Incoterm Selection Consideration

Write an essay on Transportation.

Transportation of input supplies and the finished goods play a vital role in the logistics and supply chain management of an organization. It is obligatory to endorse transportation, timely and effectively for the growth of a company in the market. Other than the economic benefits of managing transportation effectively, it also has social and political significance. Consumers now days are more inclined towards companies that are socially responsible in designing their strategies. Thus, it has become an important facet for most of the companies to choose the right strategy for transportation and make it a success. In this paper, the effectiveness of different aspects of transportation will be analyzed for a selected company (Aslani & Aslani, 2012).

One of the foremost brands in the beverage industry, Coca-Cola has been selected for this study. It is an American beverage corporation that is operational in many nations. Its headquarters is located in Atlanta, Georgia. This organization manufactures and markets beverage syrups and concentrates. It was invented by John Stith Pemberton in 1886. The company produces a number of soft drinks and juices in many flavors. Coca-cola is one of the most selling brands in many countries and has been documented as a global brand. The company’s global 2015 revenue is approx 44,294 Million US Dollars. Other than coca-cola brand, it has a range of other products which are well known such as Diet Coke, Fanta, Sprite, Minute Maid, Dasani, Powerade, etc. Company’s major competitors in the market are PepsiCo, Nestle Tea, Monster Beverage, etc (Gupta, 2011). The organization’s mission is to refresh the world, to inspire moments of happiness, create value and make a difference. Major strategies of Coca-Cola Co. are branding, being focused and working efficiently. Being innovative is the key step responsible for company’s progress and profitability.

Incoterms are the set of pre-defined terms issued by the international chamber of commerce. To make the company a success, it is a fundamental feature to make sure that the product reaches consumers effectively in the best of its position at an effective cost. The whole transportation process needs to be checked to ensure proper delivery of goods. Coca-Cola is a company with strong principles and ethics. The transportation strategy followed by Coca-Cola is standardized globally to maintain efficiency and manage freight status at an economical cost. The distribution channel of Coca-Cola is well planned and implemented. The wholesale buyers and retailers prefer the brand to attain success associated with it. Coca-Cola is associated with a huge number of bottles globally (Huderek-Glapska & Nowak, 2016). The company produces syrup concentrates and distributes it to its partner bottlers in different geographic locations. Bottlers then further make drinks with other standard ingredients and distribute to retailers.

Coca-Cola manages the core areas efficiently to utilize the resources. The global process assists in the management of demand and supply. Pre-defined wholesalers and bottlers get the delivery at desired warehouses, locations or countries based on predetermined demand. The selection process is an imperative part of executing transportation process. The certain modes of transportation are followed by the company as per Incoterms 2010 (Jolayemi, 2010)Being a global brand, Coca-Cola has longer supply lines including multiple partners, offshore manufacturing and off coast locations, thus an effective system is required to avoid any unplanned risks and loss.

Being a successful firm, appropriate Incoterms should be exercised to make the transportation and supply process an accomplishment. The supply chain management should determine the demand at first and then arrange for the transportation of goods accordingly. Supplier selection should be done via appropriate evaluation system considering both quantitative and qualitative aspects (Merkert, 2012). The selection process plays a critical part in the process that forms the base for the prosperity and survival of a firm in a competitive market. The contract terms should be mentioned correctly, including CIP- Carriage and Insurance paid to terms, delivery duty and delivery terminal, etc.

The clauses for which Incoterms will be considered should be pre-defined including details of the party maintaining liability during force situation, if any. As per recent International commerce Terms 2010, FCA Free Carrier term is an important rule to consider (Burgess et al., 2015). As per this, the seller delivers the products to the carrier and clear delivery point is mentioned in advance. Further risk passes on to the buyer. Other than this, there are diverse modes for transportation to be used during the entire process.

Carrier Selection Criteria

Before a company delivers its products to the wholesalers or retailers, it is mandatory to examine and select an effective method of transportation, a competent carrier to move the goods in an efficient manner, avoiding the possible risks and damages so that consumers get the best products at a right time and competent rate. The selection process should be potential and it should be evaluated periodically to avoid any loss and to manage the performance (Smith & Smith, 2001). Coca-cola is a big brand with its presence in more than 200 countries, so its transportation process should be very effective and smooth. Wrong or damaged delivery at any point can cause huge damage to the firm in the monetary terms as well as brand loyalty and goodwill (Sahling & Kayser, 2016) Different types of carriers should be selected based on the geographic location of the delivery hub.

Once the demand has been evaluated, the right product should be delivered at the right place. Various points to be considered while selecting a carrier for the transportation of specific goods such as:

All the alternatives should be evaluated on the basis of speed, shipment characteristics, reliability, service and the applicable costs.
All the factors including traffic, service and geographic locations should be judged closely.

Traffic related issues that affect the efficiency of a carrier can be the length of haul, freight weight; value, product packaging, and handling characteristics along with goods’ perish ability, toxicity, and fragility.

