RECOMMENDATION TO IMPROVE CARGO RETURN PROCESS AT GE HAIPHONG

MINISTRY TRANSPORTATION OF MINISTRY OF EDUCATION & TRAINING VIETNAM MARITIME UNIVERSITY STUDENT NAME: TA THI HUONG THAO DISSERTATION GLOBAL STUDIES AND MARITIME AFFAIRS RECOMMENDATION TO PROCESS AT GE HAIPHONG IMPROVE CARGO RETURN HAI PHONG – 2015 MINISTRY OF TRANSPORTATION MINISTRY OF EDUCATION & TRAINING VIETNAM MARITIME UNIVERSITY STUDENT NAME: TA THI HUONG THAOTA THI HUONG THAO CLASS: GMA02 DISSERTATION GLOBAL STUDIES AND MARITIME AFFAIRS RECOMMENDATION TO IMPROVE CARGO RETURN PROCESS AT GE HAIPHONG Supervisor: Đoàn Trọng Hiếu Division: Faculty: HAI PHONG 2015 PREFACE As one of the most popular trend nowadays is globalization, economic integration has increasing rapidly However the transaction among nations/companies is not only buying and selling which known as forward logistic During the process, there will be defective items shipped to importer In this case, it is necessary to return defect cargo back to vendor Although the defect cargoes only account for small percentage of all imported goods they play an important role in manufacturing process Understand the importance of returning cargo, this research not only provide an overview about GE Haiphong process to return cargo to vendor but also giving recommendation to improve the process I declare that this report is my own unaided work It has not been submitted before If violated, I am solely responsible for and bear the punishments of the Institution and University Student Name and Signature TABLE OF CONTENTS Table of Contents List of Figures i INTRODUCTION .1 The important of the topic Research Structures Research Object Research Scope Research Method Research Results .2 Chapter 1: LITERATURE REVIEW 1.1 Exporting activities 1.1.1 Definition 1.1.2 Responsibility of different parties in exporting transaction 1.1.3 Documents in an exporting transaction 1.1.4 Customs regulations 1.2 Returning cargo .7 1.2.1 Definition (Handling In & Outbound Product Returns)In order to get a Return Material Authorization (RMA) issued, buyer need to gather and submit a large amount of documents, such as the original PO number, packing slip number, invoice number, items, quantities, reason for the return and contact information Vendors often require documents before issuing an RMA number In the meantime, buyer is still responsible for the inventory and must account for both the quantity and value of the defective goods After the vendor has approved the request and issued an RMA number, the RTV transaction is shipped to the vendor .8 1.2.2 The reason to return cargo 1.2.3 The procedure to return cargo .8 About the tax regulation on return cargo, the customs authority shall decide not to collect tax on goods that are returned or exported to a third country or a free trade zone if the declarant submit a sufficient application for tax cancellation when following the procedure for returning goods, exporting goods to a third country or a free trade zones as guided in Article 117 of Circular 128/2013/TT-BTC, and the customs authority has ample evidence that the exported goods are the goods previously exporter .9 Chapter 2: EVALUATION OF RETURN CARGO PROCESS AT GENERAL ELECTRICS HAIPHONG 10 2.1 Company Overview .10 2.1.1 General Information of GE Haiphong 10 2.1.2 Organization .11 2.1.3 Personel 15 The total employee of Brach of GE Vietnam limited in Haiphong is 200483 Human resource plays an important role in company’s success GE Haiphong is famous for its solid human capital strategy HR manages to things to reach out to employee, tries to give them strong leadership support Working for GEEHP, besides the competitive compensation & benefit policy, excellent working conditions, employees will have great opportunity in professional trainings and expand career growth globally by joining Technical excellence, leadership, and soft skills trainings; operational management leadership program (OMLP); human resource leadership program (HRLP); financial management program (FMP)….16 2.1.4 GE culture 16 2.2 Evaluation of Return Cargo Process at GE Haiphong 16 2.2.1 Reasons to return cargo and related parties in process .16 2.2.2 The general return cargo process 18 - In the 4th, October, 2015, Bien Dong Mariner left Dinh Vu port to carry cargo to USA 28 2.2.4 Issues that can arise during process 28 2.2.5 Strengths and drawbacks of return cargo process .29 Chapter 3: Recommendations to return cargo process .33 3.1 Supportive GE staff .33 3.3 Updating workflow: .33 3.4 Systemized process: 36 CONCLUSIONS .41 Bibliography 42 Recommendations to improve cargo return process at Branch of GE Vietnam limited in Haiphong LIST OF FIGURES Figure 1-Organization chart of GE Haiphong .11 Figure 2:Tracking files of return cargo 21 Figure 314: The current process to return cargo to vendor 39 Figure 145: The systemized process to return cargo to vendor .40 Ta Thi Huong Thao