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					AIR FREIGHT TRANSPORT MANAGEMENT
            “Fresh produce”

 Arab Academy for Science & Technology & Maritime Transport
        Institute Of International Transport & Logistics

                    By: Adel Abou Heneidy                  1
Overview:
•   TACT
•   IATA traffic conference areas
•   Coding
•   Acceptance of cargo
•   Methods of paying FRT charges         Grading Policy:
•   Advanced arrangements
                                          - Interaction & assignments ……20%
•   Cargo loading priorities
•   Airlines’ timetable                   - Mid-term exam………………..30%
•   Parcel’s dimensions
•   Types of rates                        - Case study…………………….10%
•   AWB (Airway Bill)
                                          - Final exam…………………….30%
•   Shipping instructions
•    Calculation of air freight charges                     TOTAL: 100%
•    Breakeven points
•    ULD (Unit Load Device)
•    Tracking
•    Dangerous goods & fresh produce
•   Shipping fresh produce by air
•   Cold Supply Chain
                                                                              2
TACT : The Air Cargo Tariff


              RULES            Updated every 4 months



         Rates worldwide       Updated every 2 months
      (except north America)


       Rates North America     Updated every 2 months

                                                  tact.indp@iata.org



            International Air Transport Association
                                                                       3
 IATA traffic conference areas

IATA area 1 :
All of the north & south American continent and the adjacent islands.


IATA area 2 :
All Europe ( including the European part of the Russian Federation) ,
and the adjacent islands.
Africa & middle East.


 IATA area 3 :
All of Asia and the adjacent islands; except the portion included
 in IATA area 2 ( from middle east).
                                                                        4
5
                                  AIRPORTS’ CODES
 CODING                 Cairo : CAI         London : LHR
                        Dubai : DXB        NEW YORK : JFK
Countries’ codes
                        Sanaa : SAH       MILANO : MIL
Egypt …. EG
                                    IATA AIRPORTS CODING.doc
Italy……. IT
USA…… US
Yemen…YE                 AIRLINES’ CODING
                             Prefix number
Currencies’ codes
                        Egyptair : MS - 077
Egyptian Pound... EGP
                        Lufthansa : LH - 020
US $………………. USD
Yemeni Rial………YER       Emirates : EK - 176
                                                               6
                        British     : BA - 125
• Write down the 3-letters IATA
  codes for the following
  airports:

                                       ABS
Abu Simbel, Egypt
Baltimore, MD, USA                     BWI
Berlin, Germany Schoenefeld            SXF
Berlin, Germany Tegel                  TXL
Berlin, Germany Tempelhof
                                       THF


            IATA AIRPORTS CODING.doc


                                             7
• Complete::
  1) India is located in IATA area …………
  2) Egypt is located in IATA area ……..& Germany in IATA area ……..
  3) Both ……… & ……… are located in IATA area 1.
  4) We can find the published air freight rate between CAI / JFK in the
      …………….. TACT book.
  5) We can find the published air freight rate between AMS / FRA in the
      …………….. TACT book.
  6) We can find the published air freight rate between DXB / ORD in the
      …………….. TACT book.
  7) IATA stands for………………………………………………
  8) The code of the currency of KSA is…………………………



                                                                           8
Acceptance of goods
Packing : Cargo must be in very good condition
Marking : * Full style of both shipper & consignee.
             * Number of package ( 1/10 , 2/10 , …….).
             * Labels ( this side up, fragile , urgent…..).
Payment : Prepaid : PP           OR        Collect : CC
The Collect charges are not accepted in the following cases:
1) Human remains.
2) Live animals.
3) Perishables.
4) Used personal effects which can not be sold.
5) Resale of goods is less than the charges to be collected.
6) Country regulations which do not permit Collect .
                                                               9
 Advanced arrangements
The following commodities need advanced arrangements :
Valuable cargo / Live animals / Human remains & ashes / Perishables /
Dangerous goods / shipment of unusual shape & size.
** Advance arrangements are made by 1st carrier.

Cargo loading priorities :
1) Aircraft on ground AOG          2) Diplomatic pouches     DIP
3) Valuable cargo      VAL        4) Live animals           AVI
5) Perishables          PER        6) Human remains          HUM
7) Restricted items    RRA
8) News materials ,which any delay will cause loss of its value.


                                                                        10
Information by countries


It is in section 7 in TACT RULES book

      Section 7-2 : Charges collect
                   For example EGYPT (EG)
                               Charges collect accepted : Yes
                               Charge collect fees : 5 %
                               Minimum charge : EGP 35


       Section 7-3 : Import / Transit / Export regulations



                                                                11
•    How much you are going to pay for the airline to receive documents of your shipment
     arrived to CAI on CC basis with FRT charges of EUR 550 ?

     Solution:
     Collection charges = EUR 550 x 5% = EUR 27.50
     Total to be paid = 550 + 27.50 = EUR 577.50

•    How much you are going to pay for the airline to receive documents of your shipment
     arrived to CAI on CC basis with FRT charges of USD 50 ?

     Solution:
     Collection charges = USD 50 x 5% = $ 2.5 (which is less than EGP 35)
     Total to be paid = $ 50 + EGP 35

•    How much you are going to pay for the airline to receive documents of your shipment
     arrived to CAI on PP basis with FRT charges of EUR 4200 ?

    Solution: Total to be paid = 0

                                                                                     12
   Airline
  Timetable




RFS: Road Feeder surface
                           13
Aircraft Dimensions                                  Boeing 737
                 W                         W
         76      88   101   106                114
                                      H                 Forward Hold
    25   254    254   254   254           86 144

    35   254    254   254   243

    45   254    254   254   243   Examples:
H
    55   254    254   254   243
                                  L xW x H = 235 x 70 x 80 cm…
    66   254    243   243   243

    76   254    243   241   218               = 220 X 102 x 75 cm…     X
    86   254    50    50    50

               Rear Hold
                                                                           14
Airbus A300F




               15
                                       Min……………
TYPES OF AF RATES                      N ( - 45 kgs )…..
                                       + 45…………….
General cargo rate (GCR)               + 100…………..
                                       +250……………

Specific commodity rate (SCR)        Special rates for some commodities

                                • Valuable cargo    S
                                • Newspapers,books, periodicals…. R
  Class rates (CCR)
                                •Live animals   S
                                •Human remains S
                                •Baggage shipped as cargo   R
  Rates differs from origin
       to origin & for          R …. Reduction rate
   destination to another.      S ….. Surcharge rate
                                                                      16
   General Cargo Rate (GCR)
• General cargo rates apply to the carriage of
  commodities that have not been allocated a
  specific commodity rate or commodity
  classification rate. General cargo rates consist of
  minimum rate (M), normal rate (N), and lower
  charge in higher weight (Q).

                                 N…. - 45 Kg      How many KGs are
    CAI / FRA     CAI / NYC                       covered by M ?
    EGP / KG      EGP / KG       45… + 45 Kg
    M…… 143       M…… 170                         M value / N value
    N……. 10.10
                                 100.. + 100 Kg
                  N……. 11.10
    45…... 7.60   45…... 10.50   300.. + 300 Kg
    100…. 7.10    100…. 9.70
    250…. 6.60    300…. 8.50     500.. + 500 Kg               17
                  500…. 8.00
Example:       GCR & Specific commodity rates
From : CAIRO            EG           CAI
     Egyptian Pound EGP KGS
To : FRANKFURT          DE   M… 143
                             N… 10.10             Specific commodity
                             45… 7.60
                             100.. 7.10      0006…Food stuffs.

                             250.. 6.60      0007…Fruits & vegetables.
                 0006        100..    4.80   2199…Yarn ,textiles.
                 0006        500..    4.30
         MS      0007        250.. 4.00
         MS      0007        500.. 3.50
                 2199        500.. 5.50
                 2199        1000.. 5.00          MS…Egypt Air
                                                                       18
• Using rates shown in the previous slide, calculate the FRT
  charges for the following air shipments from CAI / FRA:
   1) 200 Kg of strawberry on LH.
   2) 200 Kg of strawberry on MS.
   3) 350 Kg of strawberry on MS.
   4) 200Kg of tomato paste on KL.

               Solutions:
               1) 200 x 7.10 = EGP 1420
               2) 200 x 7.10 = EGP 1420
               3) 350 x 4.00 = EGP 1400
               4) 200 x 4.80 = EGP 960
                                                               19
              Break even point
                                           Rate of higher weight
Break even point = Higher weight x
                                           Rate of lower weight
Example: if chargeable weight is 420 kgs
           and + 300 = EGP 6
               + 500 = EGP 5                 5
       Then break even point = 500 x              =      416       KGs
                                              6

As 420 > 416        upgrade the chargeable weight to be 500 kgs and apply
rate of + 500
Like that, the shipper will pay = 500 x 5 = EGP 2500
                     Instead of = 420 x 6 = EGP 2520
                                                                    20
               Solved example 1

• Calculate the FRT charges for following shipment:

  Chargeable weight is 320 kgs
  + 250 = EGP 6.70
  + 500 = EGP 6.50


             Air freight calculations.xls




                                                      21
 Specific Commodity Rate (SCR)

• Specific commodity rates are usually lower than
  general cargo rates and are published for
  particular commodities from a specified point of
  origin to a specified destination point.
  They are subject to a minimum weight
  restriction.
• When the class rate or the general cargo rate
  applicable to the consignment is lower than the
  Specific Commodity Rate, this lower rate can be
  applied.                                        22
Commodity Classification Rate
   (CCR or Class Rate)
• Commodity classification rates, also
  known as class rates, are published for
  particular commodities from a specified
  point of origin to a specified destination
  point and are usually shown in
  Surcharged (S) or Reduced (R). Class
  Rates take precedence over General
  Cargo Rates regardless of
  comparisons.                               23
       Published materials
               (R)
• Newspapers, Magazines, Periodicals,
  Books, Catalogues, Braille-Type
  Equipment and Talking Books for the Blind
  , 50% of normal GCR shall apply to the
  above commodities and the minimum
  charge will be either the minimum charge
  for the specified sector or the amount you
  get by multiplying such discounted rate per
  kg by the minimum chargeable weight,
  whichever is higher.
Class rates are not applicable to the carriage of calendars, price
tags and posters.                                               24
    Baggage Shipped as Cargo
              (R)
• For carriage of baggage shipped as cargo (excluding
  machinery, jewelry, cameras, merchandise and
  salesman samples), 50% of normal GCR will apply,
  and such baggage is subject to a minimum charge for
  10 kg.

