TDMT 2251 - Logistics Processes (CITT) | Supply Chain

Running head: TDMT 2251 - Logistics Processes (CITT)
TDMT 2251 - Logistics Processes (CITT)
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1TDMT 2251 - Logistics Processes (CITT)
Executive Summary
Supply chain can be best described as the interconnection between the suppliers of a good or
service and buyer of such good or service. Supply chain a broader concept which
encompasses “Logistics” that deal with the distribution of the goods and services from the
seller to the buyer or end users. The aim of this report is to elucidate supply chain relating to
Lorenza Polymer Sand Company of Montreal, Canada that aims to deliver its goods to
Hayward Home Centers located in southern USA. The efficient delivery of goods requires
LSP to comply with all the key requirements of Customs of both Canada as well as USA
along with searching for a warehouse that suits its business and fulfilment of Hayward’s
terms of sale. The research report aims in identifying such challenges including damage
control of defective goods that LPS will face while delivering Polymeric sand to Hayward’s
Distribution Centre along with requisite solutions to combat such challenges.

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Table of Contents
Introduction................................................................................................................................3
Description.................................................................................................................................4
Incoterms................................................................................................................................4
Customs Compliance plan......................................................................................................5
Warehousing..........................................................................................................................7
Damage control plan..............................................................................................................8
Summary and Conclusion........................................................................................................10
References................................................................................................................................11

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Introduction
Supply chain in truest sense depicts the connection between the suppliers of a product
or good and its end user or customer. In other words, supply chain is a link, system or chain
that connects all the components of delivering the final or finished goods to the end users
(Stadtler, 2015). Thus supply chain denotes the conversion of raw materials and natural
resources into final goods and delivering such goods to the end users or customers for
consumption. On the other hand, supply chain management denotes the integration of all the
principal business processes originating with the suppliers of the goods and ends with the
final consumers, that is, customers. Here, the suppliers are providers of the products and
services and also enhances the value of such goods and services through information for the
end users or customers (Qrunfleh & Tarafdar, 2014). On the other hand, logistics is a term
that applies within this broad topic of supply chain denoting the distribution of the goods and
services to the end users, whereas, supply chain is the broader concept that circumferences
the entire process initiating with the procurement of raw materials till the delivery of the
goods and services to the end users.
Lorenza polymer Sand Company (LPS) is a manufacturing company that deals and
also specializes in a special type of sand known as Polymeric sand which are used by
contractors as well as Do-It-Yourself home owners. They have been in this manufacturing
business since 25 years and are considered among reputable firms in Canada. It have it’s
headquarter situated in Montreal Canada. Polymeric Sand is a special kind of sand that covers
up the joints between stones. It takes about 18 hours to dry and join the stones when mixed
with water at room temperature of around 20 degree Celsius. It had its plans of extending its
business in the US and the opportunity came when the supplier of sand for Hayward Home
Centers ceased to manufacture sand. The aim of this report is to identify the potential

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challenges it will face while entering the US market and at the same time providing the
solutions to eradicate such challenges.
Description
Incoterms
Incoterms can be best explained as the set of instructions and codes which are
recognized internationally. In the context of logistics and supply chain, incoterms denotes
distribution of responsibility between a seller or supplier of goods and services and the buyer
of such goods and services. The aim of these incoterms is to explain, lay out and link risks,
liabilities and costs with all the parties responsible or associated with the shipping of such
goods and services (Johngood.co.uk, 2020). In the present context, Hayward maintains strict
terms of sale and wants to get the goods delivered to them as per FOB, FCA, DDP or CIP.
FOB: It stands for “Free on Board.” It demonstrates a situation where the seller voluntarily
gives up the ownership of the goods and services and the buyer accepts such ownership
during a supply chain transaction (Stapleton, Pande & O'Brien, 2014). The terms of Free On
Board portrays equal responsibility for both the seller and the buyer and they both have to
bear almost similar risks, liabilities and costs. Here, the buyer takes the title of the goods and
also is responsible for the activities post loading of the goods by the supplier. In other words,
the buyer takes all responsibility relating to the goods as soon as the goods carrier picks up
the consignment of the goods. For Hayward, this can be a better option than the others as this
term of sale will allow better cost control.
FCA: It stands for “Free Carrier.” It denotes that the seller assumes the title of goods till
delivery and is responsible to deliver such goods bearing the cost of such delivery to an
agreed location of the buyer. Here, the responsibility of the export clearance lies on the seller,

