F2F Class Notes (Nemo)

Hi Dirk

This is Carol, I am the new member of JAS. I am glad to write to you.
I learnt that Tchibo is one of the most important account for China-Germany trade lane, which made big contribution for our BSA fulfillment. Much appreciated for your great support, we will try our best to satisfy our VIP client. So we had an internal meeting today to discuss Tchibo’s P/L issue.
Our Op listed the P/L calculation for the shipments you mentioned.

I knew our current P/L calculation is based on our ANR cost, but now our ANR is higher than our proposal cost, that’s why we faced loss on these shipments. In order to fair to proceed Tchibo’s P/L, We are willing to open look and share the real picture to you about our real situation. As you know we signed BSA agreement with CV in Jan, and it was formally implement from Mar, But the whole market hasn’t getting warm, especially after Chinese New Year. We are badly need the cargo to fulfill our BSA. Even we arranged one of the shipment on CV/SHA to fulfill our BSA space, that made cny5/kg difference. We knew your selling rate is in line with the market level, but we have to fulfill the space to avoid penalty from CV.

Since there is no formal P/L sharing agreement between China- Germany trade lane and , we made below two scenarios for sharing P/L on Tchibo business, it will help us fare to you may choose one calculation process you preferred. We will adjust the invoice for all Tchibo shipments we handled after we get your final decision.

Scenario A: Just like our previous P/L calculation process, we will share P/L based on our weekly ANR. For example, the proposal cost is cny13/kg, our ANR cost is cny16/kg, and your selling rate is cny14/kg. we will share loss cny1/kg to you (14-16)/2.
Advantage: In peak season, if the market rate is increased sharply, you will have a health airfreight rate to VIP client. And space will be guaranteed.
Disadvantage: In slow season, both of us will face loss.

If you don’t accept above, pls find below option.
Scenario B: we will share P/L based on our proposal rate which is provided to you case by case. That means if ANR is higher than proposal cost, we will NOT share loss with you. For example, the proposal cost is cny13/kg, our ANR cost is cny16/kg, and your selling rate is cny14/kg. we will share the profit cny0.5/kg to you (14-13)/2. JAS/SHA will absorb all loss alone. If ANR is lower than our proposal rate, we will not share more profit to you. For example, the proposal cost is cny13/kg, our ANR cost is cny11/kg, and your selling rate is cny14/kg. we will share profit cny0.5/kg to you only (14-13)/2.
Advantage: you would control the P/L for each shipment you sell even in slow season.
Disadvantage: The airfreight will be fluctuated as the market situation and the space would not be guaranteed in peak season.

From the next shipment we will invoice proposal cost or ANR to jas/Germany, then Jas/Germany will calculate the P/L, issue debit note or credit note to JAS/SHA. The currency will be same as our proposal rate saying CNY. Do you agree?

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Hi Dirk,

I’m Carol, I am the new member of JAS.
I learnt that Tchibo is one of the most important clients for China-Germany trade lane, that made big contribution for our BSA fulfillment. Much appreciated for your great support, we will try our best to  (fulfill the expectations of our VIP client ) satisfy our VIP client. So we had an internal meeting today to discuss Tchibo’s P/L issue.
Our Op listed the P/L calculation for the shipments you mentioned.

I knew our current P/L calculation is based on our ANR cost, but now our ANR is higher than our proposal cost, that’s why we faced loss on these shipments. In order to fair to proceed Tchibo’s P/L, We are willing to open look and share the real picture to you about our real situation. As you know we signed BSA agreement with CV in Jan, and it was formally implemented from Mar, But the whole market hasn’t getting warm, especially after Chinese New Year. We are badly in the need for the cargo to fulfill our BSA. Even, we arranged one of the shipments on CV/SHA to fulfill our BSA allotment, that made cny5/kg difference. We knew that your selling rate is in line with the market level, but we have to fulfill the allotment and thus avoid the penalty from CV.

Since there is no formal P/L sharing agreement on China-Germany trade lane,  below we made two scenarios for sharing P/L on Tchibo business. You may choose preferred of the  calculation process *******. We will adjust the invoice for all of the  Tchibo’s  shipments we handled so far after we get your final decision.

Scenario A: Just like our previous P/L calculation process, we will share P/L based on our weekly ANR. For example, the proposed cost is cny13/kg, our ANR cost is cny16/kg, and your selling rate is cny14/kg. we will share loss cny1/kg to you (14-16)/2.
Advantage: In peak season, if the market rate is sharply increased, you will have a healthy airfreight rate for VIP clients. And space will be guaranteed.
Disadvantage: In slow season, both of us will face loss. Of course, this is out commercial decision for long term business development

Scenario B: we will share P/L based on our proposal rate which is provided to you case by case. That means if ANR is higher than proposed cost, we will NOT share loss with you. For example, the proposed cost is cny13/kg, our ANR cost is cny16/kg, and your selling rate is cny14/kg. we will share the profit cny0.5/kg to you (14-13)/2. JAS/SHA will absorb all loss alone. If ANR is lower than our proposal rate, we will not share more profit with you. For example, the proposal cost is cny13/kg, our ANR cost is cny11/kg, and your selling rate is cny14/kg. We will share profit cny0.5/kg- for you  (14-13)/2.
Advantage: you would control the P/L for each shipment which you sell even in the slow season.
Disadvantage: The airfreight will be fluctuating,  as the market situation and the capacity would not be guaranteed in the peak season.

Starting from the next shipment we will invoice proposal cost or ANR to JAS/Germany, then JAS/Germany will calculate the P/L, and issue debit note or credit note to JAS/SHA. The currency will be same as our proposal rate is saying-CNY. Do you agree?