Logistics Perspective of Effective Airport Cargo Export and Import Operations - Case Study Example

Section A Mechanisms for Effective and Efficient Airport Cargo Export and Import Operations: A Logistics Perspective Table of Contents Content Page No Introduction 4 Definition of Logistics Activity 4 Comparative Analysis between Airport Operations and Seaport Operations 5 Discussion 6 Conclusion 7 References 8 Executive Summary Airport operations are mainly attached with the international logistics. The international logistics activity is comprised of three broad categories: export mode, import mode and trans-shipment mode. Each mode has separate operational procedure and handling process as well. When airport operations relating to import and export are compared with the seaport operations, the results indicate that airports are better equipped with sound infrastructure capable enough to handle larger and complex operations. However, there are certain challenges that pose direct threat to the efficiency and effectiveness of airport operations. Corruption, bribery, complex and different national and international regulatory requirements make it hard for airports to operate effectively. Introduction For carrying out effective and efficient airport operations, numerous factors create challenging conditions. For example, port industry experiences an increasing competitive commercial environment (Cullinane et al., 2006). This competition is not only contributed by rise in trade activity but also the role of globalisation in which frequent and faster delivery of goods have also played a central role. Additionally, Tongzon and Heng (2005) elaborate that it is this fierce competition that has become an essential feature of today’s growing container port industry. At the same time, this ever growing competition has necessitated that the ports should remain prepared for incorporating effectiveness and efficiency while utilizing their resources (Tongzon, 2001; Cullinane, 2002). Within this backdrop, Regan and Golob (2000) state that it is highly essential that an analysis of port operations should always be carried out as it will highlight whether port operations are effective and efficient besides comparing their performance with the port planning and actual operations as well. Definition of Logistics Logistics activity refers to as a way to increase the cargo value from the place of production to the place of consumption (Lin et al., 2006). Logistics activity attracts attention as the magnitude of handling international cargo from one country to other and from region trading bloc to other has significantly increased for the last few years. Thanks to stabilizing and improving international financial transactions, international trade and commerce activities, international logistics has experienced a significant rise for its role for imports and exports through effective use of airport operations. International distribution is an essential component of the international logistics. The international distribution has been categorised into three classifications: Trans-shipment mode, import mode and export mode; in the trans-shipment mode, cargo comes from abroad and after processing in logistics centres, it is forwarded to destinations; in the import mode, imported cargo from abroad is distributed within the receiving country; in the export mode, domestically supplied cargo is exported to the international markets (Lin et al., n.d.). Graph 01: The Activity Environment of International Logistics Source: (Huang, 2002 as quoted in Lin et al., n.d.). Comparative Analysis between Airport Operations and Seaport Operations When airport operations facility is compared with the maritime or seaport operations for handling the international logistics, various factors highlight the importance of airport operations over the seaport international cargo handling services. For example, type and number of runways indicate the infrastructural facility and capability of an airport handling the amount of international cargo (Coyle et al., 2011). In other words, based on this description, it can be deduced that for efficient and effective handling of international cargo, the air cargo firms prefer only those airports which are technically and technologically equipped to handle and quickly process the handling and dispatching the international cargo. Also, when the airport operations are compared with the seaport operations, it can also be highlighted that the airport operations are more effective as they are strategically and logistically equipped to handle the international cargo. Transportation cost has a substantial effect on the international logistics. For example, Korinek (2009) contends that a 10 per cent rise in seaport transportation services decreases 6 to 8 per cent trade between trading partners. This clearly reflects that the international transportation cost has a severe effect on the international trade and subsequently this affects on the international logistics as well. As the international logistics primarily relies on the fluctuations in the international trade, international transaction cost, political and economic relations, it is highly essential that stable and growing international trade and commerce activities are a fundamental prerequisite for solidifying the international logistics. Additionally, airports have better infrastructural structure for processing the international cargo (Coyle et al., 2011). Cargo handling equipment and facility of warehouses for storage and protection of international cargo material are two important infrastructural provisions which make airport cargo handling efficient and effective as well. More importantly, airports provide conventional flight services to passengers besides serving as a vehicle for facilitating international cargo and logistics services. As a result, it is more convenient to use this facility to provide cargo services for import and export of different products or brands from one country to other and from one continent to other continent. On the other hand, the seaports are fundamentally developed to handle regional and international cargo and infrequent use by passengers has been observed; besides, more tendencies for using airport operations clearly demonstrate that airport operations are capable enough to serve simultaneously to both flight and cargo services. Discussion In addition, packing and storage are two important international logistics functions. At various points, an international shipment requires storage as material inside the shipment