Chapter 2/3: Global Dimensions & Logistics in Supply Chains

Global trade

dependent on efficient and effective supply chain flows between and among the countries and regions of the world.

Factors influencing global trade

• Inflation • Military conflict • Threat of trade wars • The possibility of terrorism • Scarcity of raw materials • Disruptive weather events

3 distinct moves in most global supply chains

• From the origin facility to the point of export, • Between the two countries, • Goods from the Customs entry point at the border to the customer’s location.

Key organizations providing important services in global supply chain

• Export trading companies • Banks and other financial institutions • Insurance companies • Government agencies & international organizations • Facilitators including regional trade organizations and associations

Product protection

export packing & marking, container loading, insurance

Freight management

freight forwarding, documentation, rate negotiation

Product handling

import consolidation, cross docking, merge-in-transit

entry facilitation

customs clearance, bonded warehousing, duty drawback

comparative advantage and specialization

• Global competition • Leveraging labor • Technology • Cost

risk diversification

Expanding markets boosts sales, scales economies, enhances competitiveness.

The U.S. has a ___ trade balance which creates supply chain challenges of empty containers and partially filled ships returning to other countries.

negative

U.S. exports tend to focus on

natural resources

U.S. imports focus on

finished goods

Logistical trade guidelines

• Standardized terms and harmonized agreements ease trade challenges. • Regional trade deals, non-government entities enhance trade facilitation development.

USMCA

United States–Mexico–Canada Agreement

NAFTA

North American Free Trade Agreement

INCOTERMS

A set of standard trade terms used in international contracts

Define the respective obligations, costs and risks involved in the goods’ delivery from the seller to the buyer

GSCM professionals must manage

extended distances, longer transit times, and multiple carriers

Cost implications

• Low labor cost suppliers offer unit cost savings • Consider delivery and transportation costs • Include import duties in landed cost • Landed cost includes brokerage, fees, insurance, and overhead • Evaluate total costs of ownership • Excessive costs may discourage global trade

Security concerns

• Cyber-security issues • Intellectual property rights protection • Financial fraud • Safety of employees while traveling on international business

Security challenge

balance security with commerce efficiency

U.S. Maritime Act

mandates cargo manifest submission

Programs to promote security without inhibiting global trade and product flows

CSI, FAST, C-TPAT

Container Security Initiative

high risk containers at foreign ports

Free and Secure Trade

“Trusted traveler” shipping program

Customs-Trade Partnership Against Terrorism

fewer exams, priority, shorter wait times

Linear Supply Chain

Supplier —> Manufacturer —> Wholesalers —> Retailers —> Customers/Consumers —> Returns/Reserve Logistics

Includes return and reverse flows

Logistics

a process of planning, implementing, and controlling procedures for the efficient and effective transportation and storage of goods

Origin of logistics

The military; • Humanitarian relief efforts and military conflicts • Increased customer sensitivity

Logistics management

s logistics systems in the private, public/government, and nonprofit sectors

Business logistics

Plan, execute, control flow of goods, services efficiently

Military logistics

Integrating support for military readiness, reliability, efficiency

Event logistics

Manage, schedule, deploy resources for event

Service logistics

Managing facilities, assets, personnel, materials for business operations

Logistics activities

Transportation, warehousing and distribution, packaging, materials handling, inventory control, order fulfillment, inventory forecasting, production planning and scheduling, procurement, facility location, return goods handling, inventory control, salvage and scrap disposal

Logistics costs ___with economic growth as production ___

rise; expands

comparing total costs to gross domestic product (GDP) for growth

How to measure logistics efficiency

Transportation costs

represent approximately 60% of overall logistics costs. The physical movement or flow of goods in the network that moves the materials and finished products.

Principle costs

transportation, inventory carrying, and other cost

Price

Sellers of products often provide a discount schedule for larger purchase quantities

Product

• physical dimensions of products affect the utilization and costs of warehousing and transportation systems such as equipment needed, damage rates, storage ability, use of materials-handling equipment such as conveyors and pallets, industrial packaging, etc.

Promotion

organization making a promotional effort to stimulate sales should collaborate with the logistics manager so that appropriate levels of inventory will be available for distribution to the customer

Place

•  the distribution channel selection and involves both transactional and physical distribution channel decisions

Recent trends

Meaningful marketing-logistics synergy. • Customer service as marketing interface

Finance

• Inventory • Warehouses and transportation fleet owned and/or outsourced • Customer service

• Inventory • Warehouses and transportation fleet owned and/or outsourced • Customer service

Accounting

Cost information for analysis of alternative logistics options • Supply chain trade-offs and performance measurement

Order cycle

•  the time that elapses from when a customer places an order to when the customer receives the order

Cuts inventory for customers

shorter order cycle

Cost cutting

as vital as price slashing

Inventory effect

• Increasing inventory reduces lost sales. • organizations are usually willing to increase the inventory cost only until total costs start to increase.

Transportation effect

• Organizations often trade off transport expenses to cut lost sales costs, opting for better service. • Organizations can reduce the cost of lost sales by spending more on transportation service

Low density

more space, higher cost

Density

impacts transportation and warehousing

Higher density

lower transportation and warehousing costs

Spatial relationships

• Location of fixed points in the logistics system wrt demand and supply points • Effect on warehousing and inventory carrying costs – transportation costs increase with increased distance

Site location decisions

• Significant impact of distance and spatial considerations • Considerations: Distance to market, distance from suppliers, access to transportation

Pull system

• the product is pulled in response to demand

Push system

the product is pushed in advance of demand necessitates such as flexibility

Warehousing and Distribution

• focused on distribution; moving products into, through, and out of a facility

Packaging

industrial packaging protects the product during movement and storage and includes materials

Materials handling

usually used for such short-distance warehouse movement and includes equipment. Increased emphasis upon timely delivery of products has led to more automation in storage facilities