Four important characteristics of glabal markets and strategy:
- Standardization reduces complexity
- Global competition reduces the product life cycle
- Traditional organizational structures and business models frequently change
- Globalization introduces more volatility
Major international transportation modes
Ocean and Air
Land modes of transportation
Motor and Rail
3 major categories of ocean shipping
liner service, charter vessels, private carriers
Ocean shipping that offers scheduled service on regular routes.
Set tariffs and accept certain standards of liability.
Carry break-bulk shipments of less-than-shipload size.
Mostly containers and roll-on, roll-off ships.
Ocean shipping that firms usually hire on a contract basis and which travel no set routes.
Can be part of a firm's own supply chain.
Voluntary associations of ocean carriers that operate over common trade routes and use a common tariff for setting rates on the commodities they handle.
Contracts covering one voyage. The carrier agrees to carry a certain cargo from an origin port to a destination. The price the carrier quotes includes all of the expenses of the sea voyage.
Allow the use of a ship for an agreed-upon time period. The carrier usually supplies a crew as part of the contract. The charterer has exclusive use of the vessel to carry any cargo that the contract does not prohibit and assumes all expenses for the ship's operation during the charter period.
transfers full control of the vessel of the charterer. The charterer is then responsible for the ship and all expenses necessary for the vessel's operation, including hiring the crew.
track the location and status of ships that are open for hire. Paid a commission for setting up a charter with the ship owner.
Nature of air cargo
high-value, low density.
Advantages of air transportation
packaging - less stringent
reduced handling costs and provided protection.
Disadvantage of air transportation
involve railroads both for transcontinental shipments and to and from inland points
substitutes land transportation for part of a container's ocean voyage, taking several days off the transit time and saving in-transit inventory costs.
Foreign Freight Forwarders
- Consolidated small shipments into economical container or larger-sized lots
Use ocean and air modes
Non-Vessel Operating Common Carriers
- Used to disperse traffic moving to and from inland part.
- Collects traffic from inland ports back to the ocean port cities
- Saves the shippers from having to pay to return empty containers to the ocean carriers
Export Management Companies
- Knowledeable shippers agent in a foreign country
Export Trading Companies
Like EMCs, they export goods and services
Allows small and medium-sized firms the ability to compete globally
Customs House Brokers
- Oversee the movement of goods through customs and ensures that paperwork accompanying a shipment is in order.
provide temporary storage while the goods await the next portion of the journey
In-transit storage areas
allow the shipper to perform some required operation on the cargo before embarkment (i.e. carrier negotiations, waiting for documentation, packing, crating, and labeling)
provided by the carrier to hold until the vessel's next departure date, allowing the shipper to consolidate goods and to save storage cost
Available for extended storage periods.
Operated under customs supervisions, designated for storing, repacking, sorting, or cleaning imported merchandise entered for warehousing without paying import duties while the goods are in storage
- Export shipments moving by ocean transportation require more stringent packaging than domestic shipments normally do
- The shipper may find settling liability claims for damage to export goods very difficult. Usually, the freight handling involves many firms, and these firms are located in different countries.
Easily defined, needs no calculation, Ex: Unit of inventory, Back order dollar
Needs definition, needs calculation or combination of measurements, often in the form of ration, Ex: inventory turns, sales dollars per stock unit.
The Process of Developing SC Performance Metrics
1. Cross-functional team effort.
2. Involve customers and suppliers
3. Tiered structure
4. Identify metric "owners"
5. Mitigate conflicts
6. consistency with the corporate strategy
7. top management support.
The Revenue-Cost Saving Connection
Revenue = Profit/Profit Margin
Return on Assets formula
ROA = Net Profit/Total Assets
Return on Net Worth formula
= Profit/Net Worth
The SC Financial Impact
- Satisfactory stockholder return is a major financial objective
- Return on net worth
- Return on Assets (important for comparing companies within an industry)
What is the financial goal for SC management?
Increase return to stockholders
Step 1 of Logistics/SC Network Design
Define the Network Design process: form a design team, establish parameters and objectives, and establish availability of resources and potential involvement of 3PLs
Step 2 of Logistics/SC Network Design
Perform a Logistics/SC Audit: Develop a comprehensive perspective, gather essential information
Step 3 of Logistics/SC Network Design
Examine the Logistics/SC Network Alternatives: use modeling to provide additional insights, develop preliminary designs, test model for sensitivity to key variables.
Step 4 of Logistics/SC Network Design
Conduct a Facility Location Analysis: Analyze attributes of candidate sites, apply screening to reduce alternative sites.
Step 5 of Logistics/SC Network Design
Make decisions regarding Network and Facility Location: Evaluate sites for consistency with design criteria, confirm types of change needed.
