November 10, 200 0 Changing Paradigm: Globa l Systems 1 BUENOS DIAS
Dec 25, 2015
November 10, 2000 Changing Paradigm: Global Systems 3
Stated Goals of this Workshop
• The new global paradigm
• Administration of global systems
• Implementing global strategies
• Managing across cultures
• Information technologies and organizations in global business
• Negotiations in the global environment
November 10, 2000 Changing Paradigm: Global Systems 5
Several Factors Propelling Trade
• Trade Agreements– EU– NAFTA– MERCOSUR– ASEAN– APEC
November 10, 2000 Changing Paradigm: Global Systems 6
Several Factors Propelling Trade
• Political Changes– Russia– Baltic– Balkans– China– India
November 10, 2000 Changing Paradigm: Global Systems 7
Several Factors Propelling Trade
• Socioeconomic– Education
– Wealth
– Income
November 10, 2000 Changing Paradigm: Global Systems 8
Two Facilitating Technologies
• Transportation/Logistics
• Information
November 10, 2000 Changing Paradigm: Global Systems 9
Agenda: This Morning• Markets and Marketing
– Marketing Process– Marketing Concept– Emerging Markets– International Marketing Environments– International Marketing Issues
• Entry Strategies• Marketing Mix Adaptation
• Logistics Introduction
November 10, 2000 Changing Paradigm: Global Systems 10
Agenda: This Afternoon• Logistics Mechanics
– Trade Intermediaries– Primary Modes
• Marine• Air
– NAFTA
• Supply Chain Management
November 10, 2000 Changing Paradigm: Global Systems 11
Markets and Marketing: Marketing Process
• Population– Who they are– Where they are– What do they look like– How much do they have to spend– What do they want– How many are there
November 10, 2000 Changing Paradigm: Global Systems 12
Markets and Marketing: Marketing Process
• Segment– Markets are not homogeneous– Basis
• Demographic• Economic• Psychographic• Purpose
November 10, 2000 Changing Paradigm: Global Systems 13
Markets and Marketing: Marketing Process
• Target– Right combination of
• People
• Dollars to spend
• Lack of competition
• Comparative Advantage
November 10, 2000 Changing Paradigm: Global Systems 14
Markets and Marketing: Marketing Process
• Position– We will never have a monopoly in a
target
– Do not overlook
– Differentiation
November 10, 2000 Changing Paradigm: Global Systems 15
Markets and Marketing: Marketing Process
• Marketing Mix– Product
– Price
– Promotion
– Place
– People
November 10, 2000 Changing Paradigm: Global Systems 16
Markets and Marketing: Marketing Concept
• Sustainable competitive advantage
• Identifying and delivering what the customer wants– Voice of the customer
– House of Quality
• External environments
November 10, 2000 Changing Paradigm: Global Systems 17
Markets and Marketing: Marketing Concept
Social
TargetMarket
November 10, 2000 Changing Paradigm: Global Systems 18
Markets and Marketing: Emerging Markets
• Demographics
• Economics
• Political Changes
• Trade Regimes
November 10, 2000 Changing Paradigm: Global Systems 19
Markets and Marketing: Emerging Markets
• Goods– Consumer– Manufacture
• Services– Tourism– Banking– Consulting
November 10, 2000 Changing Paradigm: Global Systems 21
Markets and Marketing: Emerging Markets
• Asia– India
November 10, 2000 Changing Paradigm: Global Systems 22
Markets and Marketing: Emerging Markets
• Asia– 4 Tigers
– China
November 10, 2000 Changing Paradigm: Global Systems 23
Markets and Marketing: Emerging Markets
• Europe– EU
November 10, 2000 Changing Paradigm: Global Systems 24
Markets and Marketing: Emerging Markets
• Europe– CIS
November 10, 2000 Changing Paradigm: Global Systems 25
Markets and Marketing: Emerging Markets
• Central and South America– Brazil
– Chile
November 10, 2000 Changing Paradigm: Global Systems 26
Markets and Marketing: Emerging Markets
• Mexico
November 10, 2000 Changing Paradigm: Global Systems 27
Markets and Marketing: Marketing Environments
• Financial Forces– Foreign Exchange Markets– Currency Exchange Rate Risks– Differing
• Tariffs• Taxes• Fiscal and Monetary Policies• Inflation• Accounting Practices
November 10, 2000 Changing Paradigm: Global Systems 28
Markets and Marketing: Marketing Environments
• Economic Forces– GNP
– GNP per capita
– Income Distribution
– Wealth Distribution
– Personal Consumption
November 10, 2000 Changing Paradigm: Global Systems 29
Markets and Marketing: Marketing Environments
• Socioeconomic Forces– Total Population
– Age Distribution
– Population Density and Distribution
– Gender Balance and Roles
– Multiple Income Households
November 10, 2000 Changing Paradigm: Global Systems 30
Markets and Marketing: Marketing Environments
• Physical and Environmental Forces– Most basic of all forces– Topography– Climate– Geography– Location– Natural Resources
November 10, 2000 Changing Paradigm: Global Systems 31
Markets and Marketing: Marketing Environments
• Sociocultural Forces– Aesthetics– Attitudes and Beliefs– Religion– Material Culture– Education– Language– Societal Organizations
November 10, 2000 Changing Paradigm: Global Systems 32
Markets and Marketing: Marketing Environments
• Political and Legal Forces– Open or Closed
– Receptivity to Trade and Investment
– Taxation
November 10, 2000 Changing Paradigm: Global Systems 33
Markets and Marketing: Marketing Environments
• Political and Legal Forces– Trade Regimes
• Documentation– SED– Certificate of Origin– Export License – Import License
• Tax Preferred– Agreements– FTZ– Customs Bonded
November 10, 2000 Changing Paradigm: Global Systems 34
