Report: Carrier Selection, Incoterms, and Carrier Relationship - Honda

This report offers a detailed examination of transport and distribution management within Honda, a prominent Japanese multinational corporation. It investigates three key areas: carrier selection criteria, incoterms selection considerations, and carrier relationship management. The report analyzes the importance of transit time and reliability, geographic coverage, freight rates, product protection, and technical capabilities in carrier selection. It then explores the application of incoterms such as FOB, CIF, and EXW, and how they impact Honda's operations. Finally, it delves into carrier relationship management, focusing on outsourcing and the implementation of Type III partnerships to optimize the company's supply chain. The report concludes with a recommendation for Type III partnerships to facilitate long-term outsourcing contracts and streamline operations. The report highlights the crucial role of effective transport and distribution strategies in supporting Honda's global operations, particularly in the context of its heavy machinery and automobile production.

Running head: TRANSPORT AND DISTRIBUTION MANAGEMENT
TRANSPORT AND DISTRIBUTION MANAGEMENT
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Introduction
This essay intends to provide concise investigation of three major prospects
of the transportation and distribution management namely, the carrier selection
criteria, the incoterms selection consideration and the carrier relationship
management of transportation management in Honda Company. All the three
prospects of transportation management has been briefly described in this essay in
respect to the considered company. Lastly this report concludes with an appropriate
conclusion for this essay.
The considered case company, Honda is the Japanese public international
corporation mainly popular as the producer of the automobiles, power tools as well
as motorcycles. Honda is presently considered as the largest motorcycle
manufacturer and the largest producer of the interior combustion engines in the
world that is measured with the help of volume, generating almost 14 million interior
combustion engines per year. This company grew to be the largest automobiles
manufacturer based in Japan ("Honda Global | Company Overview", 2019). This
company was first Japanese manufacturer of automobile who provided the dedicated
luxury brand, Acura. Apart from the central automobile as well as the motorcycle
businesses, this company manufactures several garden equipment, the personal
watercraft as well as the power generators. This company is presently included
within the development of artificial intelligence and robotics research and it released
the first robot ASIMO.
Incoterms selection consideration
The incoterms that could be utilised by the Honda organisation could be
categorised as FOB, CIF and EXW. These incoterms helps the organisation in

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managing the suppliers and the vendors of the organisation and ensure that the
most optimised products are provided to the customers.
FOB: The FOB or Free on board is known as the description that is primarily
utilised for indicating when liability and the possession of the goods is shifted from
any vendor to any consumer (Rushton, Croucher & Baker, 2014). When it is utilised
with any recognised physical location, the designation mainly defines the party that
has the accountability for the payment of the freight charges and at which point the
title for the shipment passes from particular seller to any buyer. Within the aspects of
the international shipping, the FOB denotes that seller is mainly accountable for the
transport of all the products to the port of shipment as well as charge of the stacking.
Buyer mainly pays charges of the ocean cargo, the coverage, the unloading as well
as the transportation from arrival port to the final destination (Anaya-Arenas, Renaud
& Ruiz, 2014). Seller then permits the complete risk to the buyer when goods have
been loaded at the originating port. The FOB is utilised four distinct methods when
included in the freight shipping that includes the Freight collect and the freight
prepaid at the origin point, the freight collect and the freight prepaid at the destination
point (Tseng & Hung, 2014).
Figure: FOB

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Source: (Tseng & Hung, 2014)
CIF: Cost, Insurance and Freight or CIF is the terminology of contract of the
sale of the goods that are being transported where the payment of cost of insurance
is done by seller and then transportation of the goods to the destination is done, the
legal supply mainly happens when all the goods crosses rail of the ship in the port of
the shipment. The purchases mainly intakes the genuine delivery of the goods at
place that has been named within contract as place of the end point (Bernon, Cullen
& Gorst, 2016). The responsibility of the seller completely finishes when all goods
are securely positioned on the target ship as from the point on, risk during the ocean
transit is completely enclosed by the mandatory insurance. CIF has been considered
as the term that is majorly used in the maritime transport with distinct characteristics
of the insurance being at the expense of seller (Ross, 2015). Within this method, the
CIF has been distinguished from the CFR that denotes to the Costs and Freight
solely.
Figure: CIF

