Create a TCO for the following shipment. Use the Spreadsheet template you are given for the TCO.

A number of items are bought from a supplier. The transaction fees for the payment were $1,250. The Incoterm is FOB (Port of Loading in China) Incoterms 2010. The supplier will need to use a 20' container and the freight rate for the container is $2,525, the Fuel Surcharge is $350 if the voyage (port to port) is completed in less than 60 days or $400 if competed in over 60 days. The Assessorial charges for the shipment are $175.

The supplier will have to have an inspection done on the goods and provide a Certificate of Inspection for the goods before they ship. This will cost $120 and will take 5 days. The goods are ready for packing when the order is received, and the packing for protection while moving will take 4 days and costs $310. The Forwarder that the Customer appoints estimates the time to make the booking and have the container filled by the Supplier will be 8 days, and cost $100. The delivery to the export port will be 1 day and $75, while the export clearance will be $55. Delivery takes place 2 days before the vessel leaves. There is a THC of $250 for the export port, and $495 for the import port. It is estimated the port THC time to unload until leaving the port will be 3 days. A Fumigation fee is payable as well as a Phytosanitary certificate which costs $300 and $125 respectively and take 2 days and 1 day respectively.

The ship voyage will take 35 days, and the clearance into the USA will be done in 2 days, at a cost of $125 for the documentation and service, and duties will be levied at 4.75% on the purchase price of the goods inclusive of financial transactions. The transport to the final destination will cost $350 and takes 3 days. The goods were purchased at a cost of $750,000, payable on delivery at the port of export. Insurance for the marine movement (port to port) is carried by the buyer at 0.05% of the value of the goods inclusive of financial fees to purchase. While all this is in play, it become evident that a delay is going to occur and the ship will only arrive 5 days later than expected.

Questions:

1)Create a TCO for this scenario by completing the TCO Spreadsheet Supplied. It is required that you insert formulas into the sheet so this calculates the TCO correctly and allows changes to the inputs. Create a summary of the charges below the main calculation as is shown in the sheet:

a)Purchase Price

b)Logistics: Preparation for Movement charges

c)Logistics: Booking and Freight Preparation

d)Logistics: Export Fees

e)Logistics: Freight Charges

f)Logistics: Import Customs Charges

g)Taxes and Fees

h)Transport to Destination

i)Total Costs

j)Economic Charges

k)Total Cost of Ownership

2)If the value of the goods is only $500,000, what is the TCO?

3)If the company has a program of Self-Insurance, should the insurance charge be removed from this calculation?

4)What is the number of days for order replenishing which the end customer should be planning in his re-ordering process?

5)If the import was into Russia, where the customs cycle time is 24 days, then in which section of the TCO would be the primary impact and what is the TCO?

6)Compare the impact on inventory and ordering in less than 100 words between International Sourcing as shown in this TCO and the purchase within a country such as the USA where goods can be delivered within 6 days of an order.

Use the following in an Excel format:

TCO Calculations

Potential Charges

Units of Measure

Charge

Time

Purchase Price

Purchase Price at Suppliers Facility

Transaction fees to purchase

Logistics: Preparation for Movement Charges

Preparation for Movement

Record or Tally

Inspection Survey

Pick, Prepare and Protect

Crating or outer protection

Labelling and Plackarding

Logsitics: Booking and Freight Preparation

Fee for booking

Collection and Delivery of empty container

Inspection of container / fumigation

Certification / Phytosanitary Certificate

Insurance charge

Logistics: Export Fees

Clearance fee to Customs / Commerce

Warehouse fee

Stuffing of container / Breakbulk packing

Transport to port

Receipt at port

Terminal Handling Charge (THC) and time for handling

Logistics: Freight Charges

Freight charge

Fuel Charge

Assessorial fees

Receiving Country

Terminal fee

Storage

Logistics: Import Customs Charges

Customs

Customs Duties

Customs Broker Fee

Taxes and Fees

Taxes

GST / VAT

Social

Special to imports - surcharge

Transport to Destination

Transport to Destination

Final Receipt and POD.

Total Costs

-

-

Economic Charges

Working Capital

Increased time taken for delivery (days)

Days

WACC

15%

%

Inventory Increase due to lead time and uncertainty

Currency forward buy or risk

Risk due to number of entities involved (coordination and quality)

Total Cost of Ownership

Purchase Price

Logistics: Preparation for Movement Charges

Logsitics: Booking and Freight Preparation

Logistics: Export Fees

Logistics: Freight Charges

Logistics: Import Customs Charges

Taxes and Fees

Transport to Destination

Total Costs

-

Economic Charges

Total Cost of Ownership

-

Late Delivery