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Chapter 2 Global Souring and Trade

Book: International Logistics: Global Supply Chain Management by Douglas LongSlides made by Ta-Hui Yang

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Outline

Global sourcing Terms of sale and incotermsInternational political economyWhy nations tradeInternational trade patterns

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1. Global Sourcing

Trends that push companies into the global market

International customersInternational competitionRegulationsNew, expanded marketsEconomies of scale

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1. Global Sourcing

The ways companies enter the global marketExportContractJoint ventureWholly owned subsidiary

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1. Global Sourcing

Production sharingA company distributes different stages of production to subsidiaries or other companies, often spread far across the globeConcentrate efforts on their core competencyOutsource those aspects that others can do betterRequire high standards of on-time performance and coordinationLogistics organization: centralized vs. decentralized

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1. Global Sourcing

SourcingAlso called purchasing or procurementSeries of activities that results in decisions regarding from whom/where goods, materials, and services should be obtained

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1. Global Sourcing

BarterAn alternative to a normal sale, but this has become increasingly rareA sign of an economy in severe distressExample: Russian farmers, Cold War

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1. Global Sourcing

Strategies of ProcurementVolume consolidationSupplier operational integrationValue management

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1. Global Sourcing

Tariff engineeringA product is made with the intention of lowering tariff ratesChanging how the product is designed and/or manufactured, or by picking one supplier over another

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1. Global Sourcing

Challenges of exporting, a survey in IndianaExport documentationTransportation costsHigh import dutiesUnable to find foreign reps with know-how to market productsDelay in transfer of fundsCurrency fluctuationsLanguage barriersDifficulty to service products

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2. Terms of Sale and Incoterms

Selling termsThe point at which ownership is passed from the seller to the buyer, and the arrangements for carriage and related activities. The questions of transfer of ownershipWho arranges for and pays for shipmentWho assumes the risk of loss/damage to the cargo at any point along the way

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2. Terms of Sale and Incoterms

Determining factors on the selling termsRiskLocationBuyer/seller relationsAbility to arrange transportCargo

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2. Terms of Sale and Incoterms

Shipping termsThose provisions that define

the seller’s and buyer’s responsibilities for making the shipping arrangements,paying transportation charges, procuring insurance on the goods, paying part charges, and bearing the risk that the goods may be lost or damaged in transit

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2. Terms of Sale and Incoterms

IncotermsA well organized set of rules for contract of carriageDeveloped by International Chamber of Commerce (ICC)Define and include obligations and duties on the part of the buyer and sellerIncoterms are for contracts of carriage, not contracts of sale

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2. Terms of Sale and Incoterms

Important issues for ICCWho is a “shipper”?What is meant by “deliver”?At what point is a cargo considered “delivered”?

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2. Terms of Sale and IncotermsIncoterms 2000 Group

DDPDelivered Duty Paid完稅後交貨

DDUDelivered Duty

Unpaid未完稅交貨

CIPCarriage and Insurance Paid to運費、保險費付至目的地

DEQDelivered Ex Quay目的港碼頭交貨

CPTCarriage paid to運費付至目的地

FOBFree On Board船上交貨

DESDelivered Ex Ship目的港船上交貨

CIFCost, Insurance, and Freight成本、保險費、及運費

FASFree Alongside Ship裝運港船邊交貨

DAFDelivered at

Frontier邊境交貨

CFRCost and Freight成本及運費

FCAFree Carrier貨交運送人

EXWEx Works工廠交貨

到達Arrival

需付主要運費Main Carriage Paid

未付主要運費Main Carriage Unpaid

出發Departure

DCFE

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3. International Political Economy

International lawMonist system vs. dualist systemPublic international law vs. private international law

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3. International Political Economy

Levels of economic integrationNo trade agreementFree trade agreementCustoms unionCommon marketEconomic union

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4. Why Nations Trade?

Absolute advantageComparative advantageNew trade theory

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4. Why Nations Trade?

Competitive advantage of Nations, Michael Porter (1990)

Factor endowmentsDemand conditionsRelated and supporting industriesFirm strategy, structure, and rivalry

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5. International Trade Patterns

Trade trendsRich countries with rich countriesNeighboring countriesColonial networksCommon cultures

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5. International Trade Patterns

Cross-tradeA country acts as a hub for trade between other countriesReasons for cross-trading

Logistical efficiencyAvoid trade restrictions, example: Chinese textiles to USA transship at Macau

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5. International Trade Patterns

Trade lanesA route for trade, connecting the major cities or industrial areaTransporting something between two points along a trade lane is much easier and cheaper

Trade liberalization in transportation