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 LavalTetra Laval

DeLavalDeLavalTetra PakTetra Pak SidelSidel

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 TEUs50 - 747 chartered aircraft

12K truck loads300K 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 ACTIVITY EXW FCA FAS FOB CFR CIF CPT CIP DAF DES DEQ DDU DDP

Tender Goods/Documents for Export B S S S S S S S S S S S S

Export Clearance & License B S B S S S S S S S S S S

Origin Domestic Transportation B S S S S S S S S S S S S

Vessel / Plane Loading B B B S S S S S S S S S S

Main Carriage, International Transport B B B B S S S S S S S S S

Transfer of Risk - Cargo Insurance B B B B B S B S S S S S S

Import Customs Duties/Fees/Taxes B B B B B B B B B B S B S

Destination Foreign Transportation B B B B B B B B B B B S S

Mode Applicability X X W W W W X X X W W X X

Analysis of Incoterms

Incoterms 2000 - published by the international chamber of commerce - icc publishing 1999

B = Buyer

S = Seller

W = Water Carrier

X = Air, Motor, Rail and Intermodel

Ex Works Named place, Sellers Premise, Buyers CarrierFree Carrier Named PlaceFree Alongside Ship Named Port of ShipmentsFree On Board Named Port of ShipmentsCost & Freight Named Port of DestinationCost, Insurance & Freight Named Port of DestinationCarriage Paid To Named Port of DestinationCarriage & Insurance paid to Named Port of DestinationDelivered at Frontier Named Port of DestinationDelivered Ex Ship Named Port of DestinationDelivered Ex Quay Named Port of Destination

Delivered Duty Unpaid Named Port of DestinationDelivered Duty Paid Named 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