Comparison analysis of direct shipment and indirect shipment from China to Malaysia : a case of plastic products

Abstract

This study aims to compare two alternatives for a Thai retail company’s process of shipping plastic product sourced from China to a subsidiary in Malaysia. The first alternative, currently in use, involves shipping the products for Malaysia subsidiary from Chinese suppliers along with those for Thailand in Full Container Load term to Thailand before being subsequently delivered to Malaysia. The second alternative is to directly ship the products from China in Less than Container Load term to Malaysia. The comparison focuses on total shipping cost, which includes sea freight, in-land transport cost, terminal handling charges, container freight station charges, warehousing fee, bill of lading fee, insurance, custom clearance, inspection cost, safety stock cost, taxes, and duties. Moreover, the comparison also considers the difference in total shipping time by analyzing the variance in the required safety stock to be kept by the Malaysian subsidiary. The analysis results reveal that the overall annual total cost of LCL Direct Shipment is 56.93% lower compared to FCL Indirect Shipment. Specifically, Logistics Costs which includes sea freight, in-land transport cost, terminal handling charges, container freight station charges, warehousing fee, bill of lading fee, insurance, custom clearance, inspection cost, and safety stock cost is 25.27% lower, and Duties and Taxes Costs decrease by 72.68%. The potential cost reduction will lead to higher profit margin for the Malaysian subsidiary. Alternatively, it will enable the subsidiary to substantially lower the products’ retail price thereby significantly enhancing their competitiveness in the market.