Saic Automotive Company: Incoterm And Carrier Selection Process

Saic's Product and Services, Vision, and Rank in the Fortune Global 500 list

Question:

Discuss about the Transport and Distribution of Saic for Shanghai International.

The selected company for the fulfillment of this assignment is Saic. This is China’s number one car manufacturing company headquartered in Shanghai. The company has a total equity of 11.683 billion shares in the Chinese automotive industry. The company was originally founded in 1955 with the name Shanghai International Combustion Engine Components Company. The company became Saic motor Corporation Limited in the year 2011. The company now manufactures complete range of vehicle products and services. Their products are available in the international market with at least one facility in every continent. They have successfully entered in the U.S., UK, Europe, South Asia and Australian market collaborating with some of the international motor companies. They have affiliation with Morris Garages, Maxus, Volkswagen, GM, SGMW, NAVECO, IVECO Hongyan and Shanghai Sunwin Bus Corp for operating in both domestic and international market. The goal of the company is to build an international reputation for their innovative approach in automotive industry and introduce future vehicles. They also focus on value creation for their stakeholders implementing market driven strategy. These strategic goals and values of the company have enabled them to climb 5 places in the Fortune Global 500 list and now rank 41th (Saicmotor.com., 2017).

This report will identify the incoterm used by the company for transporting and distributing their products in the international market. It further indentifies the best incoterm selection process that will help the company to attain a safe and cost effective distribution network. The paper will also discuss about the selection process that should be considered during selecting a carrier or shipping line for safe distribution. It is because; the distribution is directly affected by the proper selection of the carrier. Moreover, the relation between the carrier and shipper also has significant impact on the cost effective safe delivery process. Hence, both the factors are discussed in the report to increase the profitability of the company.

International Chambers of Commerce introduced the incoterm or International Commercial Terms in the year 2010. They have dictated a number of terms under this (Stapleton, Pande & O'Brien, 2014). Various importers and exporters around the world use these terms in the process of their selection of their mode of transport. Being an international automotive organization Saic requires an efficient incoterm in their sustainable international operation. The company has two separate divisions. One is involved in the manufacturing automobiles and parts that is the selected organization for the paper. The other division of the organization is involved in the logistics. Having their own logistics division, the car manufacturing division of Saic utilizes its own logistics. However, their logistics division provides services to other organizations. Hence, it can be said that the Saic Motor utilizes Saic logistics for distributing their products within the Chinese market with their latest supply chain software. It helped them to internally manage the purchase orders, shipping product invoices. It also helps them in reducing the cost incurred for the transportation (Saic.com, 2017). The third party logistics also helps them in reaching their international market as Saic logistics and supply chain is present in diversified geographical zone. However, they can increase the efficiency in the distribution process by including the under mentioned incoterms.

Incoterm Selection Process for Saic

DAT or delivered at terminal asks the shipper to deliver the goods and unload it at the decided terminal. According to this incoterm, the manufacturer is responsible for the safety of the products until the products reaches to the final destination. Moreover, they are also liable to cover all the costs of transportation starting from export fee, carriage and unloading the products at the final destination port. These final destinations mentioned are the ports or terminals of a given city where the products will be delivered. Buyers are chargeable only after the goods are unloaded at the final destination. Anything out of schedule will be charged from the manufacturer. This increase the risk for the manufacturer as they will be chargeable for the damage or delay occurs in the transit period (Bergami, 2013). However, it increases the control over the product delivery as they will monitor the transportation process. Hence, Saic can utilize this incoterm to maintain control over the products and transportation.

The shipper or manufacturer according to this incoterm is responsible for delivering the products to the nominated place to the nominated carrier selected by the buyer. The cost for taking the nominated place is incurred by the shipper. The loading of the products is also done by the seller. The Responsibilities and costing thereafter is carried out by the buyer and the buyer is responsible for the safety of the goods in the transit period (Chung & Lee, 2013). It considerably reduces the risk and cost of transportation. Saic will enjoy a greater level of benefit using this term s they will be free of responsibilities for transportation. However, the control over the transportation will considerably decrease using this incoterm (Lindstad, Asbjørnslett & Jullumstrø, 2013). 

