Exam Questions Flashcards
Explain CAF
Currency Adjustment Factor
Definition: A surcharge applied by shipping companies to address potential or actual currency fluctuations.
Reason: Multimodal tariffs and freight rates are often charged in USD, but operational costs are incurred in various currencies. Fluctuations in exchange rates impact profitability.
Application: Charged as a percentage or a fixed rate per container. It increases freight rates paid by non-vessel operators, freight forwarders, or shippers.
Significance: Ensures operators maintain financial stability despite currency volatility. Negative CAF (a discount) may occur in rare foreign exchange gain situations.
Explain COFC
** Container on Flat Car **
Definition: Rail freight service where containers (laden or empty) are loaded on flatcars for transport.
Distinction: Differs from well cars (which allow double stacking) and piggyback systems (trailer on flatcar).
Usage: Popular in the U.S. and Canada for long-distance coast-to-coast operations.
Significance: Reduces reliance on road transport for intermodal shipping, offering fuel efficiency and lower costs for hinterland connectivity.
Explain Hub and Spoke
Definition: A centralized distribution model where the hub serves as a key transshipment point, and spokes connect to smaller regional destinations.
Examples:
In aviation, major airports act as hubs.
In shipping, main ports like Rotterdam serve as hubs for feeder connections.
Logistics Applications: Warehouses as hubs distribute goods to retail stores (spokes) or consolidate them for outbound shipping.
Significance: Enhances efficiency and resource utilization, reduces shipping costs, and consolidates cargo flows for economies of scale.
Explain JIT
Just in time
Definition: Inventory management strategy minimizing stock levels by aligning deliveries with production schedules.
Goal: Avoid excess inventory and reduce capital tied up in stock.
Challenges: Relies heavily on logistics providers for speed, reliability, and frequency.
Impact: Late deliveries disrupt production, causing lost sales, while early arrivals incur unnecessary holding costs.
Explain NVOC
Non vessel operating carrier
Definition: A logistics operator that acts as a carrier without owning vessels, arranging cargo movement and assuming carrier responsibilities.
Functions:
Negotiates box rates with shipping lines.
Profits from freight margin and added services like documentation.
Extension: NVOCC (Non-Vessel-Operating Common Carrier), common in the U.S., further formalizes carrier obligations.
Explain THC
Terminal handling charge
Definition: Fees covering container movement costs within a terminal, from gate to ship and vice versa.
Scope: Includes storage, positioning, and equipment maintenance costs.
Significance: Paid by shipping lines (and passed to shippers) to ensure smooth terminal operations. Often excluded from freight rates and levied separately.
Explain waybills
Definition: Shipping documents detailing shipment details like origin, destination, and route.
Difference from B/L: Not a document of title and cannot transfer ownership.
Advantages: Enables quicker delivery since it doesn’t require consignee presentation for release.
Significance: Simplifies logistics, especially for time-sensitive shipments.
Explain the impact of increasing containership sizes
Economies of Scale
* Larger ships cost less per TEU to operate.
* Production costs for transporting a TEU decrease as ship size increases.
Fleet Optimization
* Smaller ships are redeployed to secondary routes or scrapped, depending on market demand.
Port Infrastructure Demands
* Larger ships require deep drafts, longer quays, larger cranes, and expanded yard capacity.
* Ports face significant investment to accommodate larger vessels.
Cargo Concentration
* Fewer ports of call create regional hub-and-spoke networks.
* Consolidated cargo flows necessitate robust multimodal infrastructure.
Cargo bound to the United States East Coast from China/Japan goes via the Panama Canal.
When the Panama Canal is affected by water shortage due to low rainfall, there is a
reduction in ships’ draft and the number of daily transits, creating a maritime bottleneck. How can container shipping companies overcome the constraints caused by this
maritime chokepoint?
Alternative Strategies
1. Land Bridges: Use U.S. West Coast ports with rail transport to East Coast.
Requires agreements with rail operators for seamless connections.
Impacts cargo concentration and regional hub strategies.
2. Dry Canals: Shift cargo to rail-based Panama Dry Canal.
Smaller vessels and optimized logistics required to mitigate delays.
3. Suez Canal: Divert services via the Suez Canal.
Consider vessel size limitations and East Coast port constraints.
Cargo bound to the United States East Coast from China/Japan goes via the Panama Canal.
When the Panama Canal is affected by water shortage due to low rainfall, there is a
reduction in ships’ draft and the number of daily transits, creating a maritime bottleneck. What are the logistics impacts that importers and exporters using United States East Coast ports as gateways have to deal with?
Logistics Impacts
* Longer transit times and increased inventory costs.
* Need for diversified suppliers and adaptive logistics networks.
The internationalisation and globalisation of economies has resulted in complex and
extended supply chains. Companies need to use computer applications to gain control over multimodal transport services performance. Identify and describe the type of computer applications that businesses need to consider.
Applications:
* Communication Tools: Email, messaging systems for fast, clear exchanges.
* Data Management: Systems for storing and retrieving records, such as container positions or stock levels.
* Planning Systems: Simulate scenarios for route optimization and inventory management.
The internationalisation and globalisation of economies has resulted in complex and
extended supply chains. Companies need to use computer applications to gain control over multimodal transport services performance.
Explain the advantages and disadvantages of using computer applications in freight
transport.
Advantages:
* Improved accuracy, communication, and efficiency.
* Enhanced customer service with tracking and visibility.
Disadvantages:
* High costs of implementation and maintenance.
* Vulnerability to cybersecurity threats and system downtimes.
You are the pricing manager for a global logistics provider. You have a regular door-to-door shipment of FCL containers of electronic equipment produced 100km from Shenzhen, China, to be delivered to Duisburg (Germany), located on the river Rhine, via the port of
Rotterdam. The distance from Rotterdam to Duisburg is 215 km.
Identify the different factors to consider when deciding on which price to quote.
Factors to Consider:
* Cargo characteristics, including size and classification.
* Suitable container type for the goods.
* Multimodal route availability and provider reputation.
* Cost elements: sea freight, terminal handling, inland transport.
* Contractual terms: demurrage, detention, and transit reliability.
Identify and explain the different types of bills of lading used in multi-modal transport and discuss their functions.
Bills of Lading Types:
Through B/L: Single contract across modes.
Combined Transport B/L: Covers multimodal operations.
House B/L vs. Master B/L: Issued by forwarders vs. main carriers.
Explain the objective of the IMDG Code
International Maritime Dangerous goods
The IMDG Code was developed as an international code for the maritime transport of dangerous goods in packaged form
The IMDG Code contributes to:
* Have a clear understanding of cargo nature.
* Reduce the number of accidents on board ships and in port.
* Improve and guarantee the safety of dangerous cargo transport.
* Facilitate the handling of dangerous goods.
* Understand how dangerous goods are stowed in containers.
* Be aware of cargo incompatibility (that cannot be stowed together).
* Avoiding personal, ship and cargo damage and injury.
* Protect the marine environment.
* Facilitate the free movement of dangerous goods.
* Identify the dangerous goods allowed to be transported in limited and excepted quantities.
Identify the different IMDG classes.
Cargoes are divided into the following classes:
* Class 1 - Explosives (military and commercial)
* Class 2 - Gases
* Class 3 - Flammable liquids
* Class 4 - Flammable solids
* Class 5 - Oxidising agents
* Class 6 - Poisonous (toxic) substances
* Class 7 - Radioactive substances
* Class 8 – Corrosives
* Class 9 - Miscellaneous dangerous substances.
Explain the aspects to be considered when shipping dangerous goods by sea
- Identify the proper shipping name of the goods.
- Verify if the packing group is appropriate for the dangerous goods carried.
- Check the labelling being used in containers, which must be under the provisions of the IMDG Code.