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Source: (Bernon, Cullen & Gorst, 2016)
EXW: EXW or the Ex Works could be described as the kind of incoterm that
had been created and implemented within the worldwide trading community around
1930s by International Chamber of Commerce. The incoterms are significantly
essential set of pre-defined rules, which are understood worldwide and it helps in
reducing several difficulties in communication that the international trades face on a
daily basis (Mitra & Datta, 2014). The Ex Works is presently considered as the
trading scenario where any seller of goods is primarily responsible for production as
well as packaging of the goods at the place of the manufacture solely. This is mainly
executed in the respect with the Free Carrier Preparations where seller is solely
accountable for the clearance of the goods with the customs at the place of the
transport, which is the delivery port. It then denotes that the buyer is primarily
responsible for all complete requirements of transaction proceeds. The liability
involves the prospects like the transportation after loading of the goods, the
unloading as well as the final transportation (Danloup et al., 2015). Within the
aspects of the internal trade, the Ex-Works is majorly desirable to any other liable
arrangements.
Figure: EXW
Source: (Danloup et al., 2015)

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Carrier selection criteria
Rank Selection Criteria Percentage %
1 Average transit time and reliability 30
2 Geographic Coverage 35
3 Freight Rates 25
4 Product Protection 5
5 Technical capabilities, ability to
share information
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From the above table of carrier selection measures, it could be perceived that
the average transit time and the dependability is of substantial importance within the
Honda Company. It ensures the safe and secure delivery of the products from the
suppliers to the end customer.
Average transit time and reliability
The travel time could be described as the variation happening within the travel
time and it also includes the major profitability of the success or the failure against
any pre-defined threshold travel time. In the terms of the supply chain as well as
logistics, the shippers make the agreements with customers for the delivery of the
shipment within any agreed time period (Owusu Kwateng, Manso & Osei-Mensah,
2014). The main formality of the time of delivery agreement among the shippers and
the customers could vary significantly, while it sanctions for significant lateness could
be included. When any delivery fails, shippers run the major risk of the incurring of
losses that could be either in terms of the financial aspects or in terms of the
reputation. At similar time, the customers are required to rush for the production, the

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assigning of additional labour as well as facing the probability of missing any
outbound delivery (Tsao, Zhang & Chen, 2016). The average transit time plays a
significant role in the Honda organisation as the products that are manufactured by
the organisation mainly consists of heavy machineries that are required to be safely
provided to the customers. The organisation could select the appropriate carrier who
ensure the secure transportation of cargo.
Geographic Coverage
The geographic coverage while the consideration of carrier selection plays a
vital role in the appropriate selection of carrier for the transportation of products. The
flow, networks and the nodes within the supply chain of this organisation plays a vital
role. The amount of the space, which could be easily traded with any particular
amount of time that includes the travel as well as the transhipment is being
significantly transformed by the aspects of logistics (Ivanov, Tsipoulanidis &
Schönberger, 2017). The activities that had not bene considered completely in the
space/time relationships like the distribution, is being presently combined. When the
carrier selection is required to be done in the organisation, the overall geographic
coverage of the carriers are required to be considered and analysed for reducing the
cost of the transportation of products (Franceschetti, Jabali & Laporte, 2017). The
transportation of heavy machineries that are manufactured by the Honda
organisation takes significant capital and time. It is important to select the
appropriate carrier for transporting the cargo of the organisation in lower cost and
minimised time.
Freight Rates
As the products of the Honda company includes significantly heavy
machineries, it is important to select the carrier that provide minimal charges for the

