Transportation and Distribution Management Assignment 2022

Running Head: Transportation and Distribution Management Assignment
TRANSPORTATION AND DISTRIBUTION MANAGEMENT
ASSIGNMENT

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Transportation and Distribution Management Assignment
Table of Contents
1. Introduction............................................................................................................................3
2. Incoterm selection consideration............................................................................................4
3. Criteria for carrier selection...................................................................................................7
4. Carrier relationship management...........................................................................................9
5. Conclusion............................................................................................................................10
Reference list............................................................................................................................12

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Transportation and Distribution Management Assignment
1. Introduction
Transportation and distribution involve moving products from different manufacturing plants
to warehouses or distributors. Main purpose of this essay is to analyze different aspects of
transportation management. This includes incoterms selection consideration, selection criteria
of carrier and carrier relationship management. Different duties of buyer and seller have been
discussed in the incoterm criteria that can help to understand the responsibilities of both
parties. Proper selection of criteria for carrier needs to be analyzed that can help to gain
success in distribution and procurement process. Hence, supply chain management can be
strengthened, which can help to achieve operational success.
Hennes and Mauritz (H&M) is a Swedish multinational organization, which is recognized
as a clothing retail firm. This company was incorporated in 1947 and headquarter of this
company is located at Stockholm Sweden. Area of service of this organization is worldwide
and its stores are located in around 4958 locations (Hm.com, 2018). This company provides
service in around 62 countries. Around 150000 employees work for this company (Hm.com,
2018). Products of this firm include fast-fashion clothing for women, men, and children.
Products of this company include clothes, fashion accessories, lingerie, sportswear, and
premium quality dresses for different seasons. This firm has a leading position in some of the
important marketing like USA, China, and other European nations. H&M face tough
competition in the market and Inditex (Parent company of Zara) is their main competitor.
Other competitors are GAP, Uniqlo and American eagle outfitters. Main mission of this
company is to bring long-lasting positive change that can help to improve style statement of
people at affordable cost. This will be done by making investments in different communities
and peoples and offering customers innovative products and services. Main goal of this
organization is to support industry-wide collective bargaining and provide the best quality

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Transportation and Distribution Management Assignment
materials and products to their customers. This can help them to run their business
sustainably and gain competitive advantage.
2. Incoterm selection consideration
Analysis
 Mode of shipment
Different methods of shipment are there and customers select shipment mode based on risk
and cost. Selection of effective shipment method has helped H&M to manage both suppliers
and customers. This global fashion retailer buys products from suppliers of different
countries including Germany, China, Bangladesh, Cambodia, Bulgaria, Croatia and others
(Bektaş, Ehmke, Psaraftis & Puchinger, 2019). Manufacturing and processing factories are
present in these countries and these factories are owned or controlled by suppliers of H&M.
They deliver products to their customers from all over the world. They are following Free
Carrier (FCA) incoterm for transportation of goods. They transport their goods through
different ways like ship and airplane. Plane is used to transport different goods to different
countries, which consumes less amount of time. Bulk amount of orders are transported via
ship. As mentioned by Sener & Boyuk (2017), this incoterm ensures passing of risk to the
buyer. Due to this reason, they are facing risks while collecting goods from suppliers.
 Export knowledge and skills of the manufacturer
Manufacturer must have knowledge and skills to evaluate and all kinds of potential risks.
According to Guo & Peeta (2015), managing payment and all financial matters with
confidentiality is required for international transportation of goods. Manufacturer of H&M
needs to undertake an appropriate approach to for manufacturing and exporting goods to the
warehouses of this fashion retailer. They produce plans for international sales and marketing.
On the other hand, H&M plays the role of seller while delivering products to their customers.