Markets and Marketing: Marketing Issues – Entry Strategies
• Exporting– direct or indirect
– advantages
– disadvantages
November 10, 2000 Changing Paradigm: Global Systems 35
Markets and Marketing: Marketing Issues – Entry Strategies
• Licensing– mfr., process, trademark, know-how,
technical assistance, merchandising knowledge
– advantages
– disadvantages
November 10, 2000 Changing Paradigm: Global Systems 36
Markets and Marketing: Marketing Issues – Entry Strategies
• Joint Venture– equity position in foreign company
– advantages
– disadvantages
November 10, 2000 Changing Paradigm: Global Systems 37
Markets and Marketing: Marketing Issues – Entry Strategies
• Direct Ownership– complete ownership of foreign
subsidiary
– advantages
– disadvantages
November 10, 2000 Changing Paradigm: Global Systems 38
Markets and Marketing: Marketing Issues – Entry Strategies
• Countertrade– part of payment made in goods
instead of money
– types• barter
• buyback
November 10, 2000 Changing Paradigm: Global Systems 39
Markets and Marketing: Marketing Issues – Mix Adaptation• Product
– Total Product Concept• Tangible, core• Tangible, related • Intangible benefit
– May Require Adaptation• Income/Discretionary• Cultural/Necessity
November 10, 2000 Changing Paradigm: Global Systems 40
Markets and Marketing: Marketing Issues – Mix Adaptation
• Promotion– Communication
• Message• Sender• Encoding• Channel• Decode• Receiver• Feedback• Noise
November 10, 2000 Changing Paradigm: Global Systems 41
Markets and Marketing: Marketing Issues – Mix Adaptation
• Promotion– Problems
• Encoding/Decoding
• Channel
• Noise
November 10, 2000 Changing Paradigm: Global Systems 42
Markets and Marketing: Marketing Issues – Mix Adaptation
• Price– Total Landed Cost
– Cost Build Up
November 10, 2000 Changing Paradigm: Global Systems 43
Markets and Marketing: Marketing Issues – Mix Adaptation
• Price– Sales Terms
INCO Terms
Setting the Parameters
November 10, 2000 Changing Paradigm: Global Systems 44
Four Categories•E Term
–Ex Works
•C Terms
–CFR: Cost and Freight (named port of destination)
–CIF: Cost, Insurance, and Freight, (named port of destination)
November 10, 2000 Changing Paradigm: Global Systems 45
Four Categories•C Terms (continued)
–CPT: Carriage Paid To (named place of destination)
–CIP: Carriage and Insurance Paid To (named place of destination)
November 10, 2000 Changing Paradigm: Global Systems 46
Four Categories•D Terms
–DAF: Delivered At Frontier (named place)
–DES: Delivered Ex Ship (named port of destination)
–DEQ: Delivered Ex Quay (named port of destination)
–DDU: Delivered Duty Unpaid (named place of destination)
–DDP: Delivered Duty Paid (named place of destination)
November 10, 2000 Changing Paradigm: Global Systems 47
Four Categories•F Terms
–FCA: Free Carrier (named place)
–FAS: Free Alongside Ship (named port of shipment)
–FOB: Free On Board (named port of shipment)
November 10, 2000 Changing Paradigm: Global Systems 48
ApplicabilityAny Mode• EXW• FCA• CPT• CIP• DAF• DDU• DDP
Marine Only (other than RoRo)
• EXW• FAS• FOB• CFR• CIF• DES• DEQ• DDU/DDP
November 10, 2000 Changing Paradigm: Global Systems 49
Markets and Marketing: Marketing Issues – Mix Adaptation
• Price– Getting Paid
– Cash– Open Account– Letters of Credit– Drafts
November 10, 2000 Changing Paradigm: Global Systems 50
Markets and Marketing: Marketing Issues – Mix Adaptation
• Place• Channels of Distribution
• Entry Strategies• Other Market Considerations
• Logistics
November 10, 2000 Changing Paradigm: Global Systems 52
Introduction
• Economy
• Society
• Environment
• Nation
November 10, 2000 Changing Paradigm: Global Systems 53
Evolution
• Definition– plan, implement, control– effective and efficient– flow and store– goods, services, related information– origin, production, consumption, disposal– conforming to customer requirements
November 10, 2000 Changing Paradigm: Global Systems 54
Evolution
• Relevant to– manufacturing
– agriculture
– services
– institutions
– others
November 10, 2000 Changing Paradigm: Global Systems 55
Components of Logistics
Natural Human
Financial
Physical
Info.
Inputs
Mgmt. Actions
Plan Implement Control
Logistics Management
RM WIP FG
MKTG
Utility
Efficient
Proprietary Asset.
Outputs
Suppliers Cust.
Logistics ActivitiesCS Inventory Location O/P
Forecasting WH Pkg. MH
Traffic IS MM Support
November 10, 2000 Changing Paradigm: Global Systems 56
Development of Logistics
• Trade
• Military
• Current
November 10, 2000 Changing Paradigm: Global Systems 57
Current Development Issues
• Deregulation gave us– more options
– lower cost
– SCM
– headaches
– opportunities
November 10, 2000 Changing Paradigm: Global Systems 58
Current Development Issues
• Competitive Pressures– Globalization
– Cost Control
– Consumer changes
– Customer changes
November 10, 2000 Changing Paradigm: Global Systems 59
Current Development Issues
• IT– Computers
– Intranet and Internet
– ERP Systems
– EDI
November 10, 2000 Changing Paradigm: Global Systems 60
Current Development Issues
• Channel Power– Retailers rule
– Alliances
November 10, 2000 Changing Paradigm: Global Systems 61
Current Development Issues
• Channel Power– Money Matters
• ROA
• Profit leverage
• Cash Flow
• Other measures
November 10, 2000 Changing Paradigm: Global Systems 62
Systems
• Concept– network
– related activities
– managing flow
– within the supply chain
November 10, 2000 Changing Paradigm: Global Systems 63
Systems Concept
SupplierDC
Supplier
Supplier DC
Mfr.
