Incoterm Assignment and Case Study

Global Logistics and Transportation

GSCM1005

Vatsal Dinesh Kumar Patel

200587687

Professor- Navasudeen Mohamed

Date of Submission: 20 February 2024

Assignment 1 1

Learning outcomes:
1. Describe the types and purposes of international trade documentation for managing the movement of
goods and services in international trade transactions.

International trade documents are required to export and import goods and services across borders.
International trade documents are intended to: Regulate the movement of goods and services by providing
information on the origin, destination, quantity, quality, value and specifications of the offer.

Compliance with the laws and regulations of exporting and importing countries, such as customs clearance,
import permits, duties, quotas, and sanitary and phytosanitary regulations.

Ensures payment and delivery of goods and services by providing evidence of the contract, title, transport,
insurance, and payment conditions.

Some of the types of commercial documents in the world are:

Commercial Form: A document that describes the transaction details, including the buyer, the seller, the
description and value of the goods or services, the methods of sale, and the methods of marketing and salary.

Bill of lading: A collection of documents that record matters related to the carriage of goods, such as the
consignee, consignee, consignee, port of loading, port of delivery, date of delivery, quantity and dead
weight.

Certificate of origin: a document that indicates the country where a product is produced or manufactured,
which can affect the prices and preferences associated with the product.

Packing List: Document showing the quantity, type, size, make and several packages, net and gross weight,
etc. for product packaging. Insurance Document: A document that describes the product's insurance
coverage, including the insurance company, the insured, the number of the insured, the amount and type, and
the risks covered.

Letter of Credit: Document showing the details of the payment agreement between the buyer and the seller,
including the issuing bank, the beneficiary, the amount and amount of the payment, the required documents
and the expiry date.

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Assignment 1 2

2. Explain the purpose and importance of using Incoterms® rules within international trade transaction
documentation.

The purposes of using the Incoterms® rules in international commercial transaction documents are:

Clarity and certainty for both parties about what needs to be done, when it needs to be done, and who will
pay for it.

Reduce the risk of misunderstandings, disputes and litigation by using common language and frameworks in
sales contracts.

Simplifies the process of drawing up and completing important commercial documents such as invoices,
bills of lading, certificates of origin, etc.

Ensures compliance with the laws and regulations of exporting and importing countries and international
customs and standards.

The importance of using Incoterms® rules in international business transaction documents is:

The parties can choose the most suitable terms and prices for a transaction according to their needs and

wants.

Promote the smooth and efficient movement of goods and services across borders by reducing delays,

problems and disputes.

Foster trust and cooperation between parties by sharing costs and risks fairly and equitably.

Promotes the development and growth of international trade through flexibility and transparency for

companies of all sizes and sectors.

Incoterms® rules can help organizations:

Obtain materials from the best sources in the world market taking into account the total cost of ownership,
quality and availability of inputs.

Manage and manage logistics systems in global value chains by optimizing the transportation, delivery and
storage of goods.

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Assignment 1 3

Implement strategic business management decisions that align sourcing and procurement strategies with
corporate goals and market trends to reduce costs and risks and increase overall business effectiveness.

3. Manage required documentation for international trade transactions to ensure compliance and
maximum efficiency.

To manage the documents required for international trade transactions, you must follow the following
steps:

Define the documents required for a specific transaction based on the type and destination of the goods or
services or, purchase conditions and payment conditions.

Organize and complete documents accurately and consistently, using standardized formats and codes and
avoiding errors or discrepancies.

Send and exchange documents with relevant parties, including buyers, sellers, carriers, customs, banks and
insurance companies.

Monitors and updates documents as necessary to reflect changes and modifications to transactions and to
meet requests and requirements from parties involved.

Managing the documents required for international business transactions will help you:

Comply with the laws and regulations of exporting and importing countries, including world customs and
regulations, and avoid penalties and delays.

Reduce costs and risks associated with transactions by reducing paperwork, data entry, errors and disputes.

Improves the efficiency and effectiveness of transactions by speeding up the processing, delivery and
delivery of goods or services.

Increase customer satisfaction and loyalty by providing honest and transparent information and
communication throughout the transaction.

Vatsal Patel 20 Febuary,2024

Assignment 1 4

Analysis of Case Study

Introduction:
The well-known German electronics manufacturer Metrovox specializes in designing, developing, and
producing innovative products for the entertainment and home electronics sectors. The company is recently focusing
on two main products - Bugabyte and Bugabyte Lite. While the Bugabyte is a high-end video and audio player with a
flash drive, the Bugabyte Lite doubles as a flash drive and MP3 player. Metrovox strategically sells these products to a
North American distributor and a major European retailer, navigating a highly competitive market.

Research Problem:
The critical research problem for Metrovox is to determine which of the two products, the Bugabyte
or the Bugabyte Lite, is the optimal candidate for outsourced assembly. Grunwald and Vogel, the
production consultants employed by Metrovox, are tasked with advising on improving delivery times
and reducing delays by 30 per cent. Consultants must evaluate outsourcing criteria and recommend a
strategic approach consistent with Metrovox's delivery schedule, quality standards, and overall goal of
maintaining market position and competitive advantage.

Case Evaluation:
The Metrovox case presents a complex scenario with challenges related to production delays, late
delivery volumes, and outsourcing the assembly of its Bugabyte and Bugabyte Lite products review the
main aspects of the case:

Market Dynamics:
Competitiveness: The Bugabyte and Bugabyte Lite markets are highly competitive, emphasizing the need
for product differentiation. Metrovox competes for uniqueness by focusing on the size of the Bugabyte and
the storage capacity of the Bugabyte Lite.
Product Lifecycle: Bugabyte is a relatively new product designed for anticipated future growth, while
Bugabyte Lite has been on the market for over six years and has recently established itself.

