Supply Chain of a Shipping Firm

8/3/2019 Supply Chain of a Shipping Firm

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Supply Chain Management of

Mariners Cargo

Prepared byShati Itminan (2008-2-10-121)


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Table of Contents

Contents Page

Executive Summary iv

1. Introduction 5

1.1 Origin of the Report 5

1.2 Objectives of the Study 5

1.3 Scope of the Study 5

1.4 Methodology 6

1.5 Sources of the Study 6

1.6 Limitations of the study 6

2. Mariners Cargo2.1 Company Overview 7

2.2 Core Services of Mariners Cargo 7

2.3 Supply Chain Procedure of Mariners Cargo 8

2.4 Competitive and Supply Chain Strategies of Mariners Cargo 9

3. Mariners Export Process- at a Glance 11

4. Physical Supply Chain 13

5. Physical Distribution Channel 14

5.1 Information System and Communication 14

5.2 Inventory Management 15

5.3 Warehouse Management 15

5.4 Transportation 17

5.5 Vendor and Performance Management 205. Recommendation 21

6. Conclusion 22

8. References 23


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Executive Summary

Supply chain management is the active management of supply chain activities to maximize

customer value and achieve a sustainable competitive advantage. It represents a conscious effort

by the supply chain firms to develop and run supply chains in the most effective & efficient ways

possible. Supply chain activities cover everything from product development, sourcing,

production, and logistics, as well as the information systems needed to coordinate these

activities.

A freight forwarder, forwarder, or forwarding agent is a person or company that organizes

shipments for individuals or other companies and may also act as a carrier. International freight

forwarders typically arrange cargo movement to an international destination. International freight

forwarders, have the expertise that allows them to prepare and process the documentation and

perform related activities pertaining to international shipments.

Mariners is a well known freight forwarder of Bangladesh. They facilitate the shipment needs of

RMGs and international buyers. In a nutshell, RMGs send their finished goods at the warehouses

of Mariner in Chittagong. Mariners consolidate the goods and then uses hired ships to move the

finished goods to the mother vessel located at Colombo, Sri Lanka.

This report deals with the method of communication, warehouse and inventory management,

vendor management, all kinds of outbound activities and the performance management that are

undertaken by Mariners shipping firm.


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1. Introduction

1.1 Origin of the Report

The main purpose of the study is to fulfill the requirements of Supply Chain Management (MKT

418) as the part of our BBA program bearing 3 credits. As the students of Supply Chain

Management, we were assigned by our course instructor Ms. Saadia Shabnam to get involved in

this study. The course MKT 418 as well as this report helps a student to get necessary knowledge

of the basics of supply chain system of a firm which is very useful for the students majoring in

Marketing.

1.2 Objectives of the Study

Broad Objective

The main objective of this term paper is to get the practical insight of the techniques and

strategies one organization (Mariners Cargo) uses to manage overall supply chains; both physical

supply chain and physical distribution channel.

Specific Objectives

To get insight how Mariners Cargo forecast its supply chain requirements and themethods it uses

Identifying the inbound logistic activities and parties How the vendor is selected and the method of appraisal Identifying the information system used to anticipate demand and communicate with

intermediaries

The way Mariners Cargo maintains the warehouses and inventory Route, network, mode of transportation Mariners Cargo uses

1.3 Scope of the Study

Mariners Cargo and the related fields were the scope of the study.


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1.4 Methodology

The research was done entirely on descriptive basis. The required data in the formation of this

report was elicited by face to face interviews with the officials of Mariners Cargo. The report

was prepared by summarizing the information gathered from both the officials and the firms

standard operating procedures.

1.5 Sources of the Study

Primary Sources

The report was mainly based on the data derived from primary sources. The primary sources are

given below.

Face to face interview with the managers Standard operating procedures of the firm

Secondary Sources

The secondary sources that helped us to perfect and enrich this term paper are given below.

Published articles and case studies on supply chain management

Related websites and text books.

1.6 Limitations of the study:

Of course this term paper is not flawless and we had several limitations. The limitations of the

study are given below.

The stipulated time was not sufficient to get a clear and real picture of the entire supplychain system.

Due to the company policy and highly classified database, the employees and managersshowed little interest on disclosing their confidential marketing plans.

Since Mariners Cargo does not produce any products (it is a firm that provides service), the

physical supply chain portion of this report was slightly molded to match with the requirements.