•    The baggage must be delivered to the carrier no
    later than the passenger's departure date, and the
    passenger or his agent is responsible for customs
    clearance.

• Airport of destination, must be as shown in
  passenger’s ticket.
                                                         25
IATA AREAS – Class Rates



        Example of IATA AREAS Class Rate.doc




                                        26
Example: Class rate from CAI to FRA
Both CAI & FRA are within IATA area 2
Live animals : Rate will be 175 % of normal GCR
              N….     EGP 10.10 / kg
  S           N175…EGP 17.68 / kg ( Rounded to 17.70 )


Valuable cargo : Rate will be 200 % of normal GCR
                N….     EGP 10.10 / kg
  S             N200…EGP 20.20 / kg .


Newspapers : Rate will be 50 % of normal GCR
             N….      EGP 10.10 / kg
 R           N50… EGP 5.05 / kg ( Rounded to 5.10 )      27
• Calculate the FRT charges for a horse of weight of 160 Kg
   needed to be shipped by air from CAI / FRA.


 SOLUTION:
 Live animal within IATA area 2……………150 N
 N….. EGP 10.10 per Kg.
 150 N = 10.10 x 150 % = 15.15 = 15.20 per Kg
 FRT charges = 15.20 x 160 = EGP 2432




                                                              28
• Calculate the FRT charges for a small domestic dog of weight
  of 8.5 Kg needed to be shipped by air from CAI / JED.

 SOLUTION: not allowed !
 According the RULES section # 7.3.2, the only types of dogs
 allowed to be imported into KSA are:
 Watch (Guard) dogs
 Hunting dogs
 Guide dogs for the blind




                                                               29
• Calculate the FRT charges for a shipment of spare parts of
  weight of 150 Kg needed to be shipped by air from CAI /
  DAM on MS on collect basis.



SOLUTION: not accepted !
According the RULES section # 7.2.2, collect shipment to DAM
is not allowed on MS.
You can use RJ via Amman.




                                                               30
 The Basic Facts about Calculation of
              air cargo
• Air cargo shipments are subject to the rates applying on the
  day of issue of the airwaybill.

• Rates generally apply from the departure airport to the
  destination airport and not vice versa. Rates therefore are not
  direction-bound and their amount is subject to the law of
  demand and supply.

• The cargo is established pursuant to the international air cargo
  tariff
  ( The Air Cargo Tariff = TACT ) and includes the following
  tariff group:

• Minimum cargo charges (so-called minimum charges which
                                                                    31
  must be charged)
   The Basic Facts about Calculation of
            air cargo {Continued}
• Minimum cargo charges (so-called minimum charges which
  must be charged)
• General cargo rates (so-called General Cargo Rates)
• N-Rates (normal rates) –up to 45.00 kg
• Q-rates (Quantity Rates) as from 45.00 kg
• Special rates (specific rates or. SCR = S pecific C ommodity R ates
  are exceptional rates applying to specific goods on certain routes
• Goods class rates ( C lass R ates = CR ) for specific goods
   (live animals, valuable shipments: S , newspapers: R).



                                                                    32
        Establishing the cargo weight
• For air cargo the weight is rounded up to the next full half and full
  kilo.
  e.g: 33,20 = 33,50 /       33,60 = 34.00      / 525,50 = 525,50

  If one consignment consists of several packing units (colli), the
  weight is first added up and then rounded!
• Bulkiness in air cargo is 1 : 6
  ( 1 m³ stands for a cargo volume of 167.00 kg )
• Volume (bulk) weight is calculated according to the formula:
  Volume weight = length x width x height (cm) x number of colli
                                          6000
• As a final step the actual and the calculated weights are compared
  and the higher weight is used to calculate the cargo.
                                                                   33
         Calculation of chargeable weight
                        (Solved example # 2 a )


• Calculate the chargeable weight for the following air shipment:
  a) Automotive spare parts packed as follows:
     1 carton of 25 Kg, and 75 x 60 x 40 cm, plus
     10 cartons of 10 Kg, and 50 x 30 x 25 cm each, plus
      5 cartons of 15 Kg, and 50 x 30 x 30 cm each.


                        Air freight calculations.xls




                                                                    34
        Calculation of chargeable weight
                        (Solved example # 2 b )


• Calculate the chargeable weight for the following air shipment:
  b)
  Air condition parts: 10 cartons of 10 Kg, and 50 x 30 x 25 cm each.
  plus,
  Chemicals: 5 cartons of 15 Kg, and 50 x 30 x 30 cm each.
  plus,
  Handy crafts: 17 cartons of 13 Kg, and 86 x 45 x 33 cm each.


                        Air freight calculations.xls

                                                                 35
                Rate construction
• So far only published direct rates have been mentioned:
  "Airport of Departure to Airport of Destination“

• However, rates to all airports worldwide are not published at
  every departure airport. Therefore such rates must either be
  combined with "ADD-ON" amounts or to be constructed with
  "unpublished rates" !

• The idea of an ADD-On amount-construction is to "add on"
  a domestic rate to the point of destination to a published rate
  into the country of destination.
  The ADD-ON amount can, however, also be "added" in the
  country of departure.

                                                               36
                 Conversion of rates
                                (Section 5.8)
•    Example 1:
    Construct a rate in CZK from A to C via B, where:
    Sector rate from A to B……..CZK 31.00
    Sector rate from B to C……..EUR 4.10 (a)
    USD / CZK = 20.44810 (b)
    USD / EUR = 0.72506 (c)
    Rounding off unit for CZK is 0.10
__________________________________________________
Solution:
rate from A to B……..CZK 31.00
                           a X b
rate from B to C in CZK = __________ = CZK 115.628
                                     c
Total rate from A to C = CZK 146.628
                       = CZK 146.60
                      Conversion of rates
                                         (Section 5.8)
•    Example 2:
    Construct a rate in CZK from A to E via B, C, D where:
    Sector rate from A to B……..CZK 31.00
    Sector rate from B to C……..EUR 4.10 (a)
    Sector rate from C to D……..CHF 16.70 (a)
    Sector rate from D to E……..EUR 5.99 (a)

    USD / CZK = 20.44810 (b)
    USD / CHF = 1.20569 (c)
    USD / EUR = 0.72506 (c)
    Rounding off unit for CZK is 0.10
__________________________________________________
Solution:
rate from A to B……..CZK 31.00
rate from B to C in CZK = CZK 115.628
rate from C to D in CZK = CZK 283.226
rate from D to E in CZK = CZK 168.929

Total rate from A to E = CZK 598.782
                       = CZK 598.80
 Disbursement Fees (DBC)
• Disbursements are amounts collected at
  the destination for the provision of services
  that are incurred at the origin which are
  incidental to the air carriage of the
  consignment, including surface
  transportation, storage and customs
  clearance charges.



                                             39
       Valuation Charge
• When the shipper's "declared value for
  carriage" on the Air Waybill is more than
  USD 20.00 (or its equivalent) per kilogram
  , a valuation charge of 0.5% of the
  shipper's declared value for carriage
  EXCEEDING USD 20.00 per kilogram
  (Gross Weight) will be charged.
 Valuation charge = ( Declared value – $ 20 x Gross weight ) x 0.005


                                                                       40
             Valuation Charge (examples)
 • Calculate the valuation charge for each of the following air shipments:

G.Weight       Volume weight              Chargeable weight              D.V.C
  (Kg)             (Kg)                         (Kg)
  100                90                          100                   USD20,000

  900               1260                        1260                   USD10,000

 1000               400                         1000                  EGP 200,000



  a) [ 20000 – 20 x 100 ] x 0.005 = USD 90
  b) [ 10000 – 20 x 900 ] x 0.005 = - USD 40 ???
  c) [ (200000 / 5.70) – 20 x 1000 ] x 0.005 = USD 75.44 = USD 75.45


                                                                             41
•It is not negotiable document
 are always consigned to a particular company or person

* In case of FOB terms it will
 on collect basis (payable at destination)
* In case of C&F or CIF basis it will prepaid


                                                          42
               AWB vs B/L
         AWB                            B/L
     Not negotiable                 Negotiable
AWB shall be issued after B/L shall be issued after the
the complete consignment complete consignment has
    has been received      been boarded onto vessel
The shipper is responsible     The vessel company is
     for issuing AWB         responsible for issuing B/L
  Payable to a specified         Payable to bearer
         person                                      43
   AWB - Check Digit Number
• Check Digit Number : A single digit of the air
  waybill number used to ensure that the air waybill
  number is correctly entered into a computer system.
• Example:
  AWB # 020 – 2114 1643                       2114 1643
                                        7
   Pls, check the following AWBs:          0
                                               0
   077 – 3208 9901
                                                   2
   077 – 3203 080?
                                                       3
   077 – 3203 0806
                                                           44
                 Rate Class in AWB
One or more of the following codes shall be inserted as appropriate:
M - Minimum Charge

N - Normal under 45 kg

Q - Quantity over 45 kg rate

C - Specific Commodity Rate

R - Class Rate (Reduction)

