ippc presentation 8 16-14 (final4-jre) (3)

International

Public

Procurement

Conference

(IPPC 2014)

***

Dublin,

Ireland

RENALYN C. ESTILLER

Joseph R. Estiller

Dr. Alex C. Gonzaga

Dr. Zeny Lontoc

De La Salle University-

Dasmarinas -

August 16, 2014

FACTORS INFLUENCING THE

CHOICE OF INCOTERMS OF

SELECTED SEMICONDUCTOR

AND ELECTRONICS

COMPANIES OF PHILIPPINE

ECONOMIC ZONE AUTHORITY

IN CALABARZON TOWARDS A

LOGISTICS MANAGEMENT

MODEL

• Introduction

• Methodology

• Results and Discussion

• Conclusions and

Recommendations

http://www.ncfb.com/index.html

INTRODUCTION

International Commercial Terms or simply incoterms are the official

internationally recognized trade terms, formulated and published by the

International Chamber of Commerce (ICC) (ICC, 1999).

Incoterms was first established in 1936 by

International Chamber of Commerce.

There are many reasons why incoterms were

introduced. The purpose is to: provide with a set of

international rules for the interpretation of trade terms,

minimize the uncertainties of different interpretation, and it

relates to the rights and obligation of the parties involved in

the contract of sale of tangible products .

Background of the Study

Relationship Quality, such as satisfaction

with the suppliers, commitment with the

suppliers, trust with the suppliers and conflict

with the suppliers were the main factors

which contribute in choosing the incoterms

(Shangina, 2007) .

Relationship

Quality

Relationship

model

In the Philippines, the semiconductor and

electronics companies used this model, in

choosing the incoterms.

Background of the Study

This study added 13

variables

• Mother company’s decision

•Freight Cost

•Customs Regulations

• Supplier’s decision

• Written incoterm’s policy

•Shipment’s country of

origin

• Buyer’s understanding of

incoterms

•Mode of shipment

•Company practices

•Value of goods •Volume of shipment

• Insurance

•Terms of spending

Traditionally, the belief is that relationship factors

play a role in choosing the incoterms, no one has

tried to investigate this belief.

In the Philippines, most of the players have

inherent belief that relationship factors play

significant role in choosing incoterms.

Thus, the study of Shangina (2007) has remained

unexplored.

THEORETICAL FRAMEWORK

A model of factors affecting the choice of Incoterms 2000 Shangina (2007)

CONCEPTUAL FRAMEWORK

Carland, C.C. and Carland, C.W. (1996)

explained that entrepreneurial drive was affected by

the personality of the entrepreneur and there were

other factors that influence entrepreneurial drive as

some said external factors mainly influence a

person’s entrepreneurial actions.

Generally, this study aimed to develop an incoterms model

for the semiconductor and electronics companies in

CALABARZON Region. Specifically:

1. To describe the profile of semiconductor and electronics companies in terms

of the following:

a. province;

b. PEZA location;

c. size of the company;

d. number of company employees

e. years of company operations; and

f. nationality

Objectives of the Study

2. To find out the significant relationships between the semiconductor

and electronics companies’ choice of incoterms and their:

– mother company’s decision;

– supplier’s decision;

– written incoterms policy;

– buyer’s understanding of incoterms;

– customs regulations;

– company practices;

– freight cost;

– shipment’s country of origin;

– insurance

– mode of shipment

– value of goods

– volume of shipment;

– terms of spending;

– satisfaction with suppliers;

– trust with suppliers;

– commitment with suppliers; and

– conflict with suppliers?

METHODOLOGY

ACTUAL STRATIFIED SAMPLE RESPONDENTS BY PROVINCE

In summary, there were 60 actual company-

respondents.

The 60 actual samples turn-out is a 10-

respondent better than the 50 required and

computed samples and twice as large as the

minimum 30 to 32-sample rule-of-thumb

requirement of a normally-distributed sample

size according to the Central Limit Theorem

(Annis, 2013).

QUESTIONNAIRE

A multipurpose questionnaire was used to get other

information from the respondents such as demographic

data, the size of company, number of employees, years of

company operations, importation and other research inquiry

information.

The survey questionnaire was arranged in two parts. The

first part was made to solicit demographic profile of the

respondents, while the second part was for inquiries related to

the choice of their incoterms.

DESCRIPTIVE ANALYSIS: was used to describe the demographic

profile of the company-respondents.

CORRELATION ANALYSIS: was used to find out the significant

relationships of the importation elements and supplier-relationship

elements (independent variables) and the choice of incoterms

(dependent variables).

Utilized cluster analysis because of the high dimensionality of

variables.

Used multinomial logistic regression statistical tool to find-out

the significant relationships of the importation elements and

supplier-relationship elements.

