Global Logistics & Supply Chains.pdf

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Copyri ght 2013 by The McGraw-H il l Companies, In c. All ri ghts reserved.McGraw-Hill/Irwin

Global Logistics& Supply Chains


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Region Country Name Logistics (Millions) GDP (Millions)

Logistics as % of

GDP

North America Canada 128,490 1,510,957 8.50%

Mexico 89,676 1,088,128 8.24%

United States 1,173,720 14,264,600 8.23%

Region 1,391,885 16,863,685 8.32%

Europe Austria 25,907 415,321 6.24%

Belgium 46,749 506,392 9.23%

Czech Rep 16,418 217,077 7.56%

Denmark 22,423 342,925 6.54%

France 188,005 2,865,737 6.56%

Germany 341,371 3,667,513 9.31%

GrBritain 169,947 2,674,085 6.36%Greece 51,770 357,549 14.48%

Hungary 8,721 156,284 5.58%

Ireland 22,122 273,328 8.09%

Italy 152,238 2,313,893 6.58%

Netherland 83,106 868,940 9.56%

Norway 44,475 456,226 9.75%

Poland 54,920 525,735 10.45%

Portugal 11,898 244,492 4.87%

Spain 151,513 1,611,767 9.40%

Sweden 44,864 484,550 9.26%

Region 1,436,445 17,981,814 8.22%

Pacific Rim Brazil 141,610 1,572,839 9.00%

China 1,160,349 8,083,000 14.36%

Egypt 15,219 162,164 9.38%

India 114,846 1,209,686 9.49%

Hong Kong 16,642 215,559 7.72%

Japan 440,482 4,923,761 8.95%

Korea S. 98,365 947,010 10.39%

New Zealand 9,799 128,492 7.63%

Russia 163,575 1,676,586 9.76%

Saudi Arabia 30,067 481,631 6.24%

Singapore 16,771 181,939 9.22%

Turkey 65,494 729,443 8.98%

Region 2,273,218 20,312,110 9.26%

Other 4,648,152 15,492,391 30.00%

Global 9,749,700 70,650,000 13.80%

Table 11.2 Estimated 2008 national

logistics cost


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Understanding the complexityoflogistics in the a globaleconomy

Setting the firm on a path

through the stages ofinternational development Export/Import

Local presence

Globally integrated enterprise

Managing the global supplychain differently from domesticoperations

Global supply chain integration

requires

NASA photo View of the Earth seen by Apollo 17 crew traveling toward the moon


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North American operating challenges Open geography

Extensive transportation options

Limited cross-border documentation

European operating challenges Relatively compact geography Numerous political, cultural, regulatory

and language situations

Congested transportation infrastructure

Pacific Rim operating challenges Island-based geography Relatively poor infrastructure

Extensive water and air shipments totravel vast distances

Complexity of logistics systems vary

significantly in each major global region


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Logistics in a global economy face more

complex operating characteristics

Increased uncertainty results

from

Greater distances

Longer leadtimes

Decreased market knowledge

Increased variability arises from

Unique customer requirements

Unique documentation

requirements Shifting political environments

Decreased control results from

Extensive use of international

service firms

Potential customs requirements

and trade restrictions bygovernments

Decreased visibility results

from

Longer transit times Longer holding times

Less ability to track shipment

locations


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INCOTERMS: What do they say about

responsibilities for costs/activities?

Source: ODM Group


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Figure 11.1

Generic International Strategies

Transnational

StrategyGlobal

Strategy

Multi-domestic

Strategy

No

International

Strategy

Low High

ForceTowardsLocal Responsiveness

Force

TowardsGlobal

Integration

High

Low

Source: Fitzsimmons, James and Mona Fitzsimmons (2011). Service Management: Operations,

Strategy and Information Technology, Seventh Edition (New York: McGraw-Hill). Pg. 352.


