Global Supply Chain test 2
Asset Turnover
Sales/Total Assets -In most cases higher is better. Means amount of asset generate more revenue and higher turn.
Which infrastructure category does banking belong?
Services infrastructure
Intermodal (also called Multimodal) Transportation refers to:
Shipments that move by more than one mode of transportation
Rail carriers are
Slow, Inexpensive, Offer Point-to-Point PU & DEL
Specific Tariffs
per unit, car, container, fixed rate per unit
Accounts Affected:
-COGS, Inventory, Revenue, AR, PPE; we can have some input in all aspects
Incoterms ( characterizes)
-Can not be used for the sale of services, just the sale of goods. -Originally there were 13 prior to 2013 currently there are 11 -Developed by the international chamber of Commerce Website: incotermsexplained.com
Overall Impact: of supply chain functions
-Supply chain managers use property, plant, and equipment the most -We want a higher inventory turnover; but the days of holding inventory should be lower -The highest the number for fixed assets, total assets, return on assets, -COGS goes down inventory stays the same = inventory turnover would increase -Higher inventory levels or lower inventory levels on balance sheet? You want lower
What is the significance of Flags of Convenience?
-registering a ship in a country that the company is not housed in; US flag on a ship follows US regulations (safety equipment, training, qualifications, etc) Panama has a lot of ships registered there because regulations are less stringent. Literal flag
The 11 incoterms
1. EXW 2. FCA 3.DAT 4. DAP 5. DDP 6. CPT 7.CIP 8 . FAS 9. FOB 10. CFR 11. CIF
Two things Incoterms doesn't do:
1. Ownership (they don't indicate who owns the goods) Bill of lading (same as a title) shows ownership or the contract could show ownerships/who buys the goods 2. Doesn't indicate what the goods cost: doesn't tell us the terms, with how much we pay or what we pay
Different types of Tariffs (3)
1. Specific tariffs 2. Ad Valorem tariffs 3. Compound tariffs
Non-Tariff Barriers(4)
1. absolute quotas 2. tariff quotas 3. Licenses 4. Import quotas
Strategies to Overcome Trade Barriers (6)
1. contract manufacturing 2. joint ventures 3. strategic partnership 4. greenfield 5. brownfield 6. relocating facilities
4 articles to know
1. engine supply delays to slow C series deliveries 2. U.S. slaps hefty tariff on bombardier jets 3. airbus seals bombardier 4. trump imposes tariffs
Which issues are critical to airport infrastructure?
1. runway length 2. curfews
what does infrastructure include
1. services 2. communications 3. transportation 4. utilities 5. legal and regulations
What has caused rail transport to increase in recent years?
1. the creation of the multi-modal container 2. concerns about pollution have increased 3. increase in road congestion
modes of transportation
1. water carriers 2. motor carriers 3. Rail Carriers 4. Air 5. Pipelines
Ad Valorem Tariff
12% of value of chickens, not per chicken
Days of Inventory
365/inventory turnover - lower is better. Means less days in inventory
11 Incoterms
4 of them are solely for water transport, the other 7 are for land and water
Specific tariffs description
A fixed fee levied on one unit of an imported good
What does panamax ship mean?
A ship of the maximum size that can enter the locks of the panama canal.
What does neo-panamax ship mean?
A ship whose size allows its to enter the newest locks of the panama canal
What does post-panamax ship mean?
A ship whose size is too large to enter the locks of the panama canal
What are Trade Barriers
A. Tariffs B. Taxes C. Non-tariffs
In terms of transit time
AIR-- TRUCK-- TRAIN-- WATER (ATTW)
Cabotage allows for which example?
Air India can fly into Charlotte International Airport. Panama ship cannot do domestic work (i.e. stop in Miami, pick up freight, and deliver to Baltimore). Cannot fly domestic flights in other countries. If you see domestic service, it has to be conducted by the country it is being performed in. Worldwide rule.
What is the best description of Flags of Convenience?
Allows a ship owner from one country to register their ship in other country to reduce operating expenses by following the less regulated rules and policies of another country
Which of the following is considered a brown field project?
Apple buying and renovating a factory in Taiwan to produce iPhones
Of the following, which one indicates when transfer of ownership happens?
Bill of Lading
Incoterms are used for...
Both international and domestic trade of goods
Inventory Turnover
COGS / avg inventory -higher means either strong sales or insufficient inventory
What is an example of voluntary export restraint?
China voluntarily reduces its exports of apparel to Guatemala
Principal Commodities Hauled: 5
Coal Farm products Chemicals Transportation equipment' Automobiles
Which example describes total landed cost?
Cost to manufacture, purchase, and ship goods by any mode of transportation
The responsibility for transportation arrangements, costs, and risks are highest for the seller with:
DAT
Motor carriers have the advantage of providing ______.
Door to door service
The responsibility for transportation arrangements, costs, and risks are highest for the buyer with:
EXW
Taxes placed on cigarettes and gas is an example of what kind of tax?