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2. Mariners Cargo

2.1 Company Overview

Mariners cargo, one of leading supply chain management firms, was established in 1986 as a

Freight Forwarding, Consolidation Company. Mariners cargo successfully facilitates the

shipment of international buyers using its innovative solutions, applying the right mix of state-of-

the-art technology. Mariners cargo is the first and largest logistic company that handles much

needed Garments on Hanger (GOH) for the international RMG partners and buyer.

Mariners Cargo have been working with UK partner ALLPORT since last 15 (fifteen) years.

From the beginning Mariners has maintained its basic character of a pure consolidator, providing

100% of their energy toward the efficient handling of the clients merchandise through the

establishment of individualized services as dictated by the clients operating procedure.

It provides their clients with an independent entity which looks after the clients interest,

provides a savings to their customers through the efficient loading of merchandise into container.

The primary benefits are of control and transportation savings as it relates to both

importation/exportation of goods.

2.2 Core Services of Mariners Cargo

Order Monitoring: Receiving a copy of the purchase order/letter of credit andaccordingly coordinate with the shipper(s) to ensure that shipments are made in the time

frame specified. If the shipper doesnt comply with the requirement, Mariners

immediately inform the Client via email with details for necessary action/instruction.

Cargo Receipt and Warehousing: Receiving the cargo from the shipper in good orderonly and loading the cargo as per destination delivery requirements (by

customers/stores/department etc). Up to 7 days of free storage, allows flexibility and

greater control over shipments.

Carrier Management: Booking the cargo on to the ocean carrier of the clients choice asMariners work cooperatively with all the major carriers.


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Consolidation and Container Stuffing: Multiple vendor cargo consolidation andmaximum container utilization result in lower per unit costs.

Sailing Information: Sending a itemized sailing information via LIMA/EDI within 48hours after vessel departure detailing the orders in transit.

Documentation Services: Collecting the commercial documents from the shippers andforwarding of the same via air courier permits pre-clearance of cargo at destination.

2.3 Supply Chain Procedure of Mariners Cargo

Mariners Cargo is a firm that provides shipment service only and it does not have any

manufacturing operations. So there supply chain has only one part that is physical distribution

channel. The supply chain procedure of Mariners cargo is shown below on the figure.

Orders Placed by International Buyers

Figure 1: Supply Chain Procedure of Mariners Cargo

1. As the orders are placed by international buyers, RMGs in Bangladesh starts producing the

ordered quantity and send them to the warehouse of Mariners Cargo located in Chittagong.

2. The received orders are stored in the warehouses of Mariners Cargo. The inventories are

stored there for consolidation.

3. Once the orders are consolidated, Mariners Cargo uses its transport vehicles (ship) to send

them in the mother ship located in Sri Lanka.

RMG in

Bangladesh

Mariners

Cargos

Warehouse in

Chittagong

Mother

Ship in

Sri Lanka

International

Buyers


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4. The mother ship in Sri Lanka transports the inventories to destination.

2.4 Competitive and Supply Chain Strategies of Mariners Cargo

Competitive Strategy Mariners Cargo:

Mariners cargo is known to be reliable and it serves its purpose at a low cost. Once the RMGs

place the shipment to the Chittagong office of Mariners cargo, the following activities are

accountable to Mariners cargo. They have to maintain a constant network with Wal-Mart or

other customers like Wal-Mart. For our assignment we will use Wal-Mart as an example and for

simplicity we are not using any other customers. Customers like Wal-Mart choose Mariners

cargo as the shipment processing company as it has a reputation; it never fails to deliver after the

desired timeline of course with the exception of any natural disasters like cyclone in the sea.

They take the least possible charge to deliver the merchandises. So basically the competitive

strategy of Mariners cargo is:

Facilitating the shipments in a cost effective way Providing reliable service

Supply Chain Strategy of Mariners Cargo:

Mariners cargo uses efficient supply chain strategy. They usually give a deadline to the RMGs

for supplying them with the stock. If the RMGS didnt supply them within the cutoff point, they

were entitled to reject the supply. But since, the RMGs have developed a healthy and working

relation with the company, the case of delay is not met with severe penalty.

The supply chain is Supply to order. When Wal-Mart wants any products, it places orders to

RMG. The RMGs then place bookings on Mariners cargo. The company takes preparation

according to the placement of order. The size of orders determines how much space they need on

their warehouses in Chittagong. This decision is quite sensitive since it deals with the inventory

carrying capacities of the warehouses of Mariners cargo. So they need pinpoint accuracy in

terms of knowing when the order will be delivered. However, all the details of the order data are

placed well in advance by both the RMGs and Wal-Mart.