Saic, like every other company follows the goal to distribute their products to its international market maintaining the safety of the products. They also consider the costing of transportation and seek a cost effective transportation channel for distribution. There are various aspects the shipper needs to consider while selecting a carrier to transport their good in the international market. It can be geographic coverage, average transit time, reliability, technical capabilities, product protection and safety, costing and equipment availability. However, certain factors need special attention in the process of carrier selection that is discussed below.

Geographical coverage provide by the third party logistics is of optimum priority that the shipper should consider prior to selecting their carrier. Geographical coverage for the carrier means that the area the company covers and operates. The more geographical area covered by the carrier, more the distributer gets benefit using their services. Saic is currently operating in the international market having facilities in every continent. Hence, it is important for them to select a carrier that will provide them service in all the location they are currently operating in and they plan to in future time (Guarnieri et al., 2015). Failing of covering all the locations the company is operating will fail to serve the purpose as they will have to select multiple carrier companies to distribute their products in all the markets.

Carrier Selection Process for Saic

Reliability is another considerable variable Saic needs to focus on. This criteria state that the carrier company should be reliable enough to deliver the products in time and place. It means that the company should follow the nominated pick up time and place as mentioned by the shipper. It ends with the delivery of the products. In short, the carrier should pick up the products and deliver it to the exact place in time. A carrier with bad reputation regarding reliability should be avoided at all cost as it will hamper the company’s business.

The carrier according to this term should be well equipped with modern technologies that are compatible with the modern transportation system. The company must have sufficient technologies to communicate their where about with the shipper company. It will help Saic to track their shipments and get information related to the time of delivery of the products to its destination. A more advanced technology will also facilitate the carrier to transport the products with extra care. It will likely reduce the damage incurred during transporting from the factory to its destination (Min, 2013).

Transit time is another important factor Saic should consider while selecting their carrier. The company’s goal is to deliver the products to the buyer taking shortest time. It depends on the capability of the carrier and the route selected for delivery of the products. Hence, the logistics company that takes shortest time transporting the products in a particular destination should be preferred over the others operating in the same geographical location (Eng-Larsson & Kohn, 2012).

The previous section has precisely identified Saic’s goals related to the transportation of their products to their buyers. The company seeks to deliver their products safely to their buyers in taking shortest time spending less amount of money (Fernie, 2014). This will help the shipper in value creation as it will help satisfying the buyers need. These transportation goals followed by the company matches the guideline of the transportation model provided by Govindan et al. (2012). To achieve the goals, Saic should choose effective relationship type and sustain their business in the international business. The following section will discuss about the type of relationship between the shipper and carrier that will help the business in a safe transaction.

There can be short term and long-term relationship between the shipper and carrier. However, being a automotive industry, Saic should select the long-term relationship with the ir carrier to develop sustainability. Saic can save a significant amount of money if they stick to one single carrier for a longer period of time. If the company frequently change the their carrier for distributing their products, it has to carry out a background study on the carrier (Monczka et al., 2015). The study is no doubt an expensive one as they have to collect data on the carrier company and analyse the data to identify potential. Hence, it will be unwise to frequently change the carrier partner. Moreover, a frequent change in carrier partner will fail to build trust between the carrier and the shipper. According to Graham (2013), it is important for a company to build a healthy relationship to increase the bonding. It is necessary for Saic to build trust with their logistics partner as it will help the company to transport their products safely to their buyers. Lastly, long-term relationship with the carrier will help the company to enjoy stability in their business. Saic won’t have to constantly think about the transportation as it will be handled by their fixed carrier partner.