- Cargo segregation. Due to incompatibility, cargoes must be stowed a certain distance apart. The distance is covered in the IMDG Code and the IMO resolution addressing the stowage of dangerous
goods on board container ships. - Identify subsidiary risks.
- Check if the dangerous goods are subject to limited quantities.
- Know the flash point.
- If the carriage of explosives is considered, verify the compatibility group of explosives.
- Ensure that the documentation accompanying the transport of dangerous goods is filled in appropriately.
How do the Hague-Visby and Hamburg conventions deal with the carriage of
dangerous goods?
Hague-Visby Rules: Paragraph 6 of Article IV
* Consent Requirement: Dangerous goods (inflammable, explosive, or otherwise hazardous) require the carrier, master, or agent’s informed consent for shipment.
* Carrier’s Rights Without Consent: If shipped without such consent, the carrier may:
- Discharge the goods at any location,
- Destroy them, or
- Render them harmless.
- No Compensation: The carrier has no obligation to compensate the shipper, who is liable for damages or expenses caused.
* With Consent: Even if shipped with consent, if the goods become a danger to the ship or cargo, the carrier may take similar actions (discharge, destroy, or neutralize) without liability except to general average, if applicable.
Hamburg Rules: Article 13
1. Marking and Labeling (Paragraph 1): Shippers must label dangerous goods clearly as hazardous.
2. Shipper’s Obligation to Inform (Paragraph 2):
The shipper must inform the carrier or actual carrier of the goods’ hazardous nature and any required precautions.
Failure to Inform:
(a) Shipper is liable for losses incurred by the carrier or actual carrier.
(b) Carrier may unload, destroy, or neutralize the goods without compensation.
3. Knowledge Exception (Paragraph 3): The liability provisions in Paragraph 2 cannot be invoked if the carrier knowingly accepted the goods despite their hazardous nature.
4. Immediate Danger Clause (Paragraph 4):
Dangerous goods posing a threat to life or property may be unloaded, destroyed, or rendered harmless without compensation.
Exceptions: Compensation may apply if:
General average principles apply.
Carrier is found liable under Article 5 provisions.
The combination of the different transport modes results in different transport systems. Identify each transport system with an example
- Sea + Road / Rail / Inland Waterways | Fishyback (container). In this example, reference can be made to the landbridge, microbridge, and mini-landbridge.
- Sea + Air + Road
- Inland Waterways + Road / Rail (container).
- Sea + Rail (wagons + small block trains).
- Sea + Road | Fishyback (lorries, trailers, semi-trailers + other ro-ro units + cars + heavy machinery and equipment such as bulldozers, excavators, cranes, and other oversized vehicles).
- Road + Rail (containers or other cargo that can be lifted from on mode on to the other).
- Road + Air | Birdyback.
- Roadrailer.
- Piggyback | Ferroutage | Trailer on Flat Car.
Describe the factors shipping companies consider when choosing a port
Factors influencing port choice are:
* Geographical location of the port in relation to shipping route resulting in minimum deviation.
* The location of the port relatively to the foreland, i.e. need to minimise steaming distance for the vessels.
* The location of the port relatively to the competitive hinterland.
* Port connectivity of feeder services for collection and cargo distribution.
* The availability of road + rail infrastructure allowing the seamless entry and exit of goods.
* The availability of terminals in the port for the cargo handled.
* The suitability of the port for their vessels (air draft + draft + including tidal limitations)
* Port costs (pilotage, mooring, towage, et cetera) + port procedures for vessel and cargo entry and exit.
* The role of the port as logistics centre and the support of dry ports, distriparks, freight villages for the execution of logistics activities related to the cargo and transport equipment. Role of the port as an industrial manufacturing hub. Presence of export processing zones, free trade zones.
* Labour problems | Labour unrest + Working hours.
* Number of days a port is closed. Number of days a port is closed due to bad weather.
* Level of port competition. Cargo volumes served by the port.
* The safety conditions of the port.
* Security conditions of the port.
* Geopolitical landscape of the port. Port not located in a war zone. Port does not belong to a sanctioned country.
* Ancillary services such as ship repair, surveys, bunkering facilities.
* Regulatory framework concerning the provisions of port services.
Identify and detail the factors shipping companies consider when choosing a terminal within a port.
- Location of the terminal within the port.
- Whether the terminal is constrained by tides or not for mooring purposes.
- Level of terminal congestion.
- The dimension of the quay length and the number of ships the terminal can accommodate simultaneously.
- The maximum ship sizes the terminal can handle (length).
- The existence or not of terminal draft restrictions for loaded vessels.
- Terminal handling charges.
- Service level including cargo handling rates, priorities given to the shipping line for berthing (berth scheduling policy) and/or cargo operations, terminal procedures.
- The number of gantry cranes allocated for cargo operations.
- The availability of quay and yards’ cargo handling equipment.
- Availability of equipment in case of equipment breakdowns.
- Terminal yard capacity.
- The free time offered by terminals for the cargo to be there without incurring into demurrage.
- Terminal working hours.
- Terminal efficiency.
- Integration of shipping lines IT system with terminal IT system for vessel and cargo visibility purposes.
- Terminal security.
Identity the different operators of multi-modal transport
- Vessel operating MTO (VO-MTO), aka direct operator or shipping lines
- Non vessel operating MTO (NVO-MTO), or indirect operator, including freight forwarders, port and warehouse operators and consolidators
- Multimodal transport intergrators
- Airlines
- Hauliers
- Rail operators
- Express parcel/courier services
What is a vessel operating MTO?
Definition:
A Vessel Operating Multimodal Transport Operator (VO-MTO) is an entity that owns and operates vessels for cargo transport and provides multimodal services under a single contract, taking responsibility for the entire transportation chain.
Core Activities:
* Operating and managing fleets of vessels for cargo transport.
* Handling cargo loading/unloading at ports.
* Overseeing containerized transport on a door-to-door basis.
* Providing integrated logistics solutions.
Types of Services Offered:
* Port-to-Port Services: Direct ocean freight from the port of origin to the destination.
* Door-to-Door Services: Integrated transport services involving multiple modes.
* Value-Added Services: Cargo tracking, customs clearance, and documentation.
What is a non-vessel operating MTO?
Definition:
A Non-Vessel Operating Multimodal Transport Operator (NVO-MTO) acts as a carrier without owning vessels. They contract with actual carriers (shipping lines) to provide multimodal transport services.
Players and Their Roles:
3PLs (Third-Party Logistics Providers):
- Core Activities: Outsourcing logistics processes such as warehousing, transportation, and distribution.
- Services: Inventory management, freight forwarding, order fulfillment.
Freight Forwarders:
- Core Activities: Arranging the movement of cargo across different transport modes.
- Services: Cargo booking, customs documentation, and cargo consolidation.
Port Operators:
- Core Activities: Managing terminal operations for cargo handling and storage.
- Services: Container loading/unloading, yard storage, transshipment.
Warehouse Operators:
- Core Activities: Storing goods and managing inventory for clients.
- Services: Storage, order picking, distribution, and packing.
Groupage Operators:
- Core Activities: Consolidating small shipments into full container loads (FCL).
- Services: Freight consolidation, cargo distribution, and cost-sharing.
Consolidators:
- Core Activities: Combining shipments from multiple clients for transport efficiency.
- Services: Reducing costs for smaller shippers by offering shared transport solutions.
What are multimodal transport integrators?
Definition:
Multimodal Transport Integrators are entities that manage and integrate multiple transport modes under a single contract to provide seamless logistics solutions.
Core Activities:
* Coordinating end-to-end transport chains.
* Ensuring efficient cargo handoffs between modes (e.g., sea, air, rail, road).
* Negotiating contracts with service providers across modes.
Types of Services Offered:
* Door-to-Door Logistics: Comprehensive transport solutions across multiple modes.
* Supply Chain Optimization: Minimizing costs and transit times.
