BA 244 Supply Chain Management

Reminders •  Next Article: Big data analytics in logistics and supply

chain management: Certain investigations for research and applications

•  LinkedIn Group: Presentation Grades for •  (1) Nike and Zara •  (2) Article 1 and Lenovo

Mattel •  Closed'Loop'Supply'Chain'•  Lead'Scandal'in'China'

GLOBAL SUPPLY CHAINS

How long to transport from China to the UK?

How long to transport from China to the UK?

As of 19 January 2017, we have more options

China-UK Freight Train •  Covered'8,000'miles'•  Passed'through'Kazakhstan,'Russia,'Belarus,'Poland,'Germany,'Belgium,'and'France'

•  Packed'with'34'containers'carrying'clothes,'shoes,'suitcases,'and'other'goods'made'in'China'

•  Will'run'as'a'weekly'service,'similar'to'trains'China'Railway'already'operates'to'Germany'and'Spain'

•  Forms'part'of'Chinese'President'Xi'Jinping's'vision'for'"One'Belt'One'Road"'trade'iniLaLve,'oMen'referred'to'as'the'new'Silk'Road,'a'network'of'historic'trade'routes'

30 DAYS CHINA'TO'UK'

18 DAYS CHINA'TO'UK'

ARGUMENT FOR GOING LOCAL Global'vs.'Local'Sourcing'

Transport Cost •  10'years'ago,'oil'price'was'USD'30'per'barrel'•  Recently,'oil'price'is'around'USD'60'per'barrel'with'upward'price'curve'

•  USD'1'rise'in'oil'='1%'increase'in'transport'cost'

Supply Chain Risk •  Extended'lead'Lmes''•  Exchange'rate'risks'which'give'a'lack'of'certainty'to'the'eventual'price'to'be'paid'(e.g.'Brexit'–'22%'drop)'

•  Variable'lead'Lmes'as'the'supply'pipeline'extends'e.g.'problems'due'to'delays'caused'by'port'congesLon''

•  Loss'of'control,'especially'of'second'Ler'suppliers''•  ReputaLonal'risk'•  Loss'of'IPR'as'there'is'oMen'less'legislaLve'protecLon'or'enforcement'in'developing'countries''

•  GeobpoliLcal'risk'

Loss of Agility •  Due'to'extended'lead'Lmes'•  Imbalance'between'the'need'for'organisaLons'to'be'able'to'respond'to'shiMs'in'the'market'or'innovaLons,'and'the'ability'of'extended'global'supply'chains'to'respond'quickly'

•  e.g.'a'leading'retailer,'through'offshore'sourcing'of'clothing,'needed'to'determine'fashions'one'year'ahead.'When'the'forecast'demand'failed'to'materialise,'they'were'faced'with'a'pipeline'full'of'stock'for'which'there'was'liele'demand.'

Sustainability •  Carbon'footprint,'especially'through'global'sourcing’s'increased'need'for'transport''

•  Exported'our'domesLc'carbon'footprint'elsewhere'as'goods'are'manufactured'abroad''

ARGUMENT FOR GLOBAL SOURCING

Global'vs.'Local'Sourcing'

Global sourcing is necessary to sustain our way of life •  RaLo'between'populaLon'and'land'resource''•  The'amount'of'producLve'land'needed'to'sustain'an'individual'in'their'current'way'of'life'vs.'the'amount'of'available'producLve'land'

•  Many'naLons'are'in'deficit'and'the'argument'goes'that'they'need'to'trade'globally'to'sustain'that'lifestyle'

Sustainability •  A'number'of'documented'cases'where'global'sourcing'has'been'found'to'have'less'impact'on'the'environment''

•  e.g.'Research'by'Christchurch'University'found'that:'•  New'Zealand'lamb'sold'in'the'UK'vs.'lamb'produced'in'the'UK'•  New'Zealand'lamb'was'found'to'produce'688'kilograms'of'CO2'emissions,'approximately'25%'less'than'the'UK'lamb'even'when'taking'into'account'the'distances'the'product'was'transported'

•  This'was'in'part'due'to'less'intensive'farming'methods'needing'less'use'of'ferLlizer'on'the'grazing'land'

Global Trade Contributes to Peace •  NaLons'that'trade'together'are'unlikely'to'go'to'war'

In Conclusion.. •  Predictable'products'are'suitable'for'low'cost'country'sourcing'

•  Whereas'more'difficult'products'are'more'appropriate'for'local'sourcing''

International Sourcing

Sourcing goods and services ‘overseas’ or other-

country suppliers: essentially, ‘importing’�

DOCUMENTS*FOR*OVERSEAS*IMPORTS*

Document � Descrip-on �Invoice'(or'probforma'invoice) � Evidence'of'a'contract'between'buyer'and'seller�

Bill'of'lading� Evidence'of'a'contract'for'carriage�

Seaway'/'airway'bill � Evidence'of'contract'for'carriage'by'sea'or'air�

Insurance'policy'/'cerLficate� Evidence'that'insurance'has'been'effected�

CerLficate'of'Origin � Evidence'of'the'country'of'origin'of'the'goods�

Documentation in Relation to Imports

Bill of Lading

•  Documents signed by a ship owner which states that

certain goods have been shipped on a particular ship

•  Evidence of a ‘contract for carriage’