Customer
Customer
Customer
Customer
November 10, 2000 Changing Paradigm: Global Systems 64
Systems: Logistics in the Economy
• Major Expenditure• Facilitates Economics Transactions• Provides Utility• Employment• Taxes• And so forth
November 10, 2000 Changing Paradigm: Global Systems 65
Systems: Logistics in the Firm
• Marketing
• Manufacturing
• Human Resource Management
• Finance and Accounting
• Legal
November 10, 2000 Changing Paradigm: Global Systems 66
Logistics in the Firm: MarketingThe Marketing Concept
Customer Satisfaction•Suppliers•Intermediate Customers•Final Customers
Company Profit•Max. Profits•Lower Total Cost•Proprietary Asset
Integrated Effort•Product•Price•Promotion•Place
November 10, 2000 Changing Paradigm: Global Systems 67
Logistics in the Firm: MarketingThe Marketing Mix
Cust.
Prod.
PlacePromo.
Price
Logistics
November 10, 2000 Changing Paradigm: Global Systems 68
Systems: Total Cost ConceptCustomer Service Level•Customer Service•Parts and Service Support
OP and IS•OP•Forecast•Communication
Warehousing•Store and handle•Location
Transportation Cost•Traffic and transport
Inventory Carrying Cost•Inventory Mgmt.•Pkg.•Reverse Logistics
Lot Quantity Costs•MH•Procurement
November 10, 2000 Changing Paradigm: Global Systems 69
Challenges and Opportunities
• Strategic Planning• Quality• Accounting
– Analysis– Value Added
• EVA• CVA• PVA
November 10, 2000 Changing Paradigm: Global Systems 70
Challenges and Opportunities
• Globalization• Skills
– General Management– Traffic Management– Warehousing– Inventory– Etc.
November 10, 2000 Changing Paradigm: Global Systems 71
Challenges and Opportunities
• Logistics Managers– Asset Managers
– Information Managers
• Networked Solutions
November 10, 2000 Changing Paradigm: Global Systems 74
Customer Service Defined: A Recent View
Process
Value Added
Supply Chain
Cost Effective
November 10, 2000 Changing Paradigm: Global Systems 75
Customer Service Defined: A Recent View
Activity
Measure
Philosophy
November 10, 2000 Changing Paradigm: Global Systems 76
Customer Service Defined: Elements
Customer Service
Transaction
Post-transaction
Pre-transaction
November 10, 2000 Changing Paradigm: Global Systems 77
Customer Service Strategy
Product
Organs
Formula
Where/Who
Mfr.
Retailer
Where/Who
Hospital
Doctor
November 10, 2000 Changing Paradigm: Global Systems 78
Customer Service Strategy: Follow the Money
• Capital Budgeting
• Break Even Analysis
• Other Financial Measures
November 10, 2000 Changing Paradigm: Global Systems 79
Customer Service Strategy: ABC Analysis
Small Number Big Dollars
Big Number Small Dollars
November 10, 2000 Changing Paradigm: Global Systems 80
Customer Service Strategy: Audits
• External Audit– What does the customer value?
– How do we rate and rank?
– How do our competitors?
– What do we do about it?
November 10, 2000 Changing Paradigm: Global Systems 81
Customer Service Strategy: Audits
Audits
ExternalWhat they want
How we rate and rank
How competitors rate and rank
InternalWhat measure
How measure
Where is the data
How use
How manage
Benchmark
Customer Service
November 10, 2000 Changing Paradigm: Global Systems 82
Customer Service Standards and Measures
• Must be– measurable– valid– reliable– available– effective and efficient– realistic
November 10, 2000 Changing Paradigm: Global Systems 83
Customer Service Standards and Measures
Customer Service
Transaction
Post-transaction
Pre-transaction
November 10, 2000 Changing Paradigm: Global Systems 84
Customer Service Standards and Measures
Customer Service
Transit time
Consistency
In-stock
November 10, 2000 Changing Paradigm: Global Systems 86
INTRODUCTION
• INVESTMENT–20% OF TOTAL ASSETS FOR
MFR.–50% OF TOTAL ASSETS FOR
• WHOLESALERS• RETAILERS
November 10, 2000 Changing Paradigm: Global Systems 87
INTRODUCTION
• MANAGE TO IMPROVE–ROA
–CASH FLOW
–PRODUCTIVITY
–CUSTOMER SERVICE
November 10, 2000 Changing Paradigm: Global Systems 88
RECENT TRENDS
• PRODUCT PROLIFERATION• MARKET DISPERSION• SERVICE EXPECTATIONS• SHRINKING PLC• TIME-BASED
COMPETITION
November 10, 2000 Changing Paradigm: Global Systems 89
SERVICE
• CUSTOMERS–INTERNAL–EXTERNAL
• MEASURES–FILL RATE–TIMELINESS
November 10, 2000 Changing Paradigm: Global Systems 90
COSTS: TLC
• TRADEOFFS–WITHIN LOGISTICS
–WITHIN FIRM
–WITHIN SUPPLY CHAIN
November 10, 2000 Changing Paradigm: Global Systems 91
COSTS: TLC
PRICE
PLACE
PROMO
PROD
OP/IS
ICC
OC
TC
WH
November 10, 2000 Changing Paradigm: Global Systems 92
COSTS: TYPES• ORDERING COST
ORDER SIZE (Q)
OR
DE
R C
OS
T
November 10, 2000 Changing Paradigm: Global Systems 93
COSTS: TYPES• STOCK OUT COST
ORDER SIZE (Q)
ST
OC
K O
UT
CO
ST
November 10, 2000 Changing Paradigm: Global Systems 94
COSTS: TYPES• TRANSPORT COST
ORDER SIZE (Q)TR
AN
SP
OR
T C
OS
T
November 10, 2000 Changing Paradigm: Global Systems 95
COSTS: TYPES• CARRYING COST
ORDER SIZE (Q)
CA
RR
YIN
G C
OS
T
November 10, 2000 Changing Paradigm: Global Systems 96
COSTS: TYPES• CARRYING COST
SERVE
K
ICC%
STORE
RISK
November 10, 2000 Changing Paradigm: Global Systems 98
COSTS: TYPES• CARRYING COST
ICC%
STORE PRIVATE
LEASED
PUBLIC
PLANT
November 10, 2000 Changing Paradigm: Global Systems 99
COSTS: TYPES• CARRYING COST
SERVEICC%
INSURANCE
TAXES
November 10, 2000 Changing Paradigm: Global Systems 100
COSTS: TYPES• CARRYING COST
ICC%
RISK
OBSOLESCENCE
SHRINKAGE
DAMAGE
RELOCATION
November 10, 2000 Changing Paradigm: Global Systems 101
PROFIT: BALANCE
ORDER SIZE (Q)
CO
ST
TAC
ICC$
OC
November 10, 2000 Changing Paradigm: Global Systems 103
PROFIT: ROA
ASSETS AVE.
