November 10, 2000Changing Paradigm: Global Systems1 BUENOS DIAS

November 10, 2000 Changing Paradigm: Global Systems 1

BUENOS DIAS

Globalization of Business

Understanding and Managing Markets and Marketing


Stated Goals of this Workshop

• The new global paradigm

• Administration of global systems

• Implementing global strategies

• Managing across cultures

• Information technologies and organizations in global business

• Negotiations in the global environment


Your Goals for this Workshop


Several Factors Propelling Trade

• Trade Agreements– EU– NAFTA– MERCOSUR– ASEAN– APEC



• Political Changes– Russia– Baltic– Balkans– China– India



• Socioeconomic– Education

– Wealth

– Income


Two Facilitating Technologies

• Transportation/Logistics

• Information


Agenda: This Morning• Markets and Marketing

– Marketing Process– Marketing Concept– Emerging Markets– International Marketing Environments– International Marketing Issues

• Entry Strategies• Marketing Mix Adaptation

• Logistics Introduction


Agenda: This Afternoon• Logistics Mechanics

– Trade Intermediaries– Primary Modes

• Marine• Air

– NAFTA

• Supply Chain Management


Markets and Marketing: Marketing Process

• Population– Who they are– Where they are– What do they look like– How much do they have to spend– What do they want– How many are there



• Segment– Markets are not homogeneous– Basis

• Demographic• Economic• Psychographic• Purpose



• Target– Right combination of

• People

• Dollars to spend

• Lack of competition

• Comparative Advantage



• Position– We will never have a monopoly in a

target

– Do not overlook

– Differentiation



• Marketing Mix– Product

– Price

– Promotion

– Place

– People


