Supply Chain Chapter 10

Macroeconomic Education Goods Labor Technological Market

12 Pillars of Competitiveness: 1.Institutions 2.Infrastructure 3.__________________ stability 4.Health and primary education 5.Higher ________ and training 6._______ market efficiency 7.________market efficiency 8.Financial market sophistication 9.______________ readiness 10._________ size 11.Business sophistication 12.Innovation

Right to Work Laws

A Global Location Factor 28 states have laws protecting the right of employees to decide whether or not to join or support a union. As a business, do I want to function in a location where EVERY employee is required to be in a union? NOTE: On 6/27/18 the US Supreme Court ruled in Janus v. AFSCME, that public sector unions cannot charge fees to employees who decline to join a union but are covered by its collective bargaining agreement

Land Availability and Costs

A Global Location Factor As land and construction costs in big cities continue to escalate, the trend is to locate in the suburbs and rural areas.

Business Clusters

A Global Location Factor Geographic concentrations of interconnected companies and institutions. Research parks and special economic / industrial zones serve as magnets for business. Reasons for success: ‒Innovation and competition can be geographically concentrated. ‒Close cooperation, coordination, and trust among clustered companies ‒Fierce competition among rival companies ‒Companies recruit from local skilled workers ‒

Environmental Issues

A Global Location Factor Global warming, air pollution, and acid rain are debated as being the price of industrialization. Trade liberalization creates the need for environmental cooperation

Currency Stability

A Global Location Factor Is this country prone to hyper inflation? Is currency CONSISTENTLY valuable in this country? Is it reliable? Impacts business costs and consequently location decisions. ‒A few years back, Brazil had 1000% annual inflation rate. Not so easy to set prices in that currency environment.

Labor Issues

A Global Location Factor Labor availability, productivity, and skill. Unemployment / underemployment rates Wage rates; turnover rates; labor force competitors.

Taxes and Incentives

A Global Location Factor Several levels of government must be considered when evaluating potential locations. Tariffs are federal taxes that are designed to protect local businesses. Countries with high tariffs discourage importing goods into the country and encourage multinational corporations to produce locally.

Access to Suppliers and Cost

A Global Location Factor Supplier proximity influences the delivery of materials and the effectiveness of the supply chain. Cheaper transportation costs when you are closer to a supplier

Utility Availability and Cost

A Global Location Factor Supply of electricity has not always kept pace with the high speed of development. ‒China (2006) made several factories shut down for 1 day/week 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 U.S. market.

Access and Proximity to Markets

A Global Location Factor The trend in manufacturing is to be within delivery proximity of your customers. ‒Logistics timelines and costs are the concerns, so that reinforces a clustering effect of suppliers and producers to places that offer lower cost labor and lower real estate prices. In the service industry, proximity to customers is even more critical. ‒You can't service a washing machine if your technician is 3000 miles away.

Regional Trade Agreements

A Global Location Factor These impact location decisions because if you decide to do business in an area with _____________________, you can take advantage of certain perks like zero barriers to trade. European Union (EU): [1950] following WWII, consists of 27 members countries in Europe North American Free Trade Agreement (NAFTA): [1994] Removed most barriers to trade and investment among U.S., Canada and Mexico. Southern Common Market (MERCOSUR): [1991] among Argentina, Brazil, Paraguay, and Uruguay Association of Southeast Asian Nations (ASEAN): [1967] among 10 member countries in in SE Asia Common Market of Eastern and Southern Africa (COMESA) [1993] among 19 member countries in Eastern and Southern Africa

Quality of Life Issues

A Global Location Factor You will need people to work at these locations - so consider the following ______________________ in terms of maturity, sophistication, robustness, etc., in each location, and do a comparison/evaluation: Education Economy Natural Environment Social Environment Culture Healthcare Government / Politics Mobility Public Safety Recreation

The Weighted Factor Rating Model

A location evaluation technique Compares the attractiveness of several locations along a number of quantitative and qualitative dimensions. Identify the factors Assign weights to each factor. The weights sum to 1. Determine a score for each factor. Multiply the factor score by the weight, then sum the weighted scores The location with the highest total weighted score is the recommended location.

break even model

A location evaluation technique Useful location analysis technique when fixed and variable costs can be determined Identify the locations to be considered. Determine the fixed cost of land, property taxes, insurance, equipment, and buildings. Determine the unit variable cost, materials, utilities, and transportation costs. Construct the total cost lines. Determine the break-even points on the graph. Identify the range over which each location has the lower cost.

