Intro to Supply Chain Management Chapter 10 Rutgers Taitt

Facility location Decisions

- Define each facility strategy goals

- Determine location for each facility

- Identify market that each facility serves

Offshore Factory

- Factory set up for manufacturing/assembly in a country where labor/raw materials are less expensive for import back to manufacturers home country

Source Factory

- manufactures products at low cost, but with skilled workers and significant managerial resources

- plant management involved in supplier selection & production planning

Server Factory

Factory set up to take advantage of government incentives and/or reduced tax/tariffs barriers to meet regional or local market needs

Contributor Factory

Focused on product development and engineering for products they manufacture

Outpost Factory

Factory set up in an area with abundant advanced suppliers, competitors, research facilities

Lead Factory

source of product and process innovation and competitive advantage across the entire organization

12 pillars of competitiveness

1. Institutions

2. Infrastructure

3. Macroeconomic stability

4. Health and Primary education

5. Higher education and training

6. Goods market efficiency

7. labor market efficiency

8. Financial market sophistication

9. Technological readiness

10. Market size

11. Business sophistication

12. innovation

Global Location Factors

- Competitiveness

- Taxes & Incentives

- Currency Stability

- Access and Proximity to Markets

- Labor Issues

- Right to work laws

- access to suppliers and cost

- utility availability and cost

- environmental issues

- land availability and cost

- quality of life issues

- business clusters

- trade agreements

Quality of life issues

- Education

- Economy

- Natural Environment

- Social Environment

- Culture

- Healthcare

- Government / Politics

- Mobility

- Public Safety

- Recreation

World Trade Organization (WTO)

Deals with global trade rules between nations

Weighted Factor Rating Model

compares attractiveness of several locations along several quantitative and qualitative dimensions

Weighted factor rating model steps

1. Identify Factors

2. Assign weights to each that sum to 1

3. determine a score for each factor

4. Multiply factor score by weight, then sum

5. highest score is recommended location

Break even model

location analysis technique when fixed and variable costs can be determined

-

Global Supply Chain opportunities

- Increased revenue

- Increased sourcing options

Global Supply Chain Challenges

- Tarrifs / duties

- cross border transportation is complex

- customs and regulations

Global Logistics

International Freight Security

- Tougher since 9/11

US Department of Homeland Security

- Prevent terrorist attacks in US

- Reduce America vulnerability to terrorism

- minimize damage from potential attacks and natural disasters

US Customers and Border Protection

- Gateway agency for > 20 other gov agencies

- mission to safeguard americas borders

- established in 1789, became aprt of USDHS in 2003

- inspections at ports of entry

International Trade compliance (ITC)

Completing and filing and complying with many laws and documents

Staying up to date on ITC is difficult because:

- The info changes frequently

- Often only available in foreign language

- not always produced in electronic form

Violating trade regulations

Can result in fines up to 40% of value of merchandise for "negligence" which can mean simply failing to keep certain necessary records

Trade Compliance Systems

- Only way to keep current with continuously changing laws

- Automate the process of checking every transaction

Benefits of trade compliance systems

- Increased level of compliance

- decreased number of physical inspections by US customs & border protection

- Faster release of shipments by US customs & border control

- Avoidance of fines and penalties

- Opportunity to interface w/ other systems

Import Process

When shipment reaches US the importer of record (owner) must file entry documents

Goods are not legally entered into US commerce until:

1. Shipment has arrived

2. Delivery to shipping destination has been authorized by CBP

3. Duties have been paid

Foreign Trade Zones (FTZ)

Physical areas inside the US supervised by US customs and border protection that are considered outside of the US

- merchandise is not subject to taxes

- no time limit

Permitted activities in FTZ

- Assembly

- Exhibition

- Inspection

- Salvage

- Destruction

- Reclassification

- Manufacturing

- Processing

- Storage

- Testing

- Relabeling

- Repackaging

Export Process

- Shipper must file export documents

- conform to export administration regulation

- complete and submit shippers export declaration

- submit commercial invoice for product

- know all about what, where, and who the product is and is going

Deemed Exports

Release of technology or source code subject to export administration regulations to a foreign national located in the US

- can be intentional or unintentional

Penalties for violations

- Criminal Penalties (fines or prison)

- Civil Penalties (fines or sanctions)

- Statutory Sanctions (forfeiture of items, loss of import/export privileges)

Customs Brokers

Move global shipments through customs and handle documentation

International Freight Forwarders

Move goods to and from a foreign destination

Trading Companies

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

Non vessel operating common carriers (NVOCC)

Operate like freight forwarders, but only use scheduled ocean liners