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post clearance the responsibility passes on to the buyer (Yaakub & Szu, 2017). It is to be kept
in mind that, if the location of delivery is away from the seller’s place of business, then the
cost of loading is borne by the buyer. Free Carrier can be considered beneficial for LPS as the
goods are to be delivered to the warehouse of Hayward where the loading will be done by
Hayward itself.
DDP: It stands for “Delivered Duly Paid.” The terms of sale as per DDP signify that the
seller is liable to bear all expenses including import duties till the goods are being delivered at
a designated place of the buyer (Porcelli, 2019). Here, the cost as well as responsibilities for a
seller is more as compared to a buyer of the goods. DDP can be considered as a better terms
of sale for Hayward and may not look profitable for LPS.
CIP: It stands for “Carriage and Insurance Paid.” Here, the seller bears all cost like till the
goods are handed over to a carrier (Leong, 2014). The responsibility of the buyer begins as
soon as the goods are delivered to the carrier by the seller. This term of sale can look
attractive for Hayward; however it is not benefitting LPS as it has to bear all the costs till the
goods are handed over to the carrier.
Customs Compliance plan
Customs Compliance denotes the set of rules and regulations that a firm has to follow
while exporting or importing goods. This rules have to be followed by all firms engaged in
international trade (Jiang, 2017). A customs broker can be identified as a license holder who
is engaged in assisting the exporters and importers to be in compliance with all the applicable
laws in force relating to customs clearance of goods and services. Therefore a customs broker
can be termed as a link between exporter, government agencies and the importers.
Customs compliance initiates with identifying and understanding the policies and law in force
relating to customs of both the countries of export as well as import. The effectiveness of

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customs compliance lies on institution of self-audit and monitoring the internal processes. It
is all about shielding the firm from unnecessary penalties and delays in delivery (Grainger,
2014). The first and foremost requirement is establishing an effective team dedicated in
deducing the applicable law in force and also credible in sending and receiving information
from customs authorities like Canada Border Services Agency (CBSA) for Canada and US
Customs and Border Protection for USA. There exists certain compliance issues which need
to be addressed with urgent priority. Firstly, valuation of the goods after import remains the
top priority for the importers where they have to make certain adjustments to the value of the
goods owing to “Duty of Goods.” Classification of the goods according to established
categories remains the second most important priority for exporters. Thirdly, verification of
the origin of the goods must be done before exporting. Fourthly, it has to be seen whether the
goods falls under countervailing duties, anti-dumping or any other special levies or not
(Kassee, 2014). Fifthly, it has to be specifically seen whether the goods qualify for any
special trade arrangements for duty relief or not like the “North American Free Trade
Agreement (NAFTA).” Sixthly, it has to be thoroughly checked whether the goods exported
meets the certification requirements relating to international safety, pre-established standards
and environmental requirements of the importing country. Seventhly, it should also be
expressly enquired and understood whether the exported goods falls within some kind of
export, import control measures or any embargoes or not (Peterson, 2017). Eighthly, it has to
be determined whether any special permit is required to export the goods from the source
country and import such goods in the country of import or not. Lastly, but more importantly it
has to be checked whether there exist any import country specific requirements that has to be
fulfilled before shipping the goods or not.
All the above discussed customs compliances procedures are the responsibility and
role of a customs broker. It should be recommended that the customs brokerage should be

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practiced using in-house staff because they are well accustomed with all the internal
processes, its strength and weaknesses beforehand. This will enable the exporter in easily
identifying the shortcomings and take necessary steps easily and save a considerable amount
of time and money than appointing an outside customs broking partner.
Warehousing
LPS made an agreement with Hayward to keep at least 50% of the forecast for each
month as safety stock and the goods will be delivered to Hayward’s Distribution Centre
within 8 hours of order placing. This will require LPS to keep a warehouse in a prime
location of Baton Rouge, which will also allow it to expand its business in southern USA.
The choice of warehouse for LPS will depend on the following criteria.
Private warehouse
Private warehousing has some inherent advantages. Firstly, the storage and handling
of the goods in the warehouse can be enhanced by increasing the performance of the
warehouse through better monitoring systems as per the requirement of the organization
(Mellat-Parast & Spillan, 2014). Secondly, the errors can be reduced and eliminated to a great
extent owing to the handling of the goods by the organization’s own staff. Thirdly, the overall
price or cost of warehousing could be less than a public warehouse provided there is enough
space up in there which adjusts the cost of multiple public warehouse (Brea‐Solís, Casadesus‐
Masanell & Grifell‐Tatjé, 2015). Fourthly, private warehouses can be customized and tailor
made as per the requirement of the organization. Private warehouses can be taken on rent or
lease rather than purchase. All these above mentioned facilities will enhance the service
provided to the clients of the company in terms of better service and delivery on time thereby
enabling the organization in enhancement of business with its existing clients and at the same
time acquiring of new clients.

