or his agent
made a booking with the carrier (shipping line)
to carry the cargo from A to B..
• The B/L is the EVIDENCE of the contract of
carriage entered into between the “Carrier”
and the “Shipper or Cargo Owner” to carry out
the transportation of the cargo as per the sales
contract between the buyer and the seller
• 2) Receipt of Goods – emphasis on the term
“Receipt“..

• A B/L is issued by the carrier or their agent to

the shipper or their agent in exchange for the
receipt of the cargo..
• The issuance of the B/L is proof that the carrier
has received the goods from the shipper or
their agent in apparent good order and
condition, as handed over by the shipper..
• 3) Document of Title to the goods –
emphasis on the term “Title“..

• It means that the goods may be

transferred to the holder of the B/L
which then gives the holder of the B/L,
the rights to claim the goods or further
transfer it to someone else..
 • The bill of lading can be classified based on “how
it is executed” and “Method of operation”-
• Based on execution:
• 1. Straight bill of lading reveals that the goods are consigned
to a specified person and it is not negotiable.
Types of • This type of bill is also known as a non-negotiable bill of
Bill of lading.
• 2. Order bill of lading is the bill uses express words to make
Lading the bill negotiable. This means that delivery is to be made to
the further order of the consignee using words such
• as “delivery to A Ltd. or to order or assigns.
• The cargo is only delivered to the holder of the bill of
lading, and it must be verified by an agent who issues
delivery order and the verified bill of lading.
• All goods which have not been paid in
advance and are shipped under “To order”
of the bill of lading can be categorized into
two types:
• 1- To Order, Blank Endorsed: not
consigned to any named party but ‘To
Order’ of the consignor, with the intended
– consignee’s name given under ‘notify
party.’
• The consignor must stamp and sign
(endorse) this B/L so that its title can be
transferred.
• 2-To Order, Bank: consigned to a bank with the
intended consignee’s name given under ‘notify
party.’
• The bank endorses the B/L to the intended
consignee against payment of (or a pledge to pay)
the amount of the accompanying bill of exchange.
• ‘To Order’ B/Ls are used commonly in the letter of
credit transactions and may be bought, sold, or
traded, or used as security for borrowing money
from banks or other lenders.
BASED on Method of Operation:
• 1-Received for shipment bill of lading–This bill is sent from agent
/charterer to shipper. The endorsement of this bill ensures that the
carrier has received goods but does not confirm it is onboard of the
assigned vessel
• 2-Shipped on Board B/L – This bill of lading is Issued when cargo is
loaded on board.
• 3-A clean bill of lading is one which states that the cargo has been
loaded onboard the ship in apparent good order and condition.
• Such a bill of lading will not bear a clause or notation which
expressively declares a defective condition of goods and/or the
packaging.
• The opposite term is a soiled bill of lading. It reflects that the goods
were received by the carrier in anything but good condition.
• 4) Through B/L – Similar to Combined Transport B/L except that
in the case of the Through B/L, the carrier is directly responsible
only for the sea leg and for the inland movement they act as
an agent in arranging the inland movement..
• 5) Combined Transport B/L – When a B/L is issued as a
Combined Transport B/L, it involves multiple modes of transport
from the Place of Receipt to Place of Delivery and all these
movements are carried out as a single contract by multiple
service providers under the employ of the carrier..
• Carrier takes responsibility for any loss or damage for the
entire transport including the sea and other mode of
transport..
• 6-Dirty bill of lading: If the ship owner raises an objection about
“the condition of the cargo is in good order”, he/she can include
a clause thereby causing the bill of lading to be “claused or
dirty” along with the remarks as per the finding of the cargo
condition. e.g. torn packing, broken cargo, shortage in the
quantity of the goods etc.
• 7) Port to Port B/L – When a B/L is issued as a
Port-to-Port B/L (also known as Ocean B/L),
• the carrier’s responsibility begins at the port of
loading and ends at the port of discharge and
therefore the Place of Origin/Receipt or Place of
Destination/Delivery should not be mentioned
in the B/L
• 8) Multimodal Transport B/L – Same as Combined
Transport B/L..
• 9. Electronic Bill of Lading
• Technology is advancing to the point where
Electronic Bills of Lading (eBOL) are gradually
replacing paper bills of lading.
• An eBOL is an electronic BOL that has the same
legal standing and functionalities as a regular paper
bill but is formatted electronically.
• It digitally records and shares the document’s
details, enabling access and transfer.
• Secure digital signatures and encryption
safeguard its authenticity and integrity.
 Sets of Bill of
Lading:
• This is an old practice where the bills are signed in the
sets of three originals to facilitate the goods are timely
delivered even when the original is lost.
• They are stated as the first original, second original,
third original on top of the bill.
• A duplicate copy with a stamp – “Non-negotiable” may
also be distributed.
 Bill of lading as
Contract Of
Carriage:
• The contract between the carrier and the shipper is already
created before issuing the bill of lading when the cargo is loaded
on the ship.
• The popularly used conventions and rules which covers the
contract of carriage for carrying goods by sea :
• – Hamburg Rules
• – Rotterdam Rules
• – Hague Rules
• – US COGSA
• – Hague – Visby Rules
• The convention which governs the contract of the carriage is
usually stated in the first page of the bill of lading.
House Bill of
Lading
• Definition – A House Bill of Lading (HBL) is a document
created by an Ocean Transport Intermediary (OTI) such as a
freight forwarder or non-vessel operating company
(NVOCC).
• The document serves as an acknowledgment of the receipt
of goods that are to be shipped.
• It is issued to the supplier once the cargo has been received
and may be used in lieu Letter of Credit in lieu of a Master
Bill of Lading (MBL).
• HBL includes the name and address of the supplier, who
delivers the shipment to the freight forwarder, and the
consignee, whom the freight forwarder delivers the shipment
.
• The document also includes specific information about the
items shipped and the value of the
• In the HBL
• The Shipper will usually be the actual shipper/exporter of
the cargo (or as dictated by the L/C) the Consignee will
usually be the actual receiver/importer of the cargo (or as
dictated by the L/C) the Notify could be the same as
Consignee (or any other party as dictated by the L/C)
• In the MBL
• The Shipper will usually be the NVOCC operator, or their
agent or the Freight Forwarder..
• The Consignee will usually be the destination agent or
counterpart or office of the NVOCC operator, or the
Freight Forwarder
• The Notify could be the same as Consignee or any other
party..
• June 2011: Container ship Deneb in Algeciras:
• The ship suffered a significant stability incident.
• A review after the incident found that out of the 168 containers on the
load list, 16 – or roughly 1 out 10 –containers had actual weights far in
excess of the declared weights.
• January 2007: MSC Napoli:
• “About 660 containers stowed
on deck, which had remained
dry, were also weighed.
• The weights of 137 (20%) of
these containers were more
than 3 tonnes different from
their declared weights.).
• February 25, 2011: Longshore & Shipping News –
‘Near miss’ at Australia wharf as 28-ton
• container falls
• “The container that fell 12 meters and narrowly
missed two workers was severely overloaded
• and the third accident this month at Darwin Port.
• The container was listed as four tonnes, but the
Maritime Union says it weighed 28 tonnes and
• exceeded the crane’s load limit.”
• February 2007: Container ship MV
Limari in Damietta:
• Container stack collapsed due to
stack overweight.
• The master’s incident report to the
authorities notes that: “Excessively
heavy units loaded in the upper
tiers and that the maximum stack
weight had been exceeded
considerably in some rows.
• March 2011: Excerpt from the publication
“Container carriage.
• A selection of articles previously published by
Gard AS”:
• The weight of certain containers within the stack
was found to be more than the manifested
weight.
• In one case, four containers (forty-foot units) in the
collapsed stack were found to have 18 MT or more
undeclared cargo,
• Which even resulted in the maximum
operating gross weight for each container
being exceeded”.
& O Nedlloyd
Genoa:
Overweight
containers
contributed to
this incident.
• What is SOLAS VGM – Verified Gross Mass..??
• In November 2014, the International Maritime Organization (IMO)
amended SOLAS (Safety of Life At Sea convention) Chapter VI
Regulation 2 which places responsibility on the shipper to
ensure that all containers that are loaded on a ship have a
verified weight.
• This regulation is applicable globally and it requires
shippers, freight forwarders, vessel operators,
and terminal operators to establish policies and
procedures to ensure the implementation of this
regulatory change.
• This regulation is called the SOLAS VGM (Verified Gross Mass).
What is the • Container weight misdeclaration has been a continuous
maritime safety problem for carriers and ports over the
Reason for this past many years.

