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Supply Chain Exam 3
Terms in this set (264)
"...that part of supply chain management that plans, implements, and controls the efficient, effective flow and storage of goods, services, and related information, from point of origin to point of consumption, in order to meet customer requirements."
Logistics is necessary to:
-Move goods and materials from suppliers to buyers
-Move goods and materials between sites (internal and external)
-Move finished goods to the customer
Products have little value to the customer until they are moved to the customer's point of consumption
-Delivered at the right time.
-Delivered to the desired location.
The true value of warehousing lies in
having the right product in the right place at the right time. Warehousing provides time and place utility; the availability necessary to give materials true value.
A facility used to store purchases, work-in-process (WIP), and finished goods inventory.
Function that allows a company to receive, store, breakdown, repackage, and distribute items to a manufacturing location, or finished products to a customer
Decisions driving warehouse management include:
-number of warehouse facilities in the network
-layout of the warehouses
-method of receiving, storing, retrieving, and distributing products/materials
Primary Functions of a Warehouse
Physical receipt of material, identification, inspection for conformance with the purchase order (quantity and damage), put-away, and preparation of receiving reports
The safe and secure retention of parts or products for future use or shipment.
Withdrawing components from stock to make assemblies or finished goods, or to ship to a customer.
Placing one or more items of an order into an appropriate container for safe shipping , and marking and labeling the container with customer shipping destination data, and other information that may be required.
Outgoing shipment of parts, components, and products. Includes packaging, marking, weighing, and loading for shipment.
Secondary Functions of a Warehouse
incoming and outgoing.
for specific customer orders
Warehouse operation that puts products together with other items/components before shipping them out to the final customer.
Types of Warehouses
ownership and functional
Public Warehouse is a business that provides
storage and related warehouse functions to companies on a short or long-term basis, generally from month-to-month.
Public warehouses own their own
equipment and hire their own staff to manage the facility
Public Warehousing fees are typically a combo of a
monthly storage fee plus a pallet-in fee and a pallet-out fee.
Fees will vary based on what is being stored and/or based on:
-Size and weight of the pallets
-If they can be stacked
-How fragile the product is
-Value of goods (risk of theft)
-Hazards associated with the goods
They may also have some document fees and account management fees.
Advantages of Public Warehouses
-No capital investment or property taxes
-Flexibility: Can be short or long term contract, for seasonal products, Add storage capacity even on short notice
-Lower costs and reduced risk
-Access to special features and services:
Temperature-controlled storage, Customer Service, Inventory Ordering, etc., Office space for customer's sales, accounting, etc.
Public Warehouses Disadvantages
Potential for incompatible computer systems
Specialized services may not be what is required/needed
Space may not be available when/where needed
Contract Warehouse is a variation of a public warehousing that
handles the shipping, receiving, and storage of goods on a contract basis
Contract warehousing continued
The contract can be for an entire building, or for a defined portion within a building.
Usually requires a client to commit to services for years rather than months
The fee structure may be fixed cost, cost-plus, or a combination of both.
The company providing the space handles the employees, equipment, and maintenance.
advantages of contract warehouse
Services: client can obtain specialized services tailor-made to suit their needs.
Cost: can be bundled in the contract and negotiated at a lower cost.
Control: contract warehousing offers a degree of control at a reasonable price
disadvantage of contract warehousing
Duration: The client company is expected to enter into a contract for a specific period of time; generally three years.
Private Warehouse is a storage facility that is
owned by the company that owns the goods being stored in the facility
private warehouses generally
-established by companies that have a large volume or highly valuable goods, or the need for some type of specialized storage or handling.
-Can be operated as a separate division within a company
-Can be co-located on-site with manufacturing, or off-site.
advantages of private warehouse
Control: Offers greater flexibility in designing the warehouse and gives users significant control over operations.
Visibility: inventory, material flow, handling, supervision, and associated costs.
Cost: Operating cost can be 15% - 25% lower if the company achieves at least 75% utilization.
disadvantages of private warehousing
High Start-up Cost: Capital to build or buy a warehouse. Long, risky investment. Cost of hiring and training employees. Purchase of material handling equipment.
Fixed Location: Not easy to move to another location if the market changes.
Fixed Size and Costs: When volume is low, the company still assumes the fixed costs.
Warehouse operation that receives products from different plants or suppliers, sorts them, and then combines them with similar shipments from other plants or suppliers for further distribution.
Warehouse operation that divides full truckloads of items from a single source or manufacturer into smaller, more appropriate quantities for use or further distribution.
The logistics practice of unloading materials from an incoming truck or railcar and loading these materials directly onto outbound trucks or railcars, with little or no storage in between to reduce inventory investment and storage space requirements.
The main reasons that cross docking is implemented is to:
1. Provide a central site for products to be sorted and combined for delivery to multiple destinations in the most productive and fastest method possible.