SALES
SALES
INCOME NETXROA
November 10, 2000 Changing Paradigm: Global Systems 104
PROFIT: ROA
EQPMT& PLANTPROPERTY,PPE
OTHERINVENARCASHCA
WHEREPPE CA
SALESX
SALES
INCOME NETROA
November 10, 2000 Changing Paradigm: Global Systems 105
RATIONALE• ECONOMIES OF SCALE: COST
–PRODUCTION–INBOUND SUPPLY–OUTBOUND DISTRIBUTION–PURCHASING–FINANCE
November 10, 2000 Changing Paradigm: Global Systems 106
RATIONALE
• ECONOMIES OF SCALE: BALANCE
•UNIT COST
•HOLDING COST
November 10, 2000 Changing Paradigm: Global Systems 107
RATIONALE
• SEASONALITY–DEMAND
–SUPPLY
–BOTH
November 10, 2000 Changing Paradigm: Global Systems 108
RATIONALE
• SPECIALIZATION–PLANT LEVEL
–DC LEVEL
–FOCUSED FACTORY
–ASSIGNMENT
November 10, 2000 Changing Paradigm: Global Systems 109
RATIONALE
• UNCERTAINTY–VARIABILITY
–WITHIN LOGISTICS
–WITHIN FIRM
–WITHIN SUPPLY CHAIN
November 10, 2000 Changing Paradigm: Global Systems 111
TYPES
• CYCLE–LOT SIZING–MANY METHODS–SOLD OR USED IN
• PRODUCTION• MARKETING
November 10, 2000 Changing Paradigm: Global Systems 112
TYPES
• CYCLE–CONDITIONS OF
•CERTAINTY
•MEAN PERFORMANCE
November 10, 2000 Changing Paradigm: Global Systems 113
TYPES
• CYCLE–BASIC MATH
PERCENT COSTCARRYING
UNITPER VALUE
SIZE LOTSTOCK CYCLE
WHERE
2
1
C
V
Q
CVQTACCYCLE
November 10, 2000 Changing Paradigm: Global Systems 114
TYPES
• SAFETY–LEAD TIME
–DEMAND
–OTHER FACTORS
November 10, 2000 Changing Paradigm: Global Systems 115
TYPES
• SAFETY–CONSTANT
–FUNCTION OF• VARIABILITY
• CUSTOMER SERVICE LEVEL
November 10, 2000 Changing Paradigm: Global Systems 116
TYPES
• SAFETY–BASIC MATH
PERCENT COSTCARRYING
UNITPER VALUE
VAR. OF MSR. X UNITSDAILY AVE.
WHERE
C
V
SS
CVSSTAC
Q
QSAFETY
November 10, 2000 Changing Paradigm: Global Systems 117
TYPES
• TRANSIT OR PIPELINE–EN-ROUTE
–DOOR-TO-DOOR
–HOW VALUE
November 10, 2000 Changing Paradigm: Global Systems 118
TYPES• PIPELINE
–BASIC MATH
PERCENT COSTCARRYING
UNITPER VALUE
DOORTODOOR TIME TRANSIT
DEMAND ANNUAL
WHERE
365
C
V
t
D
CVtD
TACTRANSIT
November 10, 2000 Changing Paradigm: Global Systems 119
OVERVIEW
• MEASURES OF EFFECTIVENESS–REDUCE COST
• BACKORDERS• EXPEDITED SHIPMENTS• TRANS-SHIPMENTS• FISH
November 10, 2000 Changing Paradigm: Global Systems 120
OVERVIEW
• MEASURES OF EFFECTIVENESS–INVENTORY TURNOVER
INVESTMENT INVEN. AVE.