Amendment and • Although under SOLAS the shipper was obliged to

provide an accurate container weight to the carrier, this
Implementation was not always followed.
• The consequences of container weight misdeclaration
of VGM? has been severe, leading to:
• Personal injury or death to seafarers and shore side
workers;
• Loss of vessel stability;
• Collapsed container stacks;
• Containers lost overboard (including containers that
were not mis-declared);
• Stability and stress risks for ships;
• Incorrect vessel stowage decisions;
• Damage to ships, cargo and container handling equipment;
• Overweight containers being transported on roads and highways;
• Liability claims for vessel and marine terminal accidents;
• Impairment of service schedule integrity which causes supply chain delays for shippers of
properly declared containers;
• Re-stowage of containers (and resulting delays and costs), if the incorrect condition is
• ascertained;
• Last minute shut-outs of booked and confirmed shipments when the actual weight on board exceeds
what is declared, and the total cargo weight exceeds the vessel limit or port draft limit; and
• Impairment of optimal vessel trim and draft, which causes suboptimal fuel usage and
increased vessel air emissions.
• To reduce the tangible risks
created by mis-declaration to the
dock workers, ships and cargo, the
SOLAS amendment became a
necessity and came into effect on
1st July 2016.
How Does the VGM
Work?
• As per the WSC (World Shipping Council) and IMO
Guidelines, before a packed container can be loaded
onto a ship, its weight must be determined through
weighing.
• It is a violation of SOLAS to load a packed container
aboard a vessel to which SOLAS applies without a
proper weight verification.
• There is no exception to this requirement.
• Shippers have two options or methods to verify the
container weight. Whichever method is used; the
shipper will get a certificate which certifies that the
gross mass has been verified and thus the shipping
line gets the VGM certificate.
• Under method 1, once
the container is packed,
it is taken to an
accredited weigh bridge
to verify the weight of
the cargo packed into
the container and this
weight becomes the
VGM.
• Under method 2, the cargo about to be packed into the
container is weight separately and the empty container is
weighed separately, and the total of these two weights
becomes the VGM.
• In this process, the carrier is NOT liable to verify the weight
of the container or verify the accuracy of the VGM certificate
provided by the shipper.
• However, if the carrier loads a container onto a ship without
receiving the VGM from the shipper, the carrier may be liable
for not following the agreed process with SOLAS/IMO.
• Depending on the country, shippers can weigh their
containers and secure the VGM using their own weighbridge,
port weighbridge, 3rd party weighbridge, etc.
• Main criteria is that the VGM certificate should be issued by
a weighbridge accredited by the Maritime Authority of that
country.
• Transportation Risk Management
 Disruption—an event that results in a displacement or
discontinuity; the act of causing disorder.

Transportation Disruption—an unplanned or unanticipated event

that interrupts the normal flow of goods and materials
through the supply chain. These disruptions expose companies
within the supply chain to operational and financial risks.
Risk
Concepts Risk—a hazard or a source of danger that has a possibility of
incurring loss or misfortune.

Transportation Risk—a future freight movement event with a

probability of occurrence and the potential for impacting supply
chain performance.
Risk Management—the variety of activities undertaken by an
organization to :

Control and minimize threats to the continuing efficiency,

profitability, and success of its operations.

Business Continuity Planning—the processes and procedures an

organization puts in place to ensure that essential functions can
continue during and after a disruption or disaster.
Transportation Risk Management Process

• Step 1—Risk Identification

• to identify potential disruptions that can occur to freight
that is moving through the supply chain.
• This involves a concerted effort to discover, define,
describe, document, and communicate risks before they
become problems and adversely affect freight flows
• The goal of risk identification is to capture as many
transportation disruption risks as possible.
• techniques that can be used for risk identification.
• Brainstorming
• Interviews and surveys
• Historical data and documented knowledge
• six common risk categories related
to freight transportation:
• product loss,
• product damage,
• product contamination,
• delivery delay,
• supply chain interruption,
• and security breach.
 Product Loss

Common The International Cargo Security Council reports that cargo

theft in the United States exceeds $60 billion per year
risk
categories Indirect costs of cargo theft include sales lost to stolen
related to goods, added expenses to expedite the shipment of
replacement goods, disrupted customer service, and
damaged brand value.
freight Other indirect costs include claims processing and the
transporta potential impact on insurance rates and coverage.

