Impacts of logistics management on the performance of vantage logistics corporation

MMVCFB 6VIETNAM – BELGIUM MASTER IN MANAGEMENT PROGRAM NGUY N KHOA VINH IMPACTS OF LOGISTICS MANAGEMENT ON THE PERFORMANCE OF VANTAGE LOGISTICS CORPORATION MASTER IN MANAGEMENT THESI

MMVCFB 6

VIETNAM – BELGIUM MASTER IN MANAGEMENT PROGRAM

NGUY N KHOA VINH

IMPACTS OF LOGISTICS MANAGEMENT

ON THE PERFORMANCE OF VANTAGE LOGISTICS CORPORATION

MASTER IN MANAGEMENT THESIS

HO CHI MINH CITY

2007

MMVCFB 6

VIETNAM – BELGIUM MASTER IN MANAGEMENT PROGRAM

NGUY N KHOA VINH

IMPACTS OF LOGISTICS MANAGEMENT

ON THE PERFORMANCE OF VANTAGE LOGISTICS CORPORATION

Majority: MASTER IN MANAGEMENT

MASTER IN MANAGEMENT THESIS

Thesis Tutor: Dr NGUY N V N S N

HO CHI MINH CITY

2007

This thesis was done with the research and study of author basing on those knowledge learnt from MMVCFB6, references and the supports, instructions, help from professors, thesis tutor, experts in logistics activities who are working

in current logistics companies in Viet Nam

Nguyen Khoa Vinh

- Viet Nam – Belgium Master in Management Program (MMVCFB6)

- Professors and Tutors during Master Course

- Dr Nguyen Van Son, thesis tutor

- Mr Philip Diep, Managing Director, Vantage Logistics Corporation

- Mr Michael Trung, President, Viet Nam Ship Corporation

Also, I would like to send my best regards and sincere thanks to Management Board and Staffs of Vantage Logistics Corporation who supported me for interviews, surveys to fulfill this thesis

Nguyen Khoa Vinh

Khoa Vinh with subject: “IMPACTS OF LOGISTICS MANAGEMENT ON THE

PERFORMANCE OF VANTAGE LOGISTICS CORPORATION” as below:

- However, there are still unavoidable constraints such as: analysis is mostly basing on qualitative, there is less data in term of quantitative

- In general, thesis quality matches with those requests of master level in term of content and form

2 Comments on student:

Student Nguyen Khoa Vinh has diligence, enthusiasm, creativeness in studying, researching; has ability to research independently And, he is meritorious to get master level in economic management

I accept to have student Nguyen Khoa Vinh to have thesis defense upon the jury of Viet Nam – Belgium Master in Management Program 6 (MMVCFB6)

