25 jan global supply chains
TRANSCRIPT
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BA 244 Supply Chain Management
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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
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Mattel • Closed'Loop'Supply'Chain'• Lead'Scandal'in'China'
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GLOBAL SUPPLY CHAINS
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How long to transport from China to the UK?
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How long to transport from China to the UK?
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As of 19 January 2017, we have more options
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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'
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30 DAYS CHINA'TO'UK'
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18 DAYS CHINA'TO'UK'
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ARGUMENT FOR GOING LOCAL Global'vs.'Local'Sourcing'
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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'
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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'
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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.'
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Sustainability • Carbon'footprint,'especially'through'global'sourcing’s'increased'need'for'transport''
• Exported'our'domesLc'carbon'footprint'elsewhere'as'goods'are'manufactured'abroad''
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ARGUMENT FOR GLOBAL SOURCING
Global'vs.'Local'Sourcing'
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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'
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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'
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Global Trade Contributes to Peace • NaLons'that'trade'together'are'unlikely'to'go'to'war'
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In Conclusion.. • Predictable'products'are'suitable'for'low'cost'country'sourcing'
• Whereas'more'difficult'products'are'more'appropriate'for'local'sourcing''
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International Sourcing
Sourcing goods and services ‘overseas’ or other-
country suppliers: essentially, ‘importing’�
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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�
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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)�
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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'
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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�
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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 �
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INCOTERMS*FOR*SEA*FREIGHT*
Manila
Clark
Beijing
Tianjin
EXW
FOB
CFR CIF
DDP
EXW Beijing
FOB Tianjin
CFR or CIF Manila
DDP Clark
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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*
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PHILIPPINE*FREE*TRADE*AGREEMENTS*
ASEAN
ASEAN-Australia-New
Zealand
ASEAN-India
ASEAN-Japan ASEAN-China
ASEAN-Korea PH-Japan
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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'
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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'
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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)'
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FREIGHT*FORWARDERS*
TradiLonal'Role'
• Transport'
• (Customs)'Clearance'
• Insurance'
• Delivery'to'the'Buyer'
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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'
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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'
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