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Transportation and Distribution Management Assignment
At that time, eligible persons must be recruited for reviewing all aspects of export including
cost, departure port, destination port, nature of product, mode of transport, incoterm contract
and other aspects.
 Import knowledge and skills of the wholesaler
Import of goods is bound with different policies and it is important to have effective skills as
well as knowledge to maintain all policies. As mentioned by Ho et al. (2017), wholesalers are
liable to choose the appropriate incoterm to distribute products. H&M acts as a wholesaler
and distribute their products to other local organizations. Skills regarding planning,
controlling and coordinating with opposite parties, are required in import manager of a
company (Solakivi & Ojala, 2017). Free on Board (FOB) is being used by H&M to distribute
their products. Selection of this incoterm is helping this organization as buyers bear all the
cost of transportation.
 Other considerations
Different factors are there that must be considered while importing or exporting goods. As
opined by Setamanit & Pipatwattana (2015), trade policy, exchange rate, inflation,
productivity, and others must be considered while transporting goods internationally. Risk
factors are required to evaluate for avoiding financial loss. Selection of incoterm contract
plays an important role in managing costs of transportation of goods. It is important for H&M
to select appropriate incoterm that can ensure passing of risk to the opposite party.
 Recommendation
Effective incoterm contract has been considered by H&M and this approach has minimized
risks of transportation of goods. They can continue transporting their goods through plane
and ship. This is because plane helps to deliver cargo within short period of time. On the
other hand, ship can be used to deliver large amount of cargo to different nations. As
suggested by Nazemzadeh & Vanelslander (2015), organizations must select an incoterm

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Transportation and Distribution Management Assignment
contract that can support passing of risk to the other party. It is recommended to consider EX
Works incoterm by H&M while buying goods from manufacturers. This decision may help
this organization to control the shipping process while getting goods as per market demand.
They will not be dependent on the sellers regarding gaining the goods on time.

DESTINATION BUYER’S
WAREHOUSE
MANUFACTURING
FACTORY
FIRST
CARRIER
SELLER’S OBLIGATION (COST AND RISK)
BUYER’S OBLIGATION (COST AND RISK)
TRANSFER OF RISK
EXW EX WORKS AGREED PLACE
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Transportation and Distribution Management Assignment
EX-WORKS INCOTERM

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Transportation and Distribution Management Assignment
3. Criteria for carrier selection
Previously H&M has taken effective decisions on procurement and distribution that has
helped them to increase their competitiveness. This organization has become an industry
leader in many markets due to its supply chain practices. Different essential factors need to be
considered during the selection of carrier. This includes region coverage that the carrier
provides (Setamanit & Pipatwattana, 2015). H&M is trying to increase its operation in Asia
and Europe. Hence, the carrier needs to provide strong service in both Asia and Europe.
Moreover, Chou (2015) contradicted that reliability of the carrier is another essential
selection criterion. The carrier needs to pick up on-time and deliver products in a proper way.
This can help to improve brand image of the company. Other essential criteria are freight
rates and financial stability of the transport company. High freight charges may increase
operational cost of a company impacting in future strategy implementations. Transit time
and technical capabilities are some of the factors that are also considered while selection
career.
Criteria table
Rank Criteria Weight (in %)
1 Region coverage 40
2 Charges 25
3 Reliability 25
4 Transit time 10
Total= 100%
Definition of chosen criteria

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Transportation and Distribution Management Assignment
Region coverage: This factor can be defined as a network of area that a carrier covers to
provide freight services (Miller & Saldanha, 2016). A regional service provider carries
shipment to different local areas and its area of coverage is low. Regional provider can carry
freight at low cost and travel time is also less. On the other hand, national or international
carriers have a large coverage area. They provide freight services to different regions of a
nation and perform operations across the borders. Coverage area of this type of frights service
providers are more and companies did not have to hire a different carrier for different regions.
Transit time: it can be defined as travel time that is required to transport the shipment to
desired locations (Vaxevanou & Konstantopoulos, 2015). Transit time can also be explained
as travel time that is required to deliver goods from one company to another. It is an essential
factor that states how effective a carrier can be for serving a business. High transit time can
delay the process of delivery or procurement and this can impact business and customer
satisfaction level. This problem can be minimized by selecting a carrier who offers
guaranteed transit time or selecting different regional carriers.
Reliability: Assurance of providing on-time pick-up and delivery and maintaining quality of
the shipment defines reliability of the carrier. It is very essential to maintain quality of the
shipment because the reputation of the company can be impacted if delay occurs in the
delivery of goods (Stojanović & Aas, 2015). A reliable carrier can help in growth of the
business by meeting expectations of customers. Hence, a carrier who provides transparent
operations by proper communication needs to be chosen.
Charges: This factor can be defined as the price that is required for transportation of the
shipment. It is an essential determining factor, which can be prioritized while selecting a
carrier. A least expensive carrier helps to decrease operational costs of a company (Scott,
Lundgren & Thompson, 2018).

