Capstone Project 2: Inbound Transportation of Refrigerators - ISC 205

This Capstone Project analyzes the inbound transportation of refrigerators from South Korea to Canada, focusing on supply chain management. The project outlines the routing shipment process, identifying key retailers and transportation modes (ships and trucks). It details three planned shipments, specifying product types, quantities, and container specifications. The project includes a cost analysis, breaking down expenses associated with different refrigerator models and transportation methods. It also addresses potential risks, such as accidents, theft, and damage, and assesses the application of Incoterms (CIP and CIF) to mitigate these risks. The project concludes by emphasizing the importance of marine insurance and export clearance procedures. The student uses the knowledge and skills learned in previous Supply Chain Management courses to address the problem.

Running head: CAPSTONE PROJECT 2
1
Capstone project 2
Student’s Name
Institution
Date

CAPSTONE PROJECT 2
2
Question 1
The routing shipment of the refrigerator from the warehouse located in Canada is a series
of steps. The refrigerator retailers in Canada are the Apex, Homesun and LG which are located at
the Rockville. They are the main retailers of the refrigerators and therefore the central point
where the refrigerators are purchased to. The products are shipped from the manufacturers to
other target markets through the use of the ships (Van Wassenhove, 2013). The target market for
refrigerator products from South Korea manufacturers is Canada. The refrigerators are
distributed from Apex manufactures by the Windsor distributing company to all other parts of
Canada. From South Korea, refrigerators are carried by the trucks to in Port of Busan, in South
Korea where they shipped to Port of Metro Vancouver in Canada via ships (water). The
refrigerators are packed in the shipping containers to be shipped via water to Canada. They are
distributed to other business premises in either large or small scale for use. In this routing
shipment, the ship (water) mode of transport is used for the distribution of the refrigerator
products from manufacturing companies in South Korea to Canada. Upon arrival to Canada, the
trucks are used to distribute the refrigerators to all other parts of Canada. The road transport is
used for distribution of the refrigerators to interior parts of Canada because it is fast means. In
addition, road transport by trucks is able to carry large volumes of refrigerators safely (Sáenz,
2015). In addition, the refrigerators are distributed to business parks and restaurants by use of the
small specialized cargo vehicles to carry the refrigerators safely. The specialized cargo trucks are
used in the distribution of the refrigerators because they are moved safely. Refrigerators are
delicate and therefore they need at least a safe means of transportation.

CAPSTONE PROJECT 2
3
Supply chain map
Question 2
There will be three shipments in the year, considering that 10, 0000 units are the target.
The first shipment will be done at the beginning of the year. The approximate size of the
shipment of the refrigerators is expected to be 10, 0000 units. The type of the shipment items is
LG Signature 23 cu. They are expected to be transported by specialized 40ft x 20ft because of
the large size of the refrigerators. Each container is supposed to have a carrying capacity of 300-

CAPSTONE PROJECT 2
4
400 refrigerators items for spacing. They are delicate and there is a need for better spacing
between the items (Zhang, 2013). The shipment scale is expected to be 10, 0000 units in each
three shipping periods per year.
Shipping containers of the refrigerators
Source:https://www.marinetraffic.com/blog/wpcontent/uploads/2018/02/
rsz_istock_000027555235_double-1024x683.jpg
Load plan
Shipment ID ITEM DESCRIPTION
LD1- FBAPMK5M LG Signature 23 cu-10, 0000
units
This is the first package of the
year in January. 10, 0000 units
are shipped with shipment ID.
LD2- FBA_DSCP_1 LG Signature 31 cu The second shipment is done

CAPSTONE PROJECT 2
5
at the mid of the year for 10,
0000 units as well. The
shipment Id provides all the
information regarding the
shipped refrigerators with
their shipping number.
LD3- PLN1HN2F 24 cu French Door Counter-
Depth
This is the last shipping step in
which the last 10, 0000 units
are shipped with shipping ID.
The shipping is programmed for the three shipping periods within the year. The number of
refrigerators shipped in each period is adequate to cater for the selling period to another (Powell
& Sheffi, 2013). Before the next shipping period, the number of the sold items is determined
based on the customers' test and preference. It helps is the right type and number of refrigerators
in the next shipping period according to the needs of the customer.
Question 3
The cost of the shipping is calculated depending on what is shipped. Shipping through the
water is confirmed to be most expensive in comparison with trucks distribution means. The
table below shows the cost of the shipment that is encountered through the water.
Item Description Quantity Mode Unit Price Total
1 LG Signature 23 2000 Ships $ 2,000 $4000,000