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Based on the discussion above, it is revealed that Mariners cargo has least average forecast error;

almost nil stock out rate and the margin are quite low. So the implied demand uncertainty of

Mariners cargo is very low. That means the uncertainty of demand (which is addressed by supply

chain) is very low. So, the supply chain strategy of Mariners cargo is efficient supply chain.

However, since Mariners cargo practices to be reliable, its supply chain has a subtle

responsiveness as well.

Zone of Strategic Fit:

Figure 1: Zone of Strategic Fit of Mariners Cargo

Zone of

Strategic

Fit

ResponsiveSupply Chain

Efficient

Supply

Chain Certain Demand Uncertain Demand

Mariners

Cargo


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3. Mariners Export Process- at a Glance

The entire process that is undertaken by Mariners to address the demand of international buyer is

provided below.

1) By accepting all the terms and conditions and after agreeing to the set rules, RMGs ofBangladesh book their cargo at least 7days prior cargo delivery at Mariners warehouse.

2) Based on suppliers booking, Mariners will arrange authorization from consignee throughLIMA/e-mail or communicate with consignee if there is any discrepancy.

3) Upon receiving confirmation from consignee, Mariners will relay the same to the supplierwith detailing vessel information & cut-off and also issue shipping order to handover

cargo at the warehouses.

4) Mariners will book required equipment with carrier.5) For CFS/CY shipment, suppliers will deliver their cargo at the warehouse in Chittagong

along with customs passed document. Then Mariners prepare load plan as per

consignees requirement, stuff and return containers to carrier terminal.

6) CY/CY shipment, supplier will stuff the container at their premises and return the sameto carrier terminal.

7) Within 24/48 hrs of stuffing, carrier provide us shipment details with necessaryinformation such as feeder/mother vessel, departure date from origin and arrival date at

destination, B/L number etc.

8) Based on carriers information, Mariners provide shipment detail each and every supplierthrough e-mail detailing necessary information such as vessel name with shipped on

board date, container no, seal no, purchase order no, style no, HBL & OBL no.

9) Mariners also sends sailing information to our client through e-mail or update manifest &AOD in LIMA.

10)Based on shipment advice, suppliers provide us B/L draft through Mariners prescribedformat.

11)Upon receiving B/L draft, we issue EPB (Export Promotion Bureau) B/L to supplier forissuance of Certificate of Origin, GSP from concern authority.

12)Meantime, Mariners prepare HBL and submit B/L information to carrier for releasing ofOBL within 72 hrs of vessel sailing.


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4. Physical Supply Chain

Mariners Cargo neither makes any production nor does it have any supplier for the raw materials.

So, actually it does not have any distinguishable physical supply chains. The physical supply

chain part is actually dealt by the international buyers and the RMGs. Mariners has no

responsibility or accountability on that. The actual scenario that takes place in the physical

supply chain is given below.

Determining Supply Requirements:

The officials of the international buyers forecast and determine their demands on their own.

Placing Orders:

According to the demand, international buyers place their orders to the suppliers in Bangladesh.

Inbound Logistics Activities & Parties:

Upon receiving the order, the suppliers start to produce the merchandises and they send the

finished goods to the warehouses of Mariners Cargo located at Chittagong using. The job of

Mariners Cargo starts after this part.

Terms & Conditions:

All the specifications of the cloths, price of the clothes and others are set by international buyers.

Vendor Selection/ appraisal:

The vendors are selected by the buyers too.

So basically, Mariners Cargo has no physical supply chain of its own at all. All the activities of

this part is done by the buyers. Mariners Cargo focuses on the physical distribution part.

However, Mariners has some activities in this part but they are not distinguishable. For example,Software, Human resources etc.


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5. Physical Distribution Channel

5.1 Information System and Communication

Since Mariner cargo is a firm that does business with distant customers, it provides a lot of

emphasis upon the reception of proper information. It uses the internet backbone to contact with

the customers very quickly. Moreover, it uses sophisticated communication software called

LIMA (Logistic Information Management Application) to manage the information in a better

way. Again it uses personal phone calls both local and international are done for better

connectivity.

Information System & Order Processing:

Mariners Cargo keeps communication with the buyers through the logistic information

management application (LIMA) software. And the information of shipment detail is

disseminated through e-mail.

Logistic Information Management Application (LIMA):

The LIMA software covers the complete logistics process of merchandise delivery from seller to

buyer.

The application of LIMA is done in the following fields.

Warehouse Receipts:After creating the warehouse receipts, LIMA can send orders to the mobile

users to Receive and Put Away cargo

Cargo Releases: After creating a cargo release, LIMA can send Pick and Load orders to the

mobile users.