SALESITO
November 10, 2000 Changing Paradigm: Global Systems 121
OVERVIEW
• MEASURES OF EFFECTIVENESS–FILL RATE
–ORDER ACCURACY
–TIMELINESS
November 10, 2000 Changing Paradigm: Global Systems 122
DEMAND PATTERNS
• PULL–POSTPONE
–MAKE-TO-ORDER
–MASS CUSTOMIZATION
VERSUS
November 10, 2000 Changing Paradigm: Global Systems 123
DEMAND PATTERNS
• PUSH–SPECULATE–MAKE TO INVENTORY–MASS
• PRODUCTION• DISTRIBUTION
November 10, 2000 Changing Paradigm: Global Systems 124
CLASSIFICATION
• PARETO–NATURAL SETS–“80 – 20”–ABC
• CRITICAL VALUE ANALYSIS
November 10, 2000 Changing Paradigm: Global Systems 125
BASIC Q-MODEL
• CERTAINTY
• BALANCE–ORDERING COST
–INVENTORY CARRYING COST
November 10, 2000 Changing Paradigm: Global Systems 126
BASIC Q-MODEL• DETERMINING Q (CYCLE)
UNITPER VALUE
PERCENT COSTCARRYING
DEMAND NNUAL
COSTORDERING
2
V
C
AD
P
WHERECV
PDQ
November 10, 2000 Changing Paradigm: Global Systems 127
BASIC Q-MODEL• DETERMINING Q (CYCLE)
CVQICC
Q
DOC
WHERE
ICCOCTAC
2
1
P
$
November 10, 2000 Changing Paradigm: Global Systems 128
BASIC Q-MODEL
• INTENSIVE ADMINISTRATIVE
• PERPETUAL INVENTORY
• HIGH COST
• “A-ITEMS”
November 10, 2000 Changing Paradigm: Global Systems 130
BASIC P-MODEL
• LOW ADMINISTRATION
• KEY IS P
• “C” ITEMS
November 10, 2000 Changing Paradigm: Global Systems 132
INTRODUCTION• FOCUS
–1990s• QUALITY• CUSTOMER SERVICE
–2000• SUPPLY CHAIN MANAGEMENT • SPEED
November 10, 2000 Changing Paradigm: Global Systems 133
INTRODUCTION
• BARRIERS TO CHANGE– CORPORATE CULTURE– VISION– EMPLOYEE OWNERSHIP OF “Q”– SENIOR COMMITMENT– MANAGEMENT PROCESS– TRAINING AND EDUCATING
November 10, 2000 Changing Paradigm: Global Systems 134
INTRODUCTION
• ENVIRONMENTAL FACTORS– INCREASING EXPECTATIONS
• CUSTOMERS• STOCKHOLDERS• MANAGERS
– ECONOMIC– REGULATORY
November 10, 2000 Changing Paradigm: Global Systems 135
IMPORTANCE
•SALES SERVICE•CHANNELS•POST SALE
•MFR.•PURCHASING•TRAFFIC•WAREHOUSE
•IS•BUDGET•INVENTORY•DP
CEO
MARKETING PRODUCTION FINANCE
RE
SP
ON
SIB
ILIT
IES
November 10, 2000 Changing Paradigm: Global Systems 136
IMPORTANCE
•LARGE INV.•SMALL FREQ. PROD. RUNS•DECENT. WH•LARGE ASSORTMENT
•LARGE INFREQ. PROD. RUNS•PLANT WH•FEWER PRODUCTS
•SMALL INV.
•CENTRAL. WH
CEO
MARKETING PRODUCTION FINANCE
OB
JEC
TIV
ES
November 10, 2000 Changing Paradigm: Global Systems 137
IMPORTANCE
•RAPID OP•FLEX. RETURN POLICY•FAST TRANSPORT•EXPEDITED SHIPMENTS
•INEXP OP•RIGID RETURN POLICY•LOW PRICE TRANSPORT•FEW EXCEPTIONS
CEO
MARKETING PRODUCTION FINANCE
OB
JEC
TIV
ES
November 10, 2000 Changing Paradigm: Global Systems 138
TYPES OF STRUCTURES
• DEVELOPMENT OF STRUCTURES–DIVISIONS
• PRODUCT• CUSTOMER• GEOGRAPHY• FUNCTION
November 10, 2000 Changing Paradigm: Global Systems 139
TYPES OF STRUCTURES• DEVELOPMENT OF STRUCTURES
– MATRIXMARKETING PRODUCTION FINANCE
A
C
B
November 10, 2000 Changing Paradigm: Global Systems 140
Source: Benchmarking Partners
TYPES OF STRUCTURES• DEVELOPMENT OF STRUCTURES
– HOLLOW CORPORATION
November 10, 2000 Changing Paradigm: Global Systems 141
TYPES OF STRUCTURES
• GENERAL LOGISTICS STRATEGIES–PROCESS-BASED
•BROAD GROUP OF ACTIVITIES•SUPPLY CHAINS•VALUE CHAINS
November 10, 2000 Changing Paradigm: Global Systems 142
TYPES OF STRUCTURES• GENERAL LOGISTICS
STRATEGIES–CHANNEL-BASED
• PERFORM JOINTLY• ACROSS AND WITH
–MANUFACTURER–WHOLESALER–RETAILER
November 10, 2000 Changing Paradigm: Global Systems 143
TYPES OF STRUCTURES
• LOGISTICS COORDINATION–STRATEGIC VS. OPERATIONAL–CENTRALIZED VS.
DECENTRALIZED–LINE VS. STAFF–OTHER
November 10, 2000 Changing Paradigm: Global Systems 144
TYPES OF STRUCTURES
• LOGISTICS COORDINATION–OTHER: AS FUNCTION
CEO
FIN./ACCT.MKTG.MFR.ENGIN.
HRM. LOG.
November 10, 2000 Changing Paradigm: Global Systems 145
TYPES OF STRUCTURES
• LOGISTICS COORDINATION–OTHER: AS PROGRAM
CEO
FIN./ACCT.
MKTG.MFR.ENGIN.
HRM.
LOG.
November 10, 2000 Changing Paradigm: Global Systems 146
TYPES OF STRUCTURES• LOGISTICS COORDINATION
– OTHER: AS MATRIX
MKTG. PROD.
LO
GIS
TIC
S
ENGIN. FIN. HRM.
PR
OJE
CT
November 10, 2000 Changing Paradigm: Global Systems 147
TYPES OF STRUCTURES• COMMITTEES
AD HOC STANDING
TASK
LO
W
LE
VE
L O
F A
UT
ON
OM
Y
WORK
ON-GOINGH
IGH
TEMP
LEGTH OF ASSIGNMENT
November 10, 2000 Changing Paradigm: Global Systems 148
PLANNING
• MISSION• VISION• GOALS• OBJECTIVES• TACTICAL PLANS
November 10, 2000 Changing Paradigm: Global Systems 149
DEVELOPING ORGANIZATION
• CORPORATE OBJECTIVES
• CORPORATE STRUCTURE
• FUNCTIONAL RESPONSIBILITIES
• MANAGEMENT STYLE
November 10, 2000 Changing Paradigm: Global Systems 150
DEVELOPING ORGANIZATION
• FLEXIBILITY
• DECISION SUPPORT SYSTEMS
• HUMAN RESOURCE CONSIDERATIONS
November 10, 2000 Changing Paradigm: Global Systems 151
MEASURING PERFORMANCE
• BUDGET–COST-TO-SALES–COST-TO-TOTAL COST–ROA
• PRODUCTIVITY• QUALITY
November 10, 2000 Changing Paradigm: Global Systems 153
INTRODUCTION
• INCREASING IMPORTANCE – EXTERNAL ENVIRONMENTS
– PRODUCT LIFE CYCLE
– COST OF DOING BUSINESS
– COMPRESSION• COST
• REVENUE
• TIME
November 10, 2000 Changing Paradigm: Global Systems 154
INTRODUCTION
• POTENTIAL TO IMPROVE –PRODUCTIVITY
–COST
–CASH FLOW
–SERVICE
–ROA
November 10, 2000 Changing Paradigm: Global Systems 155
COST
• IMPORTANCE OF DATA –MANAGE SYSTEMS–MINIMIZE SYSTEM
CONFLICTS–INNOVATIONS
• ACTIVITY BASED MANAGEMENT
• ACTIVITY BASED COSTING
November 10, 2000 Changing Paradigm: Global Systems 156
COST
• TOTAL COST ANALYSIS–RUDIMENTS
•SYSTEMS ANALYSIS
•COST TRADE-OFFS
•SUB-OPTIMIZATION
November 10, 2000 Changing Paradigm: Global Systems 157
COST• TOTAL COST ANALYSIS
–RUDIMENTSPROD.