* Technology Integration: Offering visibility through tracking and digital tools.
What are airlines in the context of freight operators?
Definition:
An airline is a company that provides air transport services for passengers or freight, connecting global markets through air routes.
Core Activities:
* Managing air cargo fleets and logistics.
* Ensuring compliance with international aviation regulations.
* Handling specialized cargo like perishable goods or hazardous materials.
Types of Services Offered:
* Express Freight: High-speed delivery for time-sensitive goods.
* Specialized Cargo: Transportation of temperature-controlled or dangerous goods.
* Customs Handling: Assisting with air freight customs clearance.
What are hauliers?
Definition:
Hauliers are entities that operate trucks or fleets to transport goods overland, typically handling the road leg of multimodal transport chains.
Core Activities:
* Transporting goods from ports, warehouses, or manufacturing units to destinations.
* Managing vehicle fleets and driver logistics.
* Ensuring compliance with road transport regulations.
Types of Services Offered:
* Long-Haul Transport: Interstate or cross-country delivery.
* Short-Haul Transport: Local or regional distribution.
* Specialized Transport: Handling oversized or temperature-sensitive cargo.
Describe rail operators
Definition:
Rail operators are companies providing freight transport services using national or regional railway networks, often forming a key component of multimodal transport.
Core Activities:
* Operating trains for cargo transport.
* Managing terminals for container handling.
* Coordinating with other modes for seamless cargo movement.
Types of Services Offered:
* Bulk Freight Services: Transporting raw materials like coal, steel, or grain.
* Container Services: Moving intermodal containers efficiently across distances.
* Time-Sensitive Freight: Express rail services for faster deliveries.
Describe express parcel/courier services
Definition:
Express parcel or courier services specialize in the rapid transport of small shipments, documents, and parcels, often providing door-to-door delivery.
Core Activities:
* Sorting, labeling, and distributing parcels across networks.
* Ensuring time-definite deliveries for domestic and international shipments.
* Using technology for tracking and customer communication.
Types of Services Offered:
* Same-Day Delivery: Rapid transport for urgent shipments.
* International Courier Services: Handling cross-border shipments with customs clearance.
* E-commerce Logistics: Supporting online retailers with last-mile delivery solutions.
Shipping companies must consider several pricing factors when defining their transport pricing policy. Explain the physical and geographical pricing factors.
Physical
* Nature of cargo for instance, if it is classified as dangerous under the IMDG Code, a reefer cargo, perishable cargo, out-of-gauge cargo or project cargo.
* Shipment weight, volume, density, stowability, ease of handling, liability.
* If it requires special equipment, for instance a reefer container or a high cube.
* Shipping mode FCL vs LCL or FTL vs LTL.
* Consolidation and cross docking activities.
* Any instructions leading to accessorial fees, for instance security.
Geographical
* Balanced vs unbalanced (thin) trade.
* Distance freight travels; regional vs international.
* Besides distance, the points origin and destination areas of cargo, as well as ports of loading and discharging can also affect freight rates.
* Delivery speed, Fuel fluctuations.
* Interfaces operation costs including ports, dry ports, airports, and canal transits.
* Direct call vs hub & spoke (feeder costs).
* Geopolitical issues
* Number of transport modes involved
* Regulatory aspects at custom levels
Identify and detail the functions carried out in a warehouse environment.
- Cargo reception.
- Sorting.
- Unpacking, packing, and repacking.
- Storage. Reference can be made to FIFO and LIFO inventory management methods.
- Retrieval or picking. Reference can be made to the types of picking for instance, single order picking, batch picking, multi-batch order picking, wave picking, zone picking, cluster picking.
- Accumulation or consolidation.
- Outward delivery.
Explain the importance of warehouse layout in performing its key functions
- Contributes to an optimised and efficient warehouse space utilisation. Results in more storage
- Allows better inventory management, inventory flow, stores more inventory without costly expansions.
- Allows improved productivity; increased speed of warehouse throughput
- Determines the equipment being used.
- Flexibility at stock level because of seasonality.
- Better segregation.
- Keeps employees safe, Complies with regulations.
- Improves order fulfilment rates, minimises travel times, provide easy access to stored goods.
- Reduces errors, stock losses.
- Faster order processing and increased productivity, ultimately helping you meet customer demands more efficiently.
- Better tracking and tracing of goods.
What types of international conventions exist directly impacting cargo movement by multimodal transport?
- Conventions relating to carrige of cargo
- Relating to nature of cargo
- Relating to safety and security
Name the international conventions that exist relating to the carriage of cargo
- Hague Rules 1924
- Hague-Visby Rules 1968 and Protocols
- Hamburg Rules (The United Nations Convention on the Carriage of Goods by Sea 1978)
- Rotterdam Rules
- Convention on the Contract for the International Carriage of Goods by Road (CMR)
- Uniform Rules concerning Contracts for International Carriage of Goods by Rail (CIM) (Appendix B of COTIF)
- Warsaw Convention of 1929 and Protocols.
- United Nations Conference on a Convention on International Multimodal Transport
Name the international conventions that exist relating to the nature of cargo
- International Maritime Dangerous Goods Code (IMDG Code)
- European agreement relating to the international transport of dangerous goods by road (ADR)
- Regulations concerning the International Carriage of Dangerous. Goods by Rail (RID).
- Carriage of perishable goods - the ATP Convention
Name the international conventions that exist relating to safety and security of vessels/their employees
- International Convention for Safe Containers (CSC)
- The SOLAS Container weight verification requirement
- International Ship and Port Facility Security Code (ISPS Code)
Explain liability rules under Hague 1924
- £100 per package or unit.
- time limit on legal action one year.
Explain liability rules under Hague-Visby 1968
- 666.67 SDRs per package or unit or 2 SDRs per kg, whichever amount is higher.
- time limit on legal action 1 year but by mutual consent this may be extended.
Explain liability rules under Hamburg Rules (AKA UN Convention on the Carriage of Goods at Sea 1978)
- 835 SDRs per package or 2.5 SDRs per kg.
- In the case of delay in delivery of the goods, the compensation is limited to an amount equivalent to two and a half times the freight payable for the goods delayed, but not exceeding the total freight payable under the contract of carriage of goods by sea.
- time limit on legal action 2 years.
Explain liability rules under the Convention on the Contract for the International Carriage of Goods by Road (CMR)
- 8.33 SRDs per Kg.
- In the case of delay if the claimant proves that damage has resulted therefrom the carrier shall pay compensation for such damage not exceeding the carriage charges.
- time limit on legal action 1 year extended to three years if willful misconduct is alleged.
Explain liability rules under the Uniform Rules concerning Contracts for International Carriage of Goods by Rail (CIM) (Appendix B of COTIF) based on 2016 update.
- 17.00 SRDs per Kg.
- If loss or damage results from the transit period being exceeded, the carrier must pay compensation not exceeding four times the carriage charge.
- In case of partial loss of the goods, the compensation provided shall not exceed four times (initially three times) the carriage charge in respect of that part of the consignment which has not been lost.
- time limit on legal action 1 year extended to two years if wilful misconduct is alleged against the railway.
Explain liability rules under Warsaw Convention of 1929 and protocols / Montreal Convention of 1999.
- Originally 17.00 SDRs; 19.00 SDRs (2009); 22.00 SRDs (2019) per Kg
- In the case of destruction, loss, damage or delay of part of the cargo, or of any object contained therein, the weight to be taken into consideration in determining the amount to which the carrier’s liability is limited shall be only the total weight of the package or packages concerned.
- Time limit on legal action 2 years.
Define and explain the ISPS Code
- Full Form: International Ship and Port Facility Security (ISPS) Code.
- Purpose: Established under the International Maritime Organization (IMO) to enhance security in the maritime sector. It aims to prevent security threats like terrorism, smuggling, and piracy.
