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ASSIGNMENT REFERENCE MATERIAL (2020-21)
I.B.O.-05
International Marketing Logistics
Q-1 (a) Outline the structure of civil aviation in India and discuss the role of AAI and
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DGCA in the functioning of air services in India.
Ans. The Ministry of Civil Aviation of the Government of India is the apex body in the
regulatory/ (organisational) structure of Civil Aviation in India. The ministry of Civil
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Aviation is responsible for the formulation of national policies and program’s for
development and regulation of Civil Aviation and for devising and implementing schemes for
orderly growth and expansion of civil air transport. Its functions also extend to overseeing the
provisions of airport facilities, air traffic services and carriage of passengers, goods, and
services. Within its administrative perview lie three distinct functional entities namely
.
regulatory cum development, operational, ' and infrastructural.
ba
A) Regulatory Functions:- The Directorate General of Civil Aviation and the Bureau of
Civil Aviation security performs the regulatory functions, which is responsible for ensuring
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adequate security arrangements at the airports in all its aspects.
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a
B) Operational Functions:- The operational functions are performed by Air India ltd., and
other scheduled non-scheduled airline operators. Air India ltd. (Al) provides International air
b
services to/from India, Indian Airlines ltd. and other scheduled non-scheduled operators are
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responsible for providing domestic air service in the country. Indian Airlines ltd. Provides
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International Air service to some of the neighboring countries Pawan Hans ltd. Provides
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helicopter support service primarily to the petroleum sector.
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C) Infrastructural Functions:- The Airport Authority of India provides the infrastructural
facilities, which is responsible for the management of 92 airports, including the five
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International airports Delhi, Mumbai, Calcutta, Chennai, and Thiruvananthapuram, and 28
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civil enclaves at the defence airports. The airport authority of India was formed on 1st April
1995 by the merger of International airport (authority) of India.
The Airports Authority of India (AAI) is an organization working under the Ministry of Civil
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Aviation that manages all the airports in India. The AAI manages and operates 126 airports
including 12 international airports, 89 domestic airports and 26 civil enclaves. The corporate
headquarters (CHQ) are at Rajiv Gandhi Bhawan, Safdarjung Airport and New Delhi. V.P
Agrawal is the current chairman of the AAI. The AAI was formed on 1 April, 1995 by
merging the National Airports Authority (NAA) and the International Airports Authority of
India (IAAI), to create a centralized organization that could effectively manages both the
international and domestic airports. Presently, it is owned 100 per cent by the Government of
India.
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AAI Formation Composition Structure and Functions
The Airports Authority of India (AAI) was formed on 1 April, 1995 by merging the
International Airports Authority of India and the National Airports Authority with a view to
accelerate the integrated development, expansion and modernization of the operational,
terminal and cargo facilities at the airports in the country conforming to international
standards.
Mission:- Progress through excellence and customer satisfaction with world class airports
and air traffic services fostering economic development.
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Organization
The Board
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The composition of the Board of AAI as on 30.9.1999 consisted of a Chairman, the DGCA as
the Ex-officio member, four whole time members and five part-time members.
Main Functions
.
The main functions of AAI are:
•
a
To control and manage the entire Indian airspace (excluding the special user
airspace) extending beyond the territorial limits of the country, as accepted by ICAO.
b
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• Provisioning of Communication and Navigational aids, viz. ILS, DVOR,
DME, Radar, etc.
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a
• To Design, Construct, Operate and Maintain International Airports and
b
Domestic Airports, Civil Enclaves at Defence Airports.
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• Development and Management of International Cargo Terminals.
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• Provisioning of Passenger Facilitation and Information System.
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• Expansion and Strengthening of Operational areas, viz. Runways, Apron,
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Taxiways, etc.
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• Provisioning of Visual Aids.
(b) What do you understand by the conference system in liner shipping operations?
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Explain its utility and concept of pooling arrangements.
Ans. A conference is an association of two or more liner shipping companies operating in a
well defined trade, plying a fixed route or routes within a certain geographical limits, who
agreed to abide by its regulations to their mutual benefit and quote the same rates of freight
with other agreed conditions.
The main focus of conference is upon eliminating price competition between member liners.
Maintenance of a common tariff and set of rules helps them in this. The conferences are
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basically of two types, closed and open conference. In the closed systems, the entry of new
shippers is controlled by existing members while in the open system any liner may join them
by demonstrating its ability to place suitable tonnage and give necessary berth coverage.