GMA02 Page i Recommendations to improve cargo return process at Branch of GE Vietnam limited in Haiphong Table of Contents List of Figures i INTRODUCTION 1 The important of the topic Research Structures .1 Research Object Research Scope Research Method Research Results Chapter 1: LITERATURE REVIEW 1.1 Exporting activities 1.1.1 Definition 1.1.2 Responsibility of different parties in exporting transaction 1.1.3 Documents in an exporting transaction 1.1.4 Customs regulations 1.2 Returning cargo 1.2.1 Definition (Handling In & Outbound Product Returns)In order to get a Return Material Authorization (RMA) issued, buyer need to gather and submit a large amount of documents, such as the original PO number, packing slip number, invoice number, items, quantities, reason for the return and contact information Vendors often require documents before issuing an RMA number In the meantime, buyer is still responsible for the inventory and must account for both the quantity and value of the defective goods After the vendor has approved the request and issued an RMA number, the RTV transaction is shipped to the vendor 1.2.2 The reason to return cargo 1.2.3 The procedure to return cargo .8 Ta Thi Huong Thao GMA02 Page ii Recommendations to improve cargo return process at Branch of GE Vietnam limited in Haiphong About the tax regulation on return cargo, the customs authority shall decide not to collect tax on goods that are returned or exported to a third country or a free trade zone if the declarant submit a sufficient application for tax cancellation when following the procedure for returning goods, exporting goods to a third country or a free trade zones as guided in Article 117 of Circular 128/2013/TTBTC, and the customs authority has ample evidence that the exported goods are the goods previously exporter Chapter 2: EVALUATION OF RETURN CARGO PROCESS AT GENERAL ELECTRICS HAIPHONG 10 2.1 Company Overview 10 2.1.1 General Information of GE Haiphong 10 2.1.2 Organization .11 2.1.3 Personel 15 The total employee of Brach of GE Vietnam limited in Haiphong is 200483 Human resource plays an important role in company’s success GE Haiphong is famous for its solid human capital strategy HR manages to things to reach out to employee, tries to give them strong leadership support Working for GEEHP, besides the competitive compensation & benefit policy, excellent working conditions, employees will have great opportunity in professional trainings and expand career growth globally by joining Technical excellence, leadership, and soft skills trainings; operational management leadership program (OMLP); human resource leadership program (HRLP); financial management program (FMP)… 16 2.1.4 GE culture 16 2.2 Evaluation of Return Cargo Process at GE Haiphong 16 2.2.1 Reasons to return cargo and related parties in process .16 2.2.2 The general return cargo process 18 - In the 4th, October, 2015, Bien Dong Mariner left Dinh Vu port to carry cargo to USA .28 2.2.4 Issues that can arise during process 28 2.2.5 Strengths and drawbacks of return cargo process .29 Chapter 3: Recommendations to return cargo process 33 Ta Thi Huong Thao GMA02 Page iii Recommendations to improve cargo return process at Branch of GE Vietnam limited in Haiphong 3.1 Supportive GE staff 33 3.3 Updating workflow: 33 3.4 Systemized process: 36 CONCLUSIONS 41 Bibliography 42 Ta Thi Huong Thao GMA02 Page iv - GE Haiphong’s forwarder (Geodis) can react not fast enough to deal with issue For example, in case shipping cargo back GE Pacific through Fedex, Vietnam custom did not agree to ship the cargo due to overdue CDs At that time Geodis need to have quick action However they are very passive waiting for logistic staff to deal with the case - Vendor’s forwarder: Forwarder like OCS, DHL, UPS is only transporter Some of the newly set up forwarders like OCS not have deep understanding about custom So they can barely give support when there is issue 2.2.5 Strengths and drawbacks of return cargo process A Strengths of return cargo process - Because the process relates different parties (vendor, GE Haiphong, forwarder…) the information can be check at least twice Information like weight or NCR number can be noted incorrectly therefore it is very risky Within Vietnam territory, changes can be made to fix the issue However if the cargo reachs another country and the issue arises, it would be complicated because it relates the law of other nations and takes even months to solve In conclusion double-check information is crucial The process has the participation of different parties, departments in and out GE Each party specializes different job so they have deep understand the task or any issue in the process For example if there is problem at custom, Geodis will be responsible to deal with the case They are trained with custom courses so they have better knowledge of this subject than buyer, logistic, warehouse