Bar Coding Shipment Verification: It can verify the packing list of your shipments before

shipping with our built-in bar-coding verification technology. Moreover the following services

are performed by LIMA.

Inventory Control Just In Time inventory Inventory Cycle Counts Inventory Control by Serial Numbers Direct Integration with Wireless Handheld Devices


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5. 2 Inventory Management

Inventory has a positive relation with the responsiveness of supply chain. The more inventory

one firm maintains, the better it anticipates with the fluctuating and uncertain demands. That

means, large amount of inventory is a determinant of responsive supply chain.

Since Mariners cargo is concerned with readymade garments produced by RMGs; it does not

need to go for any production related hassles. So, they are also exempted from the annoyance of

maintaining inventory. However, for the purpose of consolidation of orders and other things,

they have to maintain a certain amount of inventory as well. They have 3 warehouses and they

keep the readymade garments there. Basically the regular inventory size is 30000 Cubic Meter

per week (approximately).

Features of their inventory decision:

Mariners Cargo only facilitates or acts as a middleman between the international buyers and the

readymade garments of Bangladesh. And the order is placed way earlier and the lead time is also

flexible. So, there is no incentive for both the readymade garments and Mariners Cargo to keep

any safety or seasonal inventory. They just store the only inventories they need to address the

international buyers demand. That is they only keep cyclical inventory.

5.3 Warehouse Management

Mariners cargo does not have any manufacturing firms. It has warehouse though. The number of

warehouse is only 4. Mariners use these warehouses to house inventory for the next shipment

day.

Features of warehouses decision:

1. All their warehouses are located in Chittagong. Mariners cargo tries to save as much cost as

possible. They use the facilities of ESACK BROTHERS IND LTD. The warehouses are located

adjacent to the ports to reduce the transportation cost.

2. The method of stock keeping is job lot storage. That means instead of assigning separate

warehouses for separate merchandises, Mariners assimilates all their merchandises together and

store in the warehouses.


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Warehouses at a glance:

Mariners Cargo uses the warehouses of ESACK BROTHERS IND LTD.

Warehouse specifications:

Location : Only 1 kilometer from Chittagong Port

Space : 10000 sq. meter

Customs: Customs bonded warehouse

Security: 24 hours security

Working Hours: Sat to Thu - 9:00 to 20:00 HRS ,Friday - 9:00 to 16:00 HRS

With prior arrangement, late receiving can be allowed.

Facility Details: 19 bays for receiving and 19 bays for stuffing cargo. Well equipped to manage

large volume of cargo.

Apart from Mariners shift wise supervising personnel for 24 hours, the CFS have surveyors,

sufficient labor forces, security personnel, including maintenance & repair facilities.


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5.4 Transportation

Upon the reception of order and the words from international buyers, Mariners will contract with

one or more carriers on behalf of their customers to arrange for the pickup, transportation and

delivery of their customers product.

Mariners arrange the different carriers, cross docks, border clearances and additional services

needed to successfully transport product. The customer receives one bill for the service and does

not have to worry about the specifics. Often, Mariners specialize in handling dozens of freight

shipments on a daily basis.

Mariners Cargos transportation facts are given below.

Choice of Transportation mode:

1.

Water: The most used transportation method by Mariners is ship. Since, they do businessover international boundaries; ship is the most cost efficient mode of transportation.

Mariners use cargo vessels and ship them from Chittagong port to the port of Colombo,

Sri Lanka.

2. Air: Rarely, to address the demand of aristocratic buyers and stakeholders, Mariners useairship. This helps to fly the garments or other merchandises exports all over the world in

a very timely and accurate manner. However, this is method is too much expensive.

3. Inter-modal (Fishy back): Sometimes, Mariners go for fishybacking. That means theyuse both waterway and roadway at the same time. Some RMGs send their merchandises

in the Dhaka office of Mariners through roadway and then Mariners send them to the port

using its roadway vehicles like truck. And from the port of Chittagong, ship is used for

the rest of the route.

Type of transportation service: Contract Carrier. Mariners hire vessels of specific carriers

(MAERSK) and then use those to move their merchandises to the mother ship of Sri Lanka.

Route: The cargo vessels of Mariners floats form Chittagong port to Colombo port in Sri Lanka.

(the route map is given in the next page)


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Route map of Mariners Cargo Ships:


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Carrier and space management:

Mariners follow certain rules and restrictions in managing their carriers. For Bangladesh, the

only carrier they use is Maersk. Mariners request advance notice from the carriers to ensure any

possible shortage of equipment so that the buyers can take the desired actions accordingly.