- Scope: Provides a standardized framework for evaluating and mitigating risks to ships, ports, and maritime infrastructure.
- Legal Basis: Introduced in 2004 as an amendment to the Safety of Life at Sea (SOLAS) Convention, Chapter XI-2.
Explain who the ISPS Code applies to
Ships:
* Passenger ships, including high-speed craft.
* Cargo ships of 500 GT and above, including high-speed craft.
* Mobile offshore drilling units.
Port Facilities:
Facilities serving ships involved in international voyages.
Shipping Companies:
Entities responsible for ship operations and compliance with safety regulations.
What are the responsibilities of governements under the ISPS Code?
Implementation and Oversight:
* Designate a national authority to oversee ISPS compliance.
* Conduct security assessments for ships and port facilities.
Approval and Certification:
* Approve Ship Security Plans (SSPs) and Port Facility Security Plans (PFSPs).
* Issue International Ship Security Certificates (ISSCs) to compliant ships.
Security Infrastructure:
Ensure port facilities have adequate security measures.
Monitoring and Auditing:
Conduct periodic inspections and audits to maintain compliance.
What are the responsibilities of ships and shipping companies under the ISPS code?
Shipping Companies:
* Appoint a Company Security Officer (CSO) to manage security compliance.
* Develop, implement, and maintain Ship Security Plans (SSPs).
* Ensure crew members receive appropriate security training and drills.
Ships:
* Appoint a Ship Security Officer (SSO) responsible for implementing the SSP on board.
* Maintain and operate security equipment such as alarms and surveillance systems.
* Comply with security level requirements, including enhanced procedures at higher security levels.
* Cooperate with port facilities and relevant authorities during inspections.
What are the responsibilities of ports under the ISPS Code?
Port Facility Security Officer (PFSO):
Appointed to oversee and implement security measures in port facilities.
Port Facility Security Plan (PFSP):
Develop and maintain a PFSP tailored to the port’s specific risks and operational profile.
Access Control:
Regulate and monitor access to restricted areas within the port.
Interface Security:
Ensure secure interaction between ships and port facilities.
Communication:
Maintain coordination with national authorities, ships, and shipping companies regarding security incidents or threats.
What are the ISPS Code’s security levels?
The ISPS Code defines three security levels that dictate the measures to be implemented:
Security Level 1 (Normal):
Standard security measures in place for routine operations.
Minimum security posture to address identified risks.
Security Level 2 (Heightened):
Enhanced security measures due to a higher risk of security incidents.
Examples: Increased patrols, restricted access, and additional inspections.
Security Level 3 (Exceptional):
Maximum security measures in response to a probable or imminent security threat.
Examples: Full lockdown, evacuation, and coordinated action with national security forces.
Identify the key factors multi-modal operators must consider in service planning
Operators are expected to consider with the following the key factors in service planning:
i Owning versus leasing equipment
ii Owning or leasing ships, aircrafts, containers, trucks
iii Chartering ships, aircrafts
iv Equipment utilisation
v Service triangulation
vi Direct vs. Indirect Services (feeder services | relay services | interlining services)
vii Distribution patterns
viii Provision and operation of containers
ix Container lifecycle
x Container service life cycle
xi Size of container fleet
xii Owning vs leasing containers
xiii Inland transport
xiv Rail operations | Block trains
xv Road operations
xvi Inland waterways (quite often is considered part of inland transport)
What are the advantages and disadvantages of retaining the management of logistical operations in-house?
Advantages of retaining In House
* Direct employment and control of staff involved
* Direct communications between logistics staff and all other functions in the company
* Ensures common targets and objectives across the whole business
* A single IT platform can cover logistics as well as production, sales etc.
* Direct negotiations with carriers on rates/services – can get best deal particularly for large exporters/importers
* Individual services can be sub-contracted if required
Disadvantages of retaining In House
* Managing logistics is a distraction from core business
* May not have sufficient scale to get best freight rates
* May not have sufficient scale to attract best logistics staff
* Additional HR tasks to recruit, train and manage specialist staff for logistics functions
* Need to devote resources (including capital) to IT systems, warehousing facilities etc.
What are the advantages and disadvantages to outsourcing the management of logistical operations?
Advantages of Outsourcing
* Easy availability of specialist expertise and systems, including sophisticated pipeline tracking, inventory management, documentary processing etc.
* Major logistics providers have worldwide capability – instant support in new markets
* Logistics providers have strong purchasing power
* No requirement to allocated scarce capital resources for investment in warehouses, transport facilities etc.
Disadvantages of Outsourcing
* Arms length relationship with management of the logistics provider
* Can be difficult to remove/change third party providers
* Longer communication chain
* Provider may subcontract, so further loss of control
* Risk of loss of secure information/business secrets
* A profit element goes to the third party
* Goals of the provider may be different from your own
Describe the pysical assets an intermodal transport company needs at a transfer point
- Infrastructure - sufficient land area with required surface + load bearing strength both for the transfer activity, and to store cargo/units between arrival/departure; additionally ports will require adequate berths and depth of water
- Equipment for transfer and for storage areas e.g. cranes/lifting equipment, transfer vehicles
- Fencing/gate control areas/lighting – security and safety requirements
- Rail sidings if rail connected
- Weighbridge/weighing equipment
- Maintenance and repair facilities for equipment
- Customs/Health inspection facilities (if the area is used for statutory clearances)
- Electric plug in points for refrigerated cargo
- Office Buildings for staff employed at the transfer point, and possibly agents’ offices
Describe the human resources an intermodal transport company needs at a transfer point
- Skilled operators for the equipment used
- Staff to plan/control/manage the operation
It is important to stress the importance of education and training, employment standards, health and safety, communication, 24/7 operations requiring shift work
Describe the IT systems an intermodal transport company needs at a transfer point
- System to track units from arrival to departure at the transfer point, including an accurate record of location, and when moved
- System to record cargo details/weight/hazardous/reefer etc.
- If the transfer point is a port or other customs controlled facility, it will also need systems to manage customs status/clearance etc.
- Planning systems, e.g. container terminals will require a vessel stowage system; rail terminals will require train load planning system
- System to communicate/exchange information with lines/agents/hauliers etc.
- Billing systems
What are the reasons why delays may occur when transfers between modes take place?
- Shortage of physical assets e.g. berths, yard space, gate capacity, equipment to lift/move cargo/containers
- Labour shortages
- Peaks in arrival of ships/trains/trucks
- Failure of IT systems, equipment breakdown
- Adverse weather
- Delays due to regulatory authorities e.g. customs
What is a transfer point in intermodal shipping?
The point at which the goods are transferred from one method of transport to another
Describe the range of services which you would expect a logistics company to offer
- Providing/managing door to door transport (including different modes as required)
- Documentation/Customs clearance etc.
- Shipment Tracking – IT systems to plan and manage the inventory from supplier through to point of use/sale
- Calling forward and/or consolidating cargo at/near point of supply
- Providing and operating warehouse facility(ies) for client;
- Labelling and Packaging
- Local distribution/Last mile delivery
- Management of returns (return to warehouse or supplier, including repackaging or recycling)
How do logistics companies enable the global supply chain to function effectively?
- Regular, reliable and frequent services enable products to be sourced from almost anywhere globally
- Containerisation, together with proper packaging and handling ensure goods are protected from damage/pilfering and arrive in good condition for sale/use at destination
- IT systems provide vital visibility on the supply chain, e.g. stock management, in transit and at warehouse – information in real time; exception reports so that corrective action can be initiated quickly in case of delays
- Providing confidence to the customer that goods will arrive as scheduled, and managing any delays, and consequences of delays
- Supply chain management can reduce overall costs, so making it cost effective to source goods from cheaper suppliers, even if they are further away
- Logistics can combine different modes of transport to give an optimum balance between speed and cost, and manage supplies from different sources, providing resilience in the supply chain
- Managing communications with all parties in the supply chain
Why would a multimodal operator charge different freight rates for door to door FCL shipments of the same cargo, but shipped from A to B compared with B to A?