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Table 11.3

Differential Characteristics of Global Services

Development

Stages

Service

Focus

Marketing

Strategy

Delivery

Strategy

Management

Strategy

Human Resource

Development

No

international

strategy

Standard

product for

local market

Single

strategy

focused on

local market

Direct to customer Single simple

financials

Operated by

entrepreneur with

limited specialization

Multi-domestic

strategy

Domestic

marketing

and delivery

Domestic

customers

Collaboration Transaction

driven with

integrated

financials

Management with

home country focus

Global strategy Local marketcustomization

Focused

specific

market areaswhich may

cross

international

boundaries

Subsidiaries with

local presence

Decentralized

operations with

local profitresponsibility

Limited top

management with

internationalexperience

Transnational

strategy

Global

branding and

integrated

operations

Global

customers

Worldwide flow of

key resources

Centralized

planning in global

sites

International training

and experience


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Managing the global supply chain

Five major differences between

domestic and international

operations

Performance cycle

structure

Transportation

Operational

considerations

Information

systems integration Alliances


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Longer performance cycles for international operations Domestic is measured in days

International is measured in weeks or months E.g. fashion merchandise takes 30 to 60 days

Reasons for longer order cycle to delivery cycle times Communication delays

Financing requirements

Special packaging requirements

Ocean freight scheduling

Slow transit times

Customs clearance

Overall this change requires higher asset commitment Inventory is in transit for longer periods

Length of the performance cycle is a major

difference


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Removal of intermodal ownership and operation Reduced complexity of operation and tracking of international

shipping

Increased carrier privatization Government-owned carriers often costly and unreliable Privatization has led to increased availability of efficient carriers

Relaxing of cabotage restrictions in European Union Increases trade efficiency

E.g. US corporations save 10% to 15% in intra-European shipping costs Major constraints on physical infrastructure capacity

Significantly increasing demand on port and airport capacities

Infrastructure in much of the world was built over 50 years ago

Transportation is impacted by four

significant global changes


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Systems integration typically

lags the acquisition or merger

used to make the enterprise

global

Requires a substantial capital

investment

Requires two system types to

be integrated

ERP system

Global planning system

Few firms have fully integrated

global information systems or

capability

Information systems integration is a major

challenge


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Cost

Transport mode

Inventories

Agents

Financial risk

Cargo risk

Government

agencies

Administration

Communication

Cultural differences

About 10% of U.S. GDP today

Mainly truck and rail

Lower levels, reflecting short-order, lead-time

requirements and improved transport capabilities

Modest usage, mostly in rail

Low

Low

Primarily for hazardous materials, weight, safety

laws, and some tariff requirements

Minimal documentation involved (e.g., purchase

order, bill of lading, invoice)

Voice, paper-based systems adequate, with

growing usage of electronic data interchange and

Internet

Relative homogeneity requires little product

modification

Estimated at 14% of world GDP today

Mainly ocean and air, with significant intermodal

activity

Higher levels, reflecting longer lead times and

greater demand and transit uncertainty

Heavy reliance on forwarders, consolidators, and

customs brokers

High, owing to differences in currencies, inflation,

levels and little recourse for default

High, owing to longer and more difficult transit,

frequent cargo handling, and varying levels of

infrastructure development

Many agencies involved (e.g., customs, commerce,

agriculture, transportation

Significant paperwork; the U.S. Department of

Commerce estimates that paperwork cost for an

average shipment is $250

Voice and paper costly and often ineffective;

movement toward electronic interchange but

variations in standards hinder widespread usage

Cultural differences require significant market and

product adaptation

Domestic International

Domestic and International

Characteristic Differentials


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Logistics Performance Index (LPI)

Measures a countrys performance across sixlogistical dimensions1. Efficiency of the clearance process by border

control agencies, including customs

2. Quality of trade- and transport-relatedinfrastructure

3. Ease of arranging competitively priced shipments

4. Competence and quality of logistics services

5. Ability to track and trace consignments6. Timeliness of shipments in reaching the

destination within the scheduled or expecteddelivery time

14


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Highest- and Lowest-Rated Countries