Ho Chi Minh City, Feb 07 2007

Thesis Tutor

Dr NGUYEN VAN SON

LIST OF FIGURES

ABBREVIATIONS

INTRODUCTION 1

1 STATEMENT 1

2 RATIONALE 2

3 METHODOLOGY 3

4 SCOPE AND LIMITATION 4

Chapter One: LOGISTICS MANAGEMENT 5

1.1 GLOBAL TRENDS IN LOGISTICS 5

1.1.1 Stage 1: Physical distribution 6

1.1.2 Stage 2: Logistics system 7

1.1.3 Stage 3: Supply chain management 8

1.2 WHAT IS LOGISTICS MANAGEMENT 10

1.3 ROLE OF LOGISTICS MANAGEMENT 12

1.3.1 The cost associated with the physical transfer of the goods .12

1.3.2 Transit time 13

1.3.3 Safety of goods 14

1.3 SITUATION OF VIETNAM'S FORWARDING INDUSTRY .16

1.3.1 Overlook on Vietnam's forwarding industry 16

1.3.2 Difficulties of Vietnam forwarders 18

1.3.2.1 Low productivities 19

1.3.2.2 Lacking of long term development strategy 19

2.1 STANDARD TRADING CONDITIONS 22

2.1.1 Rights, duties and responsibilities of the forwarder as an agent 24

2.2.2 Rights, duties and responsibilities of the forwarder as a principal 24

2.2.3 Freedom of contract 25

2.2 ACTIVITIES OF FORWARDERS 26

2.2.1 On behalf of the consignor (exporter) 26

2.2.2 On behalf of the consignee (importer) 27

2.3 WHO IS VANTAGE LOGISTICS CORPORATION 28

2.3.1 Foundation 28

2.3.2 Organizational structure 29

2.3.3 Vision and Mission 30

2.3.4 Corporate strategy 30

2.3.5 Facilities 32

2.4 SCOPES OF BUSINESS 32

2.4.1 Sea – Air freight services 32

2.4.2 FCL straight Loads 33

2.4.3 Track and trace .33

2.4.4 Customs clearance 33

2.4.5 Buyers consolidation 34

2.4.6 Trucking 34

2.4.7 Project and special cargoes 34

2.4.8 Wholesale Oceanfreight FAK Import / Export Groupage Service .34

2.5.2 Private parties 35

2.6 EVALUATION ON VANTAGE LOGISTICS CORPORATION 2001 – 2006 40

2.6.1 Achievements .40

2.6.1.1 Stable organization 40

2.6.1.2 Reputation on Logistics market 40

2.6.1.3 Profitability 40

2.6.2 SWOT analysis 41

2.6.2.1 Strengths 41

2.6.2.2 Weaknesses 42

2.6.2.3 Opportunities 43

2.5.2.4 Threats 44

Chapter Three: IMPACTS OF LOGISTICS MANAGEMENT ON VANTAGE LOGISTICS CORPORATION AND SOME RECOMMENDATIONS 46

3.1 DEVELOPMENT ORIENTATION OF VANTAGE LOGISTICS CORPORATION 46

3.1.1 Promoting strategically on project handling and special cargoes 46

3.1.2 Developing oversea agency network 47

3.1.3 Setting up own warehouses 48

3.1.4 Developing customer segmentation both locally and in overseas 48

3.2.1 Cost reduction 49

3.2.2 Service enhancement 54

3.3 RECOMMENDATIONS FOR FUTURE IMPROVEMENTS 61

3.3.1 Developing information and communication technology 61

3.3.2 Reorganizing operation structure 64

3.3.3 Long term developing orientation 67

3.3.4 Focus on human resources 68

CONCLUSION 69 REFERENCES

APPENDIX 1

APPENDIX 2

FIGURES PAGE

Figure 1.1 : Physical Distribution .6

Figure 1.2 : Material Management .7

Figure 1.3 : Integrated Logistics System 8

Figure 1.4 : Supply Chain 9

Figure 1.5 : Supply Chain Management 9

Figure 1.6 : Components of Logistics Management .11

Figure 1.7 : Vietnam Market Players and Market Share .17

Figure 1.8 : Forwarder's Structure 18

Figure 2.1 : Current Organization Structure 30

Figure 2.2 : Relationship with various parties 37

Figure 2.3 : Services 38

Figure 2.4 : Services 39

Figure 2.5 : Profit growth of Vantage during 2001 – 2006 41

Figure 3.1 : Vantage Operating System 49

Figure 3.2 : Customer service and Customer retention 52

Figure 3.3 : Document Center 64

Figure 3.4 : Re-organized chart 65

ASEAN : Association of Southeast Asian Nations

CMR : The Convention of the Contract for the International Carriage of

Goods by Road

UNESCAP : United Nations Economic and Social Commission for Asia and

the Pacific

FIATA : The Federation of International Freight Forwarders Association

LTL : Less than Truck Load

INTRODUCTION

With the increasingly "globalization" of the world’s markets nowadays, there has been a fact that all countries are adjusting to strong trade liberalization pressures These pressures are derived from international and regional trade agreements, such as the World Trade Organization (WTO), the North American Free Trade Agreement (NAFTA) There is also the development of other trading blocks like the European Union (EU), the Association of South East Asian Nations (ASEAN), the Asia Pacific Economic Co-operation (APEC), and the growth of Intra Asian Trade These trade policy initiatives have a common objective to open up new trading opportunities and integrate countries into a global economy The global economic integration relies upon efficient and philosophy of logistics and supply chain management has moved to the center stage The concept of logistics and supply chain management is not new, but the acceptance of its validity by manager is still a big question There has been a growing recognition that through logistics and supply chain management, the twin goals of cost reduction and service enhancement can be achieved Better management of the 'pipeline' means that customers are served more effectively and the costs of providing that service are reduced

