Logistics Problem

Hazardous products are imported by GAIL in the following manner:

Product Annual Capacity(1 Ship Size Manufacturer

Consump.(MT) cylinder)
MT
CAB 24.48 1.5 6 cylinders USA
CAB -2 12 1.5 6 cylinders USA
DEAC 12 0.8 6 cylinders Germany
DEAE 12 1 5 cylinders Germany

The cylinders are owned by the manufacturer so they must be transported

back in a specified time limit otherwise demurrage will be charged.

Demurrage free period – 180 days

Demurrage charge per day per cylinder – US $ 10

An example of the present situation at GAIL:

1) CAB-2 is transported from USA to Mumbai on 1/1/2010.
2) Number of cylinders is 4
3) It reaches Mumbai port on 31/1/2010.
4) Custom clearance takes 7 days so it becomes 7/2/2010
5) It reaches Gail plant at Pata on 14/2/2010
6) The buffer stock is maintained for 1.5 month period to avoid plant
shut down. The imported cylinder can not be used until the buffer
stock gets over.
7) So first cylinder is used on 1/4/2010. It lasts till 1/5/2010.
8) Likewise all imported cylinders will finish on 1/8/2010
9) Now they are transported back to Mumbai port and it takes 7 days.
Custom clearance takes place for export and it takes 7 days again.
Now the date becomes 15/8/2010.
10) It takes 1 month again for empty cylinders to reach back USA and
the date becomes 15/9/2010.
Time taken for total transportation i.e. from 1/1/2010 to 15/9/2010 is
260 Days.

So Demurrage will be charged for (260-180) days i.e. 80 days.

Demurrage = 80 * 10* 4 = US $ 3200

Measures already taken by GAIL include:

• Importing small lot sizes.
• Importing 2 cylinders each for CAB-2 and DEAC which reduces
demurrage.

“ How to reduce the Demurrage?”