2. Consolidate: Combine smaller product loads into one method of transport to save on transportation costs.
3. Break-Bulk: Break down large product loads into smaller loads for transportation for an easier delivery process to the customer.
advantages of cross-docking warehouse
Operational Efficiency: Warehouse operations are more efficient as the material does not have to be stored at the warehouse, moving directly from receiving to shipping.
Inventory Efficiency: As there is no storage at the warehouses, total inventory in the supply chain can be reduced.
is simply the number of, and the relationship between, the warehouses that a company has in their organizational structure.
The fundamental questions to be answered in establishing a warehouse network are:
1. How many warehouses does the company need?
2. Where should they be located?
Trade-offs that will determine how many warehouses the company needs and where they should be located are; (1) the level of customer service the company wants to provide and (2) the amount of inventory the company is willing to invest in
Warehouse Network: Single Warehouse Positives
Operating costs and inventory will be lower
No duplication of equipment, warehouse staff, and managers
Network will be centralized and the company will have its best people, equipment and inventory systems concentrated in one place.
Warehouse can more actively focus on the needs of its customers.
Warehouse Network: Single Warehouse Negatives
may take longer to deliver product to some customers who are remote from the central location.
Warehouse Network : Multiple Warehouses Positives
Potentially faster delivery to customers from a decentralized network that is geographically dispersed throughout the market, assuming adequate inventory in each warehouse.
Warehouse Network : Multiple Warehouses Negatives
-Operating costs and inventory will be higher as each warehouse costs money to staff and operate.
-Duplication of equipment, warehouse staff, and managers
-Network will be decentralized and the company will have to spread its best people, equipment and inventory systems across a larger network.
Warehouse Network : Hybrid Approach
Companies may choose to do some type of a hybrid approach to balance costs and inventory against customer service.
hybrid approach cont
One hybrid network is a "hub-and-spoke" where there is a centralized warehouse (i.e., the "hub") which holds most of the inventory linked to a series of smaller geographically dispersed warehouses (i.e., the "spokes") which hold only a small amount of inventory to support their local area in the immediate time frame
The hub warehouse feeds the spoke warehouses with inventory as necessary on a regular basis.
Operating costs are lower because the spoke warehouses are smaller than in a decentralized model.
Inventory is also lower as all of the safety stock is held centrally, which generally means that less total safety stock is required because all of the risk and uncertainty is managed centrally.
Customer service is generally better than in a purely centralized model since some of the inventory is maintained closer to the customer.
Warehouse Network Strategy
1. market positioned strategy
2. product positioned strategy
3. intermediately positioned strategy
Market Positioned Strategy:
Close to customers to maximize distribution services and improve delivery.
Product Positioned Strategy:
Close to supply source to collect goods and consolidate before shipping products out to customers.
Intermediately Positioned Strategy:
Midway between supply source and customers, when distribution requirements are high and product comes from various locations
reduced lot sizes and shipping quantities
Cross Docking -
A LEAN concept because it eliminates the need to store inventory, and reduces some transportation, which are both wastes.
Reduced Lot Sizes and Shipping Quantities -
By reducing lot sizes and shipping quantities, a company can increase velocity in the warehouse, and get shipments out faster. Faster throughput is a LEAN concept.
Increased Automation -
Companies are using automated systems like pick to light, voice picking, conveyor systems, automatized guided vehicles (AGV's), and robotics to improve efficiencies and throughput times in the warehouse.
Green Warehousing -
One of the more sustainable goals for a green warehouse is to make it a net zero energy user.
Third Party Logistics (3PL)
A Third Party Logistics (3PL) company is an outsourced provider that manages all, or a significant part, of an organization's logistics requirements for a fee.
3PL providers charge a fee for their services.
They typically generate a 10 to 20% savings in logistics costs.
Favored by small businesses
Used to a significant degree for international logistics
Typical services offered by 3PL's include:
Pick and Pack
Billing and Invoicing
Freight Bill Auditing and Payment
Advantages of Using a 3PL:
Cost: Eliminates the need for a company to invest in warehouse space, technology, and staff to execute the logistics process.
Logistics Expertise: Knowledgeable of industry best practices and the latest developments in technology.
Efficiency: 3PL's can leverage relationships and volume discounts, which result in lower overhead and the fastest possible service.
Disadvantages of Using a 3PL:
Control: A company will not have direct control over the logistics operation.
Dependency: Outsourcing logistics creates a dependency on the 3PL.
Pricing: The company is locked into the pricing model specified in the contract
Fourth-party logistics (4PL) is an interface between the client company and multiple logistics service providers.
A company will select a lead logistics partner (referred to as a 4PL) that is then charged with managing the activities of all the other 3PL's being used by the company.