tion: Many security experts estimate the indirect costs are three
to five times greater than the direct cost of the loss.
• Product Pilferage:
• the theft of part of the contents of a shipping
package by freight handlers, equipment operators,
and managers can be a problem.
• Shipment Jettison
• In the movement of freight via water, it may be
necessary to cast all or part of a ship’s cargo
overboard to save the ship, crew, and other cargo
from perils such as catastrophic weather, running
aground, or fire.
• The master of the ship has the absolute right to
jettison cargo when he reasonably believes it to be
necessary, and the owners of the ship incur no
liability.
• Piracy and Hijacking
• Product Damage
• Product damage can result from a wide array of actions or
inactions on the part of freight handlers and equipment
operators.
• Specific damage risks include:
• Equipment Accidents
• cargo damage, vehicle damage, injuries and medical costs, loss
of revenue, increased insurance rates, and other direct costs.
• Poor Freight Handling
• Fragile goods require protection from impact, tilting, shaking,
and rough handling Improper Equipment Loading
• Freight damage risks are high if the load is not properly secured
and stacked. If too much space is left between freight, product
may shift and fall.
• If product is improperly stacked (heavy product loaded on top of
lightweight product), product may be crushed.
• Product Contamination
• Primary freight contamination risks include:
• Climate Control Failure
• Failure to provide a stable climate inside the container during
transit will result in product degradation, spoilage, or
contamination.
• Product Tampering
• Multiple individuals handle freight as it moves from the
production facility to retail store shelves, making it difficult to
fully safeguard product integrity.
• Exposure to Contaminants
• the risk of freight coming in contact with potentially undesirable
substance (physical, chemical or biological) occurs when
different types of freight are commingled.
• Contamination issues also arise if transportation equipment is
used to move different commodities on consecutive trips (for
instance, filling a railroad tank car with food grade oil after it was
used to transport an industrial solvent)
• Delivery Delay
• If a critical shipment is delayed a few hours, production
lines will stop and the lost productivity cost may be
hundreds of thousands of dollars.
• These companies are at huge risk if delivery
commitments are not kept.
• Common delivery schedule disruptors include:
• Congestion
• overburdened roadways, railways, and port facilities
impede product flows and create bottlenecks in the
supply chain.
• Poor Weather
• Equipment Malfunction
• mechanical breakdowns of delivery vehicles can cause
product to get stranded en route.
Supply Chain • Carrier bankruptcy
• in times of economic slowdown or high energy
Interruption prices, financially unstable transportation
companies are unable to survive.
• Labor disruptions
• Some strikes can be predicted in advance,
though others are sudden “wild cat” strikes
that occur with little warning and create havoc
• Capacity shortages
• during peak economic growth, transportation
capacity is stretched to the point that carriers
are often unable to provide enough equipment
and operators to service all demand.
Security • There is no shortage of security challenges facing
organizations Common points of exposure are:

Breach • Lax security processes

• A failure to establish strong security practices will
make the company a prime target for intentional
transportation disruptions.
• Unprotected transfer facilities
• many transportation companies fail to do the
simple things like lock doors, fence in facilities,
and require security badges to limit access to
freight and transportation equipment.
• Shipment control failures
• When freight is “off the radar screen,” security
risks and disruption opportunities increase
Step 2—Risk
Assessment
• Evaluating transportation risks is a challenging
proposition because they do not affect
organizations equally.
• Risks and their potential impact are influenced by
supply chain strategy, modes used, and
operational capabilities.
• For example, if a company focuses on just-in-time
delivery of materials for their assembly plant,
delivery delays pose a high risk of shutting down
the production line.
• In contrast, delivery delays are not as big of an
issue to the company that keeps a month’s worth
of raw materials on hand.
two parameters
are typically
evaluated:
• Probability—the likelihood of the risk occurring
• Impact—the consequences if the risk does occur
• Impact can be assessed in terms of the
transportation risk’s effect on time, “when will the
risk occur? ”hurricanes or blizzards, cost, and/or
quality.
• By thinking now about these seasonal risks, the
organization may be able to develop strategies to
effectively manage the risks.
Risk assessment can be
qualitative or
quantitative
• For example,
in nature.
• theft by piracy may be a high-impact, medium probability risk for
freight moving through the Gulf of Aden.
• In contrast, piracy would be a low-impact, low-probability risk for
other freight moving through another route.
• An issue landing in a “Major Risk” category is deemed to be
unacceptable.
• The organization must spend time, money, and effort on a proactive
strategy to reduce the likelihood of occurrence and limit
consequences in the event of that disruption
• Quantitative analysis incorporates numerical estimates of frequency
or probability and consequence.
.
Step 3—Risk
Management
Strategies
• Using the output from the risk
assessment, the next step is to create a
coherent strategy for managing and
mitigating transportation risks in a cost-
effective manner.
• A risk can never be eliminated, but its
frequency and effect on the organization
can be reduced if properly addressed.
• Mitigation strategies must not be haphazardly applied to disruption risks.
• First, the strategies must be in sync with the overall supply chain strategy
and corporate strategy.
• Second, mitigation strategies and actions must focus on high priority
issues.
• Third, the mitigation action must be reasonable in terms of cost and time to
implement versus the likelihood of success.
• Otherwise, money and effort will be wasted on low priority risks or
ineffective risk remedies.
• Finally, a standardized process should be used to implement disruption
mitigation actions.
• Each risk mitigation strategy should produce an action plan that
identifies:
• roles and responsibilities for developing, implementing and
monitoring the strategy
• resources required to carry out the planned actions
• timelines
• conditions present for risk level to be acceptable
• A well-developed plan plays an important role in decreasing the
risk of transportation disruptions as well as their effect on the
supply chain and company performance.
• These plans typically focus on one of four techniques to
manage and mitigate risk:
• Avoidance,
• Reduction, a hedging , postponement , buffering strategy
• Transfer, or
• Retention.
• Risk Avoidance The simplest way to eliminate a risk is to not perform an
activity that carries risk.
• Tools like root cause analysis can be used to pinpoint the reasons why a
disruption occurs.
• Processes can be revised to eliminate the disruption’s causes and greatly
minimize the risk.
• For example, if an investigation revealed that all thefts occurred when a
specific trucking company was used, the simple solution would be to never
use that carrier again. Hence, that theft risk would be removed.
• In the case of freight loss or damage risk, the seller could choose to work
only on an F.O.B. Origin basis
• Risk Reduction Given that many risks cannot be eliminated or
avoided, it is important for companies to proactively mitigate or
limit risk.
• This involves adopting risk management strategies that reduce
the likelihood of a disruption and/or limit the severity of financial
loss.
• For example, a company could attempt to reduce the risk of
theft or hijacking by hiring armed guards to travel with high
value freight.
• This strategy could be effective at reducing risk to a more
acceptable level, but it may be expensive and/or raise other
risks.
types of strategies
to pursue the goal
of risk reduction
• A hedging strategy ” In transportation, companies can
disperse their freight among multiple carriers to reduce
the financial risk of a sole sourced carrier bankruptcy or
service interruption.
• A postponement strategy Trucking companies could
reduce the risk of productivity losses by delaying the
dispatch of drivers until after a customer has loaded a
trailer and submitted proper documentation.
• This will reduce driver wait time and maximize the use
of available service hours for transporting freight.
• A buffering strategy An air freight carrier may have
extra jets available to reduce the impact of equipment
failures.
• They may also have a few pilots on call each day to be
prepared for volume spikes
To reduce
risks:
• Develop and maintain relationships with
quality carriers
• Use protective product packaging
• Properly secure freight inside containers
• Require the use of reliable equipment
and

