Recommended read: The World Is FlatBy Thomas FriedmanISBN: 0-374-29288-4

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Chapter 3

Global Dimensions of Supply Chain

7-9 min- Bangalour20-24 min- Netscape29-30 min- Supply Chaining

http://video.mit.edu/watch/the-world-is-flat-9145/

Joke: 3 That is Globalization.htm

Learning Objectives 1 Dell Inspiron 600m notebook Supply Chain.doc

Describe the scope of a global company’s supply chain network and understand what questions are appropriate for the network to function on a competitive basis.

Understand the three major phases of globalization. 1.0 Countries 2.0 Companies 3.0 Individuals

Appreciate the complexity and magnitude of the operations of some successful global companies and why global expansion is important to their growth.

Explain how technology and service specialists can help companies, especially small- to medium-size firms, penetrate the global marketplace.

Learning Objectives (cont.)

Appreciate the importance and magnitude of the trading partner countries of the United States and Canada.

Understand the nature of global markets and competitive strategy.

Explain the rationale for global security measures and the balance necessary to ensure that such security measures do not impede trade.

Discuss global transportation options and strategic intermediaries.

3 Japan Earthquake impact on Supply.doc

3 Japan Earthquake impact on Supply Automotive.doc

Wal-Mart, Supply Chain, Globalization* As consumers, we love supply chains, because they deliver us

all sorts of goods at lower and lower prices. Economists calculated a saving of $4,000/year to each family,

because of Wal-Mart. That is due directly, to lower prices at Wal-Mart and indirectly, by the pressure on prices of other retailers.

As workers, we are sometimes hostile to these supply chains, because they expose us to higher and higher pressures to compete, cut costs, cut wages and benefits.

In 2004, Wal-Mart purchased from 5000 Chinese suppliers, $18,000 million worth of goods.

HP sells 400,000 computers (products and components come from all over the world) through Wal-Mart stores, each day, during the Christmas season.

Technology and political events enabled globalization

Supply Chains in a Global Economy

Economies and companies could improve their “wealth” by allowing specialization of tasks.

The advantage is true as long as you can sell the increased volume that is produced. It is an important role of logistics to help extend the market area of countries or companies through improved efficiency to lower the “landed cost” in new market areas.

Major differences in Global Logistics (VS Domestic)*

Distance Logistics networks tend to become more expensive

and complex. Thus, lead times and inventory may rise.

Language Units of measure Dates of public holidays Time zones Culture Currency exchange

Major differences in Global Logistics (VS Domestic)*

Political stability Infrastructure of several countries Environmental regulations Labeling laws Custom and tax regulations Transport regulations Documentation and paperwork

Global Markets and Strategy

The global business environment has changed significantly and become much more conducive to business activity between and among different countries.

Success in the global market place requires developing a cohesive strategy, including product development, technology, marketing, manufacturing, and supply chains.

Global markets and strategy have four important characteristics: standardization reduces complexity global competition reduces the product life cycle traditional organizational structures and business models

frequently change globalization introduces more volatility

Supply Chain Security: A Balancing Act

Given the importance of global trade to the United States, a delicate balance exists between security and the efficient flow of global commerce.

More cargo inspections, much more paperwork, and a longer time to clear U.S. borders are now a reality.

C-TPAT is a cooperative effort to secure the global supply chain and to facilitate legitimate cargo and conveyance.

Ports

Ports are a critical part of global supply chains and also a major focus for global security.

America’s ports are a vital part of its global commerce. Over $2 trillion in trade value per year passes through U.S. ports, and over $18 billion is collected in industry fees and taxes.

A Typical Truck Shipment Crossing into Mexico

Global Transportation OptionsOcean

The most pervasive and important global shipment method, accounting for two-thirds of all international movements. Major advantages are low rates and the ability to transport a wide variety of products and shipment size

Three major categories: Liner service Charter vessels Private carriers

Air Fast transit times An advantage in packaging Disadvantage of air carriage is high rates

Global Transportation Options (cont.)Motor

Use motor transport when shipping goods to between the United States and Mexico or Canada

It is very common in Europe Motor also plays a large part in intermodal shipments

Rail International railroad use is also highly similar to domestic rail

use Intermodal container shipments by rail are increasing Maritime bridge concepts

Land bridge

CIFFA- Canadian International Freight Forwarding Association*

Attwel Drive, Toronto, ON, M9W 5Z5 (Etobicoke)Tel: 234-5100 http://www.ciffa.com/

Most international shipments involve more than one mode of transport. It would be nearly impossible for an individual exporter or importer to arrange with the various carriers, especially overseas, to pick up, document, insure, transport, store, report to customs and deliver the goods to destination.

A freight forwarder is capable of covering all of the above activities (using different 3rd party companies)

Strategic Channel Intermediaries-Freight Forwarders* CIFFA: “All about the smooth flow of international trade” Supplies expertise to international shippers Consolidate small shipments into more economical sizes Derives income from fees for service

There are 3 main areas of expertise:1. Understanding the terms of sale and terms of delivery between seller

and buyer. And ensuring that data and documents are compliant.2. Selecting the right choice of mode and route of transport, and

completing the related documentation.3. Import/Export documentation and custom clearance

Strategic Channel Intermediaries (cont.)Non-Vessel-Operating Common Carriers

Consolidates and dispenses containers at inland points Uses the shipping expertise that NVOCCs possess Ocean carrier gains from the increased market area

Export Management Companies EMCs act as agents for domestic firms in the international arena Obtain orders, selecting appropriate markets, distribution channels, and

promotional campaigns

Export Trading Companies ETC exports goods and services to overseas buyers and handles most of the

export arrangement ETC allows small- to medium-size firms to engage in foreign trade

Strategic Channel Intermediaries (cont.)Customs House Brokers

Oversee the movement of goods through customs and ensure that the documentation accompanying a shipment is complete and accurate for entry into the country

Operate under power of attorney from the shipper to pay all import duties due on the shipment

The importer is ultimately liable for any unpaid duties

Keeps abreast of the latest import regulations and specific requirements of individual products

Storage Facilities and Packaging

Transit sheds provide temporary storage while the goods await the next portion of the journey

Carrier provided hold-on-dock storage free of charge until the vessel’s next departure date

Public warehouses are available for extended storage periods.

Bonded warehouses operate under customs agency’s supervision and are used to store, repack, sort, or clean imported merchandise entered for warehousing without paying import duties while the goods are in storage.

Packaging

Export shipments moving by ocean transportation require more stringent packaging than domestic shipments normally do

The shipper may find settling liability claims for damage to export goods very difficult. Usually, the freight handling involves many firms, and these firms are located in different countries.

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Some Symbols Used for Packing Export Shipments

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Foreign Trade Zones (FTZs)

Goods enter without customs formalities, duty or bond.

Shippers can break bulk before entry. Goods can be processed, repacked, or

remarked to avoid fines before entry. Buyer can test or sample before entry. Goods can be stored indefinitely and/or re-

exported without paying duty.

Student Feedback Questionnaire: Q16, Q17, Q18

16. The guest speakers on Purchasing- Dorina and Ron, were good (Feb/05)

17. The guest speaker on Supply Chain Management from Sears Canada- Jery Marion, was good (Mar/05)

18. The field trip to the aviation manufacturing company- CFN, was good (Mar/12)

Comment on the back of the page:16. The guest speaker on ERP- Jacob Chan, was good

(Mar/26)