Being in same line with the activities of other logistics providers in Viet Nam market, Vantage Logistics Corporation is facing difficulty in logistics management which need to be researched to find out the solutions to improve

1 STATEMENT

Nowadays, most of multi national companies are moving their distribution centers, manufactories, materials suppliers basing on their potential markets,

competitive advantages in locations and Vietnam becomes a manufacturing and processing place of many foreign companies due to low labor costs, natural resources and attractive investment environment Besides, the import - export have increased strongly during recent years

These elements have raised the import - export demands in the country and created a fertile land for forwarders to develop Taking this advantage and chance, Vantage Logistics Corporation was set up in due time to be a member in this community However, during its operation and development, like other local forwarders who are also logistics provider, Vantage Logistics Corporation has exposed some difficulties that need to be solved:

applied in the most efficient way

o The industry is lacking of a strategy long term development

2 RATIONALE

This research is concentrate to study and to specify the problems of Vantage Logistics Corporation Then, there will be some suggestions to solve the problems through studying theories that developed by well-known experts in the field such as Douglas M Lambert, Martin Christopher and experiences of neighbor countries and developed countries where forwarding industry has performed successfully its role Objective of the research is to improve the performance of Vantage Logistics Corporation basing on two aspects:

- Cost reduction

Finally, the research also includes a suggestion for the near future development

of Vantage Logistics Corporation

The research is intended to answer following questions:

- Who is Vantage Logistics Corporation?

- What are the problems of Vantage Logistics Corporation?

Corporation?

- What to do to improve the activities of Vantage Logistics Corporation? This is prepared for those who have interest in and people who concerned in the field, especially for Vantage Logistics Corporation management to consider

3 METHODOLOGY

This research is prepared basing on:

Corporation

countries and neighbor countries that have strong forwarding industry and then apply these experiences in Vantage Logistics Corporation

- Studying structure of Vantage Logistics Corporation in order to apply logistics management to improve the performance

primary data, also with some investigations and interviews done on practice

management to get the practical information of the company’s activities

4 SCOPE AND LIMITATION

Scope of study

This research focuses mainly on Logistics management and Vantage Logistics Corporation In the first part, there is introduction about Logistics and Forwarding The second part introduces Vantage Logistics Corporation and its services

In the next part, there are some analyses on these experiences of logistics management of some nearby and developed countries in order to find out solution for case of Vantage Logistics Corporation There would be also some solutions for Vantage Logistics Corporation to improve itself

Limitation

This research could not show fully the impact of applying logistics management

in Vantage Logistics Corporation due to time and personal knowledge limitation However, hope that the research will be good use for further personal study in logistics service

Chapter One:

LOGISTICS MANAGEMENT

1.1 GLOBAL TRENDS IN LOGISTICS

Up till the 1970's the focus of the producer was to get the product to the market This was first done through “unimodal transport” The development of containerization in the seventies and eighties brought with it the prospect of multimodal transport At that time there was the proliferation of terms and definitions The UN finally selected the term multimodal transport as the most appropriate term to use when describing a service where the operator undertakes

to carry the goods internationally by more than one mode of transport under one transport document This did not stop the other words from being used but international trade and transport got accustomed to the word 'multimodal transport' The concept was also directly linked for the first time the goods, documentation and total liability: the essence of logistics 1

Along with developments in multimodal transport, there was a parallel development that was taking place without attracting much publicity This was the development-taking place in the logistics The global trends of logistics as follows:

Stage 1: Physical Distribution

Stage 2: Logistics System

Stage 3: Supply Chain Management

1

Training Manual on Logistics and Supply Chain Management, UN ESCAP 2002, op cit., p 3-31

1.1.1 Stage 1: Physical Distribution

In 1960’s and 1970’s US companies focused on what was defined as Physical

Distribution or inbound logistics They attempted to systematically manage a set

of inter-related activities including in order ensuring efficient delivery of finished goods to customers

Companies in particular began to recognize the relationship between inventory costs and transportation costs from a total costs perspective For example, a shift to high cost airfreight could lead to a dramatic savings in inventory and warehousing

by reducing stocks The interrelated activities included the following:

Material management / inbound logistics

Figure 1.1: Physical Distribution

- Finished goods

- Inventory levels

- Packaging

- Material handling

1.1.2 Stage 2: Logistics system

additional savings that could be gained from combining the inbound aspect (referred to as material management) with the outbound aspect (referred to as physical distribution) This combining of inbound and outbound sides of the processes was described as the logistics system

The following four factors have contributed to the further development of the concepts relating to logistics:

Physical Distribution / Outbound logistics

Figure 1.2: Material Management

Warehouse

- Liberalization of trade in goods and transport service

- Global competitiveness

- Multiple sources of supply

- Information Technology (IT)

1.1.3 Stage 3: Supply chain management

Supply chain management can be described as a strategic concept of understanding and managing the sequence of activities from supplier - to manufacturer - to customer along with the related documentation, tracking and monitoring systems that would add value to the product This concept took into account the importance of developing partnerships and alliances between manufacturing companies and their suppliers (vendors), customers, and other logistics related parties such as transportation and warehousing companies and

Manufacturing Finished

Goods Storage

Markets

Movement Transportation

Movement Transportation

Movement Transportation

Material Management

Inbound Logistics

Material Management Outbound Logistics

Figure 1.3: Integrated Logistics System

From the perspectives of the freight forwarders in the ESCAP region, logistics developments have almost taken them by surprise Freight forwarders of developing countries are yet to catch up with the full potential of multimodal transport, and are now confronted with a whole string of new concepts that everybody is talking about The following figures attempt to look at the way logistics concepts developed and through it provide some definitions that would relate to the topic better

Transport Transport Transport Transport

Suppliers Manufactures Wholesaler Retailers Consumer

Figure 1.4: Supply Chain

Sourcing

Inbound Storage Transportation

Operation Outbound

Storage Transportation

Customer Distribution

Figure 1.5: Supply Chain Management

1.2 WHAT IS LOGISTICS MANAGEMENT

In recent years, changes in production patterns within commerce and industry have called for new types of services regarding material supply and physical distribution with mass production becoming increasingly globalized Transportation has for years been recognized, among its other roles, as a sub-function of logistics The inter-relationship between logistics and transportation has been so strengthened that many consider logistics as being involving pre-production and post-production control of material

Logistics management is a management technique that controls the physical flow of goods and the flow of information on a synchronized basis Transport operators and service providers must therefore comply with the specification laid down in the logistics system This system's approach to the individual activities such as supply, production, and distribution, in the manufacturing process eliminates the separation of such activities and links them in new and more powerful combinations to achieve increased levels of efficiency, enhance quality and reduce the costs of finished goods Logistics management also plays a strategic role in the decision making process as well

as in the organization's structure Logistics has been defined by Council of Logistics Management in 1998:

Logistics is a part of the supply chain process that plans, implements, and controls the effective flow of storage of the goods, services, and related information from the point of origin to the point of consumption in order to meet customer's requirements 2)

2

Definition provided by the Council of Logistics Management, Oak Brook, IL, 1998

Natural resources

(Land, facilities,

and equipment)

Marketing orientation (Competitive advantage)

to customer Information

resources

Proprietary asset

Logistics Activities

Distribution communications Packing

Source: Adapted from Douglass M Lambert & James R Stock, Strategic Logistics

Management, Third Edition, Lute mat ional Editions 1999

Management ActionsPlanning Implementation Control

Logistics Management Raw-

materials

In-process inventory

Finished goods Suppliers

The 1998 definition of logistics acknowledges that, today, logistics is a part of the supply chain process The supply chain in consumer goods production starts with raw materials, their sourcing and delivery, through manufacturing to distribution of the finished goods to the consumer One single company is unlikely to own mine, forge, manufacture and distribute, and retail the product But it is vital for those involved, that the management of the supply chain is done

in co-ordination with each other, and the most efficient manner The activities shown in Figure 1.1 involve:

- Raw materials (subassemblies, manufactured parts, packing materials, basic commodities)

- In-process inventory (product partially completed and not yet ready for sale)

- Finished goods (completed products ready for sale to intermediate or final customers).3)