PROMO.PRICE
PLACE
TRANS.
WH
OP/IS
LOT
ICC
LO
GIS
TIC
SM
AR
KE
TIN
G
November 10, 2000 Changing Paradigm: Global Systems 158
COST
• TOTAL COST ANALYSIS–DATA NEEDS
•CONTRIBUTION–PRODUCT
–TERRITORY
–CUSTOMER
–SALESPERSON
November 10, 2000 Changing Paradigm: Global Systems 159
COST
• TOTAL COST ANALYSIS–DATA NEEDS
•CUSTOMER SERVICE LEVEL–RESPONSIVENESS
–REVENUE
–COST
–PROFIT
November 10, 2000 Changing Paradigm: Global Systems 160
COST
• TOTAL COST ANALYSIS–DATA NEEDS
•NODES–NUMBER
–LOCATION
–ASSIGNMENT
November 10, 2000 Changing Paradigm: Global Systems 161
COST
• TOTAL COST ANALYSIS–DATA NEEDS
•TRANSPORT–MODES
–CARRIERS
November 10, 2000 Changing Paradigm: Global Systems 162
COST
• TOTAL COST ANALYSIS–DATA NEEDS
•OTHER–PACKAGING
–MATERIALS HANDLING
–OP/IT/IS
–CHANNELS
November 10, 2000 Changing Paradigm: Global Systems 163
COST• TOTAL COST ANALYSIS
– CONTROLLING ACTIVITIES• NEED COST DATA• NEED OPERATING DATA• QUESTIONS
– WHAT SHOULD COSTS BE?– WHAT IS GOOD PERFORMANCE?– ARE ASSET LEVELS REASONABLE?– OTHER?
November 10, 2000 Changing Paradigm: Global Systems 164
COST• TOTAL COST ANALYSIS
– CURRENT SYSTEMS• DIFFERENT AUDIENCES• HISTORICAL RECORDS• COMMON AND INDIRECT COSTS• NATURAL ACCOUNTS• IGNORE CONTRIBUTION• MASK FIXED COSTS
November 10, 2000 Changing Paradigm: Global Systems 165
COST• TOTAL COST ANALYSIS
–CURRENT SYSTEMSSUPPLIESUTIL. EQPT. CLER.MGMT.
OH POOL
PROD. A PROD. B PROD. C PROD. D
November 10, 2000 Changing Paradigm: Global Systems 166
COST• PROBLEM SOLVING
CONTROL
THROUGH
STANDARD COST
BUDGETS
PRODUCTIVITY
SPC
ABC/ABM
November 10, 2000 Changing Paradigm: Global Systems 167
COST• PROBLEM SOLVING
– STANDARD COST• NORM• GENERATED BY
– ACCOUNTING– ENGINEERING
• MANAGE– VARIANCES– EXCEPTIONS
November 10, 2000 Changing Paradigm: Global Systems 168
COST• PROBLEM SOLVING
– BUDGETS• OPERATING
– MASTER– FLEXIBLE– VARIANCES
» INEFFECTIVE» INEFFICIENT» COST» PRICE
November 10, 2000 Changing Paradigm: Global Systems 169
COST• PROBLEM SOLVING
– PRODUCTIVITY• GENERAL
INPUT
OUTPUTPY
November 10, 2000 Changing Paradigm: Global Systems 170
COST• PROBLEM SOLVING
– PRODUCTIVITY• WAREHOUSE
HOURS LABOR DIRECT
SHIPPED ORDERS
SHIPPED ORDERS AVE.
SHIPPED ORDERS
RECEIVED ORDERS
SHIPPED ORDERS
W
W
W
P
P
P
November 10, 2000 Changing Paradigm: Global Systems 171
COST• PROBLEM SOLVING
– PRODUCTIVITY• TRANSPORT
COST TRANSPORT TOTAL
NDESTINATIO TO SHIPMENTS
COST TRANSPORT TOTAL
SERVED STOPS
COST TRANSPORT TOTAL
SHIPPED MILES-TON
T
T
T
P
P
P
November 10, 2000 Changing Paradigm: Global Systems 172
COST• PROBLEM SOLVING
– SPC – P-CHART
p
p
p
zspLCL
zspUCL
n
pps
p
)1(
Size SampleSamples ofNumber
Defects ofNumber Total
November 10, 2000 Changing Paradigm: Global Systems 173
COST• CORPORATE MIS
– TRANSACTION LEVEL DATA– SOURCE DOCUMENTS
• PURCHASE ORDER• SALES ORDER• PICK ORDER• BILL OF LADING• INVOICE• OTHER
November 10, 2000 Changing Paradigm: Global Systems 174
COST• CORPORATE MIS
SUPER. OFFICE UTIL. SUPPLY EQPT.
