Transportation And Distribution For Incoterms And Carrier Selection

Discuss about the Transportation and Distribution for Incoterms and Carrier Selection.
 

The purpose of this assignment is to analyze effectiveness of the incoterms selection consideration, incoterms refer to set of rules or binding contracts that guide business globally, whenever goods and services are transferred from the seller to the buyer. Context in focus is transportation globally for the Procter & Gamble Company, their carrier selection, what is the determining factor towards selection of a carrier of goods as the manager (Coyle et all 2016, p.347).  The paper focuses on maintaining relationship between the carrier and Proctor and Gamble company. It will also focus on the relationship management that is between the carrier and Procter & Gamble Company, the factors to consider when staging and picking orders to avoid the carriers from being overcharged, thus making cost of transportation low (Myerson, 2015 p.150).  

Headquartered in Cincinnati, United states founded in 1837 and incorporated on 5^th May 1905, Procter & Gamble Company is an organization that packages goods for consumers, it provides goods in several segments namely beauty product such as lotions, fabric care like the diapers, home care appliances and baby feminine as well as family care products, the company products are purchased in more than 180 countries globally, the company has subsidiaries in Asia, Africa. South America and North America. Procter & Gamble Co (PG). (2016, August 01). Retrieved from https://www.reuters.com/finance/stocks/companyProfile?symbol=PG 

The organization has a global market presence. It has offices in most of its business operation centers. Its main competitors include; Uniliver, Henkel and Beiersdorf and Johnson &Johnson. The Procter & Gamble Company Profile. (2016) Retrieved from https://www.hoovers.com/company-information/cs/company-profile.the_procter__gamble_company.89fae93ad9ab54d7.html.

Procter & Gamble develops an overall brand strategy, the information about the company is uniform globally, when competition arises, the company upgrades its products more so its marketing gimmicks. The products are purchased in supermarkets, drug stores, online via its websites and also the suppliers not forgetting the distributors of salon products. The company has existed for over 178 years since its managements believes in changing everything based on competition, the only thing that remain as it is are the company core values. Building a Better Company. (2016) Retrieved from https://www.pginvestor.com/CompanyStrategy/Index?KeyGenPage=208821 

Proctor and Gamble has moved transportation of its goods from the roads to rail and an avenue of   inland shipping, the company also analyzed instances whereby there was a wastage and it has worked to reduce wastage drastically. The system of waste reduction and using other avenues of transportation which cut mile deliveries, has enabled the company, to move ahead of competitors, in coming up with a cost effective logistics system. The project is named Tina, which is an environment friendly project, saving Europe from over 67000 tons of carbon emitted each year. Project Tina was launched in two countries in 2009, the project has been an adaptive model all over Europe for the Proctor & Gamble. Since the project introduction, the company has redesigned its supply network too. Towards waste reduction in the transport network, the company has moved its distribution centers closer to the customers, the customers comprise of retailers, individual customers and also wholesale customers. The organization has changed its packet volumes by ensuring the products are compacted, the measure has reduced the volumes of packaged goods.

Simon B. (2011, May 16). Procter & Gamble – greening up logistics. Retrieved from https://www.theguardian.com/sustainable-business/procter-gamble-greens-logistics 

The company should use incoterms that covers transport over water bodies and rail (Jaffeux & Wieser, 2012 p. 146). The incoterm used should define aspect like the geographical location, handling conditions and the destination. As a manager I would recommend incoterms to be used by the Proctor & Gamble to  include; FCA which is an incoterm under carriage, in this incoterm the company will deliver the products cleared for export to the carrier or the shipping company, that has been chosen by the buyer at the agreed place of delivery, in this incoterm if delivery happens at the Proctor & Gamble selling point, then the organization is responsible for loading, if delivery doesn’t happen at its  selling  premises, Proctor & Gamble will not be responsible for the loading.( Rodríguez & Lam 2009, p.27). 