- Differences in supply vs demand on the different trade legs
- Different dominant vs non dominant legs in many trades
- Availability of capacity (vessel or aircraft space)
- Differences in the level of competition on the different legs
- Container availability (surpluses/deficits)
Why would a multimodal operator charge different freight rates for door to door FCL shipments of the same cargo, on a direct port to port service, compared with a transhipment service
- Longer transit time for transhipment service (not always the case)
- Perceived risk of delay/short shipment with transhipment service
- Costs of the two services will differ; while the transhipment service will have the added cost of transhipment handling and feeding the cargo, a line may offer the transhipment service instead of a direct service to reduce its costs by gaining economies of scale on the main leg of the journey
- Competitive factors – number of direct vs transhipment services offered by competitors
- In different circumstances, a transhipment service may be cheaper or more expensive than a direct service
Explain the difference between a direct port to port shipment and a transhipment service
Direct Port-to-Port Shipment
Definition:
* A direct port-to-port shipment involves transporting goods from the origin port to the destination port on a single vessel, without stopping at intermediate ports for cargo transfer.
Key Characteristics:
* Route Simplicity: Cargo travels directly from one port to another.
* Reduced Handling: No intermediate unloading and reloading.
* Faster Transit Times: As there are no stops for transshipment, delivery times are quicker.
* Lower Risk: Minimal handling reduces the risk of cargo damage or delays.
Typical Usage:
* Frequently used for major trade routes with high cargo volumes between two large ports.
Transshipment Service
Definition:
* A transshipment service involves transferring cargo from one vessel to another at an intermediate port (transshipment hub) before reaching the final destination.
Key Characteristics:
* Intermediate Stops: Cargo is unloaded from one vessel and reloaded onto another for onward transport.
* Longer Transit Times: Additional handling and waiting time at the hub can increase total shipping time.
* Increased Handling Risk: More handling increases the potential for damage or misplacement of cargo.
* Cost Variability: Often more economical for routes where direct service isn’t feasible but may include additional handling fees.
Typical Usage:
* Used for less frequent trade lanes or smaller ports not serviced directly.
* Common in hub-and-spoke logistics models where regional ports rely on larger hubs for connectivity.
In what scenarios woukld you use a transhipment service vs door to door?
Direct Port-to-Port:
* Time-sensitive shipments.
* Cargo moving between major ports with high demand.
Transshipment:
* Cargo destined for smaller or remote ports.
* Cost-sensitive shipments where additional time is acceptable.
Why would a multimodal operator charge different freight rates for door to door FCL shipments of the same cargo between the same two points, but shipped by two different shippers?
- Different volumes of cargo
- Contract or spot business
- Different shippers may have a different importance as a customer to the carrier (e.g. multi-trade support)
- Regularity/reliability of shipments
- Prices offered by competition
Explain the role which distribution centres have for a company importing consumer goods
- A location for keeping stock, strategically placed for delivery to the point of sale/consumption
- Warehousing activities to ensure safe and secure storage of stock including records at SKU level, and access to stock as required
- Used for assembly of loads of goods from different origins for delivery to final location (e.g. retail outlet), optimising load sizes/types of product to individual destinations
- Labelling/pricing/retail packaging for the specific destination market(s)
- Management of returns, environmentally appropriate disposal of packaging, unusable stock etc.
- Ensure stock availability at short notice to deal with variable/unexpected demand
What are the advantages and disadvantages of operating with a single distriburtion centre in a particular country compared with several smaller centres?
Advantages of a single centre:
* Reduces total stock holding/warehousing costs (capital, systems, overheads etc.) due to economies of scale
* Stock can be diverted to different retail outlets to respond to short term changes in demand
* Requirements for retail packaging, pricing etc. can be centralised at a single location
* Returns can be handled through a standard processing centre
* Multiple centres increase overall costs/complexities of operation
Advantages of multiple centres:
* Orders can be responded to more swiftly as DCs are closer to end user
* Shorter distances for retail delivery – may reduce overall transport costs
* Individual centres being smaller will be more customer focused/designed to meet specific requirements
* In case of operational problems with a single centre all deliveries are affected; with multiple centres there are alternatives in case of problems with one of the centres
Explain the different factors which should be considered by a business which is importing and selling finished goods when deciding what level of inventory to hold
- Lead time for supply (use of different modes)
- Reliability of supply, including alternative/emergency sources of supply
- Variability in demand (what factors affect consumer demand)
- Quality of forecasting
- Perishability
Explain the main differences between a bill of lading and a waybill
A bill of lading is a formal transport document that serves three main functions: it acts as a receipt for goods, evidence of a contract of carriage, and a document of title. As a document of title, it allows ownership of the goods to be transferred by endorsement, making it negotiable. Delivery of the goods requires the presentation of the original bill of lading, ensuring control over the cargo. This document is commonly used in international trade, particularly in transactions involving letters of credit or when the goods may be resold during transit. However, its reliance on the original document can lead to delays if the bill is not available at the destination.
A waybill, in contrast, is a simpler, non-negotiable document that also serves as a receipt and evidence of a contract of carriage but does not act as a document of title. Ownership of the goods cannot be transferred via a waybill, and delivery is made directly to the named consignee without needing the original document. This makes waybills ideal for straightforward shipments where the consignee is fixed, payment has already been secured, or quick delivery is essential. While a waybill reduces the risk of delays, it offers less security for trade finance or ownership transfer.
Explain the main differences between a straight bill of lading and a ‘to order’ bill of lading
A straight bill of lading is a non-negotiable document where goods are consigned to a specific named party (the consignee) and cannot be transferred to another party. Delivery is made only to the named consignee upon proof of identity. This type of bill is commonly used when payment has already been made or for internal shipments, as it involves no transfer of ownership. On the document, the consignee box is completed with the consignee’s name, and the “to order” field remains blank.
A ‘to order’ bill of lading, on the other hand, is negotiable, allowing the transfer of ownership through endorsement. It is typically used in international trade when goods may be resold during transit or when payment is secured through a letter of credit. The consignee is listed as “To Order” or “To Order of [Named Party],” and delivery requires the presentation of the endorsed original bill at the destination. Endorsement can be blank (transferable to the bearer) or specific (transferable to a named party). This flexibility makes ‘to order’ bills ideal for trade finance but carries a higher risk if mishandled or stolen.
Explain the differences between a through transport bill of lading and a combined transport bill of lading
A through transport bill of lading is a document used for shipping goods across multiple modes of transport but under a single contract. While it provides the convenience of a unified contract for the entire journey, the carrier issuing the bill takes responsibility only for the segment of the transport it directly operates. For the other legs of the journey, the carrier acts as an intermediary, arranging transport with other parties. This type of bill is typically used when the carrier is not equipped to handle the full multimodal logistics chain but coordinates the movement on behalf of the shipper.
A combined transport bill of lading, on the other hand, covers the shipment across multiple modes of transport under a single contract and makes the carrier responsible for the entire journey from origin to destination, regardless of whether it operates all the transport modes directly. The issuing carrier takes on a multimodal transport operator (MTO) role, bearing liability for the entire transit process. This type of bill is commonly used in multimodal transport systems where seamless integration and accountability across different legs of the journey are critical for efficient delivery and customer assurance.
While both documents facilitate multimodal transport, the key difference lies in the liability: a through transport bill limits the carrier’s responsibility to its operated segment, whereas a combined transport bill holds the carrier liable for the entire transportation chain.
Explain the origin and development of incoterms
Introduction and Role of the ICC:
Incoterms (International Commercial Terms) were first introduced in 1936 by the International Chamber of Commerce (ICC). Their purpose was to create a standardized set of terms for international trade to avoid misunderstandings arising from the varying interpretations of shipping practices across different countries. The ICC, as a global trade body, developed these terms to promote clarity and uniformity in global commerce.