S - Class Rate (Surcharge)

U - Pivot Weight And Applicable Pivot Weight Charge

E - Weight in excess of pivot weight and applicable rate

X - Unit Load Device (as an additional line entry with one of the above)

                                                                           45
The significance of AWB:

Contract of carriage / Proof of receipt of cargo / Freight bill / Guide to carriers’ staff
in handling , dispatching, …
• Certificate of insurance ( if requested by shipper) :
  If the shipper does not declare the value for carriage ; in case of loss of cargo
  the maximum compensation to be paid by carrier is $ 20 / kg.
  But, if he declares the value for carriage , he will pay extra charges called
  valuation charge. In case of loss of cargo , the carrier will pay the total declared
  value.The valuation charge is calculated as follows:

    Valuation charge = ( Declared value – $ 20 x Gross weight ) x 0.005




                                                                                      46
Example


Shipper : ABC company
          15 Ahmed Orabi st. –Mohandeseen – Cairo –Egypt
         Tel # 3448782
Consignee: XYZ company
             15 street # 46 – DUS-Germany
             Tel # 5864875
Commodity : Air condition spare parts.
Number of parcels : 15
Dimensions of parcel : 90 x 80 x 70 cm
Gross weight per parcel : 60 kgs
Freight charges : Prepaid
Declared value for carriage : USD 75000         {in case of non declaration NVD }
Declared value for customs : NCV                { no customs value }
Handling information: Notify Mr. John Roger Tel # 5864879 upon arrival

                                                                                    47
  Calculations :
Gross weight = 60 kgs x 15 parcel = 900 kgs
Volume weight = 90 x 80 x 70 cm x 15 parcels
                                                 = 1260 kgs
                          6000
Chargeable weight = 1260 kgs
Rate CAI / DUS = EGP 6.60 / kg
Total freight charges = 6.60 x 1260 = EGP 8316
Valuation charge = ( Declared value – $ 20 x Gross weight ) X 0.005
                 = ( 75000           –  20 x 900 )          X 0.005
                 = $ 285 [ equal to EGP 1322 ]
Due carrier = EGP 71

Total prepaid =   8316 + 1322 + 71 = EGP 9709




                                                                      48
                    Solved example 3
• A shipment consists of:
  40 parcels of 4 Kg , and 30 X 20 X 10 cm each
  90 parcels of 3 Kg , and 0.5 X 0.4 X 0.2 m each
  60 parcels of 15 Kg , and 75 X 50 X 24 cm each
  1) Calculate the total air freight charges if the shipment will be
     dispatched from CAI / FRA with rate of = EGP 6.60 / kg ( +250)
  2) Calculate valuation charge if the declared value is $ 50000.

 Solution:
 • Calculate the gross & volume weights for each type of parcels.
 • Determine the chargeable weight for each type.
 • Calculate total chargeable weight.
 • Calculate total freight charges.        Air freight calculations.xls

 • Calculate valuation charge                                             49
                  AIRWAY Bill (AWB)
                                  (Summary)
                                Air Waybill.doc
• AWB is issued usually in set of 12 copies.
 Copy 1: original for carrier
 Copy 2: original for consignee
 Copy 3: original for shipper
• If the AWB indicates that transhipment will take place, transhipment is allowed
even if L/C prohibits transhipment, provided that the entire carriage is covered by
one & same AWB.

• Date of shipment in AWB (discuss)
• Split shipment (discuss)
• MAWB & HAWB
• Clean versus foul AWB
                                                                                      50
This example shows :
* A minimum charge.
* A declared value for customs.
* Chargeable weight equals to
  gross weight.




                          51
This example shows :
* Q rate.
* Chargeable weight greater than
  gross weight.




                          52
This example shows :
* A class rate : S
  based on M200.
* A declared value for carriage,
  and valuation charge.
* Chargeable weight equals to
  gross weight ( rounded).
* TRC : transit charge.



                             53
This example shows :
* A mixed shipment rating.
* C : commodity rate.
  Q : quantity rate.
  R : class rate (reduction 33 % )
 * AWA : AWB charges ( Agent)
 * SUA : transportation (agent)
 * DBC : disbursement fees resulting
          from the two other charges
          (Carrier).


                                  54
                               Example
• Calculate the total charges for the following AWB:
               ( you are allowed to make necessary changes if any)

AWB # 077 – 3203 0808
                                                                 CAI / NYC
Terms of sale: FOB CAI-EG                                        EGP / KG
                                                                 M…… 170
Airport of destination: JFK – New York – US                      N……. 11.10
                                                                 45…... 10.50
AWB charges: Prepaid (PP)
                                                                 100…. 9.70
Number of parcels: 60 of 15 Kg , and 75 X 50 X 24 cm each.       300…. 8.50
                                                                 500…. 8.00
Declared value for carriage: EGP 114,000
Other charges = EGP 71


* USD 1 = EGP 5.70

                                                                           55
                              Solution
• The given AWB is wrong. The correct one is 077 – 3203 0806
• As the terms of sale is FCA origin, the Freight charges must be collect
• Gross weight = 60 x 15 Kg = 900 Kg
• Volume weight = (75 X 50 X 24      x 60)
                                             = 900 Kg
                              6000

• Chargeable   weight = 900
• Freight charges = 900 x EGP 8 = EGP 7200
• Valuation charges = [(114000 / 5.70) – ($ 20 X 900) ] x 0.005 = $10
                     = $ 10 x 5.7 = EGP 57
• Total charges = 7200 + 57 +71 = EGP 7328                         56
        Terms of sale
Pricing your product is a matter of:
• What the product is
• How much ( or how many)
• How far the product is being moved at your expense


Damaged or lost : who is responsible?




                                                       57
• EXW - Ex Works
 Title and risk pass to buyer including payment of all transportation
 and insurance cost from the seller's door. Used for any mode of
 transportation.
 Works means Factory, Mill, Warehouse,…

 A term of sale in which for the quoted price, the seller merely makes the
 goods available to the buyer at the seller's "named place" of business.
 This trade term places the greatest responsibility on the buyer and minimum
 obligations on the seller. The Ex Works term is often used when making an
 initial quotation for the sale of goods without any costs included.


• FCA - Free Carrier
 Title and risk pass to buyer including transportation and insurance cost
 when the seller delivers goods cleared for export to the carrier.Seller is
 obligated to load the goods on the Buyer's collecting vehicle; it is the
 Buyer's obligation to receive the Seller's arriving vehicle unloaded.
                                                                              58
• FAS - Free Alongside Ship
 Title and risk pass to buyer including payment of all transportation
 and insurance cost once delivered alongside ship by the seller.
 Used for sea or inland waterway transportation.
 The export clearance obligation rests with the seller.


• FOB - Free On Board
 Title and risk pass to buyer including payment of all transportation
 and insurance cost once delivered on board the ship by the seller.
 Used for sea or inland waterway transportation.




                                                                        59
• CFR - Cost and Freight
 Title, risk and insurance cost pass to buyer when delivered on board the ship
  by seller who pays the transportation cost to the destination port. Used for
  sea or inland waterway transportation.




• CIF - Cost, Insurance and Freight
  Title and risk pass to buyer when delivered on board the ship by
  seller who pays transportation and insurance cost to destination
  port. Used for sea or inland waterway transportation.




                                                                            60
• CPT - Carriage Paid To
  Title, risk and insurance cost pass to buyer when delivered to carrier
  by seller who pays transportation cost to destination. Used for any
  mode of transportation.



• CIP - Carriage and Insurance Paid To
 Title and risk pass to buyer when delivered to carrier by seller who pays
  transportation and insurance cost to destination. Used for any mode of
  transportation.




                                                                             61
• DAF - Delivered at Frontier
 Title, risk and responsibility for import clearance pass to buyer when
 delivered to named border point by seller. Used for any mode of
 transportation.



• DES - Delivered Ex Ship
 Title, risk, responsibility for vessel discharge and import clearance
 pass to buyer when seller delivers goods on board the ship to
 destination port. Used for sea or inland waterway transportation.




                                                                         62
• DEQ - Delivered Ex Quay (Duty Paid)
 Title and risk pass to buyer when delivered on board the ship at the
 destination point by the seller who delivers goods on dock at
 destination point cleared for import. Used for sea or inland waterway
 transportation. DDU - Delivered Duty Unpaid -- Title, risk and
 responsibility of import clearance pass to buyer when seller delivers
 goods to named destination point. Used for any mode of
 transportation. Buyer is obligated for import clearance.


• DDU - Delivered Duty Unpaid
 Seller fulfills his obligation when goods have been made available at the
 named place in the country of importation




                                                                             63
• DDP - Delivered Duty Paid
 Title and risk pass to buyer when seller delivers goods to
 named destination point cleared for import. Used for any
 mode of transportation.




                            INCOTERMS 2000.pdf


                                                              64
                Solved example
• Choose the correct FRT payment method for each of the
  following term of sale:



                                        Answers
  1- EX- Work
                                   EX- Work…..CC
  2- CIF          a- PP
                                   2- CIF……….PP
  3- DDU          b- CC
                                   3- DDU……...PP
  4- FCA
                                   4- FCA……..CC


                                                    65
  TRACK & TRACE

  www.redberry.com
                            AWB 67259790
                            CAI – JFK
                            Pieces: 15
                            Weight: 900 kgs
                            FLT # MS 778
                            Arrived: 22:30 h
   AIR TRACK                Date: 20/07/02
Czech Airlines
Delta Air Logistics
Dragonair
East Line Airlines
Egyptair              077      67259790
Emirates SkyCargo                         66
                      Shipping terms
    You have to differentiate between terms of sale, terms of
    payment, and shipping terms:

•    FLT : Full Liner Terms
•    LIFO: Liner In Free Out
•    FILO: Free In Liner Out
•    FIFO: Free In Free Out {FIOS}



                                                                67
• Packaging:
  – Requires simple lightweight packing
  – Unlike sea freight, no need for solid packing to
    protect against weather, careless handling and salt
    water
  – All packages must be labeled with:
    •   Airline name
    •   Flight number
    •   Air waybill number
    •   Destination code
    •   Total number of pieces
        in the shipment
                                                   68
 Ratios to be considered upon packing

• You have to maximize the following ratios:

  1) Net weight : Gross weight
  2) Gross weight : Chargeable weight
  3) Net weight : Chargeable weight



                                               69
        Unit Load Device (ULD)
• Unit Load Devices, or ULDs, are pallets and
  containers used to load luggage, freight, and mail on
  wide-body aircraft and specific narrow-body aircraft.