Cargo booking management:

Mariners book the cargo within the shipment window of each purchase order. The date is

basically 21 days prior to the deadline set by buyers.

Consolidation Management:

Mariners have to be very careful about the requirements and specifications mentioned by the

international buyers while consolidating and shipping the merchandises. For example, according

to the requirement of Matalan, a major buyer of UK sets different specifications like:

No individual cartons would weigh more than 15 kgs. The maximum length and width of the cartons would be 100 Cms and 50 Cms.

Procedure of returning damaged goods:

If any cargo sent by Mariners is received damaged or less than satisfactory condition, must be

quoted when issuing the dock receipts. Photographic evidence must be issued when advising of

any cargo received damaged. And Mariners will be liable for any costs incurred if the

merchandise is considered damaged according to these specifications.


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5.5 Vendor and Performance Management

Vendor management and selection:

In selecting the vendors (international buyers like Matalan, Walmart) Mariners go through some

screening processes. The buyers are encouraged to place their orders via LIMA. Then the

managers at Mariners check the purchase orders and look for any discrepancies or errors from

the buyers part.

In the selection of vendors, Mariners follow certain rules like:

1. The sailing schedule should be provided at least one month in advance.2. All sailing schedules must clearly state the cut off times.3. A proper financial assessment from Mariners part is done to check the creditworthiness

of the international buyers.

4. The managers of the buyer are required to carry out regular review meeting withMariners to ensure that the correct procedures are being followed.

5. Making sure the buyers will continue to maintain a successful working relationship withMariners.

Performance management:

Using the supply chain expertise, Mariners plan to provide the highest level of service achievable

to the Mariners through the proactive and effective management of their orders. Mariners

undertake the following activities to appraise the service the offering and take corrective actions

if needed.

1. Daily action list maintenance

2. Weekly space projection reporting

3. Monthly carrier allocation management

4. Monthly origin management report


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6. Recommendation

There are some recommendations that Mariner cargo could take into consideration.

1.

Applying lean logistic:Lean supply chain management is not exclusively for those

companies who manufacture products. But service provider like Mariners can streamline

their processes by eliminating waste and non-value added activities. Mariners have a

number of areas in their supply chain where waste can be identified as time, costs or

inventory. Warehouse processes should be examined to find areas of eliminating waste of

resources and non-value added steps. Mariners can go for a reengineering that can defy

the hassle of keeping inventories. The accumulation of inventory requires resources to

store and maintain it. By reducing unnecessary inventory, a company can minimize

warehousing space and handling, in turn reducing overall costs. Mariners can also

implement lean processes often look to their transportation procedures to see where they

can be streamlined. In many instances companies find that their efforts to improve

customer satisfaction leads to poor shipping decisions. Since, Mariners deal with B2B

markets with lax lead times, it could use as cost efficient vehicle as possible.

2. Using own vehicle: Mariners is the firm that has a large number of shipments per month.So they have to use the ships of contractually. However, due to these rapid contracts, the

variable cost incurred is fairly high. So, had Mariners used their own ship, it would have

been possible to reduce the costs. Although, the fixed cost or initial investment would be

higher, it could have been absorbed by the saved cost in frequent hiring of the ship of

others.

3. Implementing tracking system: Mariners use very sophisticated technologies. However,they dont provide the tracking options. Had they provided tracking options for their

cargo flowing over the sea, the buyers could easily track their merchandises and act

accordingly.


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7. Conclusion

Like the most other freight forwarding companies, Mariners also try to gain competitive

advantages by focusing on cost reduction or maintaining a cost efficient supply chain system.

Unlike the other firms producing consumer goods, the supply chain of Mariners lacks the

physical supply chain part. The most important decisions are taken in the physical distribution

part, especially in the part of transportation. Mariners exclusively try to be congruent with the

specific demands of the international buyers.

Mariners use high quality and upgraded software to communicate with different parties

effectively, reduces transportation cost by using the port adjacent warehouses and operates with

higher delicacy to address the needs of its vendors. By managing a well knit supply chain

management, Mariners has become one of the most successful shipping service providers of

Bangladesh.


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8. References

1. Mariners Cargo website: http://mcsl-bd.com/

2. Standard operating procedure document of Mariners Cargo

3. A Presentation to the Matalan Retail Organization by Mariners Cargo Services Ltd

4. R.H. Ballou, S.K. Srivastava; Business logistics/ supply chain management; 5th

edition;

pearson education.

5. The Service Side of Supply Chain Management by Daniel J. Flint;

http://www.scmr.com/article/the_service_side_of_supply_chain_management/

Supply Chain of a Shipping Firm

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