Supply Chain Challenges:

Production Delays: The introduction of the video-enabled Bugabyte caused more and more production
delays, contributing to a high 30 per cent delay.
Considering Outsourcing: Management is considering outsourcing assembly to mitigate delays, but the
decision depends on several factors.

Outsourcing Criteria:
Supplier Commitment: The selected supplier and assembler must commit to delivering the assembled PCB
according to Metrovox and the delivery schedule.
Quality and defect rates: Quality is critical, and the outsourced assembler must ensure that Metrovox
maintains its market position and competitive advantage.
Product detail
Bugabyte: Responds to high demand, with 300 per cent growth in the first year. It is difficult for
production management to accurately forecast future demand.
Bugabyte Lite: Steady sales for the last two years with accurate forecasting and less margin of error.
Assembly Process:
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Assignment 1 5

Complexity: Bugabyte's recent design includes additional steps in the assembly process to enable video
capability.
Proprietary Information: Important proprietary information is used during circuit testing.
Consultant Role:
Grunwald and Vogel: Production consultants tasked with advising on better lead time management and 30%
delay reduction.

Recommendations:
Outsourcing Decision: Given the challenges and complexity, a thorough cost-benefit analysis should be
conducted to determine the feasibility of outsourcing. This should include a detailed evaluation of
potential suppliers and capabilities, quality assurance, and adherence to delivery schedules.

Demand forecasting: Implement improved demand forecasting mechanisms, especially for Bugabyte, which
experiences significant fluctuations. This can reduce the risk of overproduction or running out of stock.

Supply Chain Optimization: Evaluate the entire supply chain to improve efficiency. This
includes evaluating suppliers, transportation, and the internal meeting process to identify bottlenecks and
areas for improvement.

Risk mitigation: Develop a solid risk management plan for outsourcing, focusing on quality
control, protection of intellectual property, and measures for unexpected events.

Long-Term Strategy: Consider the long-term impact of outsourcing on Metrovox and competitiveness and
brand image. If Bugabyte Lite contributes to brand continuity and recognition, maintaining control over its
assembly process can be strategically important.

Proposed Solution/Changes:
Outsourcing Decision:
Conduct a thorough cost-benefit analysis to assess the feasibility of outsourcing Bugabyte and Bugabyte
Lite.
Consider outsourcing the Bugabyte assembly, especially given its increasing production delays, and assess
the impact on lead times and delayed delivery quantities.

Supplier Selection:
Thoroughly review potential suppliers based on their track record, capability, and commitment to delivery
schedules.
Ensure the selected supplier adheres to PCB quality test compliance measurements.

Risk Mitigation:
Develop robust risk management to address potential challenges related to quality control, intellectual
property protection, and contingencies.
Make clear contractual agreements with the supplier regarding quality standards and delivery times.

Demand forecasting:
Implement improved demand forecasting mechanisms, especially for Bugabyte, to reduce the risk of
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Assignment 1 6

overproduction or inventory.
Update forecasts regularly based on market trends and customer demand.

Supply Chain Optimization:

Assess and optimize the entire supply chain, including procurement and transportation, to identify
and correct bottlenecks that cause production delays.
Ensure that Chinese suppliers adhere to Metrovox's production schedules.

Long-Term Strategy:
Consider the long-term impact of outsourcing on Metrovox and competitiveness and brand image.
Assess whether the outsourcing of Bugabyte Lite, despite its stable sales, is
consistent with Metrovox's overall strategic goals.
Technology Standardization:
Standardize the technology used in product testing across both Bugabyte and Bugabyte Lite systems to
streamline processes and reduce complexity.

Continuous Improvement:
Establish a continuous improvement program to regularly review and improve the assembly process.
Encourages collaboration between Metrovox and the selected supplier to identify areas for improvement.

Quality Control Measures:

Implement strict quality control measures to address inadequate pricing and ensure that the outsourced
assembler maintains Metrovox and market position.

Communication and Collaboration:

Promote open communication and collaboration between Metrovox and the outsourced assembler to quickly
respond to potential challenges.
Make sure the assembler understands the importance of shipping the Bugabyte and Bugabyte Lite in the
same shipment to fulfil contracts with dealers and resellers.

Conclusion:
In conclusion, Metrovox, faced with increasing production delays and late deliveries,
is considering outsourcing the assembly process of Bugabyte or Bugabyte Lite. Factors such as demand
forecasts, production stability, and the impact on Metrovox and its market position must be carefully
considered in Grunwald and Vogel and evaluation.

The outsourcing decision must be consistent with Metrovox and commitment to quality, on-time deliveries,
and remaining competitive. The product chosen for outsourcing must not only meet the demand but also
contribute to the continuity of the Metrovox brand.

Balancing the need for agility between meeting market demands and maintaining product uniqueness is
critical. Strategically applied outsourcing can improve supply chain efficiency and overall efficiency,
enabling Metrovox's sustainable growth and success in the competitive electronics market.

Vatsal Patel 20 Febuary,2024

Assignment 1 7

References:

https://smallbusiness.chron.com/types-inventory-strategies-70864.html

Incoterms Explained: Definition, Examples, Rules, Pros & Cons (investopedia.com)

Using Incoterms to Simplify Global Sourcing - Inbound Logistics

A Complete Guide To Documents Required For International Trade (rupeek.com)

Vatsal Patel 20 Febuary,2024