Incoterm FAS (Free alongside ship) in this incoterm, Proctor and Gamble will deliver upon goods delivered alongside the ship at the named port of shipping. After delivery the buyer will bear all costs and risks. In case the buyer wants to export the goods, he will clear the exporting costs.  (Rodríguez & Lam 2009, p.27). Incoterm DES (Delivered by Ex Ship) The organization will deliver once goods are available to the buyers on board, in this incoterm the ship is normally not cleared for import at the port of the destination, the seller in this context is responsible for unloading goods.

Incoterm CIF (Cost, insurance and Freight) in this incoterm Proctor & Gamble will be responsible for transportation of the goods to the buyer and other issues such as loss that might result during transport. The company will be obliged to take insurance cover at a minimum cost, it will be an advantage to the company in case something unexpected happens, like ship sinking or the ship develops a mechanical problem, which will result to company loses, for other extra insurance charges the buyer is responsible. For rail transport Proctor & Gamble can use the incoterm EXW, the company having embraced the idea of having the storehouses closer to the buyers, it will deliver products to its warehouses via the rail to the packing plants next to the buyers, in this incoterm the buyers are responsible for loading, formalities in place in exporting and importing all costs that Proctor & Gamble will incur as it submits the goods to the buyers via the rail. (Rodríguez & Lam 2009, p.27).  

According to Annis Skoufalos, the product and supply officer Product & Gamble globally, the main objective or need of the company as far as transport is concerned is to make their operation to be trackable or appealing to customers at 80%, he emphasizes the company business operations are justified and measured by the customers. The company’s goal is to have the products transported to 80% percent of its retailers within one day, to make that a reality, Proctor & Gamble saw the need to build up mega distribution centers which are strategically located not only in North America but also every country that it has a footprint in business. The distribution centers can receive goods from all the business units at the distribution centers, transportation will be done at very high speed and efficiency. To support the distribution centers and have a transportation goal of 80% to the retailers or the buyers, the company has also restructured its manufacturing base in North America to ensure they are quick to respond to the needs of the distribution centers all over the world. Proctor& Gamble has also campaigned for its suppliers to have their centers next to the distribution centers, this will ensure that suppliers have a continuous process of supply without running out of goods.

Bob T. (2015, January 02). What does it take to remain a supply chain leader? Retrieved from https://www.supplychain247.com/article/what_does_it_take_to_remain_a_supply_chain_leader

Proctor & Gamble has a goal by 2020 to reduce transportation of goods using trucks. The company’s vehicles have an improved fill rate and it has also increased use of multi modal transport. Moving in the right direction (2015, May 2015) Retrieved from us.pg.com/sustainability/environmental-sustainability/focused-on/transportation 

When Proctor & Gamble is selecting a carrier, it should consider factors like transit time, based on their need to supply 80% of retailers on a given day, speed is needed here. Since the company endeavors to use rail and water transport more than the road, it is highly recommended that the carrier selected should be in a position to carry the goods with facilities that are water resistant, the storage of the carrier, should deliver the goods at the desired temperatures to the buyers. Items such clothes or diapers which are sold by Proctor & Gamble, if exposed to water might be a loss to the company, the carriers selected should have the packing facilities that ensure goods reach the desired destination in the most desirable state, to the buyers and customers. (Coyle et all 2016, p.428). 

Appropriate Criteria to be Considered when Selecting the Carrier

(Coyle et all 2016, p.429).   The company should also use a limited number of carriers, the carrier selected should not be serving many companies at the same time, limited number of carriers will enable it to have a good purchasing order of dollars at a lower or affordable rate and build relationships with the service providers who will in the end understand business operations of Proctor & Gamble. The carrier selected should be a carrier that has accorded quality service and efficiency. Last but not least the carrier selected, should be in a position to handle volumes of the goods transported by the company especially by the rail transport, making the supply continuous.

