Intro to Supply Chain - Chapter 10

CPB - continue

-PUSHING the borders back -Actice inspection at port -Have strong base of industry partnership and technology

North American Free Trade Agreement (NAFTA)

- Created in 1994 - Removes most barriers to trade and investment among US, Canada, and Mexico

Quality-of-Life Issues

- Education - Economy - Natural Environment - Social Environment - Culture/recreation - Healthcare - Government/politics - Mobility - Public Safety

Regional Trade Agreements (RTA)

- European Union (EU) [1950] = following WWII, consists of 27 member countries in Europe - North American Free Trade Agreement (NAFTA) [1994] = among the 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 SE Asia - Common Market of Eastern and Southern Africa (COMESA) [1993] = among 19 member countries in Eastern and Southern Africa

Environmental Issues

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

Trade Compliance Systems Benefits

- INCREASED level of COMPLIANCE compared to a manual process - DECREASED number of PHYSICAL INSPECTIONS by US Customs & Border Protection - FASTER release of shipments by US Customs & Border Protection - AVOIDANCE of FINES and PENALTIES - Opportunity to interface with other systems

Global Supply Chain Opportunities

- Increased REVENUE through global business and economic opportunities - Increased SOURCING option with more potential sources of supply to choose from including potential economic opportunities

Trade Compliance Systems (or Global Trade Management Systems)

- Keep Current - Automate the process of checking every transaction for commercial and non-commercial products against every legal regulation before import or export

Foreign Trade Zones (FTZ's)

- Secure sites in US under supervision of US Customs - FTZs offer storage, exporting, manufacturing, assembly, repacking, testing, and repairing services - Import duties and taxes are paid only when the goods leave the FTZ and enter US commerce

Government Taxes and Incentives

- Several levels of government must be considered when evaluating potential locations - Tariffs are federal taxes that are designed to protect local businesses

Utility Availability and Cost

- Supply of electricity has not kept pace with the high speed of development - In heavy industries the availability and cost of energy are critical considerations

Global Supply Chain Challenges

- Tariffs or duties - Transporting goods across borders - Customs, business practices, and REGULATION vary by country - Foreign markets are not homogeneous even within the country

Access and Proximity to Markets

- 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 real estate

International Freight Security

- Transportation across national boundaries introduces added complexity, particularly security - Since 9/11 there is more conflict between the US government and industry regarding more security and restrictions for international shipments

International Trade Compliance

-Complex process -Dozens of laws, regulations, and rules have to be checked and complied with for every import and/or export transaction -Staying UP TO DATE is a major challenge -35 ducuments -600 laws -25 parties

Penalties for Violations

1.) Criminal Penalties: - Substantial fines and/or 10+ years imprisonment 2.) Civil Penalties: - Substantial fines per occurrence - Individual and/or company sanctions 3.) Statutory Sanctions: - Seizure and forfeiture of items in violation - Loss of import and/or export privileges - Detailed inspections of shipments and delayed release by US Customs & Border Protection

Right-to-Work Laws

25 states have laws protecting the right of employees to decide whether or not to join or support a union

Offshore Factory

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 - Low cost w/ minimal technical and managerial resources - E.g., Clothing produced in Bangladesh, Indonesia

Server Factory

A factory set up to take advantage of government incentives, reduce taxes/tariff barriers to meet regional 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 - E.g., Coca-Cola bottling. Mix the final ingredients to take advantage of exchange rates, tariff, taxes

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

The Weighted-Factor Rating Model

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

International Trade Management (ITM)

Complex process to manage international trade 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.