• Understanding between the manufacturer and the carrier is necessary to efficiently run the process of transportation. It can be increased with the shared profitability. The carrier will then take interest in safely delivering the products in given time. Hence, the manufacturing company should consider partnering with the carrier company if time comes.
• Transparency is another important process of building healthy relationship. Saic should communicate the details of every shipment properly to their carrier. The changes in the schedule should be communicated in prior notice to help the carrier to modify their schedule accordingly.
• Commitment for the both parties involved is essential in the process of building healthy relationship. The companies involved should not deviate from the terms decided in the contract.
• The ideas proposed by the carrier should be considered by the manufacturer as it will facilitate in value creation. Moreover, the company can explore new ideas the carrier might have to offer. This can in turn facilitate Saic to reduce their cost in transportation and enjoy greater profit.

Saic's Transportation Goals and Guidelines

Conclusion

The above study concludes that incoterms are essential for the companies while decding their while transporting their products in the international market. It can potentially decrease the risk and cost incurred from distribution. However, not all incoterms proposed by International Chambers of Commerce is beneficial. It depends on the products the company is manufacturing. It can be concluded that the FCA and DAT incoterms will be beneficial for the Saic. They can potentially reduce the risk and costing using this these incotrrms. The report further identifies the need of a long term relationship with the carrier to get potential benefit from transportation. Different process of building long-term relationship is discussed in the paper that can show potential benefit for the Chinese car manufacturing company Saic. The paper also dictates the considerable factors that a company should look through before partnering any carrier company. It identifies that the geographical coverage, reliability, transit time and equipments should be properly studied for successfully transporting their product around the international market.

Reference

Bergami, R. (2013). Incoterms 2010: The newest revision of delivery terms. Acta Universitatis Bohemiae Meridionalis, 15(2), 33-40.

Chung, J. H., & Lee, B. S. (2013). A Genealogical Approach to the Incoterms Rules and Revised Incoterms 2010. Journal of Korea Trade, 17(2), 1-19.

Eng-Larsson, F., & Kohn, C. (2012). Modal shift for greener logistics–the shipper's perspective. International Journal of Physical Distribution & Logistics Management, 42(1), 36-59.

Fernie, J. (2014). 02 Relationships in the supply chain. Logistics and retail management: Emerging issues and new challenges in the retail supply chain, 35.

Govindan, K., Palaniappan, M., Zhu, Q., & Kannan, D. (2012). Analysis of third party reverse logistics provider using interpretive structural modeling. International Journal of Production Economics, 140(1), 204-211.

Graham, A. (2013). Understanding the low cost carrier and airport relationship: A critical analysis of the salient issues. Tourism Management, 36, 66-76.

Guarnieri, P., Sobreiro, V. A., Nagano, M. S., & Serrano, A. L. M. (2015). The challenge of selecting and evaluating third-party reverse logistics providers in a multicriteria perspective: a Brazilian case. Journal of cleaner production, 96, 209-219.

Lindstad, H., Asbjørnslett, B. E., & Jullumstrø, E. (2013). Assessment of profit, cost and emissions by varying speed as a function of sea conditions and freight market. Transportation Research Part D: Transport and Environment, 19, 5-12.

Min, H. (2013). Examining logistics outsourcing practices in the United States: from the perspectives of third-party logistics service users. Logistics Research, 6(4), 133-144.

Monczka, R. M., Handfield, R. B., Giunipero, L. C., & Patterson, J. L. (2015). Purchasing and supply chain management. Cengage Learning.

Saic.com.  (2017).  SAIC » Locations. Retrieved 8 November 2017, from https://www.saic.com/about/about-saic/locations/

Saicmotor.com. (2017).  SAIC MOTOR.  Retrieved 8 November 2017, from https://www.saicmotor.com/english/company_profile/about_us/index.shtml

Stapleton, D. M., Pande, V., & O'Brien, D. (2014). EXW, FOB OR FCA? Choosing the right Incoterm and why it matters to maritime shippers. Journal of Transportation Law, Logistics, and Policy, 81(3), 227.