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Transportation and Distribution Management Assignment
4. Carrier relationship management
Requirement of outsourcing
Outsourcing plays an important role in maintaining flexibility of business. As mentioned by
König & Spinler (2016), managing outsourcing relationship helps organizations to focus on
their core competencies. H&M needs to consider outsourcing for managing all aspects of
international transportation through other organizations. Level of potential risk and budget
can be reduced if this company hires another firm for transportation. Both buying and selling
activities can be done within minimum cost and time. Additionally, this organization can
focus on other activities of business by relying on outsourcing relationship for transportation.
Types of relationship
There are different types of relationships that can be adopted by H&M for achieving success
in transportation. Relationship types include an arm's length relationship, type I short term
relationship and type II and III relationship. Among these types of partnership, H&M can
adopt a type II outsourcing partnership. As opined by Yoon, Yildiz & Talluri (2016), in
type II outsourcing relationship, a contract between the two companies are made, which are
of longer duration. H&M is a multinational company that is aiming in expansion of business
in different regions like Asia. Hence, they require long term contracts that can help them to
save both costs and time. Moreover, Chou (2015) stated that type II relationship may require
investments from both ends. Hence, both H&M and Carrier Company may have to invest
money and other resources. Hence, the scope of activities also increases with the help of this
contractual relationship. H&M can deliver products to new regions at low time and higher
volume of products can be delivered. This is because if outsourcing is not done then
maintenance of transportation tools need to be done, which involves time and costs. Those
carriers need to be included in this type of relationship who offers guaranteed annual volume

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Transportation and Distribution Management Assignment
and dedicated freight lanes. However, this type of relationship helps in cost reduction and
high annual volume supply can be increased.
Building a relationship
For building this relationship, H&M needs to adopt different strategies. Proper planning is
required for developing type II outsourcing partnership by H&M. Both parties need to take an
active part in planning that can help them to carry out different transportation operations
without any confusion. As opined by Antoniolli et al. (2015), in a third-party relationship, it
is essential to conduct proper planning to eliminate any error in the process. For conducting
the planning process effectively, both the third party and H&M need to give equal inputs.
This can help them to grow their relationship and help them achieve successful
transportation.
It can also be recommended that proper communication is necessary to build this third party
relationship. Successful communication helps to eliminate conflicts and information can be
shared actively. H&M can arrange general meetings with the third party carrier for discussion
and planning. This can help to elevate the relationship between both parties properly.
5. Conclusion
From the above discussion, it can be concluded that a transportation manager must have skills
and knowledge for managing three main aspects of transportation of goods. These three
aspects include considerations for incoterm selection, criteria for carrier selection and carrier
relationship management. This study has shed light on these factors and it has included all
related perspectives towards these factors. One can understand the role of a transportation
manager by evaluating this study. Background of the chosen company and its mode of
shipment have been mentioned. Current incoterm contract of this firm has been evaluated and
a new incoterm plan has been recommended. The incoterm diagram is effective in helping

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Transportation and Distribution Management Assignment
people to understand the significance of this recommendation. Criteria for carrier selection
have been represented in a table along with their weights. Based on the mentioned criteria,
carrier must be selected in case of transportation of goods internationally. Carrier relationship
management is an important aspect in case of international transportation and this factor has
been analyzed appropriately in this study. In this section, an effective recommendation of a
relationship type has been mentioned for the chosen fashion retailer. Proper justification and
explanation of recommendations are helpful in understanding their significance in
international transportation.

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Transportation and Distribution Management Assignment
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Transportation and Distribution Management Assignment
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Transportation and Distribution Management Assignment