1.3 ROLE OF LOGISTICS MANAGEMENT

The competitiveness of internationally traded products is greatly influenced by various factors, which build up the overall logistics cost The main ones are:

1.3.1 The cost associated with the physical transfer of the goods.

This is an essential piece of information in the negotiation of an international trade transaction To maintain competitiveness, the trader must make sure that his cost is

as low as possible However, on any particular logistics channel, this cost is made up

3

Douglass M Lambert & James R Stock, Strategic Logistics Management, Third Edition,

International Editions 1999, p.4

of a number of costs elements corresponding to the services provided along each specific link These elements cannot always be clearly quantified beforehand Usually there exist two types of costs: direct and indirect.4)

Direct costs are directly related to service provided In general, they are based on published tariffs, which reflect the local market conditions, the quality of the service, and the management capacity of the service provider These considerations depend on the state of the local infrastructure and equipment, and on the local infrastructure equipment maintenance policy to provide reasonable transport services They also depend on the local capacity

to plan human resource development in order to assist managers in making the best use of existing infrastructure and equipment

Indirect cost as a consequence of the service provided They build up as financial costs resulting from poor operations (low speed, unexpected delays, etc.) as additional costs (e.g increased insurance premiums), or as

"consequential costs" (e.g sales opportunities lost because goods are not readily available) They reflect the efficiency of the services, the level of risk involved, and the capacity of the service providers to cope with administrative and operational problems

1.3.2 Transit time

Transit time is an important element as goods in transit cost money Any reduction in transit time would therefore reduce the overall cost of the delivered goods Transit time can be improve by increasing transport speed while cargo is

4 United Nations, Sustainable Transport Pricing and Charges Principles and Issues,

ST/ESCAP/2139, p 28-57

moving on any particular transport mode, and/or by reducing idle time while cargo is waiting at some interface point for its next movement The lack of proper integrates logistics strategies or the excessive burden of administrative and documentary requirement might neutralize any effort or investment in increasing commercial speed

1.3.3 Safety of goods

Safety of goods is equally important Any loss or damage, because of theft, mishandling, poor quantity packaging or physical damage caused by accident will result in the non-availability of the goods at the expected time and place, and in expected conditions The final consequences of such non-availability, in addition to the cost of loss or damage, are similar to the time reliability consequence mention earlier Strangely enough this has been an area where logistics research is scarce but where legal opinions and proceedings have taken precedence Uncertainties of schedules, breakages, loss, pilferage, rules and regulations, etc., are some of the issues faced by traders and might disadvantage exporters and importers.5)

The above-mentioned considerations indicate that trading opportunities can benefit from better-organized logistics services To take advantage of efficient logistics systems in increasing their competitiveness, sellers and buyers must adapt their commercial practices, and governments must provides logistics service providers with an institutional, regulatory, and operational environment, which can stimulate the application of logistics systems The introduction of

(5 Training Manual on Logistics and Supply Chain Management UN ESCAP 2002 p 1-4/5

logistics practices in a country provides the opportunities to realize synergy from the potential improvements, which can be obtained from public and private interests: public administrations, state owned and private logistics companies, importers and exporters

Logistics should be seen as a system approach to trade efficiency and competitiveness, not as a turnkey system, which can be bought and installed from one day to the next Such a system approach calls for an integrated view of all relevant trade, transport and logistics related issues in a country Governments can take a leading role in supporting this approach by designing the proper legal framework and streamlining administrative bottlenecks such as customs, banking, insurance, foreign exchange controls, etc An integrated logistical system approach must encompass not only the economic, commercial and operational aspects of the international movement of goods, but also all issues related to the facilitation of trade and the responsibility for the goods while in transit To take into account all interests involved in the development of logistics management, the relationships between transport users, services providers and governments must be clearly identified and proper co-ordination in the implementation of improvements must also be established

Logistics management can provide a greater awareness of the specific modal and interface improvements by identifying physical and institutional bottlenecks along the supply chain The development of logistical services will also promote the need for properly regulated logistics service providers This can result in an increased level of trade competitiveness for all involved