Regular Updates:
To keep pace with the evolving nature of international trade, the ICC regularly updates Incoterms to reflect changes in transportation practices, technologies, and trade agreements. The most recent versions include Incoterms 2010 and the newly updated Incoterms 2020, which incorporate adjustments to align with current trading realities. These revisions ensure the terms remain relevant and practical for global use.
Explain the role of incoterms in international commerce
Purpose and Scope:
Incoterms serve as a universally recognized set of rules that define the responsibilities of buyers and sellers in international transactions. They clarify key aspects of a contract of sale, including the division of costs, risks, and responsibilities related to the delivery of goods. By standardizing these terms, Incoterms reduce disputes and misunderstandings in cross-border trade.
Parts of the Contract Covered by Incoterms:
Delivery Point: When and where the seller’s obligations are fulfilled.
Risk Transfer: The point at which the risk of loss or damage transfers from seller to buyer.
Cost Allocation: Who is responsible for various expenses such as transport, insurance, and customs duties.
Parts Not Covered by Incoterms:
Price or payment terms.
Ownership or title transfer of goods.
Breach of contract or remedies.
Specific details of insurance (unless specified in terms like CIF or CIP).
What are the key features of incoterms? Describe their inclusion in contracts and the different classifications
Incorporation into Contracts:
* Incoterms are not automatically applied to contracts. For them to be effective, the specific term must be explicitly mentioned in the contract, e.g., “CIF Shanghai Incoterms 2020.”
* There is no regulatory requirement to use Incoterms, but they are widely adopted as a best practice.
Classification of Incoterms:
Incoterms are categorized into four groups based on the delivery point and division of responsibilities:
* E Terms (Departure): e.g., EXW (Ex Works) – Seller fulfills obligations at the seller’s premises.
* F Terms (Main Carriage Unpaid): e.g., FCA, FAS, FOB – Buyer arranges main transport.
* C Terms (Main Carriage Paid): e.g., CIF, CIP, CFR – Seller arranges and pays for main transport but risk passes earlier.
* D Terms (Arrival): e.g., DAP, DDP – Seller bears most responsibilities until delivery at the destination.
Certain terms like FAS (Free Alongside Ship), FOB (Free on Board), CFR (Cost and Freight), and CIF (Cost, Insurance, and Freight) are specific to maritime transport.
Explain EXW incoterm
EXW (Ex Works)
Definition: The seller makes the goods available at their premises. The buyer is responsible for all costs and risks involved in transporting the goods.
Responsibility:
* Seller: Makes goods available at a designated location (e.g., factory, warehouse).
* Buyer: Organizes and pays for all transport stages, including loading, export/import clearance, and duties.
Export/Import Clearance: Buyer is responsible for both export and import clearance and duties.
Risk Transfer: Passes from the seller to the buyer when goods are made available at the seller’s premises.
Insurance Obligations: No obligation on either party to insure the goods.
Explain FCA Incoterm
FCA (Free Carrier)
Definition: The seller delivers the goods to a carrier or another nominated party at a specified place.
Responsibility:
* Seller: Responsible for transport to the specified delivery point and export clearance.
* Buyer: Pays for main carriage, import clearance, duties, and onward delivery.
Export/Import Clearance: Seller handles export clearance; buyer handles import clearance and duties.
Risk Transfer: Passes when goods are delivered to the carrier or nominated party at the agreed location.
Insurance Obligations: No obligation, but either party may choose to insure.
Explain FOB Incoterm
FOB (Free On Board) – Maritime Only
Definition: The seller delivers the goods on board the ship at the port of shipment.
Responsibility:
* Seller: Pays for transport to the port of shipment and loading onto the vessel; handles export clearance.
* Buyer: Pays for ocean freight, import clearance, duties, and onward delivery.
Export/Import Clearance: Seller handles export clearance; buyer handles import clearance and duties.
Risk Transfer: Passes when the goods are loaded onto the vessel.
Insurance Obligations: No obligation, but the buyer often chooses to insure.
Explain CIF Incoterm
CIF (Cost, Insurance, and Freight) – Maritime Only
Definition: The seller arranges and pays for transport to the destination port, including insurance.
Responsibility:
* Seller: Pays for ocean freight, insurance, and loading at the port of shipment.
* Buyer: Pays for import clearance, duties, and onward delivery.
Export/Import Clearance: Seller handles export clearance; buyer handles import clearance and duties.
Risk Transfer: Passes when the goods are loaded onto the vessel at the port of shipment.
Insurance Obligations: Seller must provide insurance covering the buyer’s risk to the destination port.
Explain CFR incoterm
CFR (Cost and Freight) – Maritime Only
Definition: The seller arranges and pays for transport to the destination port but does not provide insurance.
Responsibility:
* Seller: Pays for ocean freight and loading at the port of shipment.
* Buyer: Pays for import clearance, duties, and onward delivery.
Export/Import Clearance: Seller handles export clearance; buyer handles import clearance and duties.
Risk Transfer: Passes when the goods are loaded onto the vessel at the port of shipment.
Insurance Obligations: No obligation on the seller; the buyer should insure the goods.
Explain DAP Incoterm
DAP (Delivered at Place)
Definition: The seller delivers the goods to the buyer at a named destination, ready for unloading.
Responsibility:
* Seller: Responsible for transport to the named destination, including export clearance.
* Buyer: Pays for unloading, import clearance, and duties.
Export/Import Clearance: Seller handles export clearance; buyer handles import clearance and duties.
Risk Transfer: Passes when the goods are made available at the named destination, ready for unloading.
Insurance Obligations: No obligation on either party, but either may choose to insure.
Explain DDP Incoterm
DDP (Delivered Duty Paid)
Definition: The seller delivers the goods to the buyer at a named destination, with all costs, risks, and duties paid.
Responsibility:
* Seller: Responsible for all transport costs to the destination, including duties, taxes, and import clearance.
* Buyer: Pays for unloading at the final destination.
Export/Import Clearance: Seller handles both export and import clearance and pays duties.
Risk Transfer: Passes when the goods are made available at the named destination, ready for unloading.
Insurance Obligations: No obligation on either party, but the seller may choose to insure.
Explain CPT Incoterm
CPT (Carriage Paid To)
Definition: The seller arranges and pays for transport to a named place, but the buyer bears the risk once the goods are handed over to the first carrier.
Responsibility:
* Seller: Pays for transport to the named destination and export clearance.
* Buyer: Pays for import clearance, duties, and onward delivery.
Export/Import Clearance: Seller handles export clearance; buyer handles import clearance and duties.
Risk Transfer: Passes when the goods are handed to the first carrier, not at the destination.
Insurance Obligations: No obligation on the seller; the buyer should insure the goods.
Explain CIP Incoterm
CIP (Carriage and Insurance Paid To)
Definition: Similar to CPT, but the seller also provides insurance for the goods to the named destination.
Responsibility:
* Seller: Pays for transport, insurance, and export clearance.
* Buyer: Pays for import clearance, duties, and onward delivery.
Export/Import Clearance: Seller handles export clearance; buyer handles import clearance and duties.
Risk Transfer: Passes when the goods are handed to the first carrier.
Insurance Obligations: Seller must provide insurance covering the buyer’s risk to the named destination.
Explain the term ‘INCOTERMS 2020’ and their significance in multimodal transport
- Standard terms for use in contracts of sale, produced by ICC
- 2020 is latest version (replaced INCOTERMS 2010 on 1.1.2021, but older version(s)
can still be used) - Identify buyer’s and seller’s responsibilities for organisation and cost of transport
(and insurance) and when risk passes from seller to buyer - Need to incorporate explicitly in the contract – and to state which version
- Split into 4 groups; E, F, C and D
- Updates from 2010; DPU replacces DAT, broader insurance requirements for CIP, enhanced flexibility for FCA, clarifty on transit modes and costs, inclusion of security obligations
- Used extensively in contracts of sale for multimodal shipments
What are the key updates in INCOTERMS 2020 vs 2010?