• They allow large quantities of cargo to be bundled
  into large units. Since this leads to fewer units to
  load, it saves ground crews time and effort, and helps
  prevent delayed flights.

• Each ULD is manifested separately so that its
  contents can be tracked.
                 http://en.wikipedia.org/wiki/Unit_Load_Device   70
                     Unit Load Device

TYPE: 10 FT CONTAINER
CODE: AQ6 , AMA, AQA , AMG
BASE DIMENSIONS: 318 X 244 CM
HEIGHT: 244 CM
VOLUME: 17 CBM
INTERNAL DIMESIONS: 300 X 228 X 238 CM
LOADABLE IN: B747-200 COMBI
             B747- 400 COMBI
             B747- 200 SF
             B747- 200 F
                                         71
                     Unit Load Device

TYPE: 20-FT PALLET
CODE: P7E , PGE
BASE DIMENSIONS: 606 X 244 CM
INTERNAL DIMESIONS: 592 X 230 CM
LOADABLE IN: B747-200 COMBI
             B747- 400 COMBI
             B747- 200 SF
             B747- 200 F



                                        72
TYPE: A320 / A321 CONTAINER
CODE: AKH
BASE DIMENSIONS: 156 X 153 CM
HEIGHT: 114 CM
VOLUME: 3.5 CBM
LOADABLE IN: A320 – 200
              A321 - 100


                                73
LD 3
       Iatacode          AKH
       Also known as     AVB
       Top length        2438mm   96.0"
       Bottom length     1562mm   61.5"
       Width             1534mm   60.4"
       Height            1143mm   45.0"
       Internal volume   3.6      m3


       MGW               1588     KG




                                   74
               Volume                 Dimensions
  Pallet     Cubic Meter              L x W (cm)                 Remarks

   LD 8            6.9                153 x 244 cm                   FQA
  LD 11            7.2                153 x 318 cm               FLA / PLA
   LD 7           10.6                224 x 318 cm               PAG / P1P
                  11.6                244 x 318 cm                 PMC




• If you have a fresh produce packed in cartons of 60 x 40 x 20 cm

 palletized on Euro pallet (120 x 100 x 16 cm) needed to be dispatched by air
 using PMC- ULD. How many cartons could be fit on this ULD ?
** Disregard the weight.
                                                                                75
                              Solution
• Maximum height = Volume / (LxW)
                 = 11.6 / ( 2.44 x 3.18) = 1.495 m = 150 cm
              318
                                                              1
244




            PMC- ULD




120
      100   100     100
                          3                                   2

120
                                                                  76
                       Solution             (Continued)

• Number of cartons per layer on the Euro pallet = 5
• Number of layers per each Euro pallet =
  ( 150 – 16) / (20) = 6.7       6 Layers only


  So, maximum number of cartons could be loaded on PMC =
  6 Euro pallets x 6 layers x 5 cartons = 180 cartons




                                                          77
     Bulk Unitization charge (BUC)
• BUC is the rate charged by carrier to shipper or freight
  forwarder on the basis of ULD.

•    The charge for the consignment shall consist of a flat
    minimum (pivot – U) charge for a specified pivot weight
    above which an additional charge (over-pivot rate) per kilo or
    pound will apply.

• The chargeable weight of the consignments in ULD will be
  charged at the actual gross weight excluding the tare weight of
  the ULD.

* Restricted Items for BUC Use: Dangerous goods, live animals,
   human remains, and valuables                              78
This example shows :
* A consolidated shipment inside
 a ULD.
* L : lb {USA}.
* U : pivot rate of ULD.
* The chargeable weight of ULD
  is greater than gross weight of
  cargo .
* ULD tare weight : no charge.




                             79
                      Solved example
• If you have a fresh produce packed in 540 cartons of
  60 x 40 x 20 cm each, palletized on Euro pallet (120 x 100 x 16 cm)
  needed to be dispatched by air using PMC- ULDs.

  Calculate the freight charges if :
  - Net weight per carton = 4.75 Kg
  - Gross weight per carton = 5 Kg
  - Pivot weight of ULD = 2200 Kg
  - Tare weight of ULD = 210 Kg.
  - Freight rate = EGP 4.10 per Kg.

  Also, calculate the three packing ratios, and discuss.

                                                                  80
                                Solution
       From previous example, we can dispatch 180 cartons on each ULD

No. of ULDs = 540 / 180 = 3 ULDs
Total chargeable weight (Pivot) = 2200 x 3 = 6600 Kg
Total gross weight of the shipment = 540 x 5 = 2700 Kg

Since the Pivot weight is greater than gross weight
Therefore, you will be charged as per pivot weight.

Fright charges = 6600 x 4.10 = EGP 27060
Packing ratios:
Net : Gross = 4.75 / 5 = 95 %
Gross : Chargeable = 2700 / 6600 = 40.9 %
Net : chargeable = (540 x 4.75) / 6600 = 38.9 %

                                    DISCUSS !
                                                                        81
Dangerous Goods




                  82
           Hazardous Substance
• Any material with one or more of the following intrinsic
  hazardous properties:
  explosiveness, flammability, oxidizing capacity, corrosiveness,
  toxicity ; and poses a threat to human health and/or the
  environment.

                Dangerous goods
 • Dangerous goods are substances which pose risk to health,
   safety, property or the environment during operation and/or
   transportation.
 All of these substances are divided in classes in accordance
  to the specific chemical characteristics resulting in a degree
                                                                   83
  of danger.
                   Class 1 Explosives




    UN             Class 2 Gases

 classification    Class 3 Flammable Liquid
                   Class 4 Flammable Solid
       of
dangerous goods
                   Class 5 Oxidizing substances and Organic Peroxides

                   Class 6 Poisonous (toxic) and infectious substances
        Such as:

        DRY ICE    Class 7 Radioactive material
                   Class 8 Corrosives                                    84
                   Class 9 Miscellaneous dangerous goods
         Identification of Dangerous Goods
             by PSN and UN Number
Within each of the 9 hazard classes dangerous goods are uniquely identified by two pieces
of information:

• A 4 - digit number known as the UN Number which is preceded by the letters
  UN; and

• The corresponding Proper Shipping Name (PSN).

For example, kerosene is identified in the IMDG Code by its PSN Kerosene and the
corresponding UN Number UN 1223.

Together the UN Number and PSN uniquely :
Identify dangerous goods from each other;
Enable rapid and precise identification during transport ensuring the correct handling,
stowage, segregation, etc; and
In the event of an emergency, ensure the correct measures are taken.                      85
• Using UN Numbers
 Using a four-digit number to identify dangerous goods enhances safety by:
• Overcoming language barriers - the four-digit number is easily
  understood in all languages;
     • Avoiding confusing similar names - e.g. TITANIUM POWDER,
       WETTED UN 1352 which is a flammable solid in class 4.1 and has very
       different transport requirements to TITANIUM POWDER, DRY UN 2546
       which is spontaneously combustible in class 4.2.


    • Using Proper Shipping Name (PSN)
    • The PSN is the accepted name which must be used for transport purposes on
      documentation / labelling, etc.
    • No alternatives or variations are permitted unless specifically stated
    • The PSN is that part of the name, which appears in the Dangerous Goods List or the
      Alphabetical Index in boldl letters only
    • Any text in lower case is only descriptive and is not part of the PSN


                                                                                     86
            Material Safety Data Sheet
                     (MSDS )
• It is a compilation of information – provided by the manufacturer - required
  under the OSHA Communication Standard on the identity of hazardous
  chemicals, health, and physical hazards, exposure limits, and precautions.

• OSHA requires manufacturers and importers of hazardous chemicals to
  distribute Material Safety Data Sheets with information concerning
  reasonably foreseeable health and toxicity concerns arising from their use.

• Users of these chemicals are required to ensure that these MSDSs are
  received with chemicals they purchase, and that they are used and available
  in the workplace.

• A Material Safety Data Sheet must be provided with the initial shipment of
  a hazardous chemical, and with the first shipment after a Material Safety
  Data Sheet is updated.