•  Document of title (ownership)�

INCOTERMS*

When'imporLng,'a'buyer'may'find'itself'involved'in'at'least'three'separate'

contracts:'

•  The'actual'purchase'contract'

•  Contract'of'carriage'

•  Contract'of'Insurance'

Stipulates the obligations of the buyers and the sellers to

avoid misunderstandings and conflicts�

INCOTERMS*

Group � Du-es/of/Buyer///Seller �

E'terms � Seller’s'only'duty'is'to'make'the'goods'available'at'its'own'premises�

F'terms � The'seller'will'undertake'all'prebcarriage'duLes,'but'main'carriage'arrangements'are'responsibility'of'the'buyer�

C'terms � Seller'arranges'for'carriage'of'the'goods,'but'once'they'are'dispatched,'it'has'fulfilled'its'obligaLons �

D'terms � The'seller’s'obligaLons'extend'to'delivery'of'goods'at'the'specified'desLnaLon;'it'is'liable'for'damage'or'loss'and'insurances'in'transit�

Incoterms International Commercial Terms

Standard terms to to prevent ambiguity of law or jurisdiction in the event of a

dispute �

Incoterm � Name �Risk/and/

Responsibility/Pass/at:�

EXW� Ex'works.. � Named'Place�

FOB � Free'on'board.. � Named'Port'of'Shipment�

CFR� Cost'and'Freight.. � Named'Port'of'DesLnaLon �

CIF� Cost,'Insurance,'Freight.. �

Named'Port'of'DesLnaLon �

INCOTERMS*FOR*SEA*FREIGHT*

Manila

Clark

Beijing

Tianjin

EXW

FOB

CFR CIF

DDP

EXW Beijing

FOB Tianjin

CFR or CIF Manila

DDP Clark

Trading/blocs'are'economic'arrangements'created'among'a'group'of'

countries'

•  FreeBtrade/area'–'barriers'to'trade'among'members'are'removed;'no'

discriminatory'taxes,'tariffs'or'quotas'are'imposed'

'

Outside'trading'blocs,'trade'is'subject'to'taxes'and'duLes'(tariffs)'and'nonb

tariff'measures'like:'

•  Quotas'–'limits'on'quanLLes'of'specified'products'allowed'for'import'

•  Compliance'with'quality,'health'&'safety,'environmental'regulaLons'

•  Government'subsidies'to'domesLc'producers'(price'compeLLon)'

INTERNATIONAL*SOURCING*

PHILIPPINE*FREE*TRADE*AGREEMENTS*

ASEAN

ASEAN-Australia-New

Zealand

ASEAN-India

ASEAN-Japan ASEAN-China

ASEAN-Korea PH-Japan

IMPORT*DUTIES*AND*TARIFFS*

Customs/or/Import/du-es'are'indirect'taxes'levied'on'imports'at'the'

point'of'entry;'assessed'on'the'CIF'value'

'

Landed/value'is'the'value'of'goods'plus'freight'and'insurance'

IMPORT*DUTIES*AND*TARIFFS*

Exchange'Rate:'PHP'47:'1'USD'

DuLes'for'Imported'Frozen'Pork'Cuts:'40%'

'

1.  CIF'Price:'USD'2.50'/'kg'

EsLmate'for'Local'LogisLcs'Cost:'5%'

No'VAT'

Landed'Cost:'?'

'

2.'FOB'Price:'USD'2.60'/'kg'

Freight'Cost:'USD'0.02'/'kg'

Local'Handling'and'Margin'Cost:'PHP'18.23'

No'VAT'

Landed'Cost:'?'

'

3.'DomesLc'Price:'PHP'169'/'kg'

PAYMENT*MECHANISMS*

An'overseas'supplier'may'not'be'enLrely'confident'that'it'will'be'paid'for'

goods,'once'the'buyer'has'got'hold'of'them.'

'

Ways'to'arrange'internaLonal'payments'include:'

•  Payment'in'advance'–'low'risk'for'seller'but'high'risk'to'buyer'(nonb

delivery'or'loss'of'value'in'transit)'

•  Leeers'of'credit'(LC)'–'buyer’s'bank'guarantees'payment'to'supplier,'

once'T&C'of'the'sales'contract'have'been'saLsified'(e.g.'by'

presentaLon'of'a'bill'of'lading'or'other'documentaLon)'

FREIGHT*FORWARDERS*

TradiLonal'Role'

•  Transport'

•  (Customs)'Clearance'

•  Insurance'

•  Delivery'to'the'Buyer'

CONTAINER*

LCL'–'Less'than'Container'Load'

FCL'–'Full'Container'Load'

TEU'–'Twenty'feet'equivalent'unit'–'20’'container'–'21,670'kg'

FEU'–'Forty'feet'equivalent'unit'–'40’'container'–'26,480'kg'

RISKS*IN*INTERNATIONAL*SOURCING*

Costs'caused'by'transport'risks'and'delays'

Exchange'rate'risk'

Quality'risks'

Increased'lead'Lmes'

Legal'risk'

NegoLaLon'and'relaLonship'risks'

END