PROD. A PROD. B PROD. C PROD. D
RECEIVEPUT
AWAYSET UP PPP&S
November 10, 2000 Changing Paradigm: Global Systems 175
COST• CORPORATE MIS
– NEED• CONTRIBUTION REPORTING
• SEGMENT REPORTING
• ERP
• IT/IS
• KBM
November 10, 2000 Changing Paradigm: Global Systems 176
Logistics Intermediaries
Type text
Type
text
Type text
Type text Type text
Type textType text
November 10, 2000 Changing Paradigm: Global Systems 177
Introduction: Ex/Im Transaction
Source Port YouPortSource
Customs Customs
D-t-PContract
P-t-DContract
P-t-PContract
Bill of
Lading
Commercial Contract
November 10, 2000 Changing Paradigm: Global Systems 178
Introduction: Ex/Im Transaction
Source Port YouPortSource
D-t-PContract
P-t-DContract
P-t-PContract
Bill of
Lading
Bill of Lading Evidence of Contract Evidence of Receipt Evidence of Title (order form)
November 10, 2000 Changing Paradigm: Global Systems 179
Introduction: Ex/Im Transaction
Source Port YouPortSource
D-t-PContract
P-t-DContract
P-t-PContract
Bill of
Lading
Bill of Lading Whoever issues is the carrier Watch who issues
varies by mode varies by contract
November 10, 2000 Changing Paradigm: Global Systems 180
Introduction: Ex/Im Transaction
Source YouSource
Commercial Contract
Payment Terms Sales Terms
November 10, 2000 Changing Paradigm: Global Systems 181
Introduction: Ex/Im Transaction
Source YouSource
Commercial Contract
Payment Terms Cash Open Account Drafts and L/C Forfeiting
November 10, 2000 Changing Paradigm: Global Systems 182
Introduction: Ex/Im Transaction
Source You
Commercial Contract
Sales Terms: INCO Terms E Term(s) C Terms D Terms F Terms
November 10, 2000 Changing Paradigm: Global Systems 183
Introduction: Pro Forma InvoiceMaritime Example
Term Costs Time Variation Party PriceEXW FAS FOB CFR CIF DES DEQ DDU DDP Total
November 10, 2000 Changing Paradigm: Global Systems 184
Freight Forwarders: Distinctions
importing exporting
mode regulations capacity
Most basic distinction is between:
November 10, 2000 Changing Paradigm: Global Systems 185
Freight Forwarders: Distinctions
importing: CHB exporting: FF
Most basic distinction is between:
November 10, 2000 Changing Paradigm: Global Systems 186
Freight Forwarders: Services
logistics documentation routing rating estimates finance
L/C drafts
"Basic" Services include:
November 10, 2000 Changing Paradigm: Global Systems 187
Freight Forwarders: Services
customs appraisement rates entries duties
insurance COGSA Montreal coverage
"Basic" Services include:
November 10, 2000 Changing Paradigm: Global Systems 188
Evaluating Forwarders
Overseas representation Financial status History Marketsgeographicproduct
Competence Competitiveness
November 10, 2000 Changing Paradigm: Global Systems 189
NVO's: What
Non-vessel operating common carriers Billed asforwardersindependent consolidatorscollection agent for carriers
November 10, 2000 Changing Paradigm: Global Systems 190
NVO's: What
Can beshippercarrierconsignee
In any casearose through 50 mile ruleunregulated for the most part
November 10, 2000 Changing Paradigm: Global Systems 191
NVO's: What is at Stake Increasing role in international trade Traditional rolesconsolidation servicestariff services
Emerging clout in service contractsHapag in the Atlanticthen the TACAAPL in the Pacificnow the ANERA and the TWRA?
November 10, 2000 Changing Paradigm: Global Systems 192
NVO's: What is at Stake
80 percent of cargo is controlled by 20 percent of shippers (CL)
20 percent of NVO control 80 percent of LCL traffic
20 percent of world market in consumer goods is at stake
November 10, 2000 Changing Paradigm: Global Systems 193
NVO's: Types
Independent Forwarder-based Mega-carriers Niche operators Trucking companies Shipper-affiliated Air freight consolidators
November 10, 2000 Changing Paradigm: Global Systems 194
The Role of Maritime Transport
A Review of Marine Options
November 10, 2000 Changing Paradigm: Global Systems 195
Liners: Operating Characteristics
International maritime common carriers
Fixed schedules Fixed routes Fixed termini
November 10, 2000 Changing Paradigm: Global Systems 196
Liners: Services
ContainersFEUTEUDryReferOther
Ro/Ro Other
November 10, 2000 Changing Paradigm: Global Systems 197
Liners: Affiliation
• Conference
• Non-Conference
• Discussion Groups
November 10, 2000 Changing Paradigm: Global Systems 198
Liners: Pricing Factors• Stowability• Density• Handling• Liability• Value• Traffic lane balance• Market conditions• Commercial relationships
November 10, 2000 Changing Paradigm: Global Systems 199
Liners: Pricing Mechanisms
• Tariffs
• Service Contracts
November 10, 2000 Changing Paradigm: Global Systems 200
Liners: Pricing Mechanisms• Service Contracts
– Contract Checklist• Introductory Clause• Replacement• Scope of Work• Period• Compensation• Payment terms• Quantities• Force Majeure• Default
November 10, 2000 Changing Paradigm: Global Systems 201
Liners: Pricing Mechanisms• Service Contracts
– Name– Volume (total and minimum)– Type of container utilized– Loading port(s)– Discharge port(s)– Service Requirements
• Frequency• Boxes/sailing• Weekly, monthly, etc.