The working style of both GE Haiphong’s staff and forwarder is very professional They manage to send the defect cargo within allowed time The shipment usually returned within weeks (depend on the location of vendor) It is important to ship return cargo back to supplier in two-week amount of time After GE ship defect items, vendor then usually fix the item and ship back to GE to continue producing Unlike other small business, GE Haiphong is a big company with detail process Every actions all follow processes Therefore, departments not let each other cut steps or something in another way This can reduce the risk to make mistakes B The drawbacks of return cargo process Ta Thi Huong Thao GMA02 Page 29  Too many forwarders: This process uses different Forwarders in each shipment can be a drawback Each forwarder has its own requirements For example: Fedex requires a set of documents with: agreements, 1manual bill, invoice and packing list (3 copies) Meanwhile, DHL ask GE Haiphong to online booking and then print the bill with invoice and packing list Therefore the person in charge of the return shipment can sometimes make mistakes when preparing documents  Repeated information: The information can repeat itself lead to wasting a big amount of time A logistic staff need average 3-4 hour in a return cargo case Within one year there are about 250- 350 return shipments This creates additional jobs and time for LOG Each department has their own tracking list (buyer, logistic and warehouse), therefore it takes time for other functions to check the information on different sheets For example: + Tracking list of Buyer: Figure 8: Tracking list of buyers + Tracking list of LOG: Ta Thi Huong Thao GMA02 Page 30 Figure 9:Tracking list of LOG  Information missing: Data can be lost due to buyer/logistic/warehouse staff might not record correctly  Inflexible workflow: Because having detailed process, the working style becomes less flexible In many urgent cases, some steps can be skipped However staffs keen on following every steps of process For example, when defective cargoes need to be shipped urgently because factory ask for replacement to continue manufacturing, LOG staff refused to prepare documents to ship cargo without confirmation from vendor to pay 75$ for custom In fact, buyer can get this confirmation when the cargo is being shipped  Not updated workflow: + The general workflow only applies for returning cargo by air with forwarder like DHL, Fedex However in fact, there are shipments (more than 70 kg), transporting by ship is more preferable When returning cargo by sea, GE staffs have no work instruction which leads to confusion or mistakes in process especially for new staffs + The process to open Custom Declaration of Geodis Wilson also lack of step After Geodis Wilson opens draft Custom Declaration and send to LOG to check The process only mentions the next step where Custom check cargo and Geodis has final Custom Declaration The case LOG checks CDs and finds out incorrect information is not mentioned Ta Thi Huong Thao GMA02 Page 31 + In the existing process, the workflow ends when cargo shipped from warehouse However, in reality after that two parties (GE and vendors) have to work together for payment Ta Thi Huong Thao GMA02 Page 32 CHAPTER 3: RECOMMENDATIONS TO RETURN CARGO PROCESS 3.1 Supportive GE staff  Recommendation: Within GE Haiphong, staffs from different department should be more supportive toward each other It is likely that each department works independently and reluctant to help other staffs from different departments  Benefit: If staffs from different departments give more support to each other, the job will go more smoothly It also builds up a friendly working environment within GE Haiphong which motivates employees to work 3.2 Using one forwarder:  Recommendation: To address the problem of using many forwarders, GE Haiphong should work with vendor to agree to use only one forwarder DHL is the most outstanding choice because of the following reason: + Their working style is professional They are willing to support their customer + Unlike other forwarders, GE Haiphong registers DHL account which means GE is a customer of DHL even though it use other companies’ account to ship the cargo + DHL Supply Chain (DSC) is the world's largest 3PL and contract logistician They have their own flight so it would be easy save time to get information to open CDs Meanwhile with other forwarders, logistic staff needs to ask for information about flight, warehouse… + DHL's scope allows its customers to more easily adjust vendor supply chains  Benefit: It is easier to work with only one forwarder Logistic staff is not likely to make mistakes with paper work GE Haiphong also has good relationship with DHL Haiphong Therefore, DHL is willing to give support or even help to make changes in documents 3.3 Updating workflow:  Recommendations:: + In the