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Public warehouse
Public warehouses as well have some inherent advantages. Firstly, the infrastructural
need is reduced by a great extent owing to availability of readymade infrastructure
beforehand (Zakić et. al., 2014). Secondly, public warehouses adapts to the needs of the
organization like availability of greater volume of space for a particular time of the year
especially for business dealing in seasonal goods (Topaloglu, McDonald & Hunt, 2018).
Thirdly, public warehouses are less costly than private warehouses. Lastly and most
importantly, maintenance of warehousing activities requires skilled employees having sound
knowledge in logistics and this requires employment of a considerable amount of funds for
the organization, however, choosing a public warehousing facility over a private warehouse
would save the company in both developing this specialized knowledge as well as employing
a considerable amount of funds.
To conclude it is recommended that LPS should opt for a private warehousing facility
in Baton Rouge owing to its consistent volume of demand, fulfilment special preferences of
client, Hayward and all other better advantages of private warehousing over public
warehousing facilities.
Damage control plan
LPS sends 25 packets of sand in a wooden pallet containing 25kg each. It was found
that on receiving the samples, some packets are found damaged. If this situation persists then
there would be 10% deduction from each invoice which will hamper its business immensely.
The steps to eradicate such losses, LPS should take the following steps:
Firstly, the staff should be properly trained in order to ascertain proper packaging of
the goods from the get go of the logistics process (Lewandowski & Oelker, 2014). Secondly,
the wooden pallet could be replaced with hard and course plastic material which is corrugated

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from outside so that the damages in transit could be reduced and eliminated to a great extent.
Thirdly, a formal checking is to be done before the goods are loaded for the first time and
after the goods arrive at the warehouse to identify any damages in transit. Last but not the
least, the total supply chain process are to be monitored by designated officials of the
company and periodic audit should be done to identify any more possibility of damages if
there is any.

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Summary and Conclusion
The above discussion provides a detailed explanation of the supply chain procedures
relating to LPS and its willingness to procure the southern USA market of Polymeric sand.
They wanted to start the market orientation with Hayward and for this they devised plans to
comply with the existing custom compliances and procurement of warehouses in Baton
Rouge. However, some of the samples they sent for verification became damaged and proper
recommendations have been provided for elimination of any further damage of sand in the
export import procedure.

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References
Brea‐Solís, H., Casadesus‐Masanell, R., & Grifell‐Tatjé, E. (2015). Business Model
Evaluation: Quantifying W almart's Sources of Advantage. Strategic
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Grainger, A. (2014). Measuring-up customs: A trade compliance cost
perspective. Nottingham University Business School Research Paper, (2014-02).
Jiang, Z. (2017). Trade facilitation and customs compliance for cost-saving and efficiency:
Policies, practices and proposals–A China case study. Global Trade and Customs
Journal, 12(11), 469-483.
Johngood.co.uk, 2020. Incoterms - What Are Shipping Incoterms And What Do They All
Mean?. [online] UK Shipping Agents | Freight Forwarder. Available at:
<https://www.johngood.co.uk/2017/08/03/shipping-incoterms-definition/> [Accessed
14 March 2020].
Kassee, D. (2014). The WTO agreement on trade facilitation: status of play in Southern
African customs. World Customs Journal, 8(1), 101-112.
Leong, Y. S. (2014). Relationship between incoterms choices, selection factors and export
performance: A case of manufacturing companies in Malaysia (Doctoral dissertation,
Universiti Utara Malaysia).
Lewandowski, M., & Oelker, S. (2014). Towards autonomous control in maintenance and
spare part logistics–challenges and opportunities for preacting maintenance
concepts. Procedia Technology, 15, 333-340.

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Mellat-Parast, M., & Spillan, J. E. (2014). Logistics and supply chain process integration as a
source of competitive advantage. The International Journal of Logistics Management.
Peterson, J. (2017). An overview of customs reforms to facilitate trade. J. Int'l Com. & Econ.,
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Porcelli, A. (2019). A control model for the strategic change of Incoterms in the green coffee
supply chain: the case Nestlé (Doctoral dissertation, Politecnico di Torino).
Qrunfleh, S., & Tarafdar, M. (2014). Supply chain information systems strategy: Impacts on
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Stadtler, H. (2015). Supply chain management: An overview. In Supply chain management
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Stapleton, D. M., Pande, V., & O'Brien, D. (2014). EXW, FOB OR FCA? Choosing the right
Incoterm and why it matters to maritime shippers. Journal of Transportation Law,
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INCOTERMS AMONG MALAYSIAN MANUFACTURERS. Internation
conferenxe on social sciences research.

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Zakić, V., Kovačević, V., Ivkov, I., & Mirović, V. (2014). Importance of public warehouse
system for financing agribusiness sector. Economics of Agriculture, 61(297-2016-
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