November 10, 2000 Changing Paradigm: Global Systems 202
Liners: Pricing Mechanisms• Service Contracts
– Seasonality– Rates
• All-in• Exclusive
– Advanced booking– Demurrage/Detention– Transloading– Force Majeure– Arbitration– Liquidated Damages
November 10, 2000 Changing Paradigm: Global Systems 203
Tramps: Operating Characteristics
• International maritime contract carriers
• Variable schedule
• Variable route
• Variable termini
• Primarily bulk commodities
• Vessel owners leasing to liners
November 10, 2000 Changing Paradigm: Global Systems 204
Tramps: Services
• General Bulk– Grain– Cement– Ore
• Specialized– LNG– Car– OBO
November 10, 2000 Changing Paradigm: Global Systems 206
Introduction
• Air is an increasingly viable option for many shippers
• Varies depending upon – Shipment
• documents• small package• emergency• scheduled
November 10, 2000 Changing Paradigm: Global Systems 207
Introduction
– Cargo• value
• customer
• characteristics
November 10, 2000 Changing Paradigm: Global Systems 208
Industry Structure
• Structure differs significantly from maritime
• Differs in– Aircraft operators– Intermediaries
• More Choices . . . But simpler . . . Sometimes
November 10, 2000 Changing Paradigm: Global Systems 209
Industry Structure: Aircraft Operators
• Combination Carriers
• Cargo Carriers
• Integrated Carriers
November 10, 2000 Changing Paradigm: Global Systems 210
Industry Structure: Aircraft Operators - Combination Carriers• Provide significant amount of lift
in nearly all markets• Combination of
– Passenger– Freight
• Derive majority of bottom line revenue from passenger
November 10, 2000 Changing Paradigm: Global Systems 211
Industry Structure: Aircraft Operators - Combination CarriersAircraft Options• Belly-hold in passenger aircraft• Combi-aircraft
– QC– main deck – below deck
• Freighters
November 10, 2000 Changing Paradigm: Global Systems 212
Industry Structure: Aircraft Operators - Cargo Carriers
• Provide significant amount of lift in some markets
• Provide one or more services– courier– small package– airfreight
• scheduled• charter
• Derive all revenue from cargo
November 10, 2000 Changing Paradigm: Global Systems 213
Industry Structure: Aircraft Operators - Integrated Carriers
• Provide significant amount of lift– Packages and, or documents carried
– Aircraft operations
• Provide one or more services– Courier
– Small package
– Airfreight
• Derive all revenue from cargo
November 10, 2000 Changing Paradigm: Global Systems 214
Industry Structure: Aircraft Operators - Integrated Carriers
Look for• “Value added services”
– Distribution– Customs– Sort/Assort– Repack– Banking and finance
November 10, 2000 Changing Paradigm: Global Systems 215
Price and Service Options
• Differ by – Service description– Service Extension
• Door-to-door• Port-to-port• Port-to-door
– Negotiability of rates and services
November 10, 2000 Changing Paradigm: Global Systems 216
Price and Service Options
• Price versus Cost
• Everything may be negotiable
• Negotiating strategies– Forwarder-based
– Integrator-based
November 10, 2000 Changing Paradigm: Global Systems 217
Price and Service Options: General Observations
• Structure of Rates – Piece Rate
• Preference• IATA
– Forwarder consolidated rate• Committed volume• Market rate
– Forwarder wholesale rate from carrier– Direct carrier rate– Carrier cost
November 10, 2000 Changing Paradigm: Global Systems 218
Regulatory Environment
• Not quite as deregulated as domestic
• But, getting there– Safety versus Economics
– Domestic versus International Framework
• Relief is on the way . . . almost
November 10, 2000 Changing Paradigm: Global Systems 219
Analyzing the Airfreight Option
• Comparing– Rates– Time– Inventory
• Cycle• Pipeline• Safety
November 10, 2000 Changing Paradigm: Global Systems 220
Analyzing the Airfreight Option
• Can be used for any system combination
• Available commercially
• Can develop in-house
November 10, 2000 Changing Paradigm: Global Systems 221
Analyzing the Airfreight Option
Base Data• Cost per unit• Forecast units• Transit time (door-to-door)• Rates per unit• Carrying cost percent
– pipeline– cycle
November 10, 2000 Changing Paradigm: Global Systems 222
Analyzing the Airfreight Option
Calculations
• Unit days of pipeline inventory
• Annual freight cost
• ROI = (Annual freight cost savings) (Pipeline investment)
• Payback = (Pipeline investment) Annual freight cost savings
November 10, 2000 Changing Paradigm: Global Systems 224
Introduction
• Two perspectives– Inland portion of international
transportation• door-to-port
• port-to-door
– Primary means of transportation
November 10, 2000 Changing Paradigm: Global Systems 225
NAFTA Considerations
• Market Overview
• Logistics Considerations– Warehousing
– Trucking
– Rail
November 10, 2000 Changing Paradigm: Global Systems 226
NAFTA Considerations: Market Overview
• Do not forget Canadians
• For Mexico
• For U.S.
November 10, 2000 Changing Paradigm: Global Systems 227
NAFTA Considerations: Logistics
• Trucking– Domestic
– Trans-border
– International
• Rail
November 10, 2000 Changing Paradigm: Global Systems 228
NAFTA Considerations: Logistics - Trucking
Types– Domestic
– Trans-border
– International
November 10, 2000 Changing Paradigm: Global Systems 229
NAFTA Considerations: Logistics - Trucking
• Domestic– Current
– Proposed
• No how, no way, never
November 10, 2000 Changing Paradigm: Global Systems 230
NAFTA Considerations: Logistics - Trucking
• Trans-border– Current
– Proposed
• But when?
November 10, 2000 Changing Paradigm: Global Systems 231
NAFTA Considerations: Logistics - Trucking
• Trans-border: Current– Lack of reciprocity
– Distinguish between• Companies
• Drivers
• Equipment
November 10, 2000 Changing Paradigm: Global Systems 232
NAFTA Considerations: Logistics - Trucking
• Trans-border: Proposed– Reciprocity
– Distinguish between• Companies
• Drivers
• Equipment
November 10, 2000 Changing Paradigm: Global Systems 233
NAFTA Considerations: Logistics - Trucking
• International– Time-phased
– Note “country of origin” differences
November 10, 2000 Changing Paradigm: Global Systems 234
NAFTA Considerations: Logistics - Rail
Types
• Rail-to-rail
• Piggyback
• Intermodal/Stacktrain
November 10, 2000 Changing Paradigm: Global Systems 235
NAFTA Considerations: Logistics - Rail
Gateways
• Laredo
• Nogales
• El Paso
• Eagle Pass