The major goal for the Proctor & Gamble company by 2020 is reduction of transport using the trucks, making sure that less kilometers are covered when transporting goods and also making sure that distributors are in continuous supply of goods.  The organization focuses also on making sure that it emits less carbon in the atmosphere. Moving in the right direction (2015, May 2015) Retrieved from us.pg.com/sustainability/environmental-sustainability/focused-on/transportation

According to (Kondo,1988, p.95) A company like Proctor & Gamble should have a working relationship with the carriers, for instance the organization should establish contact people that are in communication with the carriers, a relationship with the carriers calls them to fully understand Proctor & Gamble business operation, to understand how urgent their products are needed in the market and also the state at which the products are going to be delivered really matters.

Proctor & Gamble should have a direct relationship with the carriers (Grammenos, 2013 p.1023-1027). This enables the company to know exactly what is taking place within the carriers. Since Proctor & Gamble is using different carriers in the business, under the rail and sea, it is also important that the organization to have intercompany relationship, the company as the main carrier is contacted and it steers its staff operation, to ensure Proctor & Gamble objectives are highly met while maintaining their carrier business efficiency. A working relationship with the carriers, enable the company to have a feedback of the experience in the transportation process and what motivates efficiency. Intercompany relationship cab be facilitated by, making payments to the carriers on time and answering carriers calls, for emergencies since in the end it is Proctor & Gamble needs to keep business moving.

The company should endeavor to maintain a win win relationship win the carrier (Glowik,2014. p.21). this enabled by proving to the carrier importance of the task at hand, presently and how advantageous it will be in future. 

Conclusion

Proctor & Gamble an organization that has been existence since 1837 is among the leaders in supply chain business, for the market strategies to take place and success overall, there are key factors that happen in the background which the customers might not know, though the factors make the business thrive. The paper has defined incoterms as a set of rules or binding contract between the organization and a carrier. In the paper I assumed the role of a manager in analyzing effectiveness of transport capability by the Proctor &Gamble, reduction of transport by road to rail and water. There are various incoterms that have been recommended for Proctor &Gamble for example Incoterm CIF, which covers Cost, insurance and Freight. The assignment covers the carrier selection criteria visa vis the goals of the organization. The factors to consider and what best suits the company having in mind its service delivery of 80% to all retailers, within a day. Issues like the carrier relationship management and how best to build the relationship between the carrier and the Proctor &Gamble. Having the carrier organization communicating directly with the Proctor &Gamble, it helps the carrier organization to instill the values that are needed for delivery and expectation of their customers. The best way to have the carrier and Proctor &Gamble having an understanding is ensuring a constant flow of communication. 

References

Bob T. (2015, January 02). What does it take to remain a supply chain leader? Retrieved from https://www.supplychain247.com/article/what_does_it_take_to_remain_a_supply_chain_leader

Coyle, J. J., Langley, C. J., Novack, R. A., & Gibson, B. (2016). Supply chain management: a logistics perspective. Nelson Education.

Foekens, A., Mitrakas, A., & Tan, Y. H. (1997, January). Facilitating international electronic commerce by formalising the Incoterms. In System Sciences, 1997, Proceedings of the Thirtieth Hawaii International Conference on (Vol. 4, pp. 459-467). IEEE.

Grammenos, C. (2013). The handbook of maritime economics and business.

Myerson, P. (2015). Supply chain and logistics management made easy: methods and applications for planning, operations, integration, control and improvement, and network design. Pearson Education.

Jaffeux, C., & Wieser, P. (Eds.). (2012). Essentials of logistics and management. CRC Press.

Kondo, D. (1988). Business Basics in Hawaii: Secrets of Starting Your Own Small Business in Our State. University of Hawaii Press.

Moving in the right direction (2015, May 2015) Retrieved from us.pg.com/sustainability/environmental-sustainability/focused-on/transportation 

Rodríguez, D., Cruz, C., & Lam, F. (2009). Export logistics for fresh and processed products. Logística para la exportación de productos de productos agrícolas, frescos y procesados (No. IICA E71-184).

Taylor & Francis.     Glowik, M., & Bruhs, S. M. (2014). Business-to-business: A Global Network Perspective. Routledge.