RESULTS

AND

DISCUSSION

SUMMARY AND DISCUSSION

Mostly

CIF

Mostly

EXW

Mostly

FOB

Mostly other

incoterms

Total

Batangas

5

3 5 1 14

Cavite

7 3 3 1 14

Laguna

5 9 9 7 30

Total

17 15 17 9 58

Summary of Clustered Choice of Incoterms Distribution per Province

in Special Economic Zone, CALABARZON, 2013

Full Model Multinomial Regression

Likelihood Ratio Test Result of Respondents’

Choice of Incoterms and their Importation Elements

and Supplier’s Relationship in

Special Economic Zones of CALABARZON, 2013

Factors Affecting The Choice Of Incoterms Of Selected Semiconductor

And Electronics Companies Of Philippine Economic Zone Authority In

CALABARZON Towards A Logistics Model

Results and Discussions

Independent variables

Chi-Square

p-value

Mother company’s decision (MCD)

1.599 .660

Supplier’s decision (SD)

1.913 .591

Written incoterms policy (WIP)

4.582 .205

Buyer’s understanding of incoterms

(BUI)

4.433 .218

Customs regulations (CR)

7.130 .068

Company practices (CP)

5.386 .146

Insurance (I)

1.287 .732

Freight cost (FC)

7.639 .054

Satisfaction with supplier (SS)

2.151 .542

Trust with supplier (TS)

3.098 .377

Commitment with supplier (CS)

3.230 .358

Conflict with supplier (CFS) 5.174 .159

R Squared = .709

Final Model Multinomial Regression Likelihood Ratio Test Result of Respondents’

Choice of Incoterms and Customs Regulations and Freight Cost Importation

Elements in Special Economic Zones of CALABARZON, 2013





Independent variables

Chi-Square

p-value

Customs regulations (CR)

6.535 .088

Freight cost (FC) 8.693 .034

R Squared = .257

Actual flow of

relationship model

discovered in the

study about choice

of Incoterms of

semiconductor and

electronics companies

in special economic zones,

CALABARZON





Proposed Incoterms

Logistics Management Model

for customs regulation and

freight cost in semiconductor

and electronics companies

in special economic zones,

CALABARZON





CONCLUSIONS

AND

RECOMMENDATIONS

The choice of incoterms is significantly affected by two

factors, the customs regulation and the freight cost in the

semiconductor and electronics companies in Philippine Economic

Zone Authority in CALABARZON. Specifically:

This finding contradicts the null hypothesis stating that

the semiconductor companies’ choice of incoterms is not

significantly affected by customs regulations, and freight cost.

On the other hand, this finding accepts the null hypothesis

stating that the Philippine semiconductor companies’ choice of

incoterms is not significantly affected by their mother

company’s decision, supplier’s decision, written incoterms

policy, buyer’s understanding of incoterms, company practices,

insurance, shipment’s country of origin, mode of shipment,

value of goods, volume of shipment, terms of spending,

satisfaction with suppliers, trust with suppliers, commitment

with suppliers, and conflict with suppliers.

CONCLUSIONS

• Choosing the right incoterms one should understand what the incoterms means.

• In the case of EXW, the importers should realized that the term means minimal obligation to the seller

• There is a risk for importers in choosing EXW due to loss of control over transportation movement, how export documentation is presented to relevant governments,etc.

• The buyer bears all risk including customs regulations and freight cost




RECOMMENDATION

• Mostly CIF is best to use when the importation element is related to freight cost, especially if the shipments are with high value.

• CIF will help to facilitate the insurance and claims.

• Mostly FOB is best to use when the importation element is related to customs regulations, especially if the shipments are regulatory goods and high risk.

• Subsequently if the importer has no control over releasing factors which deals with customs issues, using mostly FOB will help to facilitate customs related issues in the origin.

• Mostly EXW is advisable to use when the importer would like to control the shipment consolidation, and the goods are with low value.




RECOMMENDATION

The results of this study were meant to provide important information to relevant persons and institutions:

(a) for future researchers and academic institutions, for relevant case material for procurement, logistics and supply chain management

(b) for government, importers and chamber of commerce, as this study provides details and information of the Philippine Economic Zone choice of incoterms.

(c) for procurement and logistics managers and practitioners, as this paper can supply a source of information to build a better decision in their choice of incoterms; and




RECOMMENDATION

• It is highly recommended that all

procurement and logistics practitioners,

including assigned in semiconductor and

electronics companies will make use of this

study and consider the customs regulations

and the freight cost in choosing their

incoterms.




RECOMMENDATION

AUTHORS

THE END

ippc presentation 8 16-14 (final4-jre) (3)

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