Supply Chain Chapter 10

permitted activities

- assembly, exhibition, inspection, salvage, destruction, reclassification, manufacturing, processing, storage, testing, relabeling, repackaging

global location - discussion outline

- facility types - location factors - decision factors - evaluation techniques

business clusters

- geographic concentrations of interconnected companies and institutions

environmental issues

- global warming, air pollution, and acid rain are debated as being the price of industrialization - trade liberalization creates the need for environmental cooperation

trade compliance systems

- have become a vital tool for every major importing and exporting company in the US - only way to keep current with all of the continuously changing laws regulations and procedures **can automate the process of checking every transaction

benefits of trade compliance systems

- increased level of compliance compared to manual process - decreased number of physical inspections by US customs and border patrol - faster release of shipments by us customs and border protection - avoidance of fines and penalties - opportunity to interface with other systems

global supply chain - opportunities

- increased revenue: through global business (more customers) and economic opportunities increased sourcing options: with more potential sources of supply to choose from including potential economic opportunities.

labor issues

- labor availability, productivity, and skill - unemployment/underemployment rates - wage rates; turnover rates; labor force; competitors

challenges

- tariffs or duties - transporting goods across borders can be complex and involve new/different partners - customs, business practices, and regulations vary by country - foreign markets are not homogeneous even within the country

international freight security

- transportation across national boundaries introduces added complexity, particularly security - since 9/11 there is more conflict bt us gov. and industry regarding more security and restrictions for international shipments

decisions involve:

1) defining each facility's strategic role 2) determining the location for each facility 3) identifying the market(s) that each facility serves.

12 pillars of competitiveness

1) institutions 2) infrastructure 3) macroeconomics stability 4) health and primary education 5) higher education and training 6) goods market efficiency 7) labor market efficiency 8) financial market sophistication 9) technological readiness 10) market size 11) business sophistication 12) innovation

facility types

1) offshore factory 2) source factory 3) server factory 4) contributor factory 5) outpost factory 6) lead factory

Department of Homeland Security (DHS)

1) prevent terrorist attacks within the US 2) reduce America's vulnerability to terrorism 3) minimize the damage from potential attacks and natural disasters want to prevent but also don't want to close us off from the rest of the world/international trade

goods aren't legally entered into the us commerce until

1) the shipment has arrived within the port of entry 2) delivery to the shipping destination has been authorized by CBP 3) estimated duties have been paid

right-to-work laws

25 states have laws protecting the right of employees to decide whether or not to join or support a union either forced unionism or right to work state

A country that imposes high tariffs encourages foreign-based companies to import goods.

FALSE

An import can only occur inside the borders of your home country and an export can only occur outside the borders of your home country.

FALSE

Two models that utilize quantitative data, to help determine the attractiveness of one location versus another, are the Break-Even Model and the Extrapolated Average Cost Model.

FALSE

If a company wanted to import materials duty-free, for use in the production of their end items, and then export them to other countries, they would most likely utilize?

Foreign Trade Zone (FTZ)

QUIZ

QUESTIONS

A right-to-work law allows employees to decide for themselves whether or not they want to join or financially support a union.

TRUE

The WTO is the only global international organization dealing with the rules of trade between nations. Type: True or False

TRUE

took 70 years to come up with 7 major laws for international trade

after 9/11 10 major laws created in only 2 years on top of the 7

land availability and costs

as land and construction costs in big cities continue to escalate, the trend is to locate in the suburbs and rural areas.

When a number of interconnected companies and institutions from a particular field are located in a single geographic location; that location is referred to as?

business cluster

Which of the following would be considered a "quality-of-life" issue in making a global location decision?

community safety

global location deicisons

companies can locate anywhere in the world due to increase globalization, technology, transportation and open markets.

the weighted-factor rating model

compares the attractiveness of several locations along a number of quantitative and qualitative dimensions

the world trade organization (WTO)

deals with the global rules or trade between nations. Its main goal is to ensure that trade flows as smoothly, predictability and as freely as possible.

contributor factory

focused on product development and engineering for products that they manufacturer ex:1 973 Sony built a Server factory in Wales and then 15 years later got involved in development planning, etc. and is now a Contributor factory OTHERS ARE JUST EXECUTING THIS ONE DOES PRODUCT DEVELOPMENT R AND D AT THOSE LOCATIONS

Shippers Export Declaration ON TEST

gives customs and border protection all information

regional trade agreement

impact location decisions

currency stability

impacts business costs and consequently location decisions ex: Brazil had 100% inflation - not easy to set up prices there