The main purpose of the conference is to eliminate price competition (not service
competition) between member liners. This is achieved by maintaining a common tariff and
rules. Besides, with a view to reducing and, of possible, eliminating competition from other
liner operators who are not members of conference, the conference enters into loyalty
agreement with the shipper to seek their patronage by offering them some inducement in
form of loyalty contract and/or deferred rebate system.
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Q-2 (a) What are the major aspects of strategic logistics planning? Explain these aspects
and enumerate the factors that influence logistics planning.
Ans. Strategic logistics planning is done keeping in view both the crucial factors, i.e.
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manufacturing and physical distribution. Manufacturing decisions include degree of vertical
integration, the number, size and locations of manufacturing units, technologies to be used,
production plan to be followed, which products to be produced and which product to be
purchased, etc. On the other hand, physical distribution planning includes decisions such as
locations of the warehouse, quantity of inventory to be maintained, means of transport to be
.
used, etc. The Main aspects of it are:
(1)
a
Leveraging Logistics: In performing strategic logistics planning, companies
often look for ways to leverage logistics. This means that companies address themselves to
b
the basic question of how logistics can be used to provide a distinctive and competitive
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advantage. Rather than focusing on ways to make the existing system more efficient, a
company which is leveraging logistics should address itself to the question of how it can
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a
meaningfully distinguish itself through its physical distribution capability.
b
(2) Evaluating Impact: The second aspect of strategic logistics planning is
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evaluating the impact of proposed corporate plans. This involves participation in the
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corporate strategic planning process by the physical distribution executives. Physical
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distribution managers should assist in developing as well as evaluating the corporate strategic
plans. As part of the strategic planning process, the distribution executive should pose such
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questions as to whether the marketing advantage gained by producing a full product line is
worth the cost of making and carrying the full product line, or whether the competitive
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advantage of superior customer service is worth the cost of doing that.
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(3) Supporting the Corporate Strategic Plan: The final aspect of strategic
logistics planning involves supporting the corporate strategic plan. Once a corporate plan is
articulated and agreed upon, this aspect of strategic logistics planning involves developing a
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plan for the logistics area that supports this corporate plan and allows the functional area to
perform in the most efficient manner possible.
(b) What is Maritime Fraud? State the various factors that lead to commitment of
maritime fraud.
Ans. Maritime Fraud: Maritime fraud is co-existent with maritime trade.
Definition of a fraud: An international trade transaction involves several parties-exporter,
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importer, ship-owner, charterer, ship’s master, officers and crew, insurer, banker, broker or
agent, and freight forwarder. Maritime fraud occurs when one of these parties unjustly takes
another’s goods or money. In some cases, several of these parties act in collusion to defraud
another. Banks and insurers are often the victims of such frauds.
Maritime fraud occurs when one of the parties involved in an international trade transaction
like the buyer, seller, ship owner, charterer, ship’s master or crew, insurer, banker, and broker
or agent illegally secures money or goods from another party to whom, on the face of it, he
has undertaken specific trade, transport and financial obligations.
International maritime trade has always been witnessing fraudulent practices from time to
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time. History of maritime trade frauds is as old as of ocean trade itself.
In liner trade the individual cargo parcels/consignments are very small, ranging from a few
kilos to up to, say, 2/3 tonnes. Thus the parcel size is never adequate enough to fill a whole
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ship and the ship owner aggregates the parcels of various shippers in a ship from the port to
various ports enroute. The various types of cargoes and various modes of transportation used
in carrying them from one destination to another make them highly vulnerable. It provides
enough scope for cheats and fraudulent people to deceive the seller by either parting with his
cargo or defrauding the ship owner or not making the payment to the seller after receiving the
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goods. The parties indulging in fraudulent practices use various modus operandi including
a
forging of documents, creating fake Letter of Credit/Bill of Lading, impersonation, false
representation, either directly or through their bankers, etc. The possibilities and probabilities
are innumerable. In fact, it poses the biggest threat to international trade and business.
b
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Q-3 Briefly comment on the following:
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a
(a) Warehouses add to the time and place value of goods.
b
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Ans. Storage is very essential for all economic sectors. Growth of storage capacity and
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facilities of a country shows its economic development. Warehousing services are part and
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parcel of trade and commerce. The necessity for storage arises fundamentally out of lack of
adjustment between the time and place of production of goods place of their consumption.
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Storage is also required for inter-temporal and inter-spatial adjustments. The need for storage
also arises from division of labour.