Excise
Shortline Carriers
Freight over short distance
Greenfield
Full ownership of new start-up operation
Risks/issues with Marine Ports
Get really busy and a lot of congestion, throw off your supply chain
West coast ports are in need of increased capacity. What is the one way they can increase capacity?
Increase productivity
when to use motor carriers
Less-than-truckload (LTL) & Truck-load (FTL) carriers move small shipments and the fees are HIGHER
Pipelines is
Limited in variety they can carry, materials hauled in a liquid or gaseous state
Railroad Carrier Types
Linehaul Carriers Shortline Carriers
As a logistics person for ABC Beverage Company, you are aware that less-than-truckload shipments are _______ per unit to transport than full-truckload shipments.
More expensive
Cash Flow
Movement of the money you receive and the money you spend.
Return on Assets (ROA)
Net Income/Total Assets On balance sheet
Value Added Tax (VAT)
Not a tariff as much as a manufacturing - Raw material --> Finished good - When you start adding value, a taz is added per step ( ex: yeast for beer)
Absolute Quotas
Number of items that can be shipped into a country; once we hit that limit, no more. - Honda back in the 80s Back in the day honda made motorcycles in japan, let's say 500k could come from honda in japan. US does not do this much.
Relocating Facilities
Option if new barriers are implemented
Three Majors Routes
Panama Canal, Suez Canal, Strait of Malacca
FAS Free Alongside Ship ( just water)
Requires the seller to deliver goods to a named port alongside a vessel designated by the buyer.
In terms of accessibility
TRUCK-- TRAIN -- WATER -- AIR (TTWA)
In terms of how reliable
TRUCKS - AIR - TRAIN - WATER (TATW)
Tariff Quotas
Tariff rates that raise after a certain amount of items have come in. ex: washing machines. - Ex. commodities subject to import quotas on US customs and border protection website like brooms, tuna, ethyl alcohol, olives, wool, cotton
INCO Terms are developed and revised periodically by __________________________.
The International Chamber of Commerce
Ex Works (EXW) Buyer -water/land
The buyer assumes all the risk and transportation costs of the shipment and the seller is only required to make the goods available for pickup (preferably at the seller's business location)
FOB Free on Board ( just water)
The buyer or seller deliver the goods on a designated vessel and either may assume all the risk and transportation costs depending on whether the goods are sold under the shipping point or destination point.
Brownfield
buying existing infrastructure
What does draft mean?
The minimum depth of water that a ship needs to float
Linehaul Carriers
The movement of freight with any mode of transport between distant cities.
If you were an exporter from the United States and exporting raw materials to a manufacturer in Poland, you would NOT use Incoterms to establish __________.
The purchase price of the raw materials
what is dredging
The removal of sediment from the bottom of a water channel to increase its depth
Delivered Duty Paid (DDP)Seller -water/land
The seller assumes all risk and transportation costs as well as clear goods for export at the shipping port and import at the final destination. (seller pays export and import duties)
Delivered at Terminal (DAT) Seller -water/land
The seller assumes all risk and transportation costs until the goods have successfully arrived at the terminal and been unloaded and the buyer assumes all the risk and transportation costs from the terminal to the final destination.
Free Carrier (FCA) Buyer -water/land
The seller delivers the goods and clears them for export at a named place and from there the goods can be delivered to a carrier nominated by the buyer or other parties.
Carriage Paid To (CPT)
The seller delivers the goods at their own expense/risk to a carrier or another person nominated by the seller. These goods are delivered at a mutually agreed upon location by the buyer and sellers and the risk of damage or loss to the goods being transported are transferred from seller to buyer as soon as the goods have been delivered to the carrier.
CFR - Cost and Freight (just water)
The seller is required to arrange the goods by seat to a port of destination and provide the buyer with the necessary documentation to obtain the goods from the carrier. The seller does not have to obtain marine insurance against risk or loss/damage of goods during transit.
Delivered at Place (DAP) Seller -water/land
The seller is ultimately responsible for arranging and delivering goods as well as properly unloading goods to the preferred place/location.
CIF (cost, insurance, freight) - just water
The seller must deliver the goods to a port and load on a specific vessel, seller is responsible for paying all transportation and insurance costs to the port as well as the cost to load the shipment onto the vessel. Buyer assumes cost and risk with transporting the shipment from the designated port to its business.
Carriage and Insurance Paid To (CIP)
The seller pays freight and insurance to deliver goods to a party at a pre-approved location. All risk or damage or loss of goods transfers from seller to buyer as soon as goods have been delivered to carrier. Under CIP, seller is obligated to insure goods while in transit for 110% of the contract value.
Cash to Cash Cycle Time
The time it takes for cash to flow back into a company after it has been spent on raw materials. Synonym: Cash Conversion Cycle.
The country exporting places quotas on themselves. Why?
To avoid a more strict tariff, better to punish yourself. Better to punish yourself then to let someone else punish you. Like when a university takes action on themselves.
What is an example of cartage (drayage)?