• work only with carriers that perform

preventative maintenance, regularly
upgrade or replace old equipment
• Leverage technology to maintain
shipment control
• Risk Transfer the organization may seek outside assistance in
controlling those risks.
• This risk transfer strategy provides a means to place liability on a
third party should the risk occur.
• Of course, the third party doesn’t freely accept the risk.
• They are paid by the customer to assume or share the risk.
• For example, Insurance and third-party logistics Companies contract
with 3PLs because these service providers have the knowledge,
capacity, technologies, and capability to mitigate some risk factors.
• Risk Retention Organizations must evaluate risk and make a
judgment and determine what, if anything, they will do about it.
the low probability, low impact issues, warrant little attention.
• These risks have limited potential to negatively affect the supply
chain. the cost of mitigating a risk may outweigh the benefits
realized
• They present an acceptable level, and the organization will
retain the risks.
Step 4—Risk Review and
Monitoring
Risk management planning is not a static, one-time process

A testing and review process must be instituted to ensure that existing risk mitigation
efforts and disruption recovery processes work as intended risk management requires
ongoing effort by the organization. It is a circular or continuous process

Conducting tests of risk management action plans is the only way to know that they
will work when a true disruption occurs.
• A thorough testing program simulates disruptions and defines benchmarks for recovery
• processes.
• Separate test plans should be developed by the organization for each disruption scenario.
• It is important to accurately simulate each disruption’s impact on inventory, physical plant,
people, and external parties.
• There are two stages to testing.
• First, well-communicated, controlled tests are conducted to walk the organization, and their
supply chain partners through the process. This identifies gaps in the risk management plan
and gets everyone comfortable with reacting to each risk scenario. Then, surprise tests are carried
out to see how the plan and people hold up under pressure.
• Without surprise tests, the organization doesn’t know how well it will react when a real event occurs.
THE 9 CLASSES OF DANGEROUS
GOODS
• ‘Dangerous goods’ are materials or items with
hazardous properties which, if not properly
controlled: present a potential hazard to human
health and safety, infrastructure and/ or their
means of transport.
• The transportation of dangerous goods is controlled and
governed by a variety of different regulatory regimes, operating
at both the national and international levels.
• Prominent regulatory frameworks for the transportation of
dangerous goods include:
• The United Nations Recommendations on the Transport of
Dangerous Goods,
• ICAO’s Technical Instructions, International Civil Aviation
Organization
• IATA’sDangerous Goods Regulations and
• The IMO’s International Maritime Dangerous Goods Code.
• Collectively, these regulatory regimes mandate how dangerous
goods are to be handled, packaged, labeled and transported.
• Regulatory frameworks incorporate comprehensive
classification systems of hazards to provide a taxonomy
of dangerous goods.
• Classification of dangerous goods is broken down into
nine classes according to the type of danger materials or
items present;
• Explosives
• Gases
• Flammable Liquids
• Flammable Solids
• Oxidizing Substances
• Toxic & Infectious Substances
• Radioactive Material
• Corrosives
• Miscellaneous Dangerous Goods
• CLASS 1 – EXPLOSIVES
• Explosives are materials or items
which can rapidly conflagrate or
detonate because of chemical
reaction.
• Sub-Divisions
• Division 1.1: Substances and articles which have a
mass explosion hazard
• Division 1.2: Substances and articles which have a
projection hazard but not a mass explosion hazard
• Division 1.3: Substances and articles which have a fire
hazard and either a minor blast hazard or a minor
projection hazard or both
• Division 1.4: Substances and articles which present no
significant hazard;
• Only a small hazard in the event of ignition or
initiation during transport with any effects
largely confined to the package
• Division 1.5: Very insensitive substances which have a
mass explosion hazard
• Division 1.6: Extremely insensitive articles which do
not have a mass explosion hazard
• CLASS 2 – GASES
• Gases are defined by dangerous goods regulations
as:
• substances which have a vapor pressure of 300 kPa
or greater at 50°c or which are completely gaseous at
20°c at standard atmospheric pressure, and items
containing these substances.
• The class encompasses compressed gases,
• liquefied gases,
• dissolved gases,
• refrigerated liquefied gases,
• mixtures of one or more gases with one or more
vapors of substances of other classes, articles
charged with a gas and aerosols.
• Sub-Divisions
• Division 2.1: Flammable gases
• Division 2.2: Non-flammable,
non-toxic gases
• Division 2.3: Toxic gases
• .
• CLASS 3 – FLAMMABLE LIQUIDS
• are defined by dangerous goods
regulations as
• liquids,
• mixtures of liquids or
• liquids containing solids in solution or
suspension which give off a flammable
vapour (have a flash point) at
temperatures of not more than 60-65°C,
• liquids offered for transport at
temperatures at or above their flash
point or substances transported at
elevated temperatures in a liquid state
and which give off a flammable vapor at
a temperature at or below the maximum
transport temperature
• CLASS 4 – FLAMMABLE SOLIDS;
SUBSTANCES LIABLE TO
SPONTANEOUS COMBUSTION;
• SUBSTANCES WHICH EMIT
FLAMMABLE GASES WHEN IN
CONTACT WITH WATER
• Flammable solids are materials which,
under conditions encountered in
transport, are readily combustible or
may cause or contribute to fire through
friction, self-reactive substances which
are liable to undergo a strongly
exothermic reaction or solid
desensitized explosives.
• Also included are substances which are liable
to spontaneous heating under normal
transport conditions, or to heating up in
contact with air, and are consequently liable to
catch fire and substances which emit
flammable gases or become spontaneously
flammable when in contact with water.
• Sub-Divisions
• Division 4.1: Flammable solids
• Division 4.2: Substances liable to
spontaneous combustion
• Division 4.3: Substances which, in contact
with water, emit flammable gases
• CLASS 5 – OXIDIZING SUBSTANCES; ORGANIC
PEROXIDES
• Oxidizers are defined by dangerous goods
regulations as substances which may cause
or contribute to combustion,
• generally, by yielding oxygen because of a redox
chemical reaction.
• Organic peroxides are substances which may be
considered derivatives of hydrogen peroxide
where one or both hydrogen atoms of the chemical
structure have been replaced by organic radicals.
• Sub-Divisions
• Division 5.1: Oxidizing substances
• Division 5.1: Organic peroxides
• CLASS 6 – TOXIC SUBSTANCES; INFECTIOUS
SUBSTANCES
• Toxic substances are those which are liable either to
cause death or serious injury or to harm human
health if swallowed, inhaled or by skin contact.
• Infectious substances are those which are known
or can be reasonably expected to contain
pathogens.
• Dangerous goods regulations define pathogens as
microorganisms, such as bacteria, viruses,
• rickettsiae, parasites and fungi, or other agents which
can cause disease in humans or animals.
• Sub-Divisions
• Division 6.1: Toxic substances
• Division 6.2: Infectious substances
• CLASS 7 – RADIOACTIVE MATERIAL
• Dangerous goods regulations
define radioactive material as any
material containing radionuclide
• where both the activity concentration and the total
activity exceeds certain pre-defined values.
• A radionuclide is an atom with an unstable
nucleus, and which consequently is subject to
radioactive decay.
• CLASS 8 – CORROSIVES
• Corrosives are substances which by chemical
action degrade or disintegrate other materials
upon contact.
• CLASS 9 – MISCELLANEOUS DANGEROUS
GOODS
• Miscellaneous dangerous goods are substances
and articles which during transport present a
danger or hazard not covered by other classes.
• This class encompasses, but is not limited to,
environmentally hazardous substances,
substances that are transported at elevated
temperatures, miscellaneous articles and
substances, genetically modified organisms and
micro-organisms and (depending on the method of
transport) magnetized materials and aviation
regulated substances. zinc oxide, lithium-ion
batteries, genetically modified organisms, air bag
modules and motor engines.
• Objectives :

