Global Supply Chain
Fundamentals
01
Why companies go global
Things to consider before going global
02
SECTION 1: Global Manufacturing
Strategies, Recalls
03
Contract
Manufacturing
04
Microsoft: Xbox Manufacturing
Xbox Facts
•First product designed or manufactured by Microsoft
•1000+ parts, 45 either cost critical or made by single supplier
Electronic Manufacturing Services Industry (EMS)
•Companies that can take on numerous primary supply chain responsibilities associated with the
manufacturing of electronic components assembled end-items
•Exploit economies of scale in the manufacturing of electronic devices
•Similar parts, processes, designs, techniques, channels of distribution
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Microsoft: Xbox Manufacturing
Advantages of Utilizing EMS firms
•FAST START –Speed to market
•STRONG START –Established Quality Control, Established Supply Chains
–Purchasing, Delivery,
–Labor, Manufacturing expertise
–International channels of distribution
•COST ADVANTAGES-Economies of scale, Small orders possible, Learning
•FLEXIBILITY -Large Volume or Small Volume orders
•Focus on your strengths
06
Microsoft: Xbox Manufacturing
Purchasing Arrangements
Commodity parts –Flextronics orders and purchases
Some custom parts –Microsoft negotiated, Flextronics controlled
Special/Critical parts –Microsoft purchased, Delivered to Flextronics
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Manufacturing Recalls
08
Outsourcing
vs
Offshoring
09
Corporate Options
Offshoring
In-Sourcing Outsourcing
Offshoring &
Outsourcing
Local
Abroad
Within
Company
Outside
Company
N Sourcing
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CAN YOU THINK OF EXAMPLES OF EACH t 5 OPTIONS?
SECTION 2: Global Logistics
Intermediaries, Ports, Documentation
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Intermediaries
12
Intermediaries
3PL’s -Third Party Logistics Company -An organization that manages and executes a particular
logistics function, using its own assets and resources, on behalf of another company.
This party can neither be the buyer, nor the seller of the item in question. They can
include packaging & container companies, and carriers. Companies from many different industries now
consider themselves 3PLs –Technology, etc.
Freight Forwarders
•U.S. Side of Exports, “Travel Agents”
•Find most Efficient and Cost-Effective Itinerary
Customs House Brokers
•Help Items Clear Foreign Customs –Before Arrival?
•Foreign Side of Exports –Arrange Local Itinerary
13
Shipping Ports
14
Shipping Ports
Cargo Port and Cargo Airport Data
Port Strategies
Port Operations
Port Security
15
Shipping Alternative –Mexican Ports
LA/Long Beach Port Congestion
•During economic boom, operated at roughly 130% utilization
•Constant delays, Excessive labor and fuel fees
Lazaro Cardenas Port
•Toyota, Mazda, and Isuzu shipping to US via Lazaro Cardenas port
•Wal-Mart and Target have considered similar alternatives
•Affordable and dependable workforce –Strikes rare
•US Gov’t often work to facilitate “no-hassle” imports via Mexican border
16
Before
Supplier Transport 1 Transport 2 Transport 3 Target
With CT-PAT (Customs-Trade Partnership Against Terrorism)
Supplier Transport 1 Transport 2 Transport 3 Target
CT-PAT Program Requirements 17
CT-PAT Program
Customs-Trade Partnership Against Terrorism
•Corporations assume responsibility for their supply chains
•Voluntary Program with Benefits for Participants
•Data mining program with 100+ data elements
•Advertisement: Low Cost + Low Security = Late shipment + Higher cost
Three Tier System –10,000+ Members
•TIER 1 –Must perform risk analysis. Take steps to control/improve weaknesses
•TIER 2 –Validated Tier 1 findings by US Customs
•TIER 3 –GREEN LANE –Follow Supply Chain Best Practices (Undefined, Sharing)
Boeing, GM, Target
Challenges and Considerations
•Attest to SC members’ security
•IT Issues -Cost to integrate IT system , Sharing information with Gov’t
•HR Issues –Background checks, Training, Education…
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Shipping Documentation
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Exporting Documentation
Shipper’s Export Declaration (SED)
Used by Customs in recording Export Types and Quantities
Required if Cargo greater than $2500 in value
OR if destined for countries prohibited by Export Administration Regulations
OR if Validated Export License is required
Validated Export License
US Gov’t Authorization for Controlled or Policed items/services
•Defense, Weapons, Ammo, Nuclear, Watercraft
•Drugs, Narcotics, Processing Equipment
•Financial Assets, Patent Sensitive Items
•Agricultural Plants and Products
•Potential Dual Purpose Technologies
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SECTION 3:
INTERNATIONAL COMMERCE
Imports, Exports, Tariffs
21
DUTY DRAWBACK -Utilized when an item is imported and then re-exported
•Typically 90%+ return of tariff
•Why would this happen? Display Items, Layovers…
•Example: NASA Telescopic Lens/Mirror
Free Trade Zones (FTZs)
•Area where acceptable items can enter the country duty free for storage, display, manufacturing,
transformation, assembly, re-packaging, etc.
•Items are then usually re-exported. Alternative to duty drawbacks. Items can remain in the country
permanently if the duties are levied.
Avoiding Tariffs 22
Procedure for US Export: Step 1
1. Which US agency controls this export?
Department of State
–CLASSIFICATION DOCUMENT: US Munitions List (USML)
–CLASSIFICATION NUMBER: Categorize product/service using appropriate USML #.
–ENFORCED RULES: International Traffic in Arms Regulations (ITAR)
Department of Commerce
–CLASSIFICATION DOCUMENT: Commerce Control List
–CLASSIFICATION NUMBER: ECCN Citation (Export Control Classification Number)
–ENFORCED RULES: Export Administration Regulations (EAR).
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Procedure for US Export : Steps 2,3,4
1. Which US agency controls this export?
2. Classify your item
•There are many ways to classify basic items.
•Sandals –Dress shoe, Athletic shoe, Casual shoe…
•Wine –Alcoholic beverage, fruit juice…
•ECCN Citations/Categories of Bacteria
3. Get a License (if necessary)
•For a new product minimum 12-16 weeks OR as much as
1 year (or longer if denied the first time.)
•Consider requests to Department of State –Weapons, Countries
4. Export upon receipt of Customs’ approval
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Art of International Commerce
Classifying your Item
Food –FDA requirements, rules, regulations
Apparel/Textile –Tariffs, Quotas
Toy –Safety standards
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Organizations searching for loopholes and opportunities
Domesticating Products
Meet minimum domestic part requirement to make foreign item domestic
Creative Importing
Importing a used Japanese sports car not presently sold in the US. What are your options?
•Third party importer
•Ship whole as unassembled parts
•Ship only the required parts
Altering the product in order to reclassify the item: SUVs
Art of International Commerce 26