DPU replaces DAT.
* New Term: DPU (Delivered at Place Unloaded) replaces the 2010 term DAT (Delivered at Terminal).
* Key Difference: DPU allows delivery at any location, not just a terminal, provided the seller unloads the goods.
Broader insurance requirements for CIF and CIP.
* CIF (Cost, Insurance, and Freight): Insurance requirements remain the same (minimum cover).
* CIP (Carriage and Insurance Paid To): The 2020 rules require broader insurance coverage (Institute Cargo Clauses A) unless otherwise agreed.
Enhanced flexibility for FCA with on-board bills of lading.
* New Option: Under FCA, sellers can request an on-board bill of lading from the carrier, even though the goods are delivered to the carrier before loading onto the vessel. This aligns better with trade financing practices, such as letters of credit.
More clarity on transport modes and costs.
* Incoterms 2020 provide clearer guidance on their application across all modes of transport or specific to maritime transport, improving usability for multimodal logistics.
* Each term in Incoterms 2020 includes detailed guidance on costs, risks, and responsibilities, making them easier to understand and apply.
Explicit mention of security obligations.
* Incoterms 2020 explicitly address security-related responsibilities for buyers and sellers, reflecting the increasing importance of supply chain security.
Explain NVOCCs and their significance in multimodal transport
An NVOCC (Non-Vessel Operating Common Carrier) is an entity that provides ocean freight services without operating its own vessels. Instead, it acts as a principal in the supply chain, contracting with ocean carriers to arrange the transport of goods. NVOCCs issue their own bills of lading to customers and assume the role of a carrier for the shipment, even though they do not physically move the goods by sea.
In multimodal transport, NVOCCs play a critical role by coordinating the movement of goods across multiple transport modes (ocean, road, rail) and managing logistics from origin to destination. They ensure seamless through-transport by integrating different legs of the supply chain.
How do NVOCCs act as a principal rather than an agent? Compare this with forwarding agents
Acting as a Principal:
* NVOCCs negotiate directly with ocean carriers, securing favorable freight rates and space allocations. They then sell these services to their customers, effectively becoming the “carrier” in the transaction.
* The relationship with ocean carriers is contractual, where NVOCCs act as customers purchasing capacity in bulk to offer flexible solutions to shippers.
Contrast with Forwarding Agents:
* Forwarding agents act as intermediaries or brokers, arranging transportation services on behalf of the shipper. They do not issue their own bills of lading or assume carrier responsibility.
* NVOCCs, in contrast, take on liability for the goods and issue their own transport documents, offering greater control and flexibility.
What are the main services provided by NVOCCs?
LCL (Less than Container Load)/Groupage Services:
Consolidating multiple smaller shipments from different shippers into a single container.
Efficient use of container space reduces costs for small and medium-sized exporters/importers.
FCL (Full Container Load):
Arranging transport for full container loads for customers with larger cargo volumes.
Calling Forward and Consolidation:
Coordinating the movement of goods to consolidation hubs for efficient containerization.
Helps streamline shipping schedules and reduce costs.
Documentation:
Issuing NVOCC bills of lading.
Managing shipping instructions, customs clearance, and regulatory compliance.
Value-Added Services:
Cargo tracking, insurance arrangements, packaging, and labeling.
Assisting with customs clearance and warehousing.
Supply Chain Management:
Offering end-to-end logistics solutions, integrating transport, warehousing, and distribution.
Optimizing supply chains to reduce costs and transit times.
What is the benefit to the cutomer of using an NVOCC?
Cost Efficiency:
Bulk negotiations with carriers allow NVOCCs to offer competitive freight rates.
Flexibility:
LCL services and consolidation options make NVOCCs ideal for businesses of all sizes.
Global Reach:
Strong networks with carriers and local agents ensure access to diverse routes and services.
Simplified Logistics:
Comprehensive solutions reduce the complexity of managing multimodal shipments.
Liability Coverage:
Customers benefit from the NVOCC’s carrier liability, offering security and accountability.
Give examples of NVOCCs and explain their specialisms
Kuehne + Nagel:
* Specializes in comprehensive logistics and supply chain management.
* Known for advanced digital platforms, global reach, and expertise in industries like pharmaceuticals, automotive, and consumer goods.
Expeditors:
* Focuses on tailored logistics solutions with strong expertise in customs brokerage.
* Excels in high-value, time-sensitive shipments, and multimodal transport coordination.
C.H. Robinson:
* Offers robust multimodal transport and supply chain services, including advanced freight consolidation.
* Specializes in leveraging technology for real-time tracking and cost optimization.
Flexport:
* A tech-driven NVOCC focusing on transparency and visibility in supply chains.
* Specializes in integrating data analytics and digital platforms for efficient logistics management.
Damco (Maersk’s NVOCC Arm):
* Expertise in end-to-end supply chain solutions and multimodal transport.
* Strong focus on flexibility and global logistics network integration, backed by Maersk’s resources.
Sinotrans:
* China-based NVOCC with a focus on large-scale consolidation and Asia-Europe trade routes.
* Specializes in managing high-volume freight and providing cost-effective solutions for exporters and importers.
Define the hub and spoke model
The hub and spoke model is a logistics and transportation framework where a central hub serves as the primary transshipment point for cargo, which is then redistributed to smaller destinations (spokes) via feeder services. This system optimizes scale and efficiency by concentrating large cargo volumes at hubs, using larger vessels or transport modes for long-haul routes, and smaller ones for regional or local distribution.
Compare the hub and spoke model to direct port-to-port services. When would you use hub and spoke over port-to-port?
**Direct Port-to-Port: **
Cargo is transported directly from the origin port to the destination port without intermediate stops. It is faster but requires high cargo volumes between the two ports to remain cost-effective.
**Hub and Spoke: **
Ideal when cargo volumes between two points are insufficient for direct services. It consolidates shipments at a hub, enabling cost-effective large-scale transport over long distances.
Circumstances Favoring Hub and Spoke:
* Trade routes with dispersed demand across multiple smaller ports or regions.
* Situations requiring efficient use of large vessels for long-haul routes and flexible redistribution.
* Ports or regions with limited direct service availability.
Describe the importance of hub locations in the hub and spoke model, and how hubs can be optimised
Geographic Location:
* Hubs are typically located near major trade routes or regions with high cargo demand.
* Proximity to inland transport networks (road, rail, and air) is critical for seamless intermodal operations.
Facilities Provided:
* Large container terminals with advanced handling equipment (e.g., cranes for large vessels).
* Ample storage areas for containers awaiting transshipment or delivery.
* Robust customs, security, and inspection services to streamline operations.
* Connectivity to inland transportation for efficient onward distribution.
Key Factors for Effective Hubs:
* Deep-water ports to accommodate large vessels.
* Advanced technology for cargo tracking and coordination.
* Efficient turnaround times and minimal congestion.
What are the main benefits of the hub and spoke model
Cost Efficiency: Reduces per-unit transport costs by consolidating shipments.
Resource Optimization: Large vessels and transport modes are used effectively for long-haul routes.
Scalability: Easily accommodates fluctuating demand by adjusting feeder services.
Improved Connectivity: Links smaller regions or ports to global trade routes through hubs.
What is UCP 600 and its significance to multimodal transport?
- Stands for Uniform Customs and Practice for Document Credits
- Set of rules issued by ICC for Documentary Credits (aka LCs)
- UCP600 is latest version (applicable as of 1.1.2007)
- Needs to be stipulated in contracts
- Contains 39 articles
- Used extensively for multimodal shipments on letters of credit
LCs
What are the key principles of UCP 600?