Step 6 of Logistics/SC Network Design
Develop an Implementation Plan: a road map in moving from current system to the desired logistics network, commit funds to implement the changes recommended by the re-engineering process.
Current trends governing site selection
strategic positioning of inventories, direct plant-to-customer shipments, growing need and use of strategically located "cross-docking" facilities, greater emphasis on access to major airports and/or ocean ports, use of 3PLs
Optimization modeling approach
Based on precise mathematical procedures guaranteed to find the "best" solution from among a number of feasible solutions.
Linear Programming (LP)
Approach of optimization model: useful in linking facilities in a network, defines optimum distribution patterns.
Simulation Modeling approach
The process of designing a model of a real system and conducting experiments with this model for the purpose either of understanding the behavior of the system or of the evaluating various strategies within the limits imposed by a criterion or set of criteria for the operation of the system. Does not guarantee optimum solution. Either static or dynamic.
Heuristic modeling approach
Based upon developing a model that can provide a good approximation to the least-cost location in a complex decision problem. Can reduce a problem to a reasonable size. "Grid Technique"
The Grid Technique
Attempts to locate a fixed facility such that the location represents the least-cost center for moving ibound materials and outbound product within a geographic grid. Finds the ton-mile center of mass - where transportation coss are minimized
Advantages of the Grid Technique
Simple to use, provides a starting point for further analysis, can accommodate "what if" questions.
Limitations to the Grid Technique
Static approach, linear rates, no consideration of topography, does not consider direction of movement
Transportation: Tapering Rates
Rates increase with distance, but not in direct proportion to distance
Transportation: Blanket Rates
Rates do not increase with distance, but remains the same from one origin to any destination in the blanket area
Transportation: Commercial Zones
A specific blanket area that includes a municipality and the surrounding area. Impact is at end of location process when a company picks a specific site.
Transportation: Foreign Trade Zones
Geographic zone into which importers can enter a product and hold it without paying duties, only paying when product enters US customs territory.
Transportation: Transit Privileges
Permits a shipper to stop a shipment in transit and perform some function that physically changes the product's characteristics.
8 Categories of reverse flow
1. Products have failed, can be repaired or remanufactured.
2. Products are old, obsolete, or near the end of their shelf life
5. "pull and replace" repair
7. Products or parts that can be remanufactured and resold
8. Scrap metal that can be recovered and used as a raw material for further manufacturing
the process of moving or transporting goods from their final desitnatino for the purpose of capturing value or for proper disposal
- involves the processes for sending new or used products "back upstream" for repair, reuse, refurbishing, resale, recycling, or scrap/salvage
Closed loop supply chains
designed and managed to explicity consider both forward and reverse flows activities in a supply chain. nothing is wasted
Forces Impacting Reverse Logistics
- Environmental Challenges
Barriers to Reverse logistics program implementations
Listed on PG 636: can be internal (no top management support, not enough financial resources, not enough personnell, etc.) or external (local, state, and federal restrictions and/or regulations)
Recommendation for managing reverse flows in a supply chain - AVOIDANCE
Producing a high-quality products and developing processes to minimize or eliminate returns
Recommendation for managing reverse flows in a supply chain: GATEKEEPING
checking and screening merchandise at the entry point into the reverse flows process to eliminate unnecessary returns or minimize handling
Recommendation for managing reverse flows in a supply chain - REDUCING REVERSE CYCLE TIMES
analyzing processes to enable and facilitate compression of time for returns to enhance value recapture
Recommendation for managing reverse flows in a supply chain - INFORMATION SYSTEMS
developing effective information systems to improve product visibility, reduce uncertainty, and maximize economies of scale
Recommendation for managing reverse flows in a supply chain - RETURNS CENTERS
developing optimum locations and facility layouts for returns centers to facilitate network flow
Recommendation for managing reverse flows in a supply chain - REMANUFACTURE AND/OR REFURBISHMENT
preparing and repairing a product for resale as is usually done in closed loop supply chains to maximize value recapture
Recommendation for managing reverse flows in a supply chain - ASSET RECOVERY
classifying and disposing of returned items, surplus, scrap, and obsolete items to maximize returns and minimize cost
Recommendation for managing reverse flows in a supply chain - PRICING
negotiating the best price for products being returned and resold
Recommendation for managing reverse flows in a supply chain - OUTSOURCING
considering a relationship with a third-party organization to handle and manage reverse flows in cases where existing personnel, infrastructure, experience, and/or capital may not be adequate to implement a successful program
Recommendation for managing reverse flows in a supply chain - ZERO RETURNS
developing a policy to exclude returns by giving a returns allowance and/or "destroying" the product in the field
Recommendation for managing reverse flows in a supply chain - FINANCIAL MANAGEMENT
developing guidelines and financial procedures to properly account for charges against sales and related financial issues when items are returned by customers.