Case Study Objectives Reduce freight costs while ensuring machines and parts arrive on-time and undamaged Develop a transportation management organization that integrates well with the Tetra Laval group, can respond quickly to customer needs, and can manage the quality of delivery services Devise an Incoterm policy that both protects Sidel's reputation as a reliable provider of high-quality equipment and affords customers the flexibility they need

Company Overview Tetra Laval DeLaval Tetra Pak Sidel

Product Characteristics and Assumptions Shipments are project based rather than transactional High value shipments with a considerable amount of capital tied up in transit Time sensitive with precise synchronization required on arrival Destinations are global, non repetitive Zero tolerance for damage and transit delays Installation, service and sales of equipment and accessories are key aspects of operations Assumed they have similar characteristics of DeLaval products Shipments are multi- modal, heavily dependent on air, sea, road Specialized packaging and handling are required

Logistics Spend 200M Euros on transport of 4.5MT of equipment 100M Euros on travel Required Modes 47K TEUs chartered aircraft 12K truck loads 300K parcel shipments Freight Volume

Objectives of Delivery Control of execution –Dollars/Cost Direct Costs –Packaging/handling, Insurance, Intl shipments, Domestic shipments –Fees import export duties, Taxes VAT, GST Indirect Costs –Legal –Execution –Damages –Time in transit –Contractors Set up / assembly –Regulatory / environmental compliance Risk Management Avoid Bad Debts/write-offs

COST OR ACTIVITYEXWFCAFASFOBCFRCIFCPTCIPDAFDESDEQDDUDDP Tender Goods/Documents for ExportBSSSSSSSSSSSS Export Clearance & LicenseBSBSSSSSSSSSS Origin Domestic TransportationBSSSSSSSSSSSS Vessel / Plane LoadingBBBSSSSSSSSSS Main Carriage, International TransportBBBBSSSSSSSSS Transfer of Risk - Cargo InsuranceBBBBBSBSSSSSS Import Customs Duties/Fees/TaxesBBBBBBBBBBSBS Destination Foreign TransportationBBBBBBBBBBBSS Mode ApplicabilityXXWWWWXXXWWXX Analysis of Incoterms Incoterms published by the international chamber of commerce - icc publishing 1999 B = Buyer S = Seller W = Water Carrier X = Air, Motor, Rail and Intermodel Ex WorksNamed place, Sellers Premise, Buyers Carrier Free CarrierNamed Place Free Alongside ShipNamed Port of Shipments Free On BoardNamed Port of Shipments Cost & FreightNamed Port of Destination Cost, Insurance & FreightNamed Port of Destination Carriage Paid ToNamed Port of Destination Carriage & Insurance paid toNamed Port of Destination Delivered at FrontierNamed Port of Destination Delivered Ex ShipNamed Port of Destination Delivered Ex QuayNamed Port of Destination Delivered Duty UnpaidNamed Port of Destination Delivered Duty PaidNamed Port of Destination

Recommendations Suggest primarily using Incoterms of DDP and DDU to insure Sidle has control of quality of transport process right through to installation, also allows total control over landed cost Take advantage of Tetra Paks global purchasing clout however suggest DDU as the term of choice Tetra Pak can possibly control freight directly with lines but outsource project management of job to a specialised forwarder