Transporting goods from Mexico just over the border into the US; Transporting a container off of a ship at a port and to the other side of the port and putting the container on a rail car for future transportation; A SHORT DISTANCE MOVE BY A THIRD PARTY
small package carriers
UPS, FedEx, DHL, United States Postal System (USPS), deliver smaller shipments—often door to door. The larger players offer warehousing, packaging, light assembly, import/export and other services.
Different types of taxes (2)
Value Added Tax(VAT) Excise Tax
In terms of the cost
WATER-- TRAIN-- TRUCK -- AIR (WTTA)
How to use the DuPont Model
a "what-if" tool, helpful for risk and scenario planning, if we make a change the model shows us how it will affect the company financially. Gives us ratios to interpret to help with important business decisions.
What is an example or examples of cartage (drayage)?
a. Transporting goods from Mexico just over the border into the U.S. B. Relocating and transporting a container from a ship at a port to the other side of the port and putting the container on a rail car for further transportation.
ad Valorem tariffs description
according to value
6.7% of the value of goats imported to Chile is an example of which kind of import tariff?
ad valorem
When an import tariff is described as follows, 12.9 % of the value of imported leather shoes, this is an example of what type of tariff?
ad valorem
DuPont Model
an expansion of the return on investment calculation to margin x turnover
you use air carriers when
carry light, high value goods over long distances -- quick delivery! Use when importance of speed > cost ex) emergency shipments
Compound Tariffs
combine specific and ad valorem ex: fixed rate (number of chicken) and percent ( dollar value of chickens) apply percent value
Compound tariffs
combines specific and ad valorem tariffs
Which infrastructure category does internet access belong?
communications infrastructure
Which infrastructure category does mail service belong?
communications infrastructure
types of water carrier
container-ships bulk carriers tankers (carrying petroleum) general Cargo Ships (has crane) Roll-on-Roll-on (cargo that can be rolled on own)
Working Capital
current assets - current liabilities
joint venture
partners share ownership of a third newly created business entity
Air Carriers are
expensive and fast
total landed cost
flows into COGS: nothing more than how much I am paying in order to bring something to me so that I can use it Purchase a raw material or a good must buy ship pay tax pay all fees in order to bring it.
Licenses
have to be applied to things harmful to humans (chemicals) or if coming from certain countries (N Korea). Click on licenses in powerpoint BIS.gov (weapons/ other items from more dangerous countries)
what is a berth
in a port, a location at which a ship can load and unload its cargo
Water Carrier
inexpensive, slow and inflexible
Incoterms
international commercial terms
when do you use rail carriers
large quantities of low-value-to-weight (bulk)
Which infrastructure category does intellectual property belong?
legal and regulatory infrastructure
strategic partnerships
linkage b/t 2 companies to jointly pursue a common goal
Common Commodities:
mail fashion flowers jewelry
Drayage carrier acts as
middleman when crossing items across border
Motor carriers are
more expensive and flexible
Transportation mode calc. example: we are moving Go Pro Camera from malaysia to the UK. The cost value of the cameras being shipped in 170,500. The company's holding cost of inventory is 40% of the cost of the products being shipped.
option 1: Truck, rail, boat Days in transit: 20 Shipping cost: 9,000 (170,500*.40)/365 = 186.85 (cost per day) 186.85*20 = 3736.99 (total holding cost) 3736.99 + 9,000 = 12,736.99 (total cost) option2: Air and truck days in transit: 15 shipping cost: 12,000 (170,500*.40)/365 = 186.85 186.85*15 = 2,802.75 2802.75 + 12,000 = 14802.75 (total)
contract manufacturing
provide specs to local manufacturers (sub-contract, outsourcing)
Incoterms shows
responsibility but don't have ownership
Excise tax
sin tax
$1,200 per 1,000 pairs of imported leather shoes is an example of which import tariff?
specific
Which import tariff best describes the following, $1,200 per 1,000 pairs of imported leather shoes?
specific
Air carriers have the advantage of providing ______.
speed
Imported Kawasaki motorcycles are taxed at one rate until 5,000 of them are imported. Starting with imported Kawasaki motorcycle number 5,001, the rate goes up. This is an example of which kind of quota?
tariff quota
Value added tax description
tax that is placed on a product whenever value is added
Specialized carriers
transport liquid petroleum, agricultural commodities, building materials, & other specialized items.
Know the order of the DuPont Model
use the chart
Piggyback Service:
used by major motor carriers Combines cost-efficiency of RR long haul with flexibility of truck PU and DEL ex: loading truck trailers or flatbed trailers carrying containers on railcars to provide both speed and flexibility
Which infrastructure category does electricity belong?
utilities infrastructure
Which infrastructure category does energy pipelines belong?
utilities infrastructure
Drayage/Cartage
very short transportation (ex: moving container from ship to yard, taking a container from Mexico to US) you don't see trucks from Mexico b/c we are protecting the US trucking industry. Their safety standards are different than ours (inspections, seatbelts, emissions)
Import quotas:
voluntary export restraints.