Offshore Factory

A type of global facility A factory set up for manufacturing or assembly in a country where labor and/or raw materials are less expensive, for eventual import back into the manufacturer's home country. Manufactures products at low cost with minimal technical and managerial resources Take advantage of low labor costs Import or acquire parts locally, then export to the manufacturer or directly to customers Local management serves in a supervisory roll not in making management decisions. Example: Clothing produced in Bangladesh, Indonesia

Server Factory

A type of global facility A factory set up to take advantage of government incentives, and/or reduced tax/tariff barriers, to meet regional or local market needs Firm uses government incentives Low exchange risk and tariff barriers to reduce taxes and logistics costs. Makes minor improvements to product and processes Set up to serve the local market Example: Coca-Cola bottling. Mix the final ingredients to take advantage of exchange rates, tariff, & taxes.

Outpost Factory

A type of global facility Factory set up in an area with an abundance of advance suppliers, competitors, research facilities, etc. Setup in a location within proximity to: Advance suppliers. Competitors. Research facilities & universities for materials, components and products. Example: Raleigh, Durham, Chapel Hill NC. Research Triangle Center. UNC, Duke, IBM , Cisco, etc. Silicon Valley, Calif.

Contributor Factory

A type of global facility Focused on product development and engineering for products that they manufacture Basically, a Server Factory which also includes: Product development. Production planning. Procurement decisions. Supplier development. Example: 1973 Sony built a Server factory in Wales and then 15 years later got involved in development, planning, etc. and now is a Contributor factory

Source Factory

A type of global facility Manufactures products at low cost but with skilled workers and significant managerial resources Basically, an offshore factory that includes: Plant management involvement in supplier selection Plant management involvement in production planning More developed local infrastructure Access to skilled workforce Low production costs Example: Hewlett-Packard Singapore factory produced calculators and keyboards

Lead Factory

A type of global facility Source of product and process innovation and competitive advantage across the entire organization (world-class) Competitive advantage of the organization. Source of innovation. There is an abundance of innovation and R&D. Lots of companies use this factory as their world HQ. Example: Intel factory in Penang, Malaysia opened in mid 1970's, now is a _____________ This is your "Go-To" factory

US Department of Homeland Security

Assumed responsibility for securing our nations's borders and transportation systems which straddle 350+ official ports of entry and connects our homeland to the rest of the world. The Department's first priority is to prevent the entry of terrorists and the instruments of terrorism, while simultaneously ensuring the efficient flow of lawful traffic and commerce the government agency whose mission is to: 1.Prevent terrorist attacks within the United States 2.Reduce America's vulnerability to terrorism 3.Minimize the damage from potential attacks and natural disasters

Negligance

Businesses violating trade regulations face fines of up to 40% of the value of the merchandise for "____________," which can mean simply failing to keep certain necessary records.

Revenue Collection

CBP is also concerned with ____________________ (i.e. tariffs and duties). Revenue is determined by item such as: -Correct valuation (price paid or payable) -Correct classification -Country of Origin (COO) -Identification of the merchandise -Identification of buyer and seller and whether they are related

Active inspections

CBP protects U.S. through ________________ at ports of entry. CBP has a strong base of industry partnerships and technology to safeguard the American public and promote legitimate international commerce.

Global Location Decisions

Companies can locate anywhere in the world due to increased globalization, technology, transportation, and open markets. Facility location must be part of the firm's supply chain strategy. Decisions involve: 1.Defining each facility's strategic role (i.e., what type of facility) 2.Determining the location for each facility (i.e., where in the world) 3.Identifying the market(s) that each facility serves

True

T/F: There is no limit on the time material may remain in the FTZ

Shipper's Export Declaration (SED)

Contains relevant export transaction data such as the transportation mode(s), transaction participants, and description of what is being exported.

Assembly Inspection Storage Testing

FTZ Permitted Activities: ____________ Exhibition ____________ Salvage Destruction Reclassification Manufacturing Processing ___________ ___________ Relabeling Repackaging

Taxes Currency Environmental Land

Global Location Factors: Competitiveness ________ and Incentives ___________ Stability Access and Proximity to Markets Labor Issues Right to Work Laws Access to Suppliers and Cost Utility Availability and Cost ____________ Issues ______ Availability and Cost Quality of Life Issues Business Clusters Trade Agreements

Port of entry authorized

Goods are not legally entered into US commerce until: 1.The shipment has arrived within the ____________________ 2.Delivery to the shipping destination has been _______________ by CBP (following submission and review of required documentation) 3.Estimated duties have been paid.

Trade Compliance Systems (or Global Trade Management systems)

Have become a vital tool for every major importing and exporting company in the US. Really the only way to keep current with all of the continuously changing laws, regulations and procedures. Can automate the process of checking every transaction -For commercial and non-commercial products against every legal regulation before import or export.