1.3 SITUATION OF VIETNAM'S FORWARDING INDUSTRY

1.3.1 Overlook on Vietnam's forwarding industry

Starting of Vietnam forwarders in the bureaucratic, subsidized and centrally planned economy is transporting cargoes within the socialist countries It's purely

to carry out the basic function of transporter Since 1986, the Communist Party of Vietnam has decided to abolish the central planned economic mechanism and to build up a socialist-oriented multi-sector economy under the State

and in company with the development of economy, Vietnam forwarders also strongly develop and expand its services to be more diversiform

As same as other industries of Vietnam, today Vietnam forwarding industry has also to face the challenges of open economy such as hash competition, improving eternally services, accumulating experiences and building up finance ability In this circumstance, Vietnam Freight Forwarders Association - VIFFAS - is established with the aim is to put freight forwarding activities in to well organized system VIFFAS was being the professional associated organization established voluntarily by freight forwarding enterprises in November 1993 and became FIATA unique ordinal member in Vietnam in October 1994, VIFFAS has now 82 members7), but the non members are 10 times bigger

Vietnam's forwarders play main role in import - export of Vietnam, there is no competition officially from foreign forwarders due to law barrier All foreign players appear in Vietnam market under Vietnamese forwarder names who are

6 http://vvwvv.mofa.gov.vn/English/Vietnam/econoniic.htm

7

http://www.viflas.org.vn/html/members.asp

their agents in legal Most of Vietnamese forwarders are private companies, some well-known private forwarders are Vinalink, Vinafreight, Mekong cargo freight CO., Thamico , unofficially figure of VIFFAS members, state own companies such as Vinatrans, Sotrans, Vietfracht, Vosa, Vietrans count for 18 percent of the total players but it counts for 57 percent of market share because they are agents for big foreign players such as Kuehne & Nagel, Panalpina, Schenker, DHL Danzas

Basically, Vietnam's forwarders are structured as the services that they offer to customers (figure 1.8); however they concentrate their services in four main departments: Sea-freight, Air-freight, warehouse and logistics and their branches are set up as same as head office Information, data are exchanged through telephone, fax, email and filed under hard copy, 95 percent of VIFFAS members have no electronic management software and five percent of members are starting to invest for their own management software

1.3.2 Difficulties of Vietnam forwarders

According to the trend of applying logistics and supply chain management in the world, the multi national companies are moving their distribution centers, manufactories, materials suppliers basing on their potential markets, competitive advantages in locations and Vietnam is one of Asian countries becomes a manufacturing and processing place of many foreign companies due

to low labor costs, natural resources and attractive investment environment These elements have raised the import - export demands in the country and

created a fertile land for freight forwarders to develop

Vietnam forwarding industry has confronted not only the advantages but also difficulties The weaknesses appear gradually during the development of the industry

Management Board

Figure 1.8: Forwarder's Structure

1.3.2.1 Low productivities Vietnam forwarders have low productiveness due to following elements:

Working skills of labors are limited because their knowledge is not updated

as fast as the development of forwarding trend in the world Oversea training

is not yet considered as the important strategy of companies

Low effective internal and external links in information and work flows between sections and departments The staff is only running around daily workings such as customs clearance, freight brokers, document handling he/she lacks of skills and facilities to link work flow between sections and departments of company in order to get higher productivity Structure of each department is big and costly; each department has its own customer service staff, document staff, sales staff

New technology has not yet considered and invested accurately E-Business

is still strange with Vietnamese companies, they know theory of E-Business but they have not yet used it and applied it in to their works, among VIFFAS members there are 44 members have there own websites for marketing purpose only, non of them using Electronic Data Interchange - EDI Logistics and Supply chain management has just appeared in management level as an idea, it has not yet studied to apply to the reality of freight forwarder in the most efficient way

1.3.2.2 Lacking of long term development strategy

The industry is lacking of a long term development strategy VIFFAS members are 82, but the number of freight forwarders who are not members of VIFFAS is

much higher (around ten times), in that non-VIFFAS members many of them just call themselves as freight forwarders or logistics but they are lacking of facility, warehouse, IT system, network system they supply poor and simple services Forwarders increase in spread but do not concentrate to develop in depth because they have not the orientation of development from higher levels such as VIFFAS, relevant ministries of state