Based on Overall LPI Score

Country LPI Rank LPI Score

Singapore 1 4.13Hong Kong,

China2 4.12

Finland 3 4.05

Germany 4 4.03

Netherlands 5 4.02

2012 Rankings

United States: Rank of 9th (3.93)

United States: Rank of 14th (3.84)
http://lpisurvey.worldbank.org/international/global?sort=asc&order=Countryhttp://lpisurvey.worldbank.org/international/global?sort=asc&order=LPI+Rankhttp://lpisurvey.worldbank.org/international/global?sort=asc&order=LPI+Scorehttp://lpisurvey.worldbank.org/international/global?sort=asc&order=LPI+Scorehttp://lpisurvey.worldbank.org/international/global?sort=asc&order=LPI+Rankhttp://lpisurvey.worldbank.org/international/global?sort=asc&order=Country


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Option 1: Domestic Purchase (USA)

Supplier

Warehouse in

Southern USA

Customer

Warehouse

Manufacturing &

Packaging Process

OrderFulfillment

Truckload

Option 2: Purchase in China - Ocean Shipment

China

Supplier

Customer

Warehouse

Supplier

Warehouse in

Southern USA

Manufacturing &

Packaging Process

Order

Fulfillment

Inspection

Process

Truckload40 Ocean

Cntr.

The Global Supply Chain: Total Cost

Example - Shipping Process


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The Global Supply Chain: Total Cost

Example - Shipping ProcessOption 3: Purchase in China - Air Shipment

China

Supplier

Customer

Warehouse

Supplier

Warehouse in

Southern USA

Manufacturing &

Packaging Process

Order

Fulfillment

Inspection

Process

TruckloadAir Transport

What other services or distribution options can be added?

Inspection?

Smaller shipments from supplier to customer warehouse?

Direct ship to end customer, bypassing customer warehouse?

Smaller Shipments ???


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The Global Supply Chain:

Total Cost Example - Plastic Cups in ChinaUSA Cost China Cost by Ocean

Raw Material Cost

Resin 2.40 2.40

Colorant 0.70 0.70

Package 1.32 1.32

QA Inspection N/A 0.15

Tooling Amortization 2.00 1.00

Molding Labor 0.35 0.18

Assembly/Packaging Labor 3.75 0.15

Freight 0.87 1.43

Port Terminal Handling N/A 0.08

STANDARD PURCHASE PRICE 11.39 7.41China Markup (10%) 0.74

Duty/Broker fee N/A 0.19

TOTAL COST TO BUYER 11.39 8.34

PRICE WITH 30% PROFIT 14.81 10.84

Inventory Carrying Cost (15%) N/A 0.82

Comparison Cost 14.81 11.66


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USA Cost China Cost by Ocean China Cost by Air

Raw Material Cost

Resin 2.40 2.40 2.40

Colorant 0.70 0.70 0.70

Package 1.32 1.32 1.32

QA Inspection N/A 0.15 0.15

Tooling Amortization 2.00 1.00 1.00

Molding Labor 0.35 0.18 0.18

Assembly/Packaging Labor 3.75 0.15 0.15

Freight 0.87 1.43 4.63

Port Terminal Handling N/A 0.08

STANDARD PURCHASE PRICE 11.39 7.41 10.53

China Markup (10%) 0.74 0.74

Duty/Broker fee N/A 0.19 0.19

TOTAL COST TO BUYER 11.39 8.34 11.46

PRICE WITH 30% PROFIT 14.81 10.84 14.90

Inventory Carrying Cost (15%) N/A 0.82

Comparison Cost 14.81 11.66 14.90

The Global Supply Chain:

Total Cost Example - Plastic Cups in China


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A list of general sourcing guidelines for

use in decision makingTable 12.5 Sourcing Guidelines

Global Logistics & Supply Chains.pdf

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