existing process, the workflow ends when cargo shipped from warehouse However, in reality after that vendors need to make payments Therefore the process should include payment step  Custom fee: With the term Exwork, vendors will pay GE Haiphong 75$ to the custom In case agreement signed with the term FCA or DDP, the custom fee will be GE Haiphong’s responsibility  Transportation fee: With the term Exwork and FCA, GE Haiphong use vendor’s account to pay or vendor remote booking With term DDP, GE Haiphong uses its account to pay forwarder to ship the cargo Ta Thi Huong Thao GMA02 Page 33  Cargo payment: After defect items sent to vendors, vendors will repair these items and send back GE Therefor no payment will be made + The general workflow needs to update the case returning cargo by sea To return cargo by ship, staff should follow another workflow as following: Figure 10: The workflow of return cargo process by sea With the shipment more than 70 kg, GE Haiphong prefers shipping the cargo by ship because the freight will be cheaper than by air In this case, the first two steps (sending request to return cargo; updating information, create manual invoice and sending documents to forwarder) are the same with shipping the cargo by air.After Ta Thi Huong Thao GMA02 Page 34 preparing a set of documents (correspondence, imported PO, non-commercial invoice and packing list, agreement), LOG staff sends these documents to vendor forwarder.Forwarder in this case can be Geodis or another forwarder depending on vendor’s decision The next step (step 3) is booking carrier and open custom declaration Forwarder contacts with shipping company to book vessel providing the following information: consignee’s address and name, the weight and dimension of cargo, cargo type and the ready time of cargo After receiving these information, shipping company then issues an booking note and send it to forwarder In this booking note, forwarder usually pays attention to the name of vessel, warehouse name, the deadline for cargo to be at that warehouse Return cargo by sea is usually LCL (less container loaded) Therefore cargo should be moved from factory’s warehouse to another warehouse to load on a container with cargoes of shipper In this step, forwarder also has to open Custom declaration At the first place, forwarder accesses custom system and request open CDs by filling information The system than informs the lane of CDs which is lane (all return cargo is lane 3) Forwarder then sends draft custom declaration to LOG staff to check After receiving confirmation from LOG staff, forwarder prepare a set of documents including draft CDs, agreement, non-commercial invoice and packing list, correspondence, imported PO With this set of documents, forwarder and custom staff come to GE’s warehouse to check the cargo Having the verification of custom, forwarder can get CDs final version The last step of the process is with this CDs, forwarder transport the cargoes from GE’s warehouse to the warehouse addressed in booking note of shipping company and ship the cargo After arriving LCL warehouse, cargoes are then loaded in container After container loaded on board of the ship, forwarder issues an Bill of lading (House Bill) and send it to GE Haiphong There are differences between House bill and Master Bill A House Bill of Lading is a transportation contract which takes place between a customer and a forwarder This legal document is issued by a freight or cargo forwarder to each exporter, for goods to be shipped or transported in a group The second type of bill of lading the master bill of lading, or MBL Just like a house bill of lading, MBL is a transportation contract between a customer and a forwarder However, unlike the HBL, the master bill of lading is issued by the shipping company or carriers When cargo reachs the port of consignee’s country, forwader continue to carry out custom and ship cargo to consignee’s warehouse Ta Thi Huong Thao GMA02 Page 35 + The process for Geodis Wilson to open Custom Declaration also needs to update the case when LOG staff checks and finds out incorrect information in draft Custom Declaration After finding the mistake and informing Geodis Wilson, Geodis Wilson then open another draft Custom Declaration and resend LOG These steps keep repeating until no mistakes are found.The new process to open Custom Declaration is following: Check documents OK NOT OK Email back to LOG staff to fix the issue Open draft custom declaration and send LOG OK Custom check cargo NOT OK Reopen CDs and send back to LOG Geodis send CDs to LOG staff Figure 11: The updated workflow to open CD  Benefits: Updated workflow helps GE staff to have more clear guidance to work avoiding confusion during process and saves time For example, when returning cargo by ship, warehouse staff can aware in advance that cargo will be transport from GE warehouse to another warehouse after