• What can be shipped

• Air Freight Categories
• The Air Cargo Market
• typical air cargo supply chain
• The Airway bill
• Air transport process
• functions of the handling agent
• ULD = Unit Load Device
• What is a Claim?
• International Air Transport Association (IATA)
Introduction to How Air Freight Works
Air Freight
• total air cargo carried in 2018 62.5 million
tones.
• That represents less than 1% of global
trade by volume, but over 35% by value.
• The expected value of goods transported
by air is exceed $6.2 trillion equivalent to
7.4% of the world’s GDP.
• Air Freight transportation is for cargoes that
fall into these few categories:
• Perishable Goods/Live animals
that have a limited lifespan
• Cargo with an ultra-high value
that requires additional security
• Cargo in small quantities or
small volume metric weight
• Cargo with utmost priority in delivery urgency
Air Fright
• Airfreight involves the shipment of
packages and goods via an air carrier.
• An air carrier could be commercial or
charter.
• Transportation via air carriers allows
shipments an easier gateway to
anywhere that airlines fly and land.
• The planes that carry all this stuff range
from normal commercial airliners to
some amazing flying mutants
• Air freight can be separated into three main
categories:
• Freight that rides on passenger airlines
• Freight that rides on dedicated cargo planes
• Huge payloads that ride in super cargo planes
• Passenger Airline Freight
• Commercial airlines make
about 5 to 10 percent of their
revenue from hauling freight.
When a package is shipped on
your flight, it is usually
consolidated with other
packages and freight and
packed into special containers
that fit in the storage area under
the passenger compartment.
• For instance, a Boeing 747-400 (one
of the largest passenger planes) can
hold 416 passengers along with (150
m3) of cargo.
• That's about as much cargo as can
fit in two semi-truck trailers
• The 747-400 can also be configured
in "Combi" mode, in which some of the
passenger compartment is used to
store freight.
• In this mode, the plane can carry
over (283 m3) of cargo and 266
passengers
Cargo Planes
• Shipping companies like FedEx
and UPS own many different
types of cargo planes. the Boeing
747-400 can hold about (736 m3)
of cargo.
• That's about as much as five semi
trucks can haul.
• The 747-400 can hold 30 pallets
of goods on the main level. The
pallets are (2.4 m by 3.2 m) and
up to (3.05-m) tall.
For Shipping
Horses
• there are special containers
called air stables that connect
to pallets and fit in the cargo
hold
• Since there often isn't room to
drive a forklift truck into the
plane to load the pallets, the
load floor is equipped with
electric rollers
Super Transporters “Airbus
Beluga”
• This is a class of plane designed purely for
moving huge stuff.
• If you need to transport a helicopter, or even a
plane, you need a Super Transporter.
• This plane is built with a huge cargo area located
above the cockpit, allowing freight to fill almost
the full length of the plane.
• The giant door on the front of the cargo hold
opens wide enough to get completely out of the
way if an object will fit in the plane, it will fit
through the door.
• This plane is built with a huge cargo area located
above the cockpit,
This plane can haul about 47 tons
of cargo.

