The impact on logistics processes as a consequence of the adoption of international trade terms-FCA

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The impact on logistics processes as a consequence of the adoption of international trade terms-FCA


Author: Kwan, Wai-wah Jaimie
Title: The impact on logistics processes as a consequence of the adoption of international trade terms-FCA
Degree: M.Sc.
Year: 2005
Subject: Hong Kong Polytechnic University -- Dissertations
Business logistics -- Management
F.O.B. clause
Export sales contracts
Department: Graduate School of Business
Pages: 66 leaves ; 30 cm.
InnoPac Record:
Abstract: The delivery terms, INCOTERMS¹, in sales contract has significant impact in logistics arrangement, the risks and responsibility over international buying and selling parties. It has been not been explored in previous purchasing, business and supply chain management research. In view of global sourcing trend in China, and articles published on the internet regarding the application of Incoterms 2000 arise the interest of exploring the logistics impact in this area. An impression from the real business transaction that Incoterms are not applied correctly as it is defined by the International Chamber of Commerce. The most commonly used Incoterms, FOB [Port], is applied in all mode of transportations and the division of cargoes custody was mis-used in many trading companies. Literature findings illustrate that FCA [Factory] would be more appropriate to be applied in terms of current logistics practice and the supply chain strategy.
This research study discusses the current practice of international sourcing companies of using Incoterms and their logistics practice in China. Five companies were selected to be interviewed for investigating the perceived effect of logistics upon adoption the FCA [Factory] terms. Results of the interviews find that the FOB [Port] is most commonly adopted in sales contract within the interviewed companies. Currently FCA [Factory] is not used while it is more appropriate due to the effect of sellers' domestic logistics costs division. The impact on lead-time and inventory management, logistics costs and resources, supply chain relationships and information visibility are considered differently between companies and industry with regards to the adoption of FCA [Factory] term. It is hoped that international global sourcing firms and sellers will have an insight on choosing and negotiating the Incoterms in their sales contract as well as matching their supply chain strategies.

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