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freight transportation. The time required for the transportation of the supplies as well
as the products intakes significant time and the carrier selection could be the aspect
that provides the area for reducing the supply chain costs (Jiang & Mahmassani,
2014).
Product Protection
The Honda mainly produces and provides automobiles and also heavy
machineries that are required to be transported to the customers. While considering
the appropriate carrier selection, there is a requirement of considering the
appropriate freight providers who could ensure the safe transportation of the
products to the customers and also the safe transportation of all the supplies that are
required by the company for production of the automobiles (Arabzad, Ghorbani &
Tavakkoli-Moghaddam, 2015).
Technical capabilities, ability to share information
The transportation of goods and products is the process that intakes several
days and time. During this period of transportation, there is a major requirement of
sharing all the information of the present status of the supplies or even the freight
that is being transported. The carriers are required to be selected accordingly who
provides real time updates of the freight status to the company. The Honda
Company should select the appropriate carrier for transporting the cargo who
provide extensive information sharing among the various actors of transportation.
Carrier relationship management
Outsourcing
Outsourcing within the aspects of the supply chain management could be
defined as the total activities included within the supply chain management of the

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organisation. Outsourcing of the supply chain management activities mainly helps
with the minimisation of the overall costs, improved focus on core competencies,
then meet all the demands of customers and finally introduce improved flexibility in
maintenance and operation in the supply chain (Speranza, 2018). With the
introduction of outsourcing in the supply chain of the organisation, the activities
included in the supply chain management could where probability of issues in higher,
could be monitored efficiently and the required help with the supply chain
management could be provided by the company to whom the functions are
outsourced (Lei et al., 2017). The strategic outsourcing could be considered as the
technique for this company to accomplish all the activities included in the value chain
rather than performing all those tasks from within the organisation. The outsourcing
of the core activities of the supply chain to one specialised company could help in
the effective strengthening of business model of that company by the improvement
of efficiency or the enhancement of significant effectiveness with development of
differentiating advantage in respect to the variety, speed as well as the quality.
Type III partnership
The outsourcing includes the main potential of decreasing the costs, upsurge
the focus, enhance the productivity, add significant tractability along with
improvement and then increase the operating income with undertaking significant
gain of any other knowledge, innovation as well as the cheaper labour of any other
organisation. The type III relationships is the most popular strategic partnership that
is being presently exercised by the organisations. The outsourcing has developed as
the trend that prevails to be on the rise, specifically in the global markets. The Honda
company produces heavy machineries that requires significant transportation and
consolidation. With the implementation of the outsourcing Type III relationships, long

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term contractual relationship could be established among the various companies
included in the supply chain of the organisation and then simplify the complete
operations management of the organisation.
Justification of recommendation
The type III partnerships is recommended for the organisation as it helps in
ensuring long term outsourcing contracts among two organisation. This kind of
partnerships are not mainly governed by the usual contract, which denotes that it
mainly outlines the operations management of this company. The operations of the
Honda Company involves the supply of raw materials that are required for the
development of the automobiles and the assembly of the products in the warehouses
of the organisation. It does not contain any formal endpoint and it is considered as
long lasting contract. Even though this kind of partnership provides significant
benefits to the organisation, there are some risks associated with the Type iii
partnerships that are required to be considered. The changing of the terms of the
partnership is the main issue within the type iii partnership in outsourcing.
Conclusion
The FOB or Free on board is known as the description that is primarily utilised
for indicating when liability and the possession of the goods is shifted from any
vendor to any consumer. Cost, Insurance and Freight or CIF is the terminology of
contract of the sale of the goods that are being transported where the payment of
cost of insurance is done by seller and then transportation of the goods to the
destination is done, the legal supply mainly happens when all the goods crosses rail
of the ship in the port of the shipment. EXW or the Ex Works could be described as
the kind of incoterm that had been created and implemented within the worldwide

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trading community around 1930s by International Chamber of Commerce.
Outsourcing within the aspects of the supply chain management could be defined as
the total activities included within the supply chain management of the organisation.
Outsourcing of the supply chain management activities mainly helps with the
minimisation of the overall costs, improved focus on core competencies, then meet
all the demands of customers and finally introduce improved flexibility in
maintenance and operation in the supply chain

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