CAPSTONE PROJECT 2
6
cu
2 LG Signature 31
cu
2000 Ships $ 3,000 $6000,000
3 23 cu 2000 Road $400 $800,000
4 24 cu French Door
Counter-Depth
2000 Ships $2000 $4000,000
5 28 cu Door-in-
Door
2000 Ships $2000 $4000,000
Subtotal $1,8800,000
Tax $ 1,692, 000
Shipping $ 12,203,000
Others $ 400,000
Total $22,115,000
In consideration of what has been illustrated in the table, there are 2000 items shipped in each of
the shipping periods. Two hundred items of the LG Signature 23 cu each cost $2000 and a total
of $ 4000. LG Signature 31 cu 2000 items require $ 3000 and a total of $60, 000. 23 cu one item
costs $4000 and a total of $800,000. In addition, 24 cu French Door Counter-Depth one item
costs $2000 and a total of $4000, 000. Finally the 28 cu Door-in-Door one item costs $2000 and
a total of $4000,000 amounting to a total of $22,115,000inclusive of the tax, shipping and other
costs (Bergami, 2016).

CAPSTONE PROJECT 2
7
Question 4
The risks associated with the entire shipping process include accident risks, theft risks
and damage risks. The shipment of the items through the water is under high chances of
subsiding by accident (Rosenberg, Ray, Palmisano & Peter, 2011). In addition to this, there are
risks of the damage of the refrigerators in the process of shipping from the manufacturers to the
consumers. Some of the refrigerators many become the default in the process of shipping.
Besides, there is a risk of theft in the process of shipping the refrigerators (Chang, Xu & Song,
2015). Incoterms assessment used in this area is the CIP and CIF. For the carriage and insurance
paid covers (CIP) the Canada refrigerator buyers from the loss and damage of the items during
shipping. It is covering the transportation by water mode of transport and also road means of
transport by trucks. Besides, cost, insurance, freight (CIF) ensures that the Canada refrigerator
buyers pay the price and the freight cost to bring the shipped refrigerators to Port of Metro
Vancouver. The South Korea manufacturers guarantee the items through the marine insurance
cover, which protects the refrigerators from the risks of damages during shipments (Glickman &
Sontag, 2015). South Korea sellers should clear the exported refrigerator through ocean transport
clearance department.

CAPSTONE PROJECT 2
8
References
Bergami, R. (2016). The link between Incoterms 2000 and letter of credit documentation
requirement and payment risk. Journal of Business Systems, Governance and
Ethics, 1(4), 49-58.
Chang, C. H., Xu, J., & Song, D. P. (2015). Risk analysis for container shipping: from a logistics
perspective. The International Journal of Logistics Management, 26(1), 147-171.
Glickman, T. S., & Sontag, M. A. (2015). The tradeoffs associated with rerouting highway
shipments of hazardous materials to minimize risk. Risk Analysis, 15(1), 61-67.
Powell, W. B., & Sheffi, Y. (2013). The load planning problem of motor carriers: Problem
description and a proposed solution approach. Transportation Research Part A:
General, 17(6), 471-480.
Rosenberg, A. S., Ray, N., Palmisano, K. A., & Peter, L. A. (2011). International Commercial
Transactions, Franchising, and Distribution. Int'l Law., 45, 191.
Sáenz, M. J. (2015). Supply chain design for unlocking the value of remanufacturing under
uncertainty. European Journal of Operational Research, 247(3), 804-819.
Van Wassenhove, L. N. (2013). Concurrent product and closed-loop supply chain design with an
application to refrigerators. International journal of production research, 41(16), 3689-
3719.
Zhang, Y. (2013). Improved load plan design through integer programming based local
search. Transportation Science, 47(3), 412-427.

CAPSTONE PROJECT 2
9