US Customs and Border Protection (CBP)

Controls the import process - It is the gateway agency for more than 20 other government agencies, each of which has some control over various aspects of international trade - 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

Global Logistics Intermediaries

Customer brokers International Fright Forwarders Trading companies Non vessel opereatinf common carriers

Outpost Factory

Factory set up in an area with an abundance of advance supplier, competitors, research facilities, etc. Setup in a location within proximity to: - Advance suppliers - Competitors - Research facilities & Universities for materials, components, and products - E.g., Silicone Valley

Contributor Factory

Focused on product development and engineering for products they manufacture Basically, a Server Factory which also includes: - Product development - Production planning - Procurement decisions - Supplier development - E.g., 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

Business Clusters

Geographic concentrations of interconnected companies and institutions - Research parks and special economic/industrial zones serve as magnets for business clusters

US Department of Homeland Security (DHS)

Government agency who's mission is to: - Prevent terrorist attacks within the US - Reduce America's vulnerability to terrorism - Minimize the damage from potential attacks and natural disasters

Currency Stability

Impacts business costs and consequently location decisions

Global Logistics

International Freight Security

Global Location Decisions

Involve Location of the facility, defining it strategic Role, and identifying the Merket it serves

Source Factory

Manufactures products at low cost but with skilled workers and significant managerial resources Basically, an offshore factory that includes: - Plant management in supplier and production planning - More developed local infrastructure - Access to skilled workforce - Low production costs - E.g., Hewlett-Packard Singapore factory produced calculators and keyboards

Customs Brokers

Move global shipments through customs and handle documentation

International Freight Forwarders

Move goods to and from foreign destination

6 Global Facility Types

Progress from basic to more comprehensive from 1 through 6 1.) Offshore Factory 2.) Source Factory 3.) Server Factory 4.) Contributor Factory 5.) Outpost Factory 6.) Lead Factory

Trading Companies

Put buyers and sellers from different countries together and handle export/import arrangements, documentation, and transportation

Lead Factory

Source of product and process innovation and competitive advantage across the entire organization (world-class) - Source of innovation - Competitive advantage of the organization - E.g., Intel factory in Penang, Malaysia opened in mid 1970s, now is a lead factory. This is your Go-to factory

Access to Suppliers and Cost

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

Deemed Export

The release of technology or source code that is subject to the Export Administration Regulations, to a foreign national located in the US

Break Even Model

Useful location analysis technique when FIXED and VARIABLE costs can be determined - Identify 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

World Trade Organization (WTO)

WTO functions include: - Administering agreements - Forum for trade negotiations - Trade disputes - Monitor trade policies - Aid for developing countries - International organizations

Location Evaluation Techniques

Weighted-Factor Rating Model Break even Model

Labor Issues

- Labor availability, productivity, and skill - Unemployment/underemployment rates - Wage rates; turnover rates; labor force competitors

Global Location Factors (12)

-Tax and incentives -Currency Stability -Proximity to Customer -Labor rates: Right - to - work -Access to Suppliers -Utility Availablity -Environmental issues - Land Avaliability -Quality of Life: education, public safety, Governmetn -Business Clusters -Regiobnal Trade Agreements -WTO

12 Pillars of Competitiveness

1.) Institutions 2.) Infrastructure 3.) Macroeconomic stability 4.) Health and primary education 5.) Higher education & training 6.) Goods market efficiency 7.) Labor market efficiency 8.) Financial market sophistication 9.) Technological readiness 10.) Market size 11.) Business sophistication 12.) Innovation

Export Process

1.) When a shipment is ready to be exported, the shipper will file export documents for the goods' at the port of departure 2.) Shipments must conform to Export Administration Regulations 3.) Complete and submit a （Shippers Export Declaration） (SED) 4.) Submit a （commercial invoice） for the product

Import Process

1.) When a shipment reaches the US, the (Importer of Record- on test) will file the entry documents at the port of entry 2.) Goods are not legally entered into US commerce until: - The shipment has arrived within the port of entry - Delivery to the shipping destination has been authorized by CBP - Estimated duties have been paid 3.) CBP is also concerned with REVENUE COLLECTION.

NVOCC

like freight forwarder but only scheduled ocean liners(远洋班轮)