• That's a lot, but not enough to transport,

say, a military tank. A tank can weigh 65
tons or more.
• For that, you need an even bigger
transport plane.
• World's Biggest Transporter
• The world's biggest transport plane is the
Antonov AN-225.
• With a cargo capacity of over 250 tons,
this plane can haul not just one, but three or
four military tanks.
Introduc
tion
The Air
Cargo
market
• The Air Cargo market.
• For someone who wants to send a shipment door-
to-door and over a medium to long distance fast,
the air transport mode will best fit this purpose
• According to plane maker Boeing in 2012:
• cargo-only aircraft or freighters handle about 60
percent of global airfreight shipments, while
passenger planes fly the other 40 percent
• the international (door-to-door) air cargo market can be divided in four major supplier
• categories:
• 1-Postal companies using Airmail
• Envelopes and parcels up to 30 kg Examples: sche Post, La Poste, Singapore Post, Swiss Post,
• TNT Mail, USPS
• 2-International Courier companies or: Couriers
• Envelopes and parcels up to 75 kg
• Examples: City-Link, DPD, DPEX Worldwide, HKDC Royale Asia, Kangaroo Worldwide Express,
KDZ Express, OCS - Overseas Courier Services
• 3-International Express companies or: Integrators
• Envelopes and parcels up to 75 kg
• Generally, operate their own aircraft, some destinations outsourced to airlines, aircraft operators or air
charter companies
• Examples: DHL Express, FedEx, TNT Express, UPS, etc
• 4-(Air Cargo) Forwarders
• Parcels and consolidations > 75 kg or up to anything that fits
in an aircraft
• Air transport generally outsourced to airlines and sometimes
aircraft operators or air charter companies
• Examples: Agility, CEVA Logistics, C.H. Robinson, Damco,
DB Schenker, DHL Global Forwarding, DSV, Expeditors,
Geodis,
• The air cargo forwarders are the ‘traditional’ and still
most important customers for the airlines.
• According to FIATA, forwarders contract over 85 per cent of
international air shipments as principals
• typical air cargo consists of :
• goods with a high value and/or an operationally or commercially critical delivery time (high
• financial breakdown risk):
• Airmail, diplomatic mail
• Live animals, hatching eggs, human organs, human remains, medical supplies
• Express parcels
• Perishables (food, flowers, dry-ice shipments)
• Pharmaceuticals
• Valuables (money, gold bars, diamonds)
• Technical supplies (high tech, oil & gas, aerospace, automotive, ship spares)
• Luxury consumer goods (electronics, fashion goods, accessories
Shippi
ng
• Shipping The door-to-door air cargo process starts with the shipper. –
• A shipper is the person or company that is physically and administratively responsible for shipping the
goods
• There are 3 vital steps that are followed under the process of shipping.
• 1. Assembling the Shipment
• Collecting goods for consignee and preparing the packing materials and the packing list is
• important. Once the shipment is assembled, we move onto the next step.
• 2. Making RFT (Ready for Transport)
• It is also important to ensure you pack your goods and label packages clearly. Following the packaging,
your freight forwarding agent will prepare any required security documents and other relevant transportation
documentation and prepare for shipment.
• 3. Ordering Transport
• Once the package has arrived, it will be sent to the freight forwarder warehouse and left at storage ready
for pick up.
Forward
ing Out
• The goods are delivered at the forwarder’s warehouse
• Forwarding Out
• When your goods are being exported, the below steps apply during transportation.
• Goods are picked up following the order received and given a POA (Proof of Acceptance)
• An incoming check is performed and sorted according to flight dates for goods to
be transported
• Recheck for labelling errors and re-label if required and make necessary security
declarations
• Prepare all relevant customs documents and clear for customs
• Consolidate all goods according to all regulations of necessity and prepare a master AWB
(Air Waybill)
• Arrange transport to airline and inform receiving end of the incoming package
• A forwarder can be IATA certified ; in that case he is referred to
as agent.
• An agent is an IATA certified expeditor or forwarder that:
• Has been thoroughly checked for financial status
• Has enough air cargo potential
• Has the right facilities for handling air cargo
• Has trained personnel for handling air cargo and dangerous
goods
• Receives commission from the IATA associated airlines
• May use the airline’s Air Waybills
• The forwarder will buy space at the airline's sales or customer
service department
(Airline) Pricing
Air cargo is generally sold for a fixed
price or a fixed rate per kilogram,
often with a minimum charge to cover
basic expenses of shipment handling.
The pricing of air freight is governed
by the International Air Transport
Association (IATA) who continues to
provide an "Official Rates Policy“
which they publish under the title of
"The Air Cargo Tariff" (TACT) along
with their rules governing
transportation
• Booking
• First step after the pricing is obtained, is to make an airline
booking for the shipment and get the airline’s confirmation to
assure space on board of an aircraft:
• Airline (Master) Air Waybill number assigned:
• Origin and (final) destination
• Type of goods / commodity (especially important for dangerous
goods, perishables and
• valuables)
• Flight date
• Flight number
• Weight, volume and dimensions of shipment
• Issuing agent / contact details
• Eventual assignment to customer (agent's) allotment
• The Airwaybill
• Consolidations or individual shipments get a Master Air Waybill
(MAWB) for the airline. To start with, the Master Air Waybill is the
shipment contract between the forwarder and the airline
• Other functions of the MAWB are:
• Communication of the applicable contract terms, conditions and