needs to be intact in its dispatched condition (Coyle et al., 2009). In this regard, the use and role of bonded warehouse is of crucial significance as they are utilised for the purpose of storage, sorting, repacking the imported goods; and they play a pivotal role for international trade and commerce (Coyle et al., 2009). However, such international logistics operations face numerous challenges. For example, corruption and bribery are two important problems normally found in the airport operations while dispatching a consignment or receiving any imported material. In this regard, Blancas et al. (2014) contend that corruption is widely common throughout the customs ranks including local, national and international agencies involved in such practices. At the same time, another bigger challenge that makes it hard for attaining efficient and effective airport operations is the presence of harsh government regulations pertaining to import and export of goods. For example, different countries use different trade sanctions on different products and tradable items while others do not have such policies. In this regard, stable political relations put direct effect on the trade relations. For example, the international trade between United States of America and United Kingdom is largely smooth and easy whereas the trade between the United States and Russia is largely complex and challenging as both have imposed certain import and export restrictions which indirectly put effect on the airport operations as well. Conclusion International logistics has gained attention in the recent history. And this attention directly affects efficiency and effectiveness of airport operations which face a range of numerous challenges. Throughout the airport operations, it has been observed that both bribery and corruption are two important threats directly affecting the efficiency and effectiveness of airport operations. At the same time, different regulations also affect the efficiency and effectiveness of airport operations. At all international airports, different national and international regulatory requirements are followed in which type and nature of regulation are not the same but different. Additionally, some trading partners do not have normal or friendly relations; consequently, trade restrictions and other harsh conditions are imposed. As a result, they also affect the efficiency and effectiveness of airport operations. References Blancas, L.C., Isbell, J., Isbell, M., Tan, H.T., & Tao, W. (2014). Efficient Logistics: A Key to Vietnam’s Competitiveness. Washington: World Bank. Coyle, J.J., Novack, R.A., Gibson, B.J., & Bardi, E.J. (2009).Supply chain Management: A Logistics Perspective. 8th Ed. Ohio: South-Western Cengage Learning. Coyle, J.J., Novack, R.A., Gibson, B.J., & Bardi, E.J. (2011). Transportation: A Supply Chain Perspective. 7th Ed. Ohio: South-Western Cengage Learning. Cullinane, K.P.B., 2002. The productivity and efficiency of ports and terminals: methods and applications. In: Grammenos, C.T. (Ed.), The Handbook of Maritime Economics and Business. Informa Professional, London, pp. 803–831. Cullinane, K., Wang, T.F., Song, D.W., & Ji, P. (2006). The technical efficiency of container ports: Comparing data envelopment analysis and stochastic frontier analysis. Transportation Research Part A, Vol. 40, pp. 254-374 Lin, S.C., Liang, G.S., & Lee, K.L. (2006). Applying Fuzzy Analytic Hierarchy Process in Location Mode of International Logistics on Airports Competition Evaluation. Journal of Marine Science and Technology. Vol. (14). No.1, pp. 25-38. Lin, S.C., Liang, G.S., & Ye, K.D. (n.d). A Survey Investigation of Airports as Distribution Centres: A Strategic Advantage Perspective. Available: http://120.109.100.158/ocu/manasystem/Files/Cures/9804271638481_A%20Survey%20Investigation%20of%20Airports%20as%20Distribution%20Centers%20A%20Strategic%20Advantage%20Perspectiv.pdf Accessed: 23 November, 2014 Regan, A.C., Golob, T.F., 2000. Trucking industry perceptions of congestion problems and potential solutions in maritime intermodal operations in California. Transportation Research A: Policy and Practice, Vol. 34, No. 8, pp.587–605. Tongzon, J.L., 2001. Efficiency measurement of selected Australian and other international ports using data envelopment analysis. Transportation Research A: Policy and Practice, Vol. 35, No. 2, pp.113–128. Tongzon, J., Heng, W., 2005. Port privatization, efficiency and competitiveness: some empirical evidence from container ports (terminals). Transportation Research A: Policy and Practice, Vol. 39, No. 5, pp. 405–424. Section B: Trading Across Borders Introduction Trading across borders highlights national and international trading performance of a country. The purpose of measuring trading performance is to assess the existing competitiveness and compare it with the regional and international trading partners so as to ascertain strengths and weaknesses of an international trading economy or business. A number of procedures are required for trading goods across borders including preparation of documentation, customs clearance and inspection and port and terminal handling. Document preparation Every shipment has a set of documents which are checked and recorded by the related authorities (World Bank, 2013). While recording documents, it is assumed that a fresh contract has been signed by both consignee and consignor relating to the shipment besides understanding their rights; obligations and duties are well understood and executed by both parties as well (World Bank, 2012). Also, it is important to highlight that various documents are required for completing a trade deal across borders. They include commercial invoices, customs value declaration, bill of lading, freight documents, FIATA (International Federation of Freight Forwarders Associations) bill of lading, air waybill (AWB), packing list, Single Administrative Document (SAD) and so on (European Commission, 2014). All these documents are separately handled and prepared by respective agencies and authorised branches of government institutions. Additionally, maritime and air casualty insurance is also important for both exporter and importer (Johnson and Bade, 2010). Clear and understandable terms of trade and engagement, potential liabilities, acts of God, and other relevant claims should be made available for insuring goods (Johnson and Bade, 2010). Each document has its own critical and essential features and which must be fully displayed by the relevant document. For example, a commercial invoice has a number of features