US Customs and Border Protection

It is the "gateway agency" for more than 20 other government agencies each of which has some control over various aspects of international trade. works to secure and facilitate imports arriving in the U.S., accommodating the increasing volume and complexities of international trade Its' mission is to safeguard America's borders thereby protecting the public from dangerous people and materials while enhancing the Nation's global economic competitiveness by enabling legitimate trade and travel. They control the import process and became part of the US Department of Homeland Security in 2003

International Trade Compliance (ITC)

Managing international trade activities is a complex process. A typical cross-border shipment involves: -Accurately completing and filing about 35 documents. -Compliance with over 600 laws and 500 trade agreements which are constantly changing. -Interfacing with about 25 parties, including Customs, carriers, freight forwarders, other government agencies, etc.

Non-Vessel-Operating Common Carriers (NVOCC)

Operate like freight forwarders but use only scheduled ocean liners.

Tariffs complex vary

Operating your supply chain globally can also present challenges: __________ or duties (i.e., import taxes) Transporting goods across borders can be ___________ and involve new/different partners Customs, business practices, and regulations ________ by country Foreign markets are not homogeneous even within the country

Criminal Civil Statutory Sanctions

Penalties for deemed export violations can be substantial. ____________ Penalties Substantial Fines (and/or) 10+ years imprisonment _______ Penalties Substantial fines per occurrence Individual and/or company 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 & Border Protection.

Foreign Trade Zones

Physical areas inside the US supervised by U.S. Customs and Border Protection that are considered to be outside of the U.S. territory. Usually located at or near a port of entry. Foreign and domestic merchandise may be moved into _______________________ for operations not otherwise prohibited by law

False

T/F: Foreign-trade zone sites are NOT subject to the laws and regulations of the United States as well as those of the states and communities in which they are located.

Physical Inspections Release fines penalties

The benefits of implementing a Trade Compliance System include: Increased level of compliance compared to a manual process. Decreased number of _________________ by US Customs & Border Protection Faster ___________ of shipments by US Customs & Border Protection. Avoidance of ________ and _____________. Opportunity to interface with other systems.

Customs Brokers

These people move global shipments through customs and handle documentation

International Freight Forwarders

These people move goods to and from foreign destination

Trade Agreements

This is one of the opportunities of operating a supply chain globally. Companies can take advantage of regional ____________________: -European Union (EU): [1950] 27 members countries in Europe -North American Free Trade Agreement (NAFTA): [1994] U.S., Canada, & Mexico -Southern Common Market (MERCOSUR): [1991] Argentina, Brazil, Paraguay, & Uruguay -Association of Southeast Asian Nations (ASEAN): [1967] 10 member countries in in SE Asia -Common Market of Eastern and Southern Africa (COMESA): [1993] 19 member countries in Eastern & Southern Africa

Increased Revenue

This is one of the opportunities of operating a supply chain globally. _________________ through global business (i.e., more customers) and economic opportunities Global Market = More Customers. More Customers = More $$$

Increased Sourcing Options

This is one of the opportunities of operating a supply chain globally. ____________________ with more potential sources of supply to choose from including potential economic opportunities Global Market = More Suppliers. These suppliers may provide better quality at a lower cost

Information Foreign Language

Trade regulations and related content are at the heart of ITC, but staying up to date is a major challenge because: The ___________ changes frequently It's often made available only in a ___________________ It's not always produced in an electronic form

offshore source server contributor outpost lead

What are the 6 types of global facilities?

Export Administration Regulations (EAR)

When a shipment is ready to be exported, the shipper will file export documents for the goods' at the port of departure. Shipments must conform to ______________________________ (regulations designed to control the export and re-export of most commercial items.)

Importer of Record

When a shipment reaches the US, the _______________________ (i.e., the owner, or purchaser) must file entry documents at the port of entry.

Excise Tax

While in the FTZ, merchandise is not subject to U.S. duty or ____________ -U.S. duty and ___________, if applicable, are only payable when the material is moved outside the FTZ for consumption.

Trading Companies

_____________ put buyers and sellers from different countries together and handle export/import arrangements, documentation and transportation.

WTO

deals with the global rules of trade between nations. Its main goal is to ensure that trade flows as smoothly, predictably and as freely as possible. functions include: -Administering agreements -Forum for trade negotiations -Trade disputes -Monitor trade policies -Aid for Developing countries -International organizations

Deemed Export

the release of technology or source code that is subject to the Export Administration Regulations, to a foreign national (i.e., non-US citizen) located in the United States. This is a situation where a US citizen provides technology (or info related to that technology) to a non-US citizen, even if you're in the same building. This is an illegal export. An intentional or unintentional export of controlled technology can easily occur within the walls of your company, even if located within the borders of the United States.

International Freight Security

transportation across national boundaries introduces added complexity, particularly security Since 9/11 there is more conflict between the U.S. government and industry regarding more security and restrictions for international shipments.