liability to all parties involved (general on the back, or specific)
• Proof of delivery (POD) of the goods to the carrier
• Act as key for other related documents as required for customs
or other authorities
• Provide handling instructions to all parties involved
• Provide a basis for invoicing for the airline and/or the forwarder
• The Airwaybills contains . the following information :
• The exact shipper’s and consignee’s address
• The forwarder taking care of (c/o) the shipment at destination
• Carrier / agent
• Airports of departure and destination
• Flight date and -number
• The overall kinds and values of the goods
• weights, volumes
• Customs status
• The agreed costs of transport and eventual other charges (also
for customs purposes in order
• for them to see added value)
• Insurance information
• Signature (to validate contract)
Air
Transpor
t
• The goods (or consolidations) are received at the
airline’s handling agent warehouse.
• The handling agent will often be a separate
company contracted by the airline, but cargo
handling can also be an in-house function of the
airline, especially at a major hub
• Examples of separate handling agents are
Aviance, Avia partner, Menzies Aviation, Servis
air, Swiss port Cargo Services, WFS - Worldwide
Flight Services
• handling agent takes care of the air cargo handling
at the airport, to and from the aircraft.
• Depending on the kind of goods, destination (flight
number) and urgency, delivery at the handling agent
must be done within a certain norm-time before
departure (TBD) of the aircraft, also called a slot or a
slot-time
• Besides the physical handling, other important functions
of the handling agent are:
• To control the overall weight & balance of the airline’s
aircraft on the cargo side,
• make a load sheet and assure flight safety
• To make a cargo manifest for all the goods on board, for
the airline’s import and export declaration to customs
• To make a notification to the captain of the aircraft
(NOTOC) to inform the crew about potential risks of
the cargo on board in case of emergencies
(dangerous goods, live animals, valuables, etc.), as
well as for the right conditioning (temperature) of the
cargo holds
• To plan & control bookings, slot-times, goods flows in
the warehouse, and ULD and flight bag flows from and
to the aircraft to prevent delays and assure correct
execution of the airline’s time-table
• To plan & control worldwide ULD stock
ULD = Unit
Load Device
• standardized air cargo loading
equipment, e.g.
• Main deck pallets
• Lower deck pallets
• Lower deck containers
• Animal stables or containers
• Security containers
• Environmentally controlled containers
Forwarding
in
• The receiving forwarder picks up the shipment
documents at the handling agent.
• The forwarder prepares import documents (if
necessary), performs customs clearance for
import (electronically or manually) and awaits
approval from customs
• Here are the steps taken to ensure goods are delivered
on time;
• Picking up documents once notified by the airline and
arranging local pickup of the documents
• Preparing customs documents, aiding with clearance
and printing the customs release note
• Arrange local pick up of the package from the airline
• Arrange delivery to consignee with all relevant
documentation and receive POD (Proof of
Delivery)
• If the forwarder is also a certified customs agent, he
will perform the clearance himself (forwarding agent) ;
if not he can outsource these activities to a certified
customs agent.
• A certified customs agent will always have a financial /
credit arrangement with customs to cover eventual import
duties and/or VAT due, often by means of a deposit at
customs.
• A customs agent knows how to exactly classify the goods for
import according to regulations ; this is done based on the
packing list and (pro-forma) invoice, so the packages remain
unopened.
• Also, a customs agent is trained and experienced in acquiring
and applying special customs arrangements, licenses and
exemptions in order to lower or avoid import duties or to speed
up the customs process where possible.
• Customs clearance is never the end-
responsibility of the customs agent though, this
responsibility remains at the principal and
depends on the agreed delivery terms
• The forwarder splits the shipments, makes them ready for
transport again, and orders connecting transport to the
consignee
• The goods are picked up by road transport for delivery at
the consignee, where the air cargo process will finish
• Again, depending on the transport agreement with the
forwarder, this road transport can be organized by either
the forwarder or the consignee.
• And again, depending on the internal organization of the
forwarders or consignee’s processes, the road transport can
be executed either with in-house operated trucks, vans or
personnel or by a third party
Consignment
• The door-to-door air cargo process ends with the
consignee.
• A consignee is the person or company that is physically
and administratively responsible for accepting the goods
at final delivery nothing more and nothing less
• Receiving shipment – once the shipment is received the
check for all number of goods and if any visible damage
can be identified. Once cleared, provide a POD.
• Unpacking goods– unpack goods and thoroughly check
for any damages that have occurred during transportation.
• Check goods with administration – count present goods
with the packing list or procurement order to verify any
missing items.
• Arrange for any warranty claims along with payments for
transport supplier where necessary.
• Make arrangements for customs declarations when
required
Top 3: Air • 1.) FedEx Express
Freight • Fleet Size: 688
• Orders: 37+
Companies • Destinations: 375+
• 2.) UPS Airlines
• Fleet Size: 519 (Including Chartered
Planes)
• Orders: 21
• Destinations: 766
• 3.) DHL Aviation
• Fleet Size: 75
• ordres: 13
• Destinations: 150
• What is a Claim?