including importer and exporter name and address, invoice number, unit of measure, quantity, unit value, date of issue, total value and so on (European Commission, 2014). If any of these important information is missing or unclearly written on the commercial invoice, it is possible that the shipment may not be forwarded further and the relevant firm or person may be asked to provide the missing or unclear information so as to complete the further procedure. Chart 1: Documents to import Source: Doing Business, n.d. Chart 2: Documents to export Source: Doing Business, n.d. More importantly, for import and export, separate documents are required as both are separate business transactions and different import and export duties are levied on them; and they also vary from country to country and from one trading bloc to other. For example, as reflected by the above charts (1 and 2), for import, Denmark requires only three documents and the same is required by Canada for export, reflecting that separate import and export documents are required by each country mentioned in the charts. Chart 3: Time to import (days) Source: Doing Business, n.d. Chart 4: Time to export (days) Source: Doing Business, n.d. More importantly, variation in time to import and time to export is also significant. For example, in the chart 3, Singapore tops the chart as it only requires 3 days for importing and this time is not regional (i.e. within South Asia), but is global, highlighting that the potential and procedures of airport operations and their overall effect on the national performance of the international trade. Customs clearance and inspection For customs clearance and inspection, separate policy procedures are adopted for importing and exporting items. For example, Singapore classifies custom clearance and inspection into four parts: conventional cargoes, containerised cargoes, internet purchases/postal parcels and hand-carried commercial goods (Singapore Customs, 2014). For inspecting the commercial cargo, Singapore customs authority uses different procedures for export, import and transhipment as well (Singapore Customs, 2014). In this regard, it is important to highlight that each country has its own list of allowable and banned goods for the purpose of import and export. As a result, it is highly essential that both exporter and importer should fully aware of such list and should make appropriate decisions relating to international trade. Port and terminal handling Terminal handling business is undergoing a rapid transformation over the period of last few years (Wang et al., 2007). Previously, local public or private firms were handling containers for the purpose of import and export; however, thanks to a surge in global trade, International Terminal Operators (ITO) have entered into this market and have substantially transformed the international logistics operations through both maritime and airport operations (Wang et al., 2007). Within this new emerging industry, Singapore has made significant progress by allowing and facilitating ITOs for enhancing and improving the terminal handling business across the country (Brooks and Cullinane, 2007). Also, technological advancement is also supporting for improving the operational efficiency of ports and terminal handling as well. For example, cargo handling technologies have been developed as they maximise mechanisation process and decrease the physical work at the ports (Tovar et al., 2013). More importantly, the development of multipurpose terminal is of those rapid changes that reduce gap between potential ability and actual ability of ports handling cargo. A multipurpose terminal refers to as “a complex of infrastructure, equipment and services which offers a combined and flexible response to the servicing demand of certain types of vessel and cargo, permitting the optimum utilisation of manpower and equipment” (Agos et al., 1991. p.2). Based on this definition, it can be extracted that port and terminal handling is a collective effort of related regulatory authorities and owners as well in which their combined effort facilitate the international trade process besides enabling trading firms, countries and blocs to manage their trade deals through using the services of ports and terminals. Conclusion Trading across borders undergoes a number of national and international procedures. For this objective, both importer and exporter are required to know and understand documentation process, customs clearance and inspection and port and terminal handling. Various documents are required before sending or receiving a consignment; and every country and trading partner has unique and different requirements. Also, with regard to Singapore customs, customs clearance and inspection have also been further classified into four classifications: Conventional cargoes, containerised cargoes, internet purchases/postal parcels and hand-carried commercial goods. References Agos, F.E., Carninos, I.D., & Puertos, C.Y. (1991). UNCTAD Monographs on Port Management: A series of monographs prepared for UNCTAD in collaboration with the International Association of Ports and Harbours (IASPH). UNCTAD/SHIP/494(9). New York: United Nations. Brooks, M.R., & Cullinane, K. (eds.). (2007). Devolution, Port Governance and Port Performance. San Diego: Elsevier. Doing Business, (n.d.). Trading across borders: Importing and exporting. Available: http://siteresources.worldbank.org/SOUTHASIAEXT/Resources/223546-1171488994713/3455847-1190819497139/dbsar2008trading.pdf . Accessed: 24 November, 2014 European Commission, (2014). Documents for customs clearance. Available: http://exporthelp.europa.eu/thdapp/display.htm?page=rt/rt_DocumentsForCustomsClearance.html&docType=main&languageId=EN Accessed: 24 November, 2014 Johnson, T.E., Bade, D.L. (2010). Export/Import Procedures and Documentations. New York: AMACOM. Singapore Customs, (2014). Clearance of Goods. Available: http://www.customs.gov.sg/leftNav/trad/Clearance+of+Goods.html Accessed: 23 November, 2014 Tovar, B., Jara-Diaz, S., & Trujillo, L. (2013). A Multioutput Cost Function for Port Terminals: Some Guidelines for Regulation. World Bank Policy Research Working Paper 3151. Washington: World Bank. Wang, J., Oliver, D., Notterboom, T., & Slack, B. (eds.). (2007). Ports, Cities, and Global Supply Chains. Hampshire: Ashgate Publishing. World Bank, (2012). Doing business in a more transparent world. Washington: World Bank World Bank, (2013). Doing Business 2014: Understanding Regulations for Small and Medium-Size Enterprises. Washington: World Bank Read More