                                                                            87
    CONTENT OF A MATERIAL SAFETY DATA SHEET
•    The identity (product name) used on the label, and chemical and common name(s) of
     ingredients which have been determined to be health hazards, and which comprise 1% or
     greater of the composition, except carcinogens shall be listed if the concentrations are 0.1% or
     greater; and,

•    The chemical and common name(s) of all ingredients which have been determined to present
     a physical hazard when present in the mixture;

•    Relevant physical and chemical characteristics of the hazardous chemical (such as vapor
     pressure, flash point);

•    Relevant physical hazards, including the potential for fire, explosion, and reactivity;


•    Relevant health hazards, including signs and symptoms of exposure, and any medical
     conditions generally recognized as being aggravated by exposure to the chemical;


•    The primary route(s) of entry into the body;


•    The OSHA permissible exposure limit and ACGIH Threshold Limit Value. Additional
     applicable exposure limits may be listed;


                                                                                               88
    CONTENT OF A MATERIAL SAFETY DATA SHEET

•   Whether the hazardous chemical is listed in the National Toxicology Program (NTP) Annual Report on
    Carcinogens (latest edition) or has been found to be a potential carcinogen in the International Agency for
    Research on Cancer (IARC) Monographs (latest editions), or by OSHA;


•   Precautions for safe handling and use, including appropriate hygienic practices, protective measures during
    repair and maintenance of contaminated equipment, and procedures for clean-up of spills and leaks;


•   Appropriate control measures, such as engineering controls, work practices, or personal protective
    equipment;


•   Emergency and first aid procedures;


•   The date of preparation of the Material Safety Data Sheet or the last change to it; and,


•   The name, address and telephone number of the chemical manufacturer, importer, employer or other
    responsible party preparing or distributing the Material Safety Data Sheet, who can provide additional
    information on the hazardous chemical and appropriate emergency procedures, if necessary.



                                                                                                              89
                                      Segregation of dangerous goods
        •      Segregation means keeping incompatible goods apart from one another in a room,
               using a barrier or intervening space.
               Chemicals must be segregated when either stored or shipped to ensure they do not
               mix in case of spillage.


NA
Separation or segregation is not applicable to
the two Classes, and they may be stored in
 the same area.

SG
The two Classes of chemicals must be
segregated (i.e., kept apart) from each other by
a distance of at least three metres.

FS
The two Classes must be fire separated.

PR
The two Classes are prohibited in the same
are storage area.
As well, they must not be stored in
adjoining areas which are attached to each other.
The two Classes must be stored in separate
areas at least ten metres apart.




                                                                                                  90
          PACKING GROUPS
• Packing is the essential component in the safe transport of
  dangerous goods.
• According to the degree of hazard of the dangerous goods; we
  have three packing groups:


 Group I ……………….great danger
 Group II……………….medium danger
 Group III………………minor danger




                                                             91
92
Labeling of dangerous goods

   Labeling is of great importance
   for safe handling and transport
         of dangerous goods.



    • Hazard Labels:
      1) Primary hazards labels
      2) Secondary hazards labels
    • Handling Labels
                                     93
94
     Primary hazard labels have “class number”
Secondary hazard labels do NOT have “class number”   95
Handling labels




                  96
97
98
           Shipping with Dry Ice
• Dry ice (Carbon Dioxide, Solid) is used as a refrigerant and
  is considered a dangerous good.

• However, a Shipper's Declaration of Dangerous Goods is not
  required when dry ice is used to cool a non-dangerous good.

• Following are guidelines that apply to shipments of dry ice;
  however, it is the shipper's responsibility to comply with all
  IATA Dangerous Goods Regulations when shipping dry ice or
  any other dangerous good.



                                                                 99
• Packaging
    Dry ice must be in packaging designed and constructed to permit the
    release of carbon dioxide gas and to prevent a build up of pressure that
    could rupture the packaging.
    The outside packaging must be marked with the following information:
•   Name of the shipper and consignee
•   The name of the contents being cooled
•   The words "Dry Ice" or "Carbon Dioxide Solid"
•   The UN number for Carbon Dioxide Solid (UN1845)
•   The net weight of the dry ice within the pieces
•   A Class 9 Miscellaneous Dangerous Goods Label affixed on the same
    surface of the package near the proper shipping name and adjacent to the
    shipper's or consignee's address appearing on the package.




                                                                               100
• Air Waybill Documentation
    For shipments of dry ice cooling a non-dangerous good, you must include specific
    information on the air waybill in the "Nature and Quantity of Goods" or "Content"
    section and in the following order:

•   The name of the contents being cooled
•   The proper shipping name (Dry Ice or Carbon Dioxide, Solid)
•   The class ( 9 )
•   The UN number (UN1845)
•   The number of pieces
•   The net weight of dry ice per piece

•   Example: Diagnostic Specimens, Dry Ice, 9, UN1845, 1 piece at 2 Kg


    For shipments of dry ice cooling a dangerous good, the shipper must
    comply with all IATA Dangerous Goods Regulations listed for both the dry
    ice and the dangerous good.


                                                                                  101
                Dry ice in baggage
• Passengers may bring dry ice in quantities not exceeding
  2.5 kg per person, when used to pack perishables that are
  themselves not dangerous goods articles or substances,
  provided the package permits the release of carbon dioxide
  gas.

• The dry ice may be in carry-on baggage, or with the approval
  of the operator, in checked baggage.

• When carried in checked baggage, each package must be
  marked – “DRY ICE” or “Carbon Dioxide Solid” and with
  the net weight of dry ice or an indication that the net weight is
  2.5 kg or less.

                                                                 102
    Letter of Credit particulars
•   L/C is a binding document that a buyer can request from his bank in order to
    guarantee that the payment for goods will be transferred to the seller.

•   Basically, a letter of credit gives the seller reassurance that he will receive the
    payment for the goods.

•   In order for the payment to occur, the seller has to present the bank with the
    necessary shipping documents confirming the delivery of goods within a given
    time frame.

•   It is often used in international trade to eliminate risks such as unfamiliarity
    with the foreign country, customs, or political instability.

In summary, an L/C is:
- A formal document of payment
- Opened by a party wishing to import
- Communicated through banking channels
- Paid by the opening bank within a specified timeframe upon presentation of stipulated
  documentation                                                                     103
•    Sight Draft
    That is payable as soon as the required documents have been
    presented.

• A time Draft
    Is not payable until the lapse of a particular time period stated on the
                                                                          104
    draft.
• Confirmed Letter of Credit
    A letter of credit, issued by a foreign bank, which has been
    verified and guaranteed by a domestic bank in the event of
    default by the foreign bank or buyer.
• Commercial Letter of Credit
    A commercial letter of credit assures the seller that the bank will
    provide payment for any goods or merchandise shipped to the
    bank's customer, assuming the seller provides any required
    documentation of the transaction and its shipment of the
    purchased goods.
    Typically the documents requested in a Letter of Credit are the
    following:
•   Commercial invoice
•   Transport document such as a Bill of lading or Airway bill,
•   Insurance document;
•   Inspection Certificate
•   Certificate of Origin
    But there could be others too.
                                                                          105
• Irrevocable Letter of Credit
  An irrevocable letter of credit includes a guarantee by the
  issuing bank that if all of the terms and conditions set forth in the
  letter are satisfied by the beneficiary, the letter of credit will be
  honored.

• Revocable Letter of Credit
  An revocable letter of credit may be cancelled or modified after
  its date of issue, by the issuing bank.

• Standby Letter of Credit
  In the event that the bank's customer defaults on a payment to
  the beneficiary, and the beneficiary documents proof of its loss
  consistent with any terms set forth in the letter, a standby letter
  of credit may be used by the beneficiary to secure payment from
  the issuing bank.

                                                                     106
• Transferable Letter of Credit
   In transferable L/C, the first beneficiary (exporter) may request
   paying the whole or part of the credit to one or more beneficiaries.

   This L/C is expressly designated “ Transferable” by the issuing bank
   on instructions of the applicant.
   ** If the words, “ transmissible” , “ assignable” , “ divisible” ,
      or “fractionable” are used, L/C is not transferable.


• Non - Transferable Letter of Credit
  In which, the beneficiary can not transfer the credit to other beneficiary.




                                                                           107
              Back-to-Back Credit
• It is a new credit opened on the basis of an already existing,
  non transferable credit.

• It is used by traders to make payment to the ultimate supplier.
  A trader receives a documentary credit from the buyer and then
  opens another documentary credit in favour of the ultimate
  supplier.

• The first documentary credit is used as collateral for the
  second credit. The second credit makes price adjustments from
   which comes the trader's profit.
              2nd L /C of $ 45000            1st L /C of $ 50000
   Supplier                         Trader                         Buyer
                                                                      108
                 Red Clause Credit

A red clause credit has a special clause (red clause) that authorizes the
confirming bank to make advances to the beneficiary (seller) prior to the
presentation of the shipping documents.

 In this credit the buyer, in essence, extends financing to the seller and
incurs ultimate risk for all sums advanced under the credit.




                                                                       109
• Latest Negotiation date
  Is the last day of the period of time allowed by L / C for the
  presentation of documents to the bank.

    ** In case the L/C does not stipulate the latest negotiation date,
   it is
        within 21 days after date of issuance the transport
   documents, but
        on or before L/C expiry date.

** B/L (AWB) which is presented to the bank later than the agreed time
   limit or 21 days later than the date of issuance of B/L is called
   Stale B/L (AWB)

• Expiry date
  Is the last day of validity of the L/C for payment.
  In case the validity of a L/C is stated in a period of time, for
  example (this L/C is valid for three months) without specifying
  the date from which the time is to run, its validity starts from
  issuance date of L/C.
                                                                    110
• Latest date of shipment
   Is the last day of the period of time allowed by L/C for shipment,
  or
  dispatching.

 Remark:
 In case the expiry date and/or latest negotiation date falls
 on a day on which the bank is closed for reason not beyond
 the bank’s control these two dates ( if any) are extended
 to the succeeding first day on which the bank is opened.
 Such extension, whoever, does not extend the latest date
 of shipment.



                                                                    111
Sample L/C




             112
              3 Most Common Reasons
              why Letters of Credit Fail
    1) Time Lines:
    The letter of credit should have an expiration date that gives sufficient time to
    the seller to get all the tasks specified and the documents required in the LC. If
    the letter of credit expires, the seller is left with no protection.

    Most LC s fail because Sellers/Exporters/Beneficiaries were unable to perform
    within the specified time frame in the LC.

