Selecting the right Incoterm to minimize risk,
reduce cost and accelerate supply chain
collaboration
Rob den Heijer
23th of May 2012
Istanbul
Table of content
• Introduction
• Collaboration versus INCO terms
• Overview of Incoterms 2012
• A case of using incorrect INCO terms
• Reduction of risks in the supply chain
• Saving costs
• Which INCO terms DSP is using to accelerate Collaboration
• Practical advices
Page 1
Introduction
• 53 years old, married 3 sons
• Logistic experience:
– 10 year experience sailing on a barge
– 3 years head of logistic department
– 5 years Logistic Manager Europe/America’s
– 2 years Global Demand & Supply Chain Manager Finished Dosages
• Expertise in Incoterms since 1995
• Hobby: hiking, training for the “Vierdaagse van Nijmegen”
Page 2
Collaboration versus INCO terms
Do both parties have the same definitions of Incoterms?
• DSP’s definition of Ex Works
Do both parties understand them?
• DSP orders green but mean blue
Choosing right Incoterm will clearly define:
• Who is arranging what and who is paying for it, this helps DSP as well as UTi
Well defined transition point of risks that is documented:
• In case of damage we have paper proof who is responsible for damage
Knowing who is responsible gives insight:
• As being responsible seller/buyer can mitigate the risk by getting an
insurance
Page 3
Overview of Incoterms 2010
Page 4
A case of using incorrect INCO terms
In 2009 a customer Service Agent of DSP used FCA Sellers Premises as Incoterm
for the sale where a LC was used.
Page 5
Reduction of risks in the supply chain
When using a container, no FOB, CFR or CIF!
Better to use FCA or CIP instead!
Page 6
Saving costs
The buyer will always pay all costs involved in transport +
Insurance, either by arranging it himself or by a higher
selling price.
Goal should be to avoid double payment for some actions:
• THC destination port
• Loading in departing port
• Using HAWB versus MAWB
Last but not least, who is
responsible for which part
of the total transport to
either accept this or get
coverage for it
Page 7
Which INCO terms DSP is using to
accelerate Collaboration
DSP has taken into account the following criteria:
1. Best for collaboration with LSP due to well defined and
documented transition point of risks
2. OWC reduction
3. Control over transport due to LC
Based on these qualifications the following golden
rule has been implemented within DSP in 2010:
Use CIP by default ALWAYS,
unless customer arranges
main transport. Then use FCA
Page 8
Practical advices
• When EXW or FCA sellers premises is used: do not sign CMR or
other transport document, because you will become part of
transport agreement
• In case of FOB: demand a copy of B/L and make sure you are not
mentioned as shipper, otherwise you become liable for transport
• If your company has an “umbrella insurance” then incoming flows
are likely to fall under this agreement. Choosing CPT as Incoterm
could avoid paying double insurance premium
Page 9