Ideally, all aspects of the client company's supply chain handled by 3PL's would be managed by the 4PL organization.
The function of planning, scheduling, and controlling activities related to the mode, carrier, and movement of inventories into and out of an organization.
Get the right product, to the right place, at the right time by ensuring the product is moved as efficiently as possible from point-of-origin to point-of-destination.
Objectives of Transportation:
1. To maximize the value to the company through price negotiations
2. To make sure service is provided effectively
3. To satisfy customers' needs
Transportation Company Classifications (companies transporting freight are classified by:)
contract carriers: person or company who transports freight under contract to one or a limited number of shippers
private carriers: person or company that transports its own cargo as a part of a business that produces, uses, sells or buys the cargo that is being hauled.
common carriers: Person or company who transports freight for a fee that can be hired by anyone to transport goods
exempt carriers: Person or company specializing in services or transporting commodities exempt from regulation by the Interstate Commerce Act.
Modes of Transportation
truck, air, rail, water, pipeline
Modes of Transportation - Truck
-most flexible mode
-carries > 80% of US Freight
-short to medium haul (0-200 miles)
Carries nearly anything from packaged household goods, to building materials, to liquid petroleum, etc.
General freight carriers -
carry the majority of goods shipped. Includes common carriers.
Specialized carriers -
transport commodities like liquids, petroleum, household goods, building materials, and other types of specialized items.
Less-Than-Truckload (LTL) carriers
move small shipments, when you don't have enough to fill a truck. Stop at depots and transfer locations to match load to the final location.
Full-Truckload (FTL) carriers
are used when you have enough to fill the truck, or you don't want other suppliers cargo on your truck (security, faster delivery)
Modes of Transportation - Rail
-Competes for transportation when the distance is long and the shipments are heavy or bulky.
-rail is slow and inflexible but it has the most capability
-Rail carriers have begun purchasing motor carriers and can now offer point-to-point pickup and delivery service.
-Rail companies use each other's rail cars. Keeping track of rail cars and getting them where needed can be problematic.
-Railroad infrastructure and aging equipment are also problems for the railroads.
-Paired with trucks for door-to-door delivery
Carries very heavy shipments including heavy building materials, construction equipment, coal, etc.
Modes of Transportation - Air
Most expensive mode of transportation
Generally the fastest mode of transportation.
Transports about 5% of U.S. freight.
Cannot carry extremely heavy or bulky cargo.
Mostly for light, high value goods, over long distances, quickly.
Half of the goods transported by air are carried by freight-only airlines, e.g., FedEx. Other half in passenger planes with luggage
Paired with trucks for door-to-door delivery
Carries items with a high cost to weight ratio. Very light, high-value goods that need to travel long distances quickly including jewelry, fine wines, pharmaceuticals, racehorses, etc.
Modes of Transportation - Pipeline
Lowest per unit cost for transportation
Limited in the variety of commodities they can carry.
Most reliable form of transportation
Little maintenance needed once the pipeline is running.
Materials are transported in a liquid or gaseous state
Carries materials in a liquid or gaseous state including: petroleum, natural gas, drinking water, gasoline
Modes of Transportation - Water
Very slow and inflexible
Competes with rail and pipeline for some cargo shipments.
Includes inland waterway, coastal and intercostal, and deep-sea cargo shipments.
Primarily used for very heavy, very heavy, very bulky (e.g., coal, grain, sand), and containerized cargo.
Paired with trucks for door-to-door delivery.
Carries heavy, bulky, low value materials like coal, grain, sand, and petroleum.
However, because transport by water is so cheap almost any item may be shipped by water including: automobiles, produce, containerized cargo, etc.
Intermodal is sometimes referred to as the sixth mode of transportation, but it is really the use of multiple modes of transportation to execute a single transport shipment.
Intermodal is growing substantially because it is
fairly cost-efficient and cost-effective.
The most common forms of intermodal transportation involve:
Rail and Motor Carriers
Rail and Water Carriers
Rail and Motor Carriers
Offer point-to-point pickup and delivery service known as Trailer-on-Flatcar (TOFC)
Rail and Water Carriers
Offer point-to-point pickup and delivery service known as Container-on-Flatcar (COFC)
specifically designed to allow trucks to be driven directly on and off the ship without the use of cranes.
Provides flexibility and speed
Since deregulation, negotiating prices is common
Cost of Service Pricing -
is the setting of a price for a service based on the costs incurred in providing it.
Value of Service Pricing -
is a pricing strategy which sets prices based on the value perceived by the customer, i.e., "priced at what the market will bear".
Combination Pricing -
price is set at a value between cost-of-service minimum and value-of-service maximum. Most carriers use some form of combination pricing. Common in highly volatile markets and changing competitive situations
Net-Rate Pricing -
Established discounts and accessorial charges are rolled into one all-inclusive price. Pricing is tailored to the individual customer's needs
Terms of Sale -
the delivery and payment terms agreed between a buyer and a seller.