cargo verification Therefore, warehouse staff can arrange cargo in the position near/neat to the gate When forwarder comes to pick up cargo, warehouse staff will not have to take time to find the cargo 3.4 Systemized process:  Recommendation: For the problem of repeating information, a solution is using digitize returning invoice and uploading report into Oracle (A system of GE Haiphong to keep track with all the shipments) The following step will be taken place: Ta Thi Huong Thao GMA02 Page 36 Figure 12: The suggested process to return cargo to vendor Step 1:Request for shipping: Quality control (QC) finds out the defect items and issues an NCR number and the name of vendor QC will put this NCR number into system The system will receive data and send NCR number and the name of supplier to Person in charge (PIC) in Buyer This Buyer then will contact with vendor and make agreement After that, Buyer will input other information (Cargo information, forwarder, ship to address, payment term, mode, …) and send agreement to logistic staff Ta Thi Huong Thao GMA02 Page 37 Step 2:Warehouse pack cargo and input information in the system The system will send a request email to warehouse Warehouse will pack the shipment and input dimension data on serve Step 3: System generates invoice and send automatically to LOG’s email From all the data inputed, logistic staff will run an automatic noncommercial invoice and packing list Step 4:Open CDs and ship out  Logistic staff will send agreement, non-commercial and packing list to Geodis Wilson to carry out custom declaration  Contact Forwarder and ship the cargo  Contact forwarder and ship the cargo All the information will be inputed in a system with the display as following: Figure 13: Display of the new system  Ta Thi Huong Thao GMA02 Page 38  Benefits: With only one input, different departments are able to re-use without repeating the information Figure 314: The current process to return cargo to vendor Ta Thi Huong Thao GMA02 Page 39 Figure 145: The systemized process to return cargo to vendor For example compare to the existing process, buyer has to send NCR number to Warehouse to get packing information and send another email to logistic staff to request return cargo Meanwhile, with the new process, when buyer input NCR number, logistic staff and warehouse staff can use this number at the same time - This new process can save time for logistic department Instead of manual invoice which takes time, logistic staff can get an invoice from system bases on all the input data In detail, the average time of making an invoice is from 10-20 minutes depends on the amount of input information Whereas the digitize digitized returning invoice only takes one-click amount of time Ta Thi Huong Thao GMA02 Page 40 CONCLUSIONS Returning defect cargo can be underestimated However, sending cargo back to vendor plays necessary role in production Without cargo sent back to suppliers, there will not be replacements to continue manufacturing The normal return process can take about weeks for the cargo to reach vendor’s factory Moreover, this process involves different parties and takes time This dissertation suggests different recommendations to improve the process The current workflow is not detail enough and lack of steps The first recommendation is using only DHL as forwarder to transport the cargo The current workflow is not detail enough and lack of steps The next suggestion is updating and improving the current workflow The third recommendation is using a digital system to input the data and get non-commercial invoice and packing list from system This new method only takes eight to nine days With the amount of time saved, GE’s employees can complete other tasks This simplification is very meaningful in increase the productivity of GE Haiphong Ta Thi Huong Thao GMA02 Page 41 BIBLIOGRAPHY (2015, NOV 15) Retrieved NOV 2015, from http://vietnamembassy-usa.org/ A Basic Guide to Exporting (1998) Finance, T M (n.d.) Retrieved Oct 2015, from http://thuvienphapluat.vn/ Handling In & Outbound Product Returns (n.d.) Retrieved from http://www.ndsapps.com/ Ta Thi Huong Thao GMA02 Page 42 APPENDICE Non-commercial invoice and packing list Return and replacement request Customs clearance Correspondence DHL’s shipment receipt Ta Thi Huong Thao GMA02 Page 43 ... current process to return cargo to vendor 39 Figure 145: The systemized process to return cargo to vendor .40 Ta Thi Huong Thao GMA02 Page i Recommendations to improve cargo return process at. .. reason to return cargo 1.2.3 The procedure to return cargo .8 Ta Thi Huong Thao GMA02 Page ii Recommendations to improve cargo return process at Branch of GE Vietnam limited in Haiphong. .. important of returning defective cargoes to vendors; I would like to choose the topic: Recommendation to Return Cargo Process at Branch of GE Vietnam limited in Haiphong to write in this dissertation