forest products marketing exam III

exporting

shipping a product to another country for sale

exporting markets

differ by industry (SW lumber, HW lumber, flooring, logs, etc)

approximately 50%

amount of all graded hardwood lumber exported from the US

basics of exporting

why do we export, where do we export, who exports, what kind do we export, when can we export, how do we export

reasons for exporting

new market opportunities, diversification, new products, increase in sales, new customers, increased profit

why some people export

hassle, don't know how, failure, risk, short-term effects, out of comfort zone

countries the US exports to

East Asia, Southeast Asia, Oceania, South Asia, Middle East, Europe (primarily western), South Africa, Mexico and the Caribbean, Canada

where we export lumber to

countries that have no wood, countries that have their own wood but don't like to cut it, countries that have one kind of wood but not another

manufacturers

makes lumber, sellers to merchants or foreign buyers with or without agents; sells to intermediaries

intermediaries

agents and merchants (jobber); wholesaler and importer

agents

do not take title to a product, negotiate sales between buyer and seller on commission; finds customers, sells for the mill but is not an employees

merchant (jobber)

buys from mill, marks up price and resells under their company name

buyers

industrial end user (furniture/flooring factory), ultimate buyer, consumes the lumber; exports to intermediaries (wholesaler and importer)

wholesaler

store product, break down large quantities into small orders; provide credit, packaging, arrange transport, some re-manufacture, some import; buys and stores, may also import

importer

some store and distribute a producer's product often exclusively, some do not sell the product but sell to another wholesaler in bulk

sales offices/companies

a producers sales office in a foreign country, employ salaried staff

brokers

can represent multiple manufacturers per product category; don't have a territory, independent, transactional

manufacturer's reps

represent one manufacturer per product category; have a defined territory, directed by manufacturer

jobbers

get large-volume orders from customers and then buy from manufacturers (take title), drop-ship from manufacturers directly to customer

industrial end-user

companies that reprocess the product; furniture manufacturers, homebuilders, door and window producers, etc

retail stores

sell to consumers and small industrial end-users a wide variety of products

pros to using intermediaries

more convenience, better insulation from problems

cons to using intermediaries

higher prices, less margin per participant

types of lumber we export

species, grade, dimensions, surfacing, moisture (green, shipping, dry, kiln dry), certification

when can we export

when a foreign customer is found, we get a buy-in, an order is signed, documentation is required, payment terms are agreed upon, have talked with the bank, decide how cargo will be shipped

holy trinity of export documentation

bill of lading, packing list, commercial invoice

bill of lading

title to goods

packing list

inventory of goods

commercial invoice

value of goods

other export documents needed

phytosanitary certificate, wood packaging certificate, certificate of origin

who ships the lumber

local trucker, freight forwarder, steamship line

local trucker

drops container at the mill for stuffing, transports container to port or rail head

freight forwarder

books space on the vessel, processes documentation, troubleshoots lost freight

steamship line

transports container on ship from port to port

prepping bundles for export

1 1/4 in steel banding, neatly trimmed ends, IPPC-stamped heat treated dunnage, no bark anywhere on any plank, 42" wide bundles, lengths 15-16', 13-14', 11-12', 9-10', 7-8', etc

shipping by containers

lumber typically shipped in a 40-foot steel shipping container, can be loaded on a ship/train/chassis for transport by truck; max weight 44,000 lbs

incoterms (international commerical terms)

international sales terms widely used throughout the world, used to divide transaction costs and responsibilities between buyer and seller; tell who pays for what and whose risk it is if the freight is damaged or lost/destroyed at a particular point in transit

EXW (Ex Works)

named place; the seller makes the goods available at his premises

FOB (Free On Board)

named loading port; seller must load the goods on board the ship nominated by the buyer, cost any risk being divided at ships rail

CFR (Cost and Freight)

named destination port; seller must pay the costs and freight to bring the goods to the port of destination, risk is transferred to the buyer once the goods have crossed the ships rail

CIF (Cost, Insurance, Freight)

named destination port; exactly the same as CFR except the seller must in addition procure and pay for insurance for the buyer

