Discussion Exercises
Discussion Questions
Chapter 13 Distribution Strategies: Physical Distribution and Documentation
- What are some of the hazards associated with the air, water, and land modes of transportation?
Hazards related to the ocean/water mode include wave impact, navigation exposures, water damage, and the various vessel motions (rolling, pitching, heaving, surging, swaying, and yawing). Hazards related to the air mode include ground handling and changes in atmospheric pressure and temperature. Hazards related to the rail and highway modes include acceleration/deceleration (braking), coupling impact, swaying on curves, and shock and vibration.
- Explain how the freight rates-density effect can affect the choice of transportation.
The freight rates-density effect determines true costs rather than absolute costs of each transportation mode. Sea freight is very cheap when goods are very dense (i.e., low volume per unit of weight). But as density declines (i.e., the increase in bulk in relation to constant weight), the charge for sea freight rises rapidly. Consequently, air freight is quite competitive for such low-density goods as ladies' shoes and towels.
- Distinguish among conference lines, independent lines, and tramp vessels.
An ocean freight conference line is an association of ocean carriers that have joined together to establish common rules with regard to freight rates and shipping conditions. Consequently, the operators in the group charge identical rates.
An independent line is a line that operates and quotes freight rates individually and independently. Independent lines accept bookings from all shippers.
A tramp vessel is a ship not operating on a regular route or schedule. Tramp vessels operate on a charter basis whenever and wherever they can get cargo.
- Distinguish between special coverage and blanket coverage.
A special policy is a one-time policy that insures a single specific shipment. One-time insurance is relatively expensive, but it is a practical insurance solution if a seller's export business is infrequent.
An open policy is an insurance contract issued to a firm in order to cover all its shipments as described in the policy within named geographic regions. A single premium is charged for a specified time period regardless of the number of shipment.
- When is an export license needed?
An export license is needed for all exports being shipped from the United States, except for shipments going to Canada and U.S. territories and possessions. However, a validated export license (as compared to a general license) is required only for controlled items as related to national security, short supply, or foreign policy.
- Explain these documents: SED, dock receipt, invoice (commercial, foreign customs, and consular), certificate of origin, inspection certificate, air waybill, and bill of lading.
A Shipper's Export Declaration (SED) form is required for virtually all shipments. It is a multi-purpose document because the information is required for export control and compiling of statistical information.
A dock receipt is proof of delivery for goods received at the dock or warehouse of the steamship line.
A commercial invoice is a document that provides an itemized list of goods shipped and other charges. It provides a complete description of merchandise, quantity, price, and shipping and payment terms.
A foreign customs invoice is a special format invoice required by customs officials in some countries.
A consular invoice is a legalized or visaed document prepared by a seller in the importing country's language on an official form supplied by the importer's government.
- Distinguish among these types of bill of lading: clean, foul, straight, and negotiable.
A bill of lading is clean when a carrier sees no evidence of damage to the packing or condition of the cargo. It is foul when there is indication of damage to the goods received.
A straight bill of lading is nonnegotiable, and it is consigned directly to a consignee rather than to order. In contrast, a negotiable bill of lading is a negotiable instrument that is consigned to order. When endorsed, it allows transfer of title to the holder of documents, and delivery can be made to a named party or anyone designated.