CBP also

is concerned with revenue collection

deemed exports

is the release of technology or source code that is subject to the export administration regulations to a foreign national located in the US ex: scientists working in operation from foreign country some chemicals are dual use can be used for pharma products or weapons if access given to foreign scientists have to make sure they don't have access to these products otherwise it's a deemed export the releassed can be visual, oral, through on the job training, or via systems access

taxes and incentives

levels of gov. must be evaluated tariffs and federal taxes are designed to protect local businesses high tariffs discourage importing goods into the country - encourage to produce locally

international trade compliance

managing international trade activities is a complex process - a typical cross-border shipment involves - 35 documents - compliance with over 600 laws and 500 trade agreements - interfacing with about 25 parties staying up to date is a major challenge because 1) info changes frequently 2) made available only in foreign language 3) not always produced in electronic form

source factory

manufactures products at a low cost but with skilled workers and significant managerial resources - plant management involvement in supplier selection ex: hewlett-packard Singapore factory produced calculators and keyboards INVOLVED IN SUPPLIER SELECTION

customs brokers

move global shipments through customs and handle documentation

international freight forwarders

move goods to and from foreign destination

Which global facility type describes a factory set-up primarily to produce products at a low cost with minimal technical and managerial resources?

offshore factory

non-vessel-operating common carriers (NVOCC)

operate like freight forwarders but use only scheduled ocean liners

US Customs and Border Protection

originally established in 1789 - controls the import process gateway agency for more than 20 other government agencies safeguard America's borders by enabling legitimate trade and travel about 20% of cargo is actually checked 100% is checked on paperwork "pushing border back" - active inspections at ports of entry - industry partnerships and technology

Which global facility type describes a factory set up in an area with an abundance of advance suppliers, competitors, and research facilities

outpost factory

foreign trade zones (FTZ)

physcial areas inside the US supervised by US customs and border protection that are considered to be outside of the US territory. Usually located at or near a port of entry

trading companies

put buyers and sellers from different countries together and handle export/import arrangement, documentation and transportation

statutory sanctions

seizure and forfeiture of items in violation, including the vessels and aircraft carrying the items loss of import and/or export privileges for a business unit, division, or for the entire company detailed inspections of every single shipment, and delayed release by us customs and border protection

offshore factory

set up for manufacturing or assembly in a country where labor and/or raw materials, for eventual import back into the manufacturer's home country ex: clothing produced in Bangladesh, Inondesia JUST FOR LABOR

outpost factory

set up in area with an abundance of advance suppliers, competitors, research facilities, etc. ex: Raleigh, Durham, Chapel Hill NC. Research Triangle Center. UNC, Duke, IBM, Cisco, ect. Silicon Valley, Calif AROUND ANOTHER BUSINESS CLUSTER

server factory

set up to take advantage of government incentives and/or reduced tax/tariff barriers to meet regional or local market needs ex: coca-cola bottling. mix the final ingredients to take advantage of exchange rates, tariff and taxes TAX INCENTIVES

lead factory

source of product and process innovation and competitive advantage across the entire organization (world-class) ex: Intel factory in Penang, Malaysia opened in mid-1970's, now is a lead factory. This is your "go-to" factory MAIN Facility Where MOST Innovation AND R AND D TAKE PLACE DEVELOP NEW PRODUCTS, LAUNCH AND THEN WHEN THEY TAKE OFF TRANSFER PRODUCTION SOMEWHERE ELSE

criminal penalties

substantial fines 10+ years imprisonment

civil penalties

substantial fines per occrrence individual annd/or company sanctions

access to suppliers and cost

supplier proximity influences the delivery of materials and the effectiveness of the supply chain

utility availability and cost

supply of electricity has not always kept pace with the high speed of development in heavy industries the availability and cost of energy are critical considerations telecommunication costs have dropped dramatically. Many organizations now have back office operations and call centers internationally to serve the US markets.

access and proximity to markets

the trend in manufacturing is to be within delivery proximity of your customers in service industry, proximity to customers is even more critical ex: can't service a washing machine if you're 3000 miles away.

import-export process flow

think of it as a mirror image process

break even model

useful location analysis technique when fixed and variable costs can be determined specifically for the economic portion only dealing with costs and financial things

quality-of-life issues

what quality of life do your workers have what's the economy like what is the natural environment like (weather, susceptibility to natural disasters) how stable is the gov mobility - your ability to get around - move people

import process

when a shipment reaches the US, the importer of record must file entry documents at the port of entry

FTZ

while in the FTZ merch is not subject to US duty or excise tax are subject to laws and regulations of the US as well as those states and communities in which they are located

importer of record

who owns the goods