    Three dates are of importance in an LC:
    a) The date by when shipment should have occurred. The date on B/L.
    b) The date by when documents have to be presented to the Bank.
    c) The expiry date of the LC itself.

•   A good source to give you an idea of the timelines would be your freight
    forwarding agent. As a seller check with your freight forwarding agent to see
    if you would be in a position to comply.
                                                                                     113
          3 Most Common Reasons
          why Letters of Credit Fail
2) Discrepancy within the Letter of Credit:
  Letters of credit could also have discrepancies. Even a discrepancy as small as
  a missing period or comma can render the document invalid. Thus, the earlier
  in the process the letter of credit is examined, the more time is available to
  identify and fix the problem. This is another common reason why LCs fail.


3) Compliance with the Documents and Conditions within
   the Letter of Credit:
  Letters of credit are about documents and not facts; the inability to produce a
  given document at the right time will nullify the letter of credit. As a
  Seller/Exporter/Beneficiary you should try and run the compliance issues with
  the various department or individuals involved within your organization to see
  if compliance would be a problem. And if so, have the LC amended before
  shipping the goods.
                                                                                    114
            Mid-Term Revision
1) Complete:
 a) TACT stands for………………………………………..
                      The Air Cargo Tariff
 b) The main types of Air Freight rates are:
   - General Cargo rate (GCR)
   - Specific commodity rate (SCR)
   - Class cargo rates (CCR) : S & R

                                 2
c) FRA is located in IATA area # ……………………….
                                       prefix number
d) For AWB # 020 – 3203 0806, 020 is ………………... of Egypt Air
e) For perishables, MAWB (for liners) must shows the FRT charges
   prepaid
   ……………………..


                                                               115
2)   How much you are going to pay for the airline to receive documents of your
     shipment arrived to CAI on CC basis with FRT charges of USD 50 ?
     Solution:
     Collection charges = USD 50 x 5% = $ 2.5 (which is less than EGP 35)
     Total to be paid = $ 50 + EGP 35

3) Complete:
   a) The check digit of AWB 077- 3266240…    5
   b) The sales term DDU stands for……………, unpaid
                                      delivered duty
      but the shipping term LIFO stands for……………..
                                              liner in-free out
   c) The dry ice is considered as a dangerous good with class … 9
   d) ULD stands for…………………, and the pivot weight of a ULD
                       unit load device
       is…………………………………… for an ULD
          the minimum weight to be charged
   e) If the AWB shows “NCV” it means……………… No customs value
   f) In case of CIF shipment, FRT charges must be…………   prepaid


                                                                              116
4) Using rates shown :
                                    From : CAIRO           EG            CAI
  a) calculate the FRT charges
     for an air shipment from              Egyptian Pound EGP KGS
      CAI / FRA: 350 Kg
                                     To : FRANKFURT         DE    M… 143
      of strawberry on
                                                                 N… 10.10
      Egypt Air.
  b) Calculate the FRT charges                                   45… 7.60
     for a horse of weight of                                    100.. 7.10
     160 Kg needed to be
      shipped by air from                                        250.. 6.60
      CAI / FRA.                                     0006        100..    4.80
Solution:                                            0006        500..    4.30
a) 350 Kg x EGP 4 = EGP 1400                  MS    0007         250.. 4.00
b) Both CAI & FRA are within IATA area 2      MS    0007         500.. 3.50
Live animals :                                      2199         500.. 5.50
Rate will be 175 % of normal GCR
N…. EGP 10.10 / kg                                  2199         1000.. 5.00
N175…EGP 17.68 / kg ( Rounded to 17.70 )
FRT charges = 160 Kg x 17.70 = EGP 2832
                                                                          117
5) A shipment of air condition spare parts consists of:
   40 parcels of 4 Kg , and 30 X 20 X 10 cm each
   90 parcels of 3 Kg , and 0.5 X 0.4 X 0.2 m each
   60 parcels of 15 Kg , and 75 X 50 X 24 cm each

   a) Calculate the total air freight charges if the shipment will be
     dispatched from CAI / FRA with rate of = EGP 6.60 / kg ( +250)
   b) Calculate valuation charge if the declared value for carriage is $ 50000.

  Solution:
  * 40 parcels: G.Wt = 40 x 4 = 160 Kg
                 Volume Wt. = (30 x 20 x 10 x 40) / 6000 = 40 Kg
  * 90 parcels: G.Wt = 90 x 3 = 270 Kg
                 Volume Wt. = (50 x 40 x 20 x 90 ) / 6000 = 600 Kg
  * 60 parcels: G.Wt = 60 x 15 = 900 Kg
                  Volume Wt. = (75 x 50 x 24 x 60) / 6000 = 900 Kg

  a) FRT charges = 6.60 x (160 + 600 + 900) = EGP 10956
  b) Valuation charge = ( 50000 – $20 x 1330) x 0.005 = USD 117
                                                                              118
6) State three main differences between AWB & B/L

               AWB                                 B/L

          Not negotiable                        Negotiable

   AWB shall be issued after the   B/L shall be issued after the complete
  complete consignment has been     consignment has been boarded onto
             received                              vessel

      Contains FRT charges            Does not contain FRT charges


7) Mention the main restricted dates in L/C:
  - Latest   date of shipping
  - Latest Negotiation date
  - Expiry date
                                                                        119
The Chain from Original Supply to
Final Consumption
                                               INFORMATION FLOW




                 Transfer
                  Transfer                   Transfer
                                              Transfer                  Transfer
                                                                         Transfer                   Transfer
                                                                                                     Transfer


    Supplier                 Manufacturing               Distribution               Retail Outlet               Consumer

                                         CASH FLOW


                                         Supply Chain Optimization



                Highest level of customer responsiveness at lowest cost

                                                                                                                    120

 SAP AG 1998 CPSAP_e February ‘98 /13
     What makes SCM difficult?

1) Global optimization
  * Supply chain is a complex network.
  * Different facilities in the supply chain with different
    interests.
  * The supply chain is a dynamic system.
  * System variation over time
                  "Managing continual change."




                                                              121
      What makes SCM difficult?

2) Managing uncertainty
  Supply chain is designed and operated in uncertain
  environments, such as:

   * Matching supply and demand
   Months before demand is realized, manufacturers have to
   commit themselves to specific production levels.
   These advance commitments imply huge financial and
    supply risks.

                                                             122
     What makes SCM difficult?

* Forecasting does not solve the problem
 It is impossible to predict the precise demand for a specific item, even
with the most advanced forecast techniques.
“ Forecasts are always wrong”.



* Demand is not the only source of uncertainty
 As supply chain becomes larger and more geographically diverse,
natural and man-made disasters can have tremendous impact.


                                                                       123
           Changing the Focus
        Old Way                                   New Way
FOCUS        Grower            Grower                 Grower




            Customer
                       FOCUS   Customer              Customer




            End-User           End-User
                                          FOCUS      End-User
           Global Supply Chains
• Increasing more complex
  –   Language
  –   Culture
  –   Currency fluctuations
  –   Political
  –   Transportation costs    To be minimized

  –   Local capabilities
  –   Finance and economics
  –   Environmental
                                                125
          Transportation rates
 Estimate transportation costs based on:
 Truck Load (TL)
 Less Truck load (LTL)
 Internal & external fleet.
 Commodity class.
*** Transportation cost function is not always linear
    with distance.




                                                        126
 Mileage estimation between
      two cities 1 & 2
 1- Determine the Longitude & latitude for each city.
   * Longitudes west of the meridian have negative value.
   * Latitudes south of the equator have negative value.
2- use the following formula to estimate the straight distance
   between a & b in Miles:




                   Transportation problems.xls
                                                                 127
       Optimal distribution strategy
        D1 D2 D3        Capacity
                                                      D1        D2      D3

  F1    2 3 7               20                 F1     15            5   0    20
                                               F2      0            0   10   10

  F2    1 6 4               10                 F3      0        10      5    15



  F3    5 2 4               15                        15        15      15



        15 15 15
  d                         45
                                                                             125
The given table shows the capacity in tons of three farms (F) of
a certain fresh produce, demand (d) in tons of three distributors
(D), and cost of transportation from each supplier to
manufacturers in US$ per ton.
Determine your transportation plan to minimize total
transportation cost.
                                                                                   128
      Solving transportation problems
          using Excel spreadsheet
• The ABC retailer has sales points in 5 Midwestern cities. They
  order their fresh produce from the XYZ distributor, which has
  warehouses in 6 cities. The shipping costs (in dollars per ton)
  are given below:




                                                               129
• The demand for each sales point and the tons
  available at each warehouse are:


                Tons                         Tons




               Transportation problems.xls


                                                    130
                              Assignment
   • The manager of a distribution             W     X      Y     Z     Capacity
           system between farms
                                                                         (Tons)
     (A, B and C) and distributors             20    40     70    50
                                          A                                 500
(W, X, Y and Z) wishes to minimize
 the global transport costs between a     B    100   60     90    80        1500
       set of origins (farms) and
      destinations (distributors).        C    10    110    30    200       900
  Consider the cost of transportation
    between farms and distributors        D    700   600   1000   500       2900
  are as shown in the table ( $/ unit).