Shipping factors may be investments, the size of the firm, distribution systems, management structure, and evaluation process.
Other features that are service related can also affect the carrier effectiveness like cost, speed, consistency, accessibility, and customer relationship, etc.

The carrier selection should be based on the goal that it should meet the requirements of the company, customers, and economy (Bisignano et al., 2013).

Before the selection, the social and environmental factors should be considered to avoid any damage caused by the carrier to the surrounding.

Cost is one of the major concerns of any firm which should be managed effectively.

Resource consumption is also a major factor that needs to be checked so the carrier should not pose any sort of threat to the economy of the country of operation.

The carrier selected should be able to deliver the products in the remote areas along with the urban that will in turn help company gain brand loyalty.

The global beverage giant selects the carriers very carefully to build a strong and sustainable system. The company’s goal is to maintain a shipper-carrier relationship. As the beverage business is volatile in nature, the correct information needs to be shared with the partner carriers. The demand should be met timely to create goodwill among consumers (Collier, 2014). Small issues need to be concentrated on instead of big problems at first level. The systematic selection procedure is one the best ways to choose the right carrier for a company. The factors that directly affect the carrier selection should be identified at first. Different modes should be embarked on to reduce the applicable costs. Equipment innovation should also be considered to make the process more effective. Instead of looking for a carrier hire, the company looks into the collaboration opportunity with other shippers.

As per current policy followed by Coca-Cola, Oracle Transportation Management has been selected to manage all the inbound transportations between suppliers and the firm plants. Collaboration has been done with more than 20 carriers who transport goods between the plants and bottling partners globally (Sundar, 2012).

Carrier Relationship Management

Any big firm needs to provide good carrier services and value the partner carriers. The fundamental job of carriers is to do all transportation related jobs. The organization and the transport partner should share a commitment to their jobs and sort out any arising problems jointly. Good behavior, trust, and effective communication are mandatory to make transportation process successful. Transportation success provides values to a company’s clients and maintains its goodwill.

A healthy relationship between a supplier and a carrier can be maintained by considering requirements and expectations of both ends. When a carrier understands and meets the requirements outlined by the supplier and the shipper comprehends and satisfies the demands of a carrier, then only good relation can be formed and maintained. A list of requirements from both shipper and carriers has been mentioned below for better understanding such as Service Performance, Price, Damage claim ratio, General rate increase, and Customer service etc. Similarly, the carrier expects negotiable pricing, volume, accessibility, and waits time etc. from the shipper.

Companies can develop a sound relationship among shipper-carrier through several ways.
Coca-Cola announces carrier of the year annually to strengthen their bond with the partner carriers. Illustrating US carriers, Coyote Logistics got Core Carrier of the year award 2014, it can be explained easily that carrier relationship can be managed effectively. This program by Coca-Cola consists of a number of transportation providers (Foster, 2014). Other than this, the challenger carrier of the year award is offered to the carrier that provides national service footprint and this award in 2014 has been granted to Heyl Truck Lines.

In order to perk up the transportation process, an effective logistical process is required. If the transportation capacity of an organization holds back, it ultimately affects the company’s performance in the market. Any relationship is based on the information shared between two parties. An honest conversation between the shipper and carrier is very important to meet the operational demands. Coca-Cola being a huge organization has a number of carrier partners. The relationship among these can be established by keeping a clear and concise conversation. (Torres-Machí et al., 2015) For example, quarterly or semi-annual meetings can be arranged to discuss various aspects of transportation. A source should be kept open for suggestions from carriers regarding size, weight, and packaging of products.

Various ways by which shipper-carrier relationship can be managed effectively are discussed below in this paper.

Study the changing demand and supply timely and adjust the rates accordingly. Seasons for sales should also be considered (Goehlich & Rücker, 2005).

Keep updated about changing trends and global market issues. Be in touch with internet updates, reports, and blogs regarding company and products. Know the needs of your business and industry.

Educate staff
Constantly educate and train the staff about the current requirements of the industry. Attend essential meetings, seminars, and training to understand the carrier demands efficiently.

Results management
Keep updated about current market trends and economic conditions. Evaluate the performance and results timely to keep a check on the loss. Review the contract terms, rates and targets time to time (Wagner, 2013).

Conclusion

As discussed in the statement, transportation is a fundamental key to the success of any organization. The distribution process is incomplete without a successful transportation process. The companies that operate globally need a more effective way of transportation to meet company’s goals and customer satisfaction. Various modes of transportation and carriers need to be used for the process. The transportation system should be managed effectively to reduce costs and deliver products timely and productively (Baird & Stammer Jr., 2000). The system should be properly designed and placed so that suppliers, intermediates, and customers all get benefited from it.

Other than this, the company should follow the international commerce terms to meet its goals. There should be an effective plan to choose the right carrier for the goods based on market demands and kind of customers. A strong relationship should be built between the shipper and the carrier to make the transportation process a success. 

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