1 1 Transportation & Supply Chain Systems John H. Vande Vate Spring 2008.
1 1 Landed Cost Models John H. Vande Vate Fall 2009.
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1 1 Landed Cost Models John H. Vande Vate Fall 2009
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3 3 Features Typically “piece price” and logistics focused Accumulate costs from supplier to … –Factory –DC –Point of revenue, e.g., customer Used at both the SKU level and family level Apply some standardized metric –$/standard case Allocate shared costs and fixed costs
Transcript of 1 1 Landed Cost Models John H. Vande Vate Fall 2009.
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Landed Cost Models
John H. Vande VateFall 2009
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Frequently Used to Evaluate
• A product launch• Changing a supplier• Changing a distribution network• Changing modes• Changing ports or gateways• …
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Features• Typically “piece price” and logistics focused • Accumulate costs from supplier to …
– Factory– DC– Point of revenue, e.g., customer
• Used at both the SKU level and family level• Apply some standardized metric
– $/standard case• Allocate shared costs and fixed costs
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Typical Components• Logistics-Transportation
– Freight• Ocean, Air, Truck, Rail• Fuel Surcharge
– Duties, Taxes, Fees• Brokerage• VAT• Forwarding
– Customs Duties & Fees
• Manufacturing– Raw Material Costs
• Direct material• Consumables
– Labor• Assembly• Quality Audit• Configuration• Shipping• Export documentation
– Testing• Test equipment
• Inventories– Usually primitive
• Packaging– In many cases packaging is a
major component especially returnable packaging
• Handling– Sequencing, cross docking, …
• Management Overhead
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Additional Factors• Incidental Costs
– Travel Expenses• Air Fare • Hotel and travel expenses• Contract Manufacturing (soft) expenses rolled into the cost of the product
– Expedites• End of Quarter/End of year demand• Unexpected spikes in demand
• Sensitivity Analysis– Volatile cost components
• Certain commodity prices• Transportation• Fuel surcharge• FX• Labor rates• …
– Risk-Supply Chain Disruptions• A Port Strike on the West Coast• A power disruption at CM• Limited lift during peak season• …
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Examples
• Ford: China Sourcing– Typically by part or part family– Compare with “landed cost” of
current source
Supplier
Consolidation
Port
PickUp
Air/Ocean Carriers
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Scenario 1 - RM purchased in the US Exported to Brazil
Material 1 FOB JAXCompany Source 1 TransitSource Location Charlotte NC Shipment Freq.Product Desc. 1/150/34 Origin Charlotte NCUnit Measure lbs Destination Sao Paulo BrazilOverpack Lead Time/daysUnits per Case 24 Production 21
Length 29.5 Origin Dray 1Width 20 Ocean transit 19
Height 35.75 Destination/Del 7Actual Weight 137 lbs Total Lead Time 48Chargable Wtg 127.06 ForwardingCubic Meter 0.35 Transp. Mode OceanPallet Info LCL Rate/Cbm port to door
Length FCL/20' TEU $885 600 +240 + 45Width Units per 20' TEU 1680
Height Lbs. Per 20' TEU 9590 port to doorActual Weight 1096 lbs. FCL/40' FEU $1,345 1000 + 280 + 65Chargable Wtg 0.00 Units per 40' TEU 3408Cubic Meter 0.00 Lbs. Per 40' TEU 19454Unit Price/lb. $0.91 Exit Port JAXUnits/Pallet 192 Destination Port Santos, Brazilweekly volume, lb 2400 Incoterm DDP Sau Paulomonthly volume, lb 10392 local dray insurance $138 per unitannual volume, lb 124800 Insurance 1% CIF-V $1,248 Annualannual Tons 62.40Annualized Cost Freight CostBlended FCL/Lb. $0.09 Unit cost/ 20' TEU $0.61Total Freight $11,232 Cost/Lb/ 20' TEU $0.11Import Value $113,568 Unit cost/ 40' TEU $0.44Annualized CIF Value Cost/Lb/ 40' TEU $0.08
$124,800 Import Duty-TaxesImport Duty $19,968HTS # 5402.33.00 16%Industrial Tax 0Circulation Tax $31,778Pis/Cofins Tax $16,331Brokerage Fees60% 40' TEU's 440% 20' TEU's 5 9B/L Fee $226 $25Doc Tax $724 $80AFRMM Tax $2,808Customs Clearance $1,630 $180Storage if Necessary $499Total Projected Annual Cost
$198,765Cost per Unit
$1.59
RM Sourced and Purchased in US
Transport & Import into Brazil
• For a supplier to GM – Asked to increase sourcing from Brazil
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Sensitivity to Volatile Variables
• Certain commodity prices• Transportation• Fuel surcharge• FX• Labor rates
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FX Volatility
• RMB to USD 21% appreciation
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Inflation Rate
• China inflation rate – cost of operations
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Shipping • The BDI indicating changes in shipping
costs
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Locating a single facility
• US On Highway Retail Diesel price Cents/Gallon
Cents per Gallon
0
100
200
300
400
500
600
10/10/2006 4/28/2007 11/14/2007 6/1/2008 12/18/2008 7/6/2009 1/22/2010
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Sensitivity Analysis
[c1x1/d1(x,y)+c2x2/d2(x,y)+c3x3/d3(x,y)] [c1/d1(x,y)+c2/d2(x,y)+c3/d3(x,y)]
But that depends on x!
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Next
• Supply Chain Design Overview• Introduction to Part 2: Managing
Variability