The weak points of Vietnam's forwarding industry are also the threats when Vietnam became WTO member because the Vietnamese forwarders will be strongly competed by foreign forwarders who have networks, strong IT systems, experiences and strong capitals

Originally, a forwarder was a commission agent performing on behalf of the exporter / importer routine tasks such as loading / unloading of goods, storage of goods, arranging local transport, obtaining payment for his customer, etc The forwarder's position humorously summarized in the slogan “we forward all you like, but we do not carry it”8)

8 Ralph De Wit, Multimodal Transport Carrier Liability and Documentation, Lloyd's of London

press ltd., first edition, 1995 p 19

However, the expansion of international trade and the development of different modes of transport over the years that followed enlarged the scope of his services Today, a forwarder plays an important role in international trade and transport The services that the forwarder renders may often range from routine and basis tasks such as the booking of space or customs clearance to a comprehensive package of services covering the total transportation and distribution process

There is no internationally accepted definition of the term “Forwarder”9) Forwarders are known by different names in different countries, such as

“customs house agent”, “clearing agent”, “customs broker”10), “shipping and forwarding agent” and in some cases acts as a "principal carrier", that is, the main carrier However, one aspect of their activities that is common to all of them, whatever the name they use, is that they all sell their services only

2.1 STANDARD TRADING CONDITIONS

Some countries have adopted the Standard Trading Conditions which spell out in general the contractual obligations of the forwarder in his relationship with his customer and in particular, his rights, responsibilities and liabilities as well as the defenses available to him These conditions are usually formulated in accordance with the commercial practice or legal system prevailing in each

9 United Nations, Multimodal Transport Handbook for Officials and Practitioners

UNCTAD/SDD/MT/Misc1/Rev.l, New York and Geneva, 1996, p 36-37

(10

Customs brokers, are defined by UNCTAD's Multimodal Transport Handbook for Officials and Practitioners, 1996, p 35, are licensed by a governmental authority (generally, the Ministry of Finance) and are under the supervision of the Customs administration.

country; they are based on the model formulated by FIATA11) (The Federation

of International Freight Forwarders Association, founded in 1926)

For the purposes of illustration, the STC adopted by the national associations of the following countries are annexed:

The United Kingdom (A copy of the STC is also available at British International Freight Association’s web page at: http://www.bifa.org/ )

Republic of Singapore (A copy of the STC is also available at the Singapore Logistics Association's web page at: http://www.sla.org.sg/)

Laying down the standard trading conditions is one of the essential means of improving and maintaining the professional standards of the forwarding industry National associations are expected to devote special attention to these In countries where standard trading conditions do not exist, the contracts that are entered into between the freight forwarder and the customer define their respective rights, duties and responsibilities Although the standard trading conditions vary from country to country, a forwarder is expected to:

Take reasonable care of the goods entrusted to him

Comply with the instructions of his customer in matters relating to their transportation

The forwarder does not commit himself to any firm date of delivery at destination and has usually a right to lien12) and detention over the goods in the event of failure on the part of his customer to pay his dues

2.1.1 Rights, duties and responsibilities of the forwarder as an agent.

A forwarder acting as agent generally accepts liability for his own faults or the faults of his employees Examples of such errors and omissions are:

Delivery of goods contrary to instructions

Omission to take cargo insurance in spite of instructions

Errors during customs operations

Routing to wrong destination

Re-export without compliance with necessary formalities for drawback or refund of duty, etc

Delivery of goods without collecting cash from the consignee

The forwarder is also exposed to claims from third parties for any loss or damage

or personal injury that he may cause to them during the course of his operations

A forwarder generally does not accept liability for acts or omissions of third parties (such as carriers, re-forwarders, etc.) provided he has shown proper care

in the choice of such third parties This is the position under the STC when forwarders act as agents in their traditional role and perform functions such as booking of space, arranging transport, customs clearance, etc

2.2.2 Rights, duties and responsibilities of the forwarder as a principal

As a principal, the forwarder is an independent contractor who assumes responsibility IN HIS OWN NAME for providing the services required by his customer: He becomes liable for the acts and omissions of carriers, re-forwarders etc., whom he engages for the performance of the contract Generally speaking,

procedure Sometimes, too, the lien-holder may realize his security and sell the property he holds in order to extract what is owed to him