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Any programme or project of agricultural and industrial development should have component
of storage and warehousing. Those who have ignored this important aspect of physical
distribution at the stage of initial planning have learnt it the hard way. It is now recognized
that these facilities require careful planning.
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Warehousing is an important link in the chain of marketing. Warehouses add to the time and
place value of goods. These also smoothen out fluctuations in supply and demand which are
often influenced by natural events and national polices. With the gradual change in the
pattern of production, intra and interstate trading activities, modes of transport and the
systems of marketing, different types of warehouses have emerged to suit the requirements of
trade.
(b) During the last three decades Multi – Modal Transportation has made rapid
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progress.
Ans. Multimodal transport (also referred to as combined transport) is the transportation of
goods under a single contract but performed with at least two different means of transport. i.e.
the carrier (in a legal sense) is liable for the entire carriage even though it is performed with
several different means of transport (e.g. Rail, Sea and Road). The carrier, however, does not
have to be in the possession of all of the means of transport and in practice usually not. The
carriage is often performed by using sub-carriers, in legal language often referred to as actual
carriers. The carrier that is responsible for the entire carriage is referred to as a Multimodal
Transport Operator (MTO). Multimodal Transport can be viewed as, The chain that
interconnects different links or modes of transport like Air, Sea, and Land into one complete
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process that ensures an efficient and cost-effective door-to-door movement of goods under
the responsibility of a single transport operator which is known as a Multimodal Transport
Operator (MTO), on one transport document.
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Transportation from shipper’s premises to gateway port usually required transportation
through Road, Rail and Sea. This aspect of transportation from warehouse to gateway port
resulted in multiple handling, damages, pilferages and delays due to switch over from one
mode of transport to another. To overcome the above obstacles and also for achieving
speeder cargo flow, the concept of unitization was introduced which resulted in an era of the
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finished and semi-finished products being carried through the containers. This made
a
transportation not only cheaper but also safer and faster. Unitization is based on the principle
of increasing the size of unit load to reduce the handling and transportation costs.
b
(c) The world economic situation and the world trade are very closely related.
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Ans. Economic development may go in any direction, downward or upward but former situation
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a
always exerts a direct impact on the latter. It is crystal clear that economic situation of world and the
world trade are very closely related to each other. The global economic recovery that began in 1993
continued till 1996, when the world output grew by 2.8 per cent over 1995. However, growth belied the
b
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hopes that the world economy would enter a new era of sustained growth not in excess of 3 per cent
which was expected to be achieved by 1997. Growth in the developed market economies of the world,
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as a whole, was slower than what had been expected. Expansion in the United States was more
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sustained than most forecasts had predicted, and Japan finally reaped the benefits of its fiscal packages
and recovered faster than expected. But the widely expected recovery in the Western Europe could not
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materialize.
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Developing countries (including China) recorded an average increase of 5.6 per cent in 1996. Latin
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America had recovered from the depressed conditions of the post - Mexican crisis, but its growth
remained a modest 3.3 per cent. East Asia continued to be the brightest area of the world economy, but
the growth slowed down with the weakening of exports. Hence policies in some countries have been
re-oriented towards curbing growing external deficit and price levels, and in some cases, towards
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coping with difficulties in the financial sector. Growth in both regions continued to be heavily
dependent on capital inflows from developed economies.
(d) Shippers – Shipowners consultation arrangements in India leave much scope for
improvement.
Ans. The organisational set up for consultation arrangements on shipping matters of Interest in India
consists of regional level shippers associations and AU India Shippers Council (AISC), an apex body
of Indian shippers at national level. The Government of India set UP the Freight Investigation Bureau
of India (FIB) as a department within the Directorate General of Shipping (DGS) in 1959, Mumbai
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with centres at Chennai, Kolkata and Cochin. The FTB which now stands merged in the D.G.S. was
vested with the responsibility of wing a constant watch on the activities of liner shipping companied
conferences in matters of freight rates, shipping space, shipping facilities, etc. The FIB Arrangements
was instrumental in organising the shippers at regional level and, as a result, a beginning was made
towards establishment of shippers associations in early 1960s, when the first such association came
into being in Western India.
Q-4 Write short notes on the following :
(a) Strategic logistics Planning
Ans. Strategic logistics planning is done keeping in view both the crucial factors, i.e.