• -A written complaint about any aspect of the

performance of an organization in relation to a
• contract, combined with a demand for financial
compensation. Main categories for claims are:
• -Damage : physical damage to the shipment
• -(Partial) loss : loss of an entire shipment, or one or
more entire parcels from a larger shipment
• -Theft / pilferage) : loss of items out of a parcel, or a
(partial) loss of a shipment that is certainly caused by
theft
• -Delay : delivery of the shipment later than the agreed
or reasonably expected delivery time
• Applicable law
• -Apart from the contractual conditions, almost all
international transportation by air is regulated by
international treaties known as the Montreal
Convention or the Warsaw Convention (with
several amending Protocols).
• -National Aviation laws may also apply.
• They cannot overrule the international treaties, only
extend regulations not specified in the Montreal or
Warsaw Convention
International Air
Transport
Association (IATA)
• non-governmental organization (NGO)
• Private organization promoting cooperation among the world's
scheduled airlines to ensure safe, secure, reliable, and economical air
services.
• Through IATA, local airlines have combined their individual ticketing
and reservation networks into a global system that overcomes
differences in currencies, customs, languages, and laws.
• Founded in Hague in 1919 as International Air Traffic Association, it
was given the current name in 1945 in Havana and now includes 280
airlines from 130 countries which handle over 95 percent of the
world's scheduled air traffic.
• IATA accredits the travel agents all over the world, except the US
where a local organization (Airline Reporting Corporation) provides
accreditation.
• IATA's headquarters are in Montreal, Canada and the executive
offices are in Geneva, Switzerland. Not to be confused with
International Civil Aviation Organization (ICAO) which is a
governmental organization.
What is a
TMS?
• A transportation management system
(TMS) is a real-time logistics tool that
streamlines a company's ability to
manage its inbound and outbound
shipping.
• TMS solutions, often provided as
software-as-a-service (SaaS), can often
plug into a company's enterprise
resource planning (ERP) or supply chain
management (SCM) software.
• A TMS helps global businesses keep
track of their important shipments,
enables automation at scale, and
helps various organizations within
the supply chain collaborate to keep
the global economy running.
• Moving to TMS software can help
companies better view their
operations in terms of organizational
key performance indicators.
Transportation
management
systems
components
TMSs often use advanced technologies
like machine learning (ML) and artificial
intelligence (AI) functions to optimize
existing manual processes in their
transportation operations, which take up
valuable employee time.
While some customers will purchase
their TMS based on price, others pick the
solutions that excel at providing some of
the below components:
• Warehouse management system (WMS): By
understanding the current inbound and outbound
schedules for goods, warehouse managers can maximize
as much of its space as possible while never exceeding
capacity.
• Workflows: TMSs help establish, automate and monitor
workflows that make the supply chain lifecycle run
smoothly and enhance route optimization.
• Rather than rely on manual work like calls, emails or
texts, automated workflows can handle routing, carrier
selection, shipment tracking and invoicing without
unnecessary human intervention.
• Procurement: A TMS helps companies to centralize and
understand their procurement approach by comparing
vendors and distributors, storing all terms and conditions
on a single platform, and more effectively observing the
impact of vendor changes on short and long-term
deliveries.
• Order management: This tracks the creation and
completion of orders. If multiple orders are from the
same customer, TMSs can eliminate wastage and
increase overall efficiency by combining those
orders.
• Invoicing: A time-consuming facet of shipping is
invoicing customers and paying invoices to
suppliers.
• TMS solutions can automate this process so that
payment requests and billing are checked for
accuracy and that money exchanges hands without
human interference.
• This removes a significant cost drain from all
organizations on the supply chain.
• APIs: A key component of any TMS is the ability to
tap into external software and systems through
APIs.
• Many modern TMSs are available for purchase or
license fits can work with many internal software
and solutions, like ERPs and SCMs, through APIs.
Beneficiaries of
transportation
management systems
• Shippers
• Companies that own or produce goods being shipped
via different transportation modes. For example, sea,
rail, road or air, or a combination of them like
intermodal, require both real-time and long-term
visibility across the supply chain.
• That means they need well-organized information to
manage their invoices, monitor the flow of goods,
understand the status of their products on fleets, and
track shipments.
• Carriers or freight service providers
• The companies operating the fleet vehicles that
transport raw materials and supplies should use TMS
to track the freight they ship on behalf of shippers.
• Freight brokers
• Logistics service providers sit in between shippers and freight
service providers, and they arrange for specific freight
equipment.
• They need to know the status of equipment of their customers
and the requirements of expected shipments to support them
with the right solutions when required.
• Shipping yards and warehouses
• Warehouse managers and shipping yard laborers should have a
real-time dashboard to see where deliveries are; this way, they
can accommodate them with the appropriate number of staff
and space within buildings and yards for efficient offloading and
storage.
• Resellers, e-commerce providers and retailers
• At the far end of the supply chain, these companies need to
know when goods will arrive to sell to consumers.
• TMS provides real-time visibility so they can manage to stock
their shelves and communicate with customers.
Benefits of
transportation
management
systems
• Cost savings: By optimizing shipping routes and destinations,
companies can reduce costs and drive efficiencies. Businesses
devote a significant amount of manual labor to maintain and
update a complex network of spreadsheets. TMS software helps to
manage this complexity by centralizing this information within one
tool.
• Subsequently, this reduces long-term labor costs, freeing up
employees to work on higher-level problems. Some shippers
require less than truckload (LTL) deliveries, where what they’re
shipping is combined on one truck with goods from other shippers.
• Being able to track their shipments among the rest of the goods is
important. By automating the creation and analysis of internal and
external data, shipping organizations can generate new insights to
help them boost profitability and improve efficiency, such as faster
invoicing and offloading of goods.
• Increased collaboration: Shipping on the global
supply chain requires significant collaboration
among the transportation network - between
shippers, freight brokers, freight service
providers and other entities. By aligning all on
one cloud-based software, multiple
organizations can have a holistic view of the
entire supply chain.
• Enhanced forecasting: Shipping on the global
supply chain requires accurate projections to
plan for shipment loading, pickups and routing.
• This type of visibility into the supply chain
allows organizations to plan and optimize for
efficiency for themselves and their clients.
• By tracking shipments on varying timelines,
organizations have a better overall vantage of
their business.
• Increased customer satisfaction: Along every step of the supply chain, there is a
hand-off from raw materials providers to manufacturers to shippers to resellers
and retailers to customers. Their satisfaction and the satisfaction of their
customers depend on on-time deliveries or notifications of delays so they can
make alternative plans.
• Using TMS to track movement and alert all participants if there are delays (or if
something will be delivered before the estimated date and time) keeps everyone
happy.
• Better documentation: By automating the process of shipping goods, a TMS
improves documentation in several ways; this includes standardizing all
documents for compliance, creating a digital chain of custody, enabling real-time
shipping updates and creating an archived record of documents automatically.
• Automated tendering: Tendering is the process by which shippers
can solicit multiple bids from carriers for any given shipping need
they have.
• TMS can organize all the information that shippers have on potential
carriers, can contact them automatically with the key information and
terms, and accept offers, saving costs and cutting down on
unnecessary manual work.
• Mobility: While many organizations will primarily run their TMS and
manage their workflows on desktop computers, having a mobile app
is critical for agile businesses that have workers constantly on the go.
 User adoption: For organizations with a unique, manual
approach to managing logistics, it might be difficult to
wean them off the historical approach for a new system.
Often, when companies introduce new systems,
employees might fall back on their existing processes if
Challenges they feel confused by the new system.

of Management needs to communicate clearly and justify

their decision-making with data to help their teams
transporta understand the value of this technology in their work.
Providing onboarding education to demonstrate how
tion different modules work will also accelerate this process.
management
Integration into existing ERPs and SCMs: A new TMS
systems requires integration with existing software and systems.
The complexity of this integration depends on what
existing software and systems a company has, its IT
support, the costs of such integrations, and how it can
approach the integration without disrupting existing
business processes.
• Partner participation: While TMSs can
be valuable for one organization within
the supply chain to manage their part of
the transportation process, the value is
exponential for every partner and
supplier that taps into it.
• Failure to get a company's partners
integrated into and using the software
will mean it must manage multiple
streams of communication and logistics,
minimizing the solution's effectiveness.
Examples of TMS Software:
• SAP Transportation Management: Provides end-to-end supply chain planning and execution capabilities.
• Oracle Transportation Management: Helps manage transportation operations, including carrier selection,
shipment planning, and freight payment.
• 3Gtms: A TMS platform known for its flexibility and comprehensive features.
• e2open: Offers a range of transportation management solutions.
• MercuryGate: A TMS that supports various transportation modes and integrates with other systems.
• Blue Yonder: Provides a comprehensive TMS for enterprises with various components.
• Rose Rocket: A cloud-based TMS focused on improving communication and visibility for carriers.
• Magnus TMS: Offers a SaaS-based solution for truckload and LTL fleets.
• TrueFleet: A user-friendly, cloud-based TMS for smaller and medium-sized fleets.
• Kuebix TMS: A modular, scalable, and user-friendly TMS platform.
Key TMS Features:
• Route Optimization: Finding the most efficient routes for deliveries.
• Carrier Management: Managing relationships with carriers and ensuring optimal selection.
• Load Planning and Consolidation: Optimizing load configurations to maximize efficiency.
• Shipment Tracking and Visibility: Providing real-time tracking of shipments and communication
with customers.
• Freight Auditing and Payment: Streamlining the process of freight billing and payment.
• Asset Management: Tracking and managing transportation assets like vehicles.
• Integration with WMS: Connecting with warehouse management systems for seamless
operations.
• Business Intelligence and Reporting: Providing insights into transportation performance and
trends.
 Cloud-based: Accessible from anywhere with
an internet connection, often offering greater
flexibility and scalability.

On-premises: Installed and maintained on a

Types of company's own servers.
TMS
Solutions: Planning & Execution: Focuses on optimizing
transportation plans and executing shipments.

Fleet Management: Manages and optimizes a

company's fleet of vehicles.