                                              Transportation problems.xls
                                                                              131
      Example 1: Trans-shipping
                                                                ZROX
                                                  0. 62          R1    50 Tons


75 Tons   Farm 1
          ARNOLD
                                   OST                   0. 70
                            0.90
               0.03                                     0. 62
                      CAI                                   HEWESR2    60 Tons
                      a/p                               0. 68
               0.05            1

90 Tons   Farm 2                   HAN
                                   WASH
                                   BURN                   0. 80

                                                  0. 55          R3    40 Tons
                            Capacity to OST: 80000 Kg
                            Capacity to HAN: 90000 Kg
        Example 1: Trans-shipping
Solution:
                                                            ZROX
                                                1. 52       R1     50 Tons

                                                        1. 68
Take 75     Farm 1
            ARNOLD
                                OST
Tons
                 0.03                             1. 52
                        CAI                                 R2
                                                         HEWES     60 Tons
                        a/p                         1. 70
                 0.05

Take 75 Farm 2                  HAN
                               WASH
                               BURN                 1. 70
Tons only
                                               1. 55        R3     40 Tons
                              Transportation problems.xls
           Example 2: Trans-shipping
Farm 1                           ZROX
                                  R1

               CAI
Farm 2         a/p     OST       R2


                       CDG        R3
                                HEWES
 Farm 3        ALY
               a/p
                                  R4
                       HAN
                      WASH
                      BURN
  Farm 4
                                  R5
              Example 2: Trans-shipping
                           CAI                     ALY         Supply (Tons)
       F1                  30                       40               500
       F2                   20                      60               700       Costs are in $/Ton
       F3                   50                      35               900
       F4                   70                      55               600
   Capacity                2000                    1500


                   OST       CDG             HAN          Supply (Tons)

   CAI             900       1000            1000             1700
   ALY             1000          800         950              1000
 Capacity          1900      1000            1000



              R1     R2      R3        R4     R5          Supply (Tons)

 OST        500      400    500        550    470             1900              Transportation
 CDG        900      840    875        690    780             1000              problems.xls
 HAN        600      680    550        700    575             1000
Demand      400      300    700        700    600




                                                                                            135
                         Case Study
An Egyptian grower has three farms F1,F2, and F3 in different locations within Egypt, which can
supply the same kind of fresh produce, but with different capacities. If this product must be exported to
Europe by air, calculate the minimum selling price per Kg of product of plantation cost of $ 655 per
ton, and minimum profit margin is 20% of total costs, given that:

1) Capacities of farms & Egyptian Airports
                           CAI    ALY     Capacity (Tons)
           F1               ?       ?            150
           F2               ?       ?            100                              318 cm
           F3               ?       ?            150
    Available space       300      100
         (Tons)




                                                                   244
2) Available ULD to be used from both airports                                  PMC- ULD
  Thickness of ULD = 2 cm
  Max. height from ground = 162 cm
                                                                                                   136
  Chargeable weight per ULD = 2.2 tons
3) Available packaging unitization in the farms:
The fresh produce packed in cartons of 60 x 40 x 20 cm , 7 Kg each, and palletized on
Euro pallet (120 x 100 x 16 cm). If the one empty carton costs $ 2, and each pallet costs
$ 11.5 , and customs clearance costs $ 50 per ton.

4) Available refrigerated trucks from the farms to airports:

The inner dimensions of the truck’s container are 12.50 x 2.25 x 2 m, and
Max. payload of the truck is 30 tons.

                                               CAI      ALY
          Cost per truck from F1 ( $)          330      250

          Cost per truck from F2 ($)           400      280
          Cost per truck from F3 ($)           310      350




                                                                                     137
5) Air freight rates ( $/ ULD) from Egyptian airports to European destinations:

                     OST     CDG          HAN          Supply (Tons)

           CAI       1980    2200         2200              300

           ALY       1800    2000         2000              100

         Capacity    200      70          130




 6) On-Forwarding cost ($/ton) from European airports to retailers :

 .                    R1    R2      R3           Supply (Tons)

              OST     500   400     500              200
             CDG      900   840     875               70
             HAN      600   680     550              130
            Demand    100   150     150




                        Transportation problems.xls

                                                                         138
INHERENT RISKS IN Agro-Commodities
         SUPPLY CHAIN




                                 139
    Air Transport in cold chain logistics
• Perishable agro-commodities are very sensitive to post harvest facility & care,
  handling,…etc

• Specific requirements applicable to perishable goods; responsibilities of shippers
  and operators; types of perishables; special knowledge, documentation, labeling,
  packaging, claims……...

• Air Freight allows products to be transported quickly over long
  distance.

 • Cold Chain Logistics can make all the difference !


                                                                                140
             Clod Chain Logistics
• What is Export Cold Chain Logistics?
   Is the seamless movement of perishable food:
  * Temperature and /or environment controls.
  * From supplier to customer to consumer.
  * Accounting for all functions.

• 5 habits of highly successful exporters:
  - Know the product
  - Plan the logistics chain
  - Know your partners
  - Get the basis right
  - Know the market                               141
     Farm
                                           Packer /Processor
Grower/ Producer         Transport
                                            and cold stores

                          CAI A/P           Refrigerated truck
        Air            Cargo Terminal
     Transport                                Transport
                           (Cold)

  Refrigerated truck                 Refrigerated truck
                       Distributor
     Transport                          Transport         Retailer Consumer
                        (Client)



       The Export Logistics Cold Chain
               (Air transport)
                                                                        142
         Don’t break the chain !!
• In case of Air transport of perishables, the cold chain is
  broken during one of the following processes:

   1- Unloading from refrigerated truck at the airport cold store.
   2- Moving the ULD on tarmac.
   3- Waiting loading to the aircraft.
   4- Loading the aircraft.
   5- In flight.
   6- Unloading the aircraft at destination.
   7- Moving the ULD to terminal.
   8- Breaking down point in the terminal.

                                                                 143
                                                Quiz
•       Suppose that you are planning for some fresh produce exports during the Q1 of
        2008, based on the historical recorded data of previous periods, as follows:
                                      Q1 2003        Q1 2004          Q1 2005          Q1 2006         Q1 2007
         A/F rate ($ /Kg)                0.85           0.90            1.00             0.95               0.97
          Demand (tons)                  540            600              635              670               650

    Calculate:
    1) The required BUDGET for Q1 2008
    2) Minimum selling rate (delivery to client in Paris) if your profit margin is at least is 20% of
       the cost, given that:
    -    The fresh produce packed in cartons of 60 x 40 x 20 cm , 7 Kg each, and palletized on Euro pallet (120 x
         100 x 16 cm). If the one empty carton costs $ 2, and each pallet costs $ 11.5 , and customs clearance costs $
         50 per ton.
    -     Plantation cost per ton is $ 600.
    -     The permissible height above the unitized Euro pallet is 160 cm

    -     The TL rate of reefer truck (30 tons – 22 pallets) from the farm to CAI a/p is USD 200 / truck.
    -     Forecast for Q1 2008 applying 3-periods Weighted Moving Average method, given that:
                                                                                                                   144
          Ct-1= 0.5 , Ct-2= 0.3 , Ct-3= 0.2
                            Quiz                  ( continued)

 If OST is the a/p of destination, and the shipments have to be sent to some clients in Paris. If
  the shipments will be sent directly to customers from OST, most shipments will be LTL.
  However, if you locate a D.C in Paris, you can ship TL from OST to Paris, and distribute by
  local cartage (LTL) to customers in that area.
 Assume the following:
 OST to customer LTL = $ 100/ ton
  OST to D.C TL = $ 50/ ton
 Inventory-carrying cost in the D.C = $ 10/ton
 D.C to customer LTL = $ 20/ton
Is it more economical to establish the D.C in Paris? If yes what will be the saving during
Q1 2008?




                                                                                               145
Forecasting
     &
Its Techniques
• Why Forecast?
• Common Principles of Forecasting
• Forecasting Steps
• An Overview of forecasting techniques

  This part has been added according to the request of the students !
                                                                        146
• forecasting –
    • act of making predictions about:

    - Occurrence of particular events in the future

    - Value of particular variable at future date

  "If you can look into the seeds of time, and
     say which grain will grow and which will
     not, speak then unto me. "
                          William Shakespeare
                                                      147
                  BUT !
• "It is far better to foresee even without
  certainty than not to foresee at all. "
--Henri Poincare in The Foundations of
  Science, page 129.




                                              148
                     Why Forecast?
1)    Uncontrollable external events
      Example: those that originate with the national economy, governments,
      customers’ demand,…..
2)    Controllable internal events
     such as: marketing or manufacturing decisions within the firm.

Role of Forecasting:
•     Scheduling: Forecasts the level of product’s demand
•     Acquiring resources: Lead time* to acquire raw materials, etc.
•     Determining resource requirements: Long term planning.


*Lead time: it is a time lag between the time “about to happen event” and the
     “actual occurrence of the event”.


                                                                            149
      Forecasting in management

Forecasting is used in various domains
of management, such as:

•   Personnel management
•   Resource management, e.g: logistics operations
•   Finance management
•   Organizational management

                                                     150
 Common Principles of Forecasting
• Forecasts are rarely perfect (Forecast is always wrong)
• Forecasts are more accurate for grouped data than for
  individual items
• Forecast are more accurate for shorter
                                                 I see that you will
  than longer time periods                       get an A this semester.




                                                                     151
              Forecasting Steps
• What needs to be forecast?
    – time horizon required
•   What data is available?
•   Select and test the forecasting model
•   Generate the forecast
•   Monitor forecast accuracy over time :(error)


                                                   152
       An Overview of Forecasting
              Techniques
• Quantitative (time series methods):
   Sufficient quantitative information are available.
         It depends on accumulated data.
       Used to formulate Strategy, long-range plans, etc.

• Qualitative (subjective): Little or no quantitative information are
available, but sufficient qualitative knowledge exists.
  Predicting the impact of gasoline price if and when it
  hits $ 3.00 per gallon.

• Some   combination of the two
 Note: only time series methods will be discussed in details in this course.


                                                                               153
   Subjective Forecasting Methods
            (Retail Sales)
• Sales Force Composites--Getting info from the
  frontlines.

• Customer Surveys--Getting the info straight from the
  horse’s mouth.