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manufacturing and physical distribution. Manufacturing decisions include degree of vertical
integration, the number, size and locations of manufacturing units, technologies to be used,
production plan to be followed, which products to be produced and which product to be
co
purchased, etc. On the other hand, physical distribution planning includes decisions such as
locations of the warehouse, quantity of inventory to be maintained, means of transport to be
used, etc. The Main aspects of it are:
(1) Leveraging Logistics: In performing strategic logistics planning, companies
often look for ways to leverage logistics. This means that companies address themselves to
.
the basic question of how logistics can be used to provide a distinctive and competitive
a
advantage. Rather than focusing on ways to make the existing system more efficient, a
company which is leveraging logistics should address itself to the question of how it can
b
meaningfully distinguish itself through its physical distribution capability.
7
(2) Evaluating Impact: The second aspect of strategic logistics planning is
40
a
evaluating the impact of proposed corporate plans. This involves participation in the
corporate strategic planning process by the physical distribution executives. Physical
distribution managers should assist in developing as well as evaluating the corporate strategic
b
9
plans. As part of the strategic planning process, the distribution executive should pose such
questions as to whether the marketing advantage gained by producing a full product line is
84
worth the cost of making and carrying the full product line, or whether the competitive
ly
advantage of superior customer service is worth the cost of doing that.
50
(3) Supporting the Corporate Strategic Plan: The final aspect of strategic
logistics planning involves supporting the corporate strategic plan. Once a corporate plan is
ul
articulated and agreed upon, this aspect of strategic logistics planning involves developing a
93
plan for the logistics area that supports this corporate plan and allows the functional area to
perform in the most efficient manner possible.
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(b) Significance of Air Transport
Ans. Air transport is essential for managing and controlling the flow of goods, energy,
information, and other important resources for trade and will need other types of services.
Without air transport, services of freight would have been impossible to do any kind of global
trade, import–export processes and repositioning of raw materials and products.
Air Transport, the youngest member of the transportation system, has made rapid strides
during the last three and a half decades. Today, about 20-25 per cent of the total world trade
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in value terms moves by this mode of transport. The unprecedented growth of air cargo
industry in these years has been due to the acceptance of concepts like ‘Just in Time
Shipments (JIT)’ and ‘total distribution cost’, the world over.
The improvement in air technology and introduction of containerization in air cargo, coupled
with the technological advancements in production processes of a variety of products has
enlarged the list of items for export by air. Currently, not only perishables and high valuables,
but many products like machinery parts, electrical/electronic equipment, textiles, and ready-
made garments, leather garments and travel goods, toys, hand-tools, etc. are moved by Air
Transport.
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(c) Contract of Affreightment
Ans:-
. co
ba
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b a
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(d) Privatisation of Ports
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Ans:- Irrespective of broad missions and visions stated by ports, the objectives of most port
50
entities are to establish efficiency, sustainability and equity. These values can be achieved
through various means, privatization being one of them.
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Privatization has been defined in many different ways, however, in general, it is any process
aimed at shifting functions and responsibilities, in whole or in part, from the government to
the private sector. This definition is generally acknowledged by many authors with some
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additional expansion (Song et al., 2001b; UNCTAD, 1998).
According to the Michigan Education Society for instance, privatisation refers to shifting the
delivery of services performed by public employees to private business, a process that usually
occurs in the form of contracting out or outsourcing. The definition is expanded further by
several authors who have studied the privatization process in ports. For instance port
privatization can be defined as the transfer of ownership of assets from the public to the
private sector, or as the use of private capital to fund investment in port facilities, equipment
and systems (UNCTAD, 1998). Similar definitions are given by (Baird, 1999; Bucholtz,
2006). On the other hand other authors have not necessarily focused narrowly on the private
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and public role in defining privatization, but rather see it as all efforts made to improve the
“commercial orientation of ports operations” (Ircha, 2001).
e) Rorder level (ROL) and Reorder Quantity (ROQ)
Ans:- Reorder level is the stock level of a particular item of inventory, at which a firm needs
to place an order for the fresh supply or replenishment of the item; whereas reorder quantity
is the magnitude or the number of units to be ordered in a new purchase order for the fresh
supply of a particular inventory item.
While reorder level gives a signal regarding when to place a new order for the fresh supply of
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an inventory item; reorder quantity makes obvious the size of a particular order.
The reorder level acts as a trigger or indication for placing the order for an item; whereas
reorder quantity is the actual act of calculating and placing the size on a new purchase order.
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While in reorder level, the main element is time; in case of reorder quantity, the main element
is quantity or number of units.