Free on Board (F.O.B.) Origin
Seller states price at point of origin and agrees to load a carrier
Buyer selects the carrier and pays for the transportation
Title passes to the buyer when the shipment originates.
Buyer assumes the risk for in-transit loss or damage
Free on Board (F.O.B.) Destination
Seller arranges for transportation and adds charges to the sales invoice.
Seller assumes the risk for in-transit loss or damage.
Title does not pass to the buyer until delivery is completed.
all the following after
Granger laws (1870s) (don't need to know dates)
regulated the railroads
Interstate Commerce Act of 1887 -
created the Interstate Commerce Commission (ICC).
Transportation Act of 1920 -
changes to Interstate Commerce Act
Motor Carrier Act of 1935 -
brought motor carriers under Interstate Commerce Commission control.
Transportation Act of 1940 -
established Interstate Commerce Commission control over domestic water transportation.
Federal Aviation Act of 1958 -
created air traffic and safety regulations and the national airport system.
Department of Transportation Act of 1966 -
(don't need to know any of the dates)
coordination of all transportation-related matters.
Railroad Revitalization and Regulatory Reform Act (1976)
Railroads could change rates without ICC approval
Air freight deregulated in 1977
Motor carriers deregulated in 1980
Promote competitive, safe and efficient motor transportation
Shipping Act of 1984
Allowed ocean carriers to pool shipments, assign ports, publish rates, and enter into contracts with shippers
ICC Termination Act of 1995
ICC was eliminated
Ocean Shipping Reform Act of 1998
Requirement for ocean carriers to file rates ended
Regulation -vs- Deregulation pro
Regulation tends to assure adequate transportation service throughout the country. Protects consumers from monopoly pricing, safety, and liability
Regulation -vs- Deregulation con
Regulation discourages competition and does not allow prices to adjust based on demand or by negotiation.
U.S. transportation industry remains mostly
Consolidates LTL shipments into FTL shipments.
They take small shipments from multiple companies and consolidate them into larger shipments.
Load or Transportation Broker -
Bring shippers and carriers together
Shippers' Association -
Nonprofit cooperatives which arrange for members' shipping
Intermodal Marketing Company -
Purchase blocks of rail capacity and sell it to shippers
Technology and Trends in Transportation
New Concept Trucking
Vertically Folding Shipping Containers
Warehouse Management Systems (WMS)
Track and control the flow of goods from receiving dock to outbound shipment. New technologies, such as RFID tags, facilitate tracking.
Transportation Management Systems (TMS)
Used to select the best mix of transportation services and pricing.
Global Trade Management Systems (GTM)
Provides global visibility, standardization, and documentation to comply with international trade regulations.
Reverse logistics involves the process of
moving a product from the point of customer receipt back to the point of origin to recapture value or ensure proper disposal.
reverse logistics is
Backwards flow of goods from customers in the supply chain
"Reverse logistics is all about damage control and making the process as customer-friendly as possible"
Five R's of Reverse Logistics
Reverse logistics cost 4 - 5 times as much as forward logistics and requires on average 12 times as many processing steps.
Often viewed as:
An "unwanted" supply chain activity. Many companies outsource this activity to a 3PL
A cost of doing business
A quality or regulatory compliance issue
problems of reverse logistics that can hurt a company
Inability of information systems to handle returns
Lack of worker training in reverse logistics procedures
Little or no identification on returned packages
Need for adequate inspection and testing of returns
Danger of placing returned products back into sales stocks
Can affect the entire supply chain financially
Can have a large impact on how a consumer views a product or brand, potentially impacting future sales.
Retail returns = 6% to 10% of sales
Return of Unsold Goods
In some industries, goods are distributed to downstream members in the supply chain with the understanding that the goods may be returned for credit if they are not sold e.g., newspapers, magazines, even pharmaceuticals.
This acts as an incentive for downstream members to carry more stock, because
the risk of obsolescence is borne by the upstream supply chain partner.
The risk is that the downstream member in the supply chain might exploit the situation by
ordering more stock than is required and returning large volumes.
Green Reverse Logistics Programs
Can have a positive impact on the environment though activities such as recycling, reusing materials and products, or refurbishing unused products.
These programs can reduce environmental impact on landfills and deal with dangerous contaminants.
Companies can locate anywhere in the world due to increased
globalization, technology, transportation, and open markets.
Facility location must be part of the firm's supply chain strategy.
Defining each facility's strategic role (i.e., what type of facility)
Determining the location for each facility (i.e., where in the world)
Identifying the market(s) that each facility serves
Global Facility Types (in order of complexity)
Facility Types: Offshore Factory
A factory set up for manufacturing or assembly in a country where labor and/or raw materials are less expensive, for eventual import back into the manufacturer's home country.
Manufactures products at low cost with minimal technical and managerial resources
Take advantage of low labor costs
Import or acquire parts locally, then export to the manufacturer or directly to customers
Local management serves in a supervisory roll not in making management decisions.
Facility Types: Source Factory
Manufactures products at low cost but with skilled workers and significant managerial resources
Basically, an offshore factory that includes:
Plant management involvement in supplier selection
Plant management involvement in production planning
More developed local infrastructure
Access to skilled workforce
Low production costs
Facility Types: Server Factory
A factory set up to take advantage of government incentives, reduce taxes/tariff barriers to meet regional needs
Firm uses government incentives
Low exchange risk and tariff barriers to reduce taxes and logistics costs.
Makes minor improvements to product and processes
Set up to serve the local market
Facility Types: Contributor Factory
Focused on product development and engineering for products that they manufacturer
Basically, a Server Factory which also includes:
Facility Types: Outpost Factory
Factory set up in an area with an abundance of advance supplier, competitors, research facilities, etc.
Setup in a location within proximity to:
Research facilities & universities for materials, components and products
Facility Types: Lead Factory
Source of product and process innovation and competitive advantage across the entire organization (world-class)
Source of innovation.
Competitive advantage of the organization.
Global Location Factors used to compare/contrast one potential location against another
Taxes and Incentives
Access and Proximity to Markets
Right to Work Laws
Access to Suppliers and Cost
Utility Availability and Cost
Land Availability and Cost
Quality of Life Issues
12 Pillars of Competitiveness
Health and primary education
Higher education and training
Goods market efficiency
Labor market efficiency
Financial market sophistication
Taxes and Incentives
Several levels of government must be considered when evaluating potential locations.
Tariffs are federal taxes that are designed to protect local businesses.
Countries with high tariffs discourage importing goods into the country and encourage multinational corporations to produce locally.
Impacts business costs and consequently location decisions.
Access and Proximity to Markets
-The trend in manufacturing is to be within delivery proximity of your customers.
-In the service industry, proximity to customers is even more critical.
Labor availability, productivity, and skill.
Unemployment / underemployment rates
Wage rates; turnover rates; labor force competitors.
25 states have laws protecting the right of employees to decide whether or not to join or support a union.
Access to Suppliers and Cost
Supplier proximity influences the delivery of materials and the effectiveness of the supply chain.
Utility Availability and Cost
Supply of electricity has not always kept pace with the high speed of development.
In heavy industries the availability and cost of energy are critical considerations.
Telecommunication costs have dropped dramatically. Many organizations now have back office operations and call centers internationally to serve the U.S. market
Global warming, air pollution, and acid rain are debated as being the price of industrialization.
Trade liberalization creates the need for environmental cooperation
Land Availability and Costs
As land and construction costs in big cities continue to escalate, the trend is to locate in the suburbs and rural areas.
You will need people to work at these locations - so consider the following Quality-of-Life issues in terms of maturity, sophistication, robustness, etc., in each location, and do a comparison/evaluation:
Government / Politics
Geographic concentrations of interconnected companies and institutions.
Research parks and special economic / industrial zones serve as magnets for business.
Reasons for success:
Innovation and competition can be geographically concentrated.
Close cooperation, coordination, and trust among clustered companies
Fierce competition among rival companies
Companies recruit from local skilled workers
Regional Trade Agreements impact location decisions
European Union (EU):  following WWII, consists of 27 members countries in Europe
North American Free Trade Agreement (NAFTA):  Removed most barriers to trade and investment among U.S., Canada and Mexico.
Southern Common Market (MERCOSUR):  among Argentina, Brazil, Paraguay, and Uruguay
Association of Southeast Asian Nations (ASEAN):  among 10 member countries in in SE Asia
Common Market of Eastern and Southern Africa (COMESA)  among 19 member countries in Eastern and Southern Africa
The World Trade Organization (WTO)
deals with the global rules of trade between nations. Its main goal is to ensure that trade flows as smoothly, predictably and as freely as possible.
WTO functions include:
Forum for trade negotiations
Monitor trade policies
Aid for Developing countries
The Weighted-Factor Rating Model
Compares the attractiveness of several locations along a number of quantitative and qualitative dimensions.
Break Even Model
Useful location analysis technique when fixed and variable costs can be determined
Operating your supply chain globally can present opportunities:
increased revenue through global business and economic opportunities
increased sourcing options with more potential sources of supply to choose from including potential economic opportunities
Operating your supply chain globally can also present challenges:
Tariffs or duties (i.e., import taxes)
Transporting goods across borders
Customs, business practices, and regulations vary by country
Foreign markets are not homogeneous even within the country
International Freight Security
Transportation across national boundaries introduces added complexity, particularly security.
Since 9/11 there is more conflict between the U.S. government and industry regarding more security and restrictions for international shipments.
U.S. Department of Homeland Security (DHS)
DHS is the government agency who's mission is to:
Prevent terrorist attacks within the United States
Reduce America's vulnerability to terrorism
Minimize the damage from potential attacks and natural disasters
On March 1st 2003, DHS assumed responsibility for securing our nation's borders and transportation systems which straddle 350+ official ports of entry and connects our homeland to the rest of the world.
The Department's first priority is to prevent the entry of terrorists and the instruments of terrorism, while simultaneously ensuring the efficient flow of lawful traffic and commerce.
U.S. Customs and Border Protection (CBP)
controls the import process
Its' mission is to safeguard America's borders thereby protecting the public from dangerous people and materials while enhancing the Nation's global economic competitiveness by enabling legitimate trade and travel.
CBP works to secure and facilitate imports arriving in the U.S., accommodating the increasing volume and complexities of international trade.
CBP protects U.S. through active inspections at ports of entry.
CBP has a strong base of industry partnerships and technology to safeguard the American public and promote legitimate international commerce.
International Trade Compliance
Managing international trade activities is a complex process.
A typical cross-border shipment involves:
Accurately completing and filing about 35 documents.
Compliance with over 600 laws and 500 trade agreements which are constantly changing.
Interfacing with about 25 parties, including Customs, carriers, freight forwarders, other government agencies, etc.
Trade regulations and related content are at the heart of ITM, but staying up-to-date is a major challenge because:
The information changes frequently
It's often made available only in a foreign language
It's not always produced in an electronic form
International trade compliance Is a major concern and dozens of laws, regulations and rules have to be checked and complied with for every import and/or export transaction.
Millions of shipments cross into the US annually providing the US with goods and services:
11.2 million trucks
2.2 million rail cars
7,500 foreign-flag ships making 51,000 calls on U.S. ports
On a typical day, 70,334 truck, rail, and sea containers are arriving at 328 ports across the US.
Businesses violating trade regulations face fines of up to 40% of the value of the merchandise for "negligence," which can mean simply failing to keep certain necessary records.
Trade Compliance Systems (or Global Trade Management systems)
Have become a vital tool for every major importing and exporting company in the US.
Really the only way to keep current with all of the continuously changing laws, regulations and procedures.
Trade Compliance Systems can automate the process of checking every transaction
For commercial and non-commercial products against every legal regulation before import or export.
The benefits of implementing a Trade Compliance System include:
Increased level of compliance compared to a manual process.
Decreased number of physical inspections by US Customs & Border Protection
Faster release of shipments by US Customs & Border Protection.
Avoidance of fines and penalties.
Opportunity to interface with other systems.
When a shipment reaches the US, the Importer of Record (i.e., the owner, or purchaser) must file entry documents at the port of entry.
Goods are not legally entered into US commerce until:
The shipment has arrived within the port of entry
Delivery to the shipping destination has been authorized by CBP (following submission and review of required documentation)
Estimated duties have been paid.
CBP is also concerned with revenue collection (i.e. tariffs and duties). Revenue is determined by item such as:
Correct valuation (price paid or payable)
Country of Origin (COO)
Correct identification of merchandise
Correct identification of buyer and seller and whether or not they are related
Foreign Trade Zones (FTZ's)
Physical areas inside the US supervised by U.S. Customs and Border Protection that are considered to be outside of the U.S. territory.
Foreign and domestic merchandise may be moved into FTZs for operations, not otherwise prohibited by law, including storage, exhibition, assembly, manufacturing, and processing.
While in the FTZ, merchandise is not subject to U.S. duty or excise tax.
Foreign-trade zone sites are subject to the laws and regulations of the United States as well as those of the states and communities in which they are located.
There is no limit on the time material may remain in the zone.
Internationally, similar areas are called free trade zones.
When a shipment is ready to be exported, the shipper will file export documents for the goods' at the port of departure.
Shipments must conform to
Export Administration Regulations
The shipper must:
Know the product or technology being exported
Know where it is being produced
Know where and to whom it is being sent
Know who will use the product
Know whether there are any illegal restrictions in the order, L/C or other document (e.g. Boycott clauses).
-complete and submit a Shippers Export Declaration
-submit a commercial invoice for the product
the release of technology or source code that is subject to the Export Administration Regulations, to a foreign national located in the United States
An intentional or unintentional export of controlled technology can easily occur within
the walls of your company, even if located within the borders of the United States.
The release can be visual, oral, through on the job training, systems access, etc.
Technology" is defined as the specific information necessary for the development, production or use of a commodity
Usually, technology is even more strictly controlled than a commodity
The proper controls are needed to ensure that any such export occurs legally (i.e., with the proper licenses and approvals) and does not expose you or your company to penalties.
Substantial Fines (and/or)
10+ years imprisonment
Substantial fines per occurrence
Individual and/or company sanctions
Seizure and forfeiture of items in violation, including the vessels and aircraft carrying the items.
Loss of import and/or export privileges for a business unit, division, or for the entire company.
Detailed inspections of every single shipment, and delayed release by US Customs & Border Protection.
Move global shipments through customs and handle documentation.
International Freight Forwarders
Move goods to and from foreign destination
Put buyers and sellers from different countries together and handle export/import arrangements, documentation and transportation.
Non-Vessel-Operating Common Carriers (NVOCC)
Operate like freight forwarders but use only scheduled ocean liners.
How does supply chain management in the service industry differ from supply chain management in manufacturing?
The tangibility of the end product. Services are generally not tangible [i.e., you can't touch or hold them in your hands]
The involvement of the customer in the service process. Customers are much more directly involved in the service industry
The assessment of quality. Quality is assessed differently in the service industry
The labor content. There is a much higher ratio of labor to materials in the service industry
The facility location considerations. Services are largely provide and heavily impacted by location decisions.
Types of Services
Services offering very few or no tangible products to customers (e.g., consulting, storage facilities, training / education, etc.)
Services which offer tangible components along with the service component (e.g., restaurants; food along with the dining service)
Services which directly involve things owned by the customer (e.g., car repair, dry cleaning, haircut, and healthcare).
Goods can, but services cannot be
typically services are produced/consumed simultaneously
unlike goods, services are often
unique to the customer
unlike goods, services have high
unlike goods, services are
decentralized due to the inability to inventory or transport most services, they must be located near to the customer base
Improving service productivity is challenging due to:
-High labor content
-Individual customized services
-Difficulty of automating services
-Problem of assessing service quality
Global services are increasing all over the world and managing them involves a number of issues:
-identifying global customers
-labor, facilities, and infrastructure support vary by country
-legal and political issues
-Domestic competitors and the economic climate
Lowest cost service provider. Requires large capital investment in state-of-the art equipment and significant efforts to control and reduce costs.
Unique service created based on customer input and feedback
Serve a narrow niche better than other firms.
The delivery of services can be expressed as a continuum with
mass produced, low-customer contact systems at one end, and highly customized, high-customer-contact systems at the other end.
service delivery system
slide 10 chapter 12
Any service system should be
audited often to assess performance
Bundling services can deliver more than expected and
enhance customer satisfaction.
Bundle of Service Attributes
location, decoration, layout, architectural appropriateness, equipment.
tangible elements that are used or consumed by the customer or the service provider along with the service provided.
availability and access to the service, consistency of service performance, comprehensiveness of the service, and training of service personnel
attitude of the servers, atmosphere, waiting time, status, privacy and security, and convenience
-Make it easy for customers to find the facility / store.
-Once they arrive, make it easy to find what they want, or to find what you want them to find.
-Layouts designed to reduce distance traveled within the store
-Departmental layouts to maximize closeness desirability
Services may require the use of Facilitating Goods which are
tangible elements that are used or consumed by the customer or the service provider along with the service provided.
These items need to be purchased, transported, received, and warehoused in order to provide the service activity.
Generally these supply chain activities occur behind the scenes (i.e., out of view of the service customer)
Customers have no idea how these facilitating goods actually get to the destination but they sure notice if they are not available as expected!
The primary concern of service response logistics is the
management and coordination of the organization's service activities
The four primary activities of Service Response Logistics:
Demand management tactics are also important, as services cannot be
inventoried and customer demand must be met
Service capacity can be expressed as the number of customers
per day, per shift, per hour, per month, or per year, that the company's service system is designed to serve.
Regardless of the specific breakdown, it's the number of customers that the service provider can service at any one time.
The planned capacity for the service environment.
If the demand exceeds capacity, and the provider does not currently have the capacity to serve all of the customers, there are three basic alternatives:
1. Turn customers away and not service them, i.e., lose business.
2. Make them wait until service is available for them
3. Increase service capacity
This situation makes forecasting service demand critically important, particularly because
services cannot be inventoried or carried out in advance.
To minimize the cost of hiring and laying off employees, the following strategies deal with periods of high demand
-Cross-training and sharing employees so that they can help on the task that is busy at the moment.
-Using part-time employees
-Using customers - "hidden employees"
-Using employee scheduling policies
If capacity exceeds demand, instead of disposing of excess capacity (e.g., laying off personnel), find other uses for the available capacity
-Do other jobs when it's not busy.
-Do training or cross training
-Use demand management techniques to shift demand from peak demand periods into non-peak periods by offing incentives like discounts and special sales
Service providers are 100% reliant on the customer to create the flow of demand, which
has a direct impact on their ability to fully utilize capacity.
Some of the challenges of service capacity planning are:
-Customer arrivals fluctuate and service demands also vary.
-Customers are participants in the service and the level of congestion impacts on perceived quality.
-Idle capacity is a reality for services
-Inability to control demand results in capacity measured in terms of inputs
Service Capacity Decisions
Capacity can be used as a preemptive strike where the market is too small for two competitors to co-exist
-A strategy of building ahead of demand is often taken to avoid losing customers.
The lack of short-term capacity planning can generate customers for the competition
Capacity decisions must be balanced against the costs of lost sales if capacity is inadequate . . . or against operating losses if demand does not reach expectations.
Capacity Utilization =
Actual customers served per period / Capacity
Managing Service Capacity
Level Demand Strategy
Chase Demand Strategy
Level Demand Strategy
Capacity remains constant regardless of demand. When demand exceeds capacity, queue management tactics deal with excess customers
Chase Demand Strategy
Capacity varies with demand. So you can handle fluctuations but must take appropriate actions prior. Need to have options.
Managing waiting time involves managing both the actual waiting time and
the perceived waiting time.
Key questions to ask to determine waiting time strategy:
What is the average arrival rate of the customers?
In what order will customers be serviced?
What is the average service rate of providers?
How are customer arrival and service times distributed?
How long will customers wait before they either leave or lower their perceptions of service quality?
How can customers wait even longer without lowering their perceptions of service quality?
A queue management system is used to help control the flow and prioritization of people expecting to receive a service.
Queues can be utilized for almost any situation where large numbers of persons are
gathering, or waiting in line to purchase tickets, enter a facility, etc.
There are a variety of queue types:
These queues are set in a fixed position such as a super market checkout line, airport or bank. In some cases queue management systems can be structure with or without numbers such as "take-a-ticket number" allowing a person to walk around and wait for their number to be called.
When people form queues somewhat informally in various directions and locations. These types of ques are seen in retail stores, at an airport waiting for a taxi, people waiting for an ATM machine, etc.
Queues formed virtually with technology. Customers can use technology such as a smartphone to place their name in a real-time electronic queue such as at a restaurant. This type of queuing has provided a great deal of flexibility and allows for reduced stress level on the part of the customer.
Queuing System Input
-Customers are the demand source for services and their arrival triggers the start of the service experience.
-Customers generally appear in predictable arrival patterns
-There are models used to predict customer arrivals such as a Poisson distribution
Queue System Assumptions:
Most queuing models assume that customers enter the queue, and stay in the queue until served:
is when a customer refuses to join the queue
when customers decide to leave the queue.
Queuing models assume
infinite length of a queue
Queue System Characteristics:
-Queue discipline describes the order in which customers are served.
-Queuing can be comprised of single or multiple lines.
-Queue lines can be serviced by either a single server or multiple servers. Multiple servers can also act in series or in parallel.
Queuing System Design
slide 30 ch 12
Rule 1 for managing perceived waiting times
Satisfaction = customer perception ≥ customer expectation
It is hard to play catch-up.
You may only get one chance to get it right
Waiting Time Management Techniques
Keep customers occupied
Start the service quickly
Relieve customer anxiety
Keep customers informed
Group customers together
Design a fair waiting system
Distribution channels involve traditional methods and new channels that incorporate new Internet technologies
-eatertainment combines restaurant and entertainment elements
-Entertailing combines retail with entertainment elements
-Edutainment combines learning with entertainment to appeal to customers looking for substance along with play
-Allows business to expand quickly in dispersed geographic markets
-Protects existing markets
-Builds market share and facilitates business when owners have limited financial resources
-Operate / partner with firms familiar with the region's markets, suppliers, infrastructure, government regulations, and customers
-Must address language and cultural barriers
Internet Distribution Strategies
-Internet retailing is growing faster than traditional retailing
-Primary advantages of the Internet include the ability to offer convenient sources of real-time information, integration, feedback, and comparison shopping
Many retailers today sell products exclusively over the Internet
Mixed Strategy -
While others use it as a supplemental distribution channel
Customer satisfaction with the service depends not only on the ability of the firm to deliver what customers want, but on
the customers' perceptions of the quality of the service received
Service quality depends on the firm's employees to satisfy customers varying expectations.
Service quality may vary from person-to-person even within the same organization.
The key is to exceed the customers expectations . . .
so you also need to help form their expectations
Good quality service should involve:
Recovering from poor service quality
Keeping customers loyal and coming back serves as good word of mouth advertising
Service recovery systems require:
-Developing recovery procedures that are thought out prior to the bad event happening
-Training employees in these procedures prior to the event
-Empowering employees to remedy customer problems and recognizing them when they do.
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