DDP (Delivered Duty Paid)

named destination place; the seller pays for all transportation costs and bears all risk until the goods have been delivered and pays the duty, aka free domicile

risks with international transactions

huge distance, no real legal recourse

ways to mitigate risk

bank-assisted methods of payment, export insurance, long-term relationship of trust with customer

payment term options

open credit, documents against payment (DP), letter of credit (LC), cash in advanced; moves safest for buyer to safer for seller

open credit

product and documents sent to buyer before buyer sends money to seller through bank

documents against payment (DP)

product sent to buyer and title sent through bank, title is traded to buyer with the exchange of payment

letter of credit (LC)

seller sends product to buyer and title to bank while buyer pays through the bank, bank trades title for payment and delivers payment to seller and title to buyer, then product is given

cash in advanced

buyer sends money to seller, seller sends title and product

logistics

the planning and controlling of the physical flow of product to the consumer

physical distribution

influenced by decisions regarding product, consumer, market area, and competitive advantage; company must consider dimensions of transportation

dimensions of transportation

modes (ship, rail, truck, air), routes, costs, timetables

pursuing commodity product strategy

distribution involves large volumes and regular but infrequent shipments where low cost is most important

pursuing custom-made product strategy

rapid transportation is most important with cost being secondary

components of physical distribution

transportation, material handling, oder processing, inventory control, warehousing, packagin

transportation

physically translocating a product

material handling

'touching' of the product; movement in the warehouse or factory with forklift, etc

order processing

process between the time the order is taken and the arrival to the customer (cycle time)

inventory control

how much stock to keep on hand

warehousing

storage

packaging

for protection, to facilitate shipment, and for branding

systems concept

management views logistics as a system of interrelated components

total cost approach

management attempts to minimize the costs of using the components taken as a whole

distribution manager (traffic manager/logistics manager)

minimizes total costs through management of carrier rates/selection, freight consolidation, documentation, tracking, expediting

carrier rates

how much the carrier charges

carrier selection

which transportation partner to use

freight consolidation

combining shipments and modes to minimize cost

documentation

bills of lading, packing lists, etc

tracking

following a shipment from departure to arrival

expediting

special, (expensive) rapid shipments

modes of transportation

water, rail, truck, air

full truckload (FTL)

shipper contracts whole truck, cheapest option if truck is full; flatbed (domestic), container (international)

milkrun

the truck makes multiple stops for the same shipper; cheaper than LTL

less than truckload (LTL)

a less than truckload quantity is sent via a third party who ships several shippers' freight on same truck; more expensive than FTL when quantity is large

expedited

a special, fast shipment; very expensive

parcel

UPS, FedEx; small quantities

truck modes (multimodal)

using multiple modes to reduce overall costs; consolidation, pool distribution

consolidation (inbound)

multiple pickups via LTL to crossdock, finish the journey with a full truck

pool distribution (outbound)

full truck to a pool point, local deliveries separated and shipped via LTL

sea modes

full container, LCL, break bulk

full container

40 foot container (for lumber), cheaper than 20'; 20 foot container (for knockdown furniture)

LCL (less than container load)

less than the container-load quantities from multiple shippers are consolidates into one container

break bulk

freight shipped without container (eg oversized freight)

intermodal

using more than one different mode to transport from one place to another; common intermodal method truck, rail, water via steel containers

reverse logistics

process of moving things from customers back to sellers (repairs, returns, recycling); often returned by different mode than initial delivery, can be expensive

transport management system (TMS)

logistics platform/software that uses technology to help businesses plan, execute, and optimize the physical movement of goods, both incoming and outgoing, and making sure the shipment is compliant and proper documentation is available

functions of a TMS

planning and optimization of transporting, inbound/outbound transportation mode and provider selection, real-time transportation tracking, service quality control in form of KPIs (key performance indicators), vehicle load and route optimization, cost control, freight negotiation, etc

possible logistics expenses that contribute to total cost

packaging/warehousing/loading costs, cost of damaged goods during handling/storage, domestic freight costs, harbor feed, freight insurance, etc

ensuring quality of distribution

proper packaging, good storage conditions, proper mode of transportation, careful loading and unloading, quick and careful transportation

reducing climate impact

using local suppliers and local available materials, improve material routing, consolidate delivering, return loading, cleaner fumes/lubricants, fuel consumption management, vehicle redesign, good maintenance procedures, etc

price

the amount of money that the supplier asks for a product or service and the amount which the customer provides

value

the amount of money the customer would potentially pay for that product/service; defined by the customer on base of personal utility

price optimization

understanding value from the customers perspective

pricing without consideration for value

price so high that sales are low, prices so low that revenue is lost

degree of price control

the ability of a company to control price depends partially on the characteristics of the product and marketplace

product considerations of price control

price of commodity products (like lumber) depend highly on the market, when product is unique the company has more control

short channel considerations to price control

company can price per its own objectives

long channel considerations to price control

company must also consider objectives of channel members

pricing in dynamic market environments

established market prices can change due to market trends, reactions of competitors, changes in raw material supplies; managers must carefully weigh the short and long term consequences of pricing decisions

pricing considerations

value to the customer, total cost of making and delivering product, influence of distribution system, direct competitor reactions, need to raise or lower price in the future, how price hits with the discount scheme, how the price fits into price of entire product line