-
Irrevocable Nature of Credits
All credits issued under UCP600 are irrevocable unless explicitly stated otherwise.
This means the issuing bank guarantees payment to the beneficiary, provided the terms and conditions of the credit are strictly met. -
Types of Documents Covered
UCP600 governs the handling of various trade-related documents, including:
* Commercial Invoice: Proof of sale, must conform to the terms of the credit.
* Transport Documents: Includes bills of lading, air waybills, rail or road consignment notes, and courier receipts.
* Insurance Documents: Policies or certificates showing adequate coverage.
* Certificates: Includes inspection certificates, origin certificates, weight certificates, etc.
* Packing List: Details the contents and arrangement of the shipment. -
Principle of Strict Compliance
Banks examine documents strictly against the terms and conditions of the credit.
Any discrepancies, even minor ones, can lead to rejection of the documents. -
Role of Banks
Issuing Bank: Undertakes to pay the beneficiary upon presentation of complying documents.
Advising Bank: Notifies the beneficiary of the credit’s issuance but assumes no payment liability unless acting as a confirming bank.
Confirming Bank: Adds its payment guarantee, ensuring payment even if the issuing bank defaults. -
Presentation and Examination of Documents
Documents must be presented within the time specified in the credit (maximum of 21 days after shipment unless stated otherwise).
Banks have a maximum of five banking days to examine the documents for compliance. -
Partial Shipments and Transshipments
Partial Shipments: Allowed unless explicitly prohibited by the terms of the credit.
Transshipments: Permitted unless the credit specifies otherwise, with allowances for containerized goods. -
Standard for Letter of Credit (L/C) Terminology
UCP600 establishes standardized terms and conditions for letters of credit to minimize ambiguity. -
Use of Electronic Records
Recognizes the possibility of electronic presentations under specific conditions agreed by all parties. -
Banks’ Liability and Responsibility
Banks deal with documents, not goods, services, or performance of the underlying contracts.
They are not liable for the quality or value of goods/services, only for verifying the compliance of presented documents. -
Independence Principle
The letter of credit is independent of the underlying sales or service contract, and banks are not concerned with disputes between the buyer and seller.
What is the FMC and how is it significant to multimodal shipping?
- Federal Maritime Commission
- USA Regulatory Body set up in 1961 to oversee overseas shipping
- Enforcement of provisions of the various US Shipping Acts, such as the shipping act of 1984, ocean shipping reform act 1998, foreign shipping practices act 1998, jones act
- Objective is fair and efficient shipping for benefit of US exporters/importers and
consumers; protection from unfair competition - Scrutinises agreements between shipping lines, which need to be filed with and
approved by FMC (mainly conference, VSA and Alliance agreements) - Monitors shipping tariffs, and confidential service contracts which have to be filed
with the FMC - Key regulator for multimodal operators with services to/from USA
What is the CMR and what is its significance in multimodal shipping?
The CMR (Convention on the Contract for the International Carriage of Goods by Road), adopted by the UNECE in 1956 and in force since 1961, standardizes the rules for international road transport. It applies to commercial road transport between countries where at least one is a contracting party and can govern the road leg of multimodal transport under a single contract. The convention requires a CMR consignment note, detailing the parties, goods, and delivery instructions, though the contract remains valid without it. The carrier is liable for loss, damage, or delay during their custody, with compensation capped at 8.33 SDR per kilogram, but is exempt in cases like force majeure, inherent defects in goods, or shipper negligence. The CMR provides a harmonized legal framework that facilitates cross-border trade and logistics.
Define SDR as used liability protocols
SDR (Special Drawing Rights) is an international monetary unit created by the International Monetary Fund (IMF) to serve as a supplementary reserve asset and a standard of value in international agreements. In the context of conventions for the carriage of goods, SDR is used as a basis for calculating compensation for loss, damage, or delay of goods.
Definition:
It represents a basket of major currencies, including the U.S. Dollar, Euro, Chinese Yuan, Japanese Yen, and British Pound, ensuring stability against fluctuations in any single currency.
Application :
Compensation for loss or damage is typically limited to X SDR per kilogram of gross weight of the lost or damaged goods.
Compensation for delays is capped at the freight charge, also calculated using SDR.
Why Use SDR?
It provides a consistent and fair standard of value across multiple countries, avoiding complications from currency fluctuations in international trade and transport agreements.
Conversion to Local Currency:
The value of SDR is published daily by the IMF and can be converted into the local currency of the involved countries at the time of claim settlement.
Using SDR ensures that liability limits remain equitable and universally applicable, regardless of the specific currencies used in the transport contract.
Explain what is meant by a ‘Just in Time’ supply chain
A Just-in-Time (JIT) supply chain is a logistics and production strategy designed to minimize inventory levels by synchronizing the delivery of materials and goods with their immediate need in production or sale. The goal is to have products or components arrive “just in time” for use, reducing storage costs, waste, and tied-up working capital.
Minimized Inventory:
* Materials, components, and finished goods are only produced or delivered as required, keeping inventory levels low.
Demand-Driven Production:
* Operates based on actual demand rather than forecasts, reducing overproduction and obsolescence.
Streamlined Processes:
* Efficient coordination between suppliers, manufacturers, and distributors to ensure smooth operations and precise timing.
High Dependence on Reliability:
* Relies on dependable suppliers, accurate forecasting, and robust logistics to prevent disruptions.
Short Lead Times:
* Focuses on reducing the time between ordering, delivery, and use.
What are the main advantages and disadvantages to a JIT supply chain?
Advantages
* Minimises ‘wasted’ inventory holding costs, including capital/financing cost of stock,
and costs of providing/operating warehousing space
* Avoids risk of damage to and loss of warehoused stock
* Avoids risk of obsolescence; in the context of car assembly it avoids holding stocks of
parts for many different models, where customer preferences may change rapidly
Disadvantages
* Risk of running out of stock – financial and reputational consequences
* Consequences of unforeseen demand change – explain the importance of
forecasting
* Consequences of delays in supply chain and at point of manufacture – and the need
to have alternative plans, including alternative suppliers, alternative modes/routes
(resilience in the supply chain)
What different factors (other than price) should a manufacturer look for
when choosing a multimodal transport operator to provide the transport services
as part of a JIT supply chain?
Key service factors:
* Speed
* Frequency
* Reliability
* Transparency of data on cargo movement (including appropriate routine and
exception reports to the customer)
Additional factors:
* Global coverage (of markets important to the manufacturer)
* To what extent the operator owns/controls the key parts of the supply chain
* Expert assistance/advice with cargo transport and related issues
* Timeliness/Quality of documentation
* Range/quality of E Commerce products (ease of access to information/time saving)
* Guaranteed space availability per sailing
* Environmental credentials (e.g. demonstrating approach to minimising pollution,
carbon emissions etc.)
What are the main business functions associated with managing a fleet of containers?
- Ensuring the operator has a fleet of containers (of different sizes and types) to meet its business needs
- Determining and procuring the optimum mix of owned and leased containers
- Tracking the location and status of all its containers to ensure proper records of the company’s assets, and to provide a ‘real time’ database of its fleet for forward planning purposes; this should also provide information on containers delayed bycustomers so that detention/demurrage charges can be calculated
- Managing the leased containers in its fleet in accordance with the terms of the lease agreements, including the correct payment of daily hire rates, and that pick up and drop off of containers comply with the terms of the agreement
- Managing the maintenance and repair of containers in accordance with regulatory requirements (CSC Convention and national laws) and company standards, including scrapping/selling containers as required
- Planning the level of container stocks at every location in order to meet customer requirements, including the use of forecasting and planning techniques
- Implementation of plans to deal with surpluses/deficits of containers, through leasing in/out, cabotage, imbalance movements, container type substitution, commercial incentives etc.