• Jury of Executive Opinions--Let the experts meet and
  come to a consensus

• Delphi Method--Survey the experts anonymously
                                                   154
          Sales Force Composites
• Get estimates of future sales from individual sales
  associates

• Add individual estimates to get total for region or
  product

• Possible problems -
  may be in the interest of sales force to bias forecasts
  downward if paid on commission or if quotas are
  involved

                                                            155
             Customer Surveys
• where estimates of future sales come directly
   from customers
 -”do you plan to buy a car in the next month?”
     -”how much are you looking to spend?”
• Possible problem -
  – Generally, this method is more accurate for
    corporate or industrial buyers than for the general
    population….
  – Why?!
  – Members of the general population often do not
    have a clue what ACTUAL purchases they might
                                                      156
    make soon.
     Jury of Executive Opinions
• combine subjective predictions of those
  knowledgeable in field…the list of experts
  depends on the topic.
       e.g., who is going to win the next
      presidential U.S election and why?
  You are the experts.

• Possible problem -
  – strong personalities may dominate group
                                               157
              Delphi Method
•   Select participants.
•   Participants submit individual forecasts.
•   Results are summarized, presented back to
    the participants.
•   They submit new revised forecasts, taking
    into account information from others.
•   Repeat until no significant changes result.


                                                  158
               Delphi Method
• Advantages -
  – Requires little quantitative background
  – Widely used, not time consuming
  – Not dominated by strong personalities
• Disadvantage -
  – May not reach consensus if you have people who
    are firm in their opinions
  – There may be some question as to who is an
    authority in the field
                                                     159
          When Can One Do
       Quantitative Forecasting?
1. Information about the past is available.
2. This information is available in the form of
   numerical data
3. Assumption of continuity: It can be assumed that
   some aspects of the past pattern will continue into
   the future.

•    Continuity assumption is also needed for qualitative
     forecasting
    – Forecasts generated through mathematical modeling

                                                            160
            Quantitative Methods
• Time Series Models:
  – Assumes the future will follow same patterns as the
    past.
• Causal Models:
  – Explores cause-and-effect relationships
  – Uses leading indicators to predict the future




                                                      161
Time Series Data Composition

• Data = historic pattern + random variation
• Historic pattern to be forecasted:
   – Level (long-term average)
   – Trend
   – Seasonality
   – Cycle
• Random Variation cannot be predicted

                                               162
Time Series Patterns




                       163
               Time Series Models
• Naive:
  – The forecast is equal or near to the actual value observed during the
    last period – good for level patterns
• Simple Mean:
  – The average of all available data - good for level patterns
   example: 12,13,14,15
                                                Mean = 54/4 = 13.5
• Central Moving Average:
  – For a number of applications it is advantageous to avoid the shifting
    induced by using only 'past' data. Hence a central moving average
    can be computed, using both 'past' and 'future' data. The 'future' data
    in this case are not predictions, but merely data obtained after the
    time at which the average is to be computed.
  – Each new forecast drops the oldest data point & adds a new
    observation
                                                                              164
    Naive forecasts: NF1 and NF2

• NF1. (“The value tomorrow will be the same as
  today”).
  Example: Number of required trucks today was 20. Forecast NF1 for
  tomorow: 20.
• NF2. (“The value tomorow will be less (greater) by
  …10% ”).
  Example: Average or required trucks this month is 20 trucks. Forecast
  NF2 for the next month: will be 25 trucks (increase of 25%).



                                                                          165
      Time Series Models (continued)
• Weighted Moving Average:                   Ft 1  Ct A t

• All weights must add to 100% or 1.00
  e.g. Ct .5, Ct-1 .3, Ct-2 .2 (weights add to 1.0)

• Allows emphasizing one period over others; above indicates
  more weight on recent data (Ct=.5)

• Differs from the simple moving average that weighs all
  periods equally - more responsive to trends

                                                               166
   Time Series Models (continued)
• Exponential Smoothing:
                                       Ft 1  αA t  1  α Ft
• Most frequently used time series method because of ease
  of use and minimal amount of data needed
• Need just three pieces of data to start:
   – Last period’s forecast (Ft)
   – Last periods actual value (At)
   – Select value of smoothing coefficient    between 0 and 1.0
• If no last period forecast is available, average the last few
  periods or use naive method
          
• Higher values (e.g. .7 or .8) may place too much
  weight on last period’s random variation
                                                                   167
               Time Series Problem
• Determine forecast for periods
                                           Period   Forecasted   Actual
   Jul & Aug
                                            Jan                   300
• 2-period moving average
                                            Feb                   315
• 4-period moving average
                                            Mar                   290
• 2-period weighted moving average
  with t-1 weighted 0.6 and t-2 weighted    Apr                   345
  0.4                                       May                   320
• Exponential smoothing with alpha          Jun        370        360
  =0.2.                                     Jul        370        375
• Actual demand for Jul found to be 375
                                            Aug

   Arab Academy.xls
                                                                          168
                              Example
       4-year Weighted Moving Average forecast
                       (WMA)


      Period                   $$
•      1999                    1,000,000                Discuss !
•      2000                    1,200,000
•      2001                    1,350,000
•      2002                    1,250,000

• Forecast 2003 = .40 (1,250,000) + .30 (1,350,000) +
                 .20 (1,200,000) + .10 (1,000,000)

• Forecast = $1,245,000


                                                               169
                Causal Models

• Often, leading indicators can help to predict changes
  in future demand
• Causal models establish a cause-and-effect
  relationship between independent and dependent
  variables
• A common tool of causal modeling is linear
  regression:

                   Y  a  bx
                                                      170
            Linear Regression
                          • Identify dependent (y) and
                            independent (x) variables
      XY  X  Y 
                          • Solve for the slope of the
b
      X 2  X  X      line
                                  b
                                        XY  n XY

                                       X
                                                       2
                                            2
                                                 nX

                          • Solve for the y intercept
                                  a  Y  bX
                          • Develop your equation for
                            the trend line Y=a     + bX

                                                           171
      Linear Regression Problem: A maker of golf shirts has been
     tracking the relationship between sales and advertising dollars.
       Use linear regression to find out what sales might be if the
         company invested $53,000 in advertising next year.
       Sales $ Adv.$
         (Y)    (X)
                         XY    X^2    Y^2
                                                   b
                                                       XY  nXY
                                                       X  nX2          2
 1       130      32    4160   1024 16900
 2       151      52    7852   2704 22801          28202  447.25147.25
                                              b                               1.15
                                                      9253  447.25
                                                                     2

 3       150      50    7500   2500 22500
                                              a  Y  b X  147.25  1.1547.25
 4       158      55    8690   3025 24964     a  92.9
                                              Y  a  bX  92.9  1.15X
 5      153.85    53
                                              Y  92.9  1.1553  153.85
Tot      589     189   28202 9253 87165
                                                 Investing $ 53000 might
Avg     147.25 47.25                            generate sales of $ 153,085

                                                                              172
          How Good the trend line Fits?
 • Correlation coefficient (r) measures the direction and strength of the linear
   relationship between two variables.
 • It has a value between –1 and +1
 • The closer the r value is to 1.0 the better the regression line fits the data
   points.
                               n  XY    X  Y 
                    r
                         n  X 2    X  * n  Y 2   Y 
                                                 2             2


                                    428202  189589
                    r                                                  0.982
                         4(9253) - (189) * 487,165  589
                                             2                     2


                    R 2  0.982  0.964
                                2




                                         2
•The coefficient of determination, R , measures the percentage of variation in the dependent
variable that is explained by the regression or trend line. It has a value between zero and one,
with a high value indicating a good fit.


                                                                                 2                 173
                Forecast Accuracy
• Error - difference between actual value and predicted value
• Mean Absolute Deviation (MAD)
   –   Average absolute error
• Mean Squared Error (MSE)
   –   Average of squared error
• Mean Absolute Percent Error (MAPE)
   –   Average absolute percent error




                                                                174
    MAD, MSE, and MAPE
                Actual       forecast
  MAD      =
                            n
                                          2
                ( Actual    forecast)
  MSE     =
                            n -1


          Actual     forecas     / Actual)*100
MAPE =
                        t
                       n
                                                    175
                              Example
Period   Actual    Forecast    (A-F)   |A-F|   (A-F)^2   (|A-F|/Actual)*100
  1       217        215         2       2        4                    0.92
  2       213        216         -3      3        9                    1.41
  3       216        215         1       1        1                    0.46
  4       210        214         -4      4        16                   1.90
  5       213        211         2       2        4                    0.94
  6       219        214         5       5        25                   2.28
  7       216        217         -1      1        1                    0.46
  8       212        216         -4      4        16                   1.89
                                 -2     22        76                  10.26

 MAD=       2.75
 MSE=      10.86
MAPE=       1.28


                                                                     176
Selecting the Right Forecasting Model
• The amount & type of available data
  – Some methods require more data than others
• Degree of accuracy required
  – Increasing accuracy means more data
• Length of forecast horizon
  – Different models for 3 month vs. 10 years



                                                 177
                                      Exercise
•    Write down the common principles of forecasting?

•    List the different types of forecasting techniques.

•    What is the main differences between “ Weighted
     Moving Average” than “ exponential Smoothing”
     methods?
                                                            Month   Actual ($)
•    The given table shows the actual values of sales ($)    Jan    300,000
     for some product during the period from Jan till
     Sep 2007.                                              Feb     315,000

    Forecast the value of sales ($) in Oct 2007 applying    Mar     290,000
     3-periods Weighted Moving Average method,              Apr     345,000
     given that:                                            May     320,000
     Ct-1= 0.5 , Ct-2= 0.3 , Ct-3= 0.2
                                                             Jun    360,000
                                                             Jul    375,000
                                                            Aug     300,000
                                                            Sep     325,000

                                                                                 178

				
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