While reorder level provides an answer to the question ‘when’; reorder quantity provides an
.
answer to the question ‘how much’.
a
While the internal factors involved in reorder level are maximum usage during the lead time,
safety level, and replenishment period; the internal factors involved in reorder quantity are
b
carrying cost of inventory per unit, cost of order, etc.
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Whereas the external factor involved in reorder level is lead time taken by the supplier; the
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a
external factors involved in reorder quantity are cost of freight, and big order quantity
discounts.
b
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Reorder level has first precedence. first of all, we assess whether the stock level of an
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inventory item is above the reorder level or below it. if the stock level is below the reorder
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level, it is the trigger to place a purchase order; reorder quantity is calculated to be placed on
the new purchase order, only after it has been decided that a purchase order is to be made.
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(b) Registration and Classification of Ships
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Ans:- Compulsory registration of ships is almost 400 years old and dates back to the British
Navigation Act of 1660. The purpose of registration of a ship is to confine the privileges of
certain branches of trade to ships owned by respective countries. As per the law, all ships
operating within or outside territorial water have to be duly registered. In some countries, the
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ships are required to be registered compulsorily in the country to which its owner belongs or
where it is built. But, 111 most other countries, it is the privilege of ship owner to register the
shp in a country of his choice.
A ship built in country 'A' may be registered in country 'B' or 'C' provided the ship owner
adheres and complies with the various rules and regulations of registering countries. As of
today, the law still requires, with the exception of a few dispensations, that ships must be
registered. There are, however, two important policy issues involved in registration: (i) who
may be entitled to the privilege of plan of registry, and (ii) the evidence of title of ownership
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of the ship.
Classification of Ships:- Apart from the official requirement of registration, almost all ocean
going ships are classed and registered with one or other classification societies. Such
registration is not compulsory but it is so advantageous, that an un-classed ship is virtually
non-existent now-a-days. In the absence of classification, a lot of difficulty would be
experienced by underwriters, chartering brokers, bankers, merchants and shippers and others
who have ready access to the latest and most reliable information regarding the ship in which
they are interested. Ship owners would also be at a disadvantage if there existed no reliable
organisation to check and certify whether their ships were constructed, repaired and
maintained in accordance with the highest prevailing standards and were in conformity with
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the international regulations.
(c) General Cargo Rates and Specific Cargo Rates
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Ans. General Cargo Rates: These are overall rates which cover all those commodities for
which specific commodity rates have not been fixed. These rates are mentioned in the
shipping documents as N.O.S. or N.O.E. which means ‘Not Otherwise Specified’ or ‘Not
Otherwise Enumerated’. As the number of such general cargo is very large and their nature
differs widely, the rates are usually high so as to help the carriers.
a .
The specific commodity rate is applicable to a specific commodity between a specific origin-
destination pair. The specific commodity rate is generally lower than the general cargo rate.
A high minimum weight is usually required for each shipment. Because the air carrier utilises
b
the specific commodity rate to attract freight and to enable shippers to penetrate certain
7
market areas, it may have a time limit. AS with the other commodity based rates, the specific
commodity rate can be either door to door or airport-to-airport.
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a
(d) Time Charter and Bareboat Charter
b
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Ans. Time Charter:- When a ship is hired for a fixed period of time for operation within
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the agreed ports, it is said to be time charter. In this arrangement the ship obviously operates
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under the command of charterer but it cannot be taken outside the agreed territories or agreed
ports.
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Definitions of Time Charter:
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• A form of charter party where owner lets or leases his vessel and crew to the
charterer for a stipulated period of time. The charterer pays for the bunkers and port charges
in addition to the charter hire.
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• A charter party hiring a vessel for a specified period of time or a particular
voyage, in which the ship owner provides the vessel and crew while the charterer supplies the
cargo. It is also known as non-demise charter.
Bareboat Charter:- A bareboat charter is an arrangement for the hiring of a boat, whereby no
crew or provisions are included as part of the agreement; instead of the people who hire the
boat from the owner are responsible for taking care of such things.
There are legal differences between a bareboat charter and other types of charter
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arrangement, such as time or voyage charters. In a voyage or time charter the charterer
charters the ship or part of it for a particular voyage or for a set period of time. In these
charters the charterer can direct where the ship will go, but the owner of the ship retains
possession of the ship through its employment of the master and crew. In a bare-boat or
demise charter, on the other hand, the owner gives possession of the ship to the charterer and
the charterer hires its own master and crew. The bare-boat charterer is sometimes called a
“disponent owner”. The giving up of the possession of the ship by the owner who is defining
characteristic of a bare-boat or demise charter.
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