The style A fixtures that can be loaded into an intermodal 40 foot ocean container is calculated using the size of one style A package dimensions. The standard volume of the 40 foot container is (40 ft* 8 ft* 8 ft) = 2560 cubed feet. The volume of one style A package is (12” * 12” *12”) = 1728 cubed inches, which is equivalent to one cubed foot. Therefore, 2560 style A fixtures can be loaded onto a 40 foot intermodal container.
The style B fixtures that can be loaded into an intermodal 40-foot ocean container is calculated using the size of one-style B package dimensions. The standard volume of the 40 foot container is (40 ft* 8 ft* 8 ft) = 2560 cubed feet. The volume of one style A package is (12” * 12” *48”) = 6912 cubed inches, which is equivalent to 4 cubed feet. Therefore (2560/4) = 640 style B fixtures can be loaded onto a 40-foot intermodal container.
Total cost to fill the style A light fixtures order is broken down below:
For each Style A fixture, the total cost would be $ 4.60, therefore for the full container, the cost would be ($4.60 * 2560) = $11,776. This however is exclusive of Shipping.
Total cost to fill the style B light fixtures order is broken down below:
For each Style A fixture, the total cost would be $ 4.60, therefore for the full container, the cost would be ($ 7 * 640) = $ 4,480. This however is exclusive of Shipping.
The five basic transportation modes are rail, road, water, air and pipeline. In the case of the LUML Company and the Hong Kong building project, the simplest and probably cheaper option is water transport. This means shipping is considered as the best option.
This situation may be considered as intermodal transportation because in order for the shipment to get to the port of Miami, the lighting fixtures need to be moved from the location of manufacturing via rail or road.
The main considerations in selecting the mode of transportation depend on time and cost. Selecting the carrier also depends on various factors such as their terms and conditions of shipment, the cost of the entire shipping and the hidden charges.
The terms of sale code that is likely to be assigned in this case would have the following conditions:
- Cost, insurance and freight
- Duty payment
If LUML wins this contract, a few trade specialists may be used to make this shipment successful. These specialists may include a freight manager to help track and oversee the whole shipment process, insurance agent, who will follow up on the insurance issues that may pop up and a lawyer, who will ensure the terms and conditions of the contract are upheld.
If the exchange rate change to HK$ 7.5000 from HK$7.7544, the likely impact on the purchaser is that for the same amount of money purposed to buy the light fixtures, the number of light fixtures will be less, meaning the purchaser will be on the losing end. On the other side, LUML will indirectly gain by making the same amount of money to make lees products.
My recommendation is that LUML should pursue this contract, as it will be the first international transaction, which may open up to many more international business opportunities. This contract will also bring in a margin profit, which may benefit the company. This order will also offer a platform for learning and improving international contracts and deals.
The main assumption made is that there are no losses or damages during shipping, which would affect the contract negatively and increase the company’s losses.
Grath, Anders. The Handbook of International Trade and Finance. London: Kogan Page, 2012. Internet resource.
Lucas, David, and Hill Dickinson. Shipping & International Law. Thomson Reuters, 2011. Print.