This book comprises current practices and issues in supply chain management for global operations using a practical perspective. The emphasis is on supply chain costs and the ways to identify and manage costs. Because global operations entail unique vocabularies, complex processes, and intricate decision variables, I tried my best to explain concepts in simplest English, providing step-by-step guidelines for decision-making processes. Case stories were incorporated in many places to provide contexts and the sense of reality in terms of concrete data.

The ultimate objective of global supply chain management is to link the marketplaces, distribution networks, manufacturing process, and procurement activities, in a way that customers are served at a higher level, yet at lower costs. The book integrates principles and techniques in supply management, operations management, and logistics for the effective supply chain management in a global environment.

Thereby, the objectives of this text are to:

•     understand supply chain operations in a global business context;

•     know how to make strategic decisions in global supply chain management;

•     be able to get needed data and calculate customs duty, freight, and landed costs; and

•     be able to perform cost analysis for global sourcing and offshoring.

The book is designed for readers from a variety of backgrounds: supply chain professionals who want to have broader understanding for global operations; business students learning global issues in supply chain managements; engineers new to the supply chain operations; and business owners exploring global operations.

Preface i

Author Profile ii

Table of Contents iii

Table of Figures vii

Table of Tables viii

Chapter 1. Introduction to managing global supply chains  1

Opening Vignette: Li & Fung explains the company’s global supply chain operations 1

Supply chain and supply chain costs 2

Network-level competition and its implication  4

Globalization and fragmentation of supply chains 8

CASE. T-shirts Made-in-Globe 10

Key trends and recent topics for managing global operations 12

Inventory visibility and supply chain visibility 12

Supply chain risk management 14

Tailored to local tastes 15

Integrating the digital and physical worlds 15

Career paths in global supply chain management 16

Chapter 2. Regulatory influence on international trade  18

Opening Vignette: Foreign-trade zones are getting busier in U.S. 18

Customs duties 19

Harmonized Tariff System codes 21

Exercise. Calculate the customs duty for importation  23

Import license and export license 24

Country of origin  25

Free-trade zone and its benefits 29

Case. BMW saves duty payments using FTZ in South Carolina 30

Legal case. BMW v. United States on imposition of harbor maintenance tax 31

World Trade Organization (WTO) Agreement on Trade Facilitation  32

CASE. Cambodia’s progress in improving customs procedures 32

Regional trade agreements 33

Chapter 3. Import and export process  35

Involved parties and contracts 35

Documents for import/export 37

Transportation documents 37

Commercial documents 41

Customs documents 42

Financial documents 43

Procedures for documentary credit 44

customs clearance 46

Export/Import procedures 48

Chapter 4. Delivery and payment terms  52

Delivery terms 52

Short description of the Incoterms^® 2010 (offered by ICC website) 52

The logic of the Incoterms^® 2010 54

Incoterms^® 2010 reflecting changes in business practices 58

Terminal handling charges are the frequent cause of disputes 59

Incoterms: which one should I use? 61

Incorporating Incoterms into contracts 62

North American FOB usage 63

Payment terms 64

Payment currency 64

Payment conditions 66

How to fill in Bill of Lading for documentary collection and for documentary credit 68

How to write an international commercial contract 70

An excerpt from the ITC’s Model Contract - the payment term section  71

Chapter 5. Intermodal transport and logistics service provider  73

Opening Vignette: Alliance network providing end-to-end logistics service 73

Intermodal container 74

Intermodal freight transport 77

CASE. Panama expansion and its implication to shipping routes 78

Shipping liners, freight forwarders, and multimodal transport operator 80

Ocean carriers 80

Freight forwarders 82

Multimodal transport operators 83

Carrier liability vs. Cargo insurance 84

Carrier liability 84

Limits of carrier liability 85

Cargo insurance 86

Do I need a cargo insurance? 87

Third party logistics, 3PL 88

CASE. 3PL provider, Dachser carrying out global logistics operations for Otis 89

Chapter 6. Transportation Cost  91

Opening Vignette: How California wine is distributed to U.S. 91

Selecting mode of transportation  92

EXERCISE. Air vs. ground transportation considering freight cost and transit time 95

Calculating the annual inventory carrying cost rate 96

Transportation economics 97

Less-than-container load shipping  100

LCL shipping process 100

How is LCL Shipping Priced? 102

Truckload (TL) and Less-than-Truckload (LTL) operations 104

Calculating freight costs in U.S. domestic ground transportation  105

Chapter 7. Global sourcing and cost analysis  109

Opening Vignette: Ingersoll-Rand analyzes the true cost of global sourcing  109

Global sourcing  111

CASE. Three reasons why U.S. cotton is chosen by cotton buyers all around the world  112

Sourcing process in general 113

Additional costs of global sourcing  114

Landed cost 116

Total cost of sourcing  117

Cost analysis: global vs. local sourcing  120

EXERCISE. Purchasing wiring harness: global supplier or local supplier 120

Chapter 8. Global outsourcing and offshoring  123

Opening Vignette: Outsourcing call centers return, to US homes 123

Global outsourcing  124

China’s open door policy and Hong Kong’s outsourcing  125

Electronic manufacturing services (EMS) 126

Original design manufacturer (ODM) 127

CASE. Google’s use of ODM for Nexus smartphone 128

Service-level agreements (SLA) to manage outsourced services 129

Offshoring  131

Re-shoring  132

Chinese labor – totally changed  133

The hidden costs of offshoring  134

Figure 1.1 Anheuser-Busch's Supply Chain                                                                                                      2

Figure 1.2 Honda's supply chain for a center console assembly of an Accord model. Choi & Hong (2002)                5

Figure 1.3 T-shirts' global supply chain                                                                                                           10

Figure 1.4 Breakdown of the supply chain costs of Men's shirt. National Public Radio (2013)                                   11

Figure 1.5 Inbound supply chain visibility: Industry responses to Aberdeen Groups’ survey                                       13

Figure 1.6 Outbound supply chain visibility: Industry responses to Aberdeen Groups’ survey                                     13

Figure 2.1 Determining HTS-US code and duty rate for copper cathodes                                                              23

Figure 2.2 NAFTA Certificate of Origin form                                                                                                     27

Figure 2.3 Instructions for NAFTA Certificate of Origin                                                                                       28

Figure 3.1 Multiple parties and contracts in an international trade                                                                       35

Figure 3.2 Straight bill of lading                                                                                                                    38

Figure 3.3 Order bill of lading                                                                                                                       39

Figure 3.4 Export packing list example                                                                                                            41

Figure 3.5 Documentary credit: a typical transaction                                                                                         45

Figure 4.1 Incoterms 2010 illustrated by Montezuma                                                                                        58

Figure 4.2 Unloading handling and container transfer handling at a destination terminal                            60

Figure 4.3 Payment currencies versus trade                                                                                                      65

Figure 4.4 Completing a bill of lading for a cash-in-advance or open account payments                                         68

Figure 4.5 Completing a bill of lading for a documentary collection                                                                    69

Figure 4.6 Completing a bill of lading for a documentary credit                                                                          69

Figure 5.1 Load bearing of container stacking is at the 40 ft coupling.                                                                 75

Figure 5.2 20-foot containers have forklift pockets, accessible from the sides.                                                       75

Figure 5.3 Truck driver picking up an import container at a container yard                                                            76

Figure 5.4 Transit through expanded Panama Canal (Picture taken in September 2016)                                           77

Figure 5.5 Land bridge can reduce the transit time and avoid the expensive passage through the Panama Canal         78

Figure 5.6 Trade routes from East Asia to U.S. East Coast. Source: Webster(2015) “Redrawing global shipping routes”  79

Figure 5.7 Container shipping companies worldwide based on number of ships as of November 2017                      81

Figure 5.8 World container ship fleet: Total capacity and actual trade carried by them                                             82

Figure 6.1 Trade-offs between freight costs and speed                                                                                       92

Figure 6.2 Impact analysis: Train vs. Truck vs. Ship. Comparative study by New Zealand Transport Agency                 95

Figure 6.3 Larger capacity transportations are less expensive per unit of weight.                                                     97

Figure 6.4 Economy of scale illustrated in freight rate for trucking                                                                       97

Figure 6.5 Economy of distance                                                                                                                    98

Figure 6.6 Container freight stations of international ocean carriers vs. Container yards of local domestic LTL carriers   100

Figure 6.7 Proper packaging is a shipper's responsibility.                                                                                    101

Figure 6.8 A price quote for a LCL seafreight from Florida to Sydney                                                      103

Figure 7.1 The USDA testing of cotton tells importers exactly what they are buying.                                               113

Figure 8.1 CFI Goup’s (2010) Customer satisfaction survey results                                                                       124

Figure 8.2 “Breaking it down: Google Nexus One smartphone,” CHaINA, March/April 2010                                     129

Figure 8.3 Five year projection of the present TCO of Table 8.2, considering wage inflations and currency risk.            137

Table 1.1 The Gartner Supply Chain Top 25 for 2017                                                                                             7

Table 1.2 Exports of goods and services* (% of gross domestic product)                                                                   9

Table 2.1 The tariff rates for imports to the EU from other countries                                                                       20

Table 2.2 China's import export licensing framework                                                                                            25

Table 3.1 Time Limits for submitting cargo declarations as specified in EU Customs Code                                          47

Table 4.1 Risk and Cost allocation to buyer/seller according to Incoterms 2010                                                        56

Table 4.2 Payment conditions                                                                                                                          66

Table 5.1 Dimensions of commonly used cargo containers                                                                                   74

Table 6.1 Cost structure of an airline                                                                                                                 98

Table 6.2 Rate Basis Number determined by From/To cities                                                                                 105

Table 6.3 Freight classes based on shipment contents                                                                                         106

Table 6.4 Freight rates for sample freight classes                                                                                                107

Table 7.1 A typical U.S. cotton farming in numbers                                                                                            112

Table 7.2 Total cost of sourcing from China by Platts and Song (2010)                                                                 118

Table 8.1 Reshored+Foreign direct investment (FDI) manufacturing jobs. Source: Reshoring Initiative 2016 data report  132

Table 8.2 Comparison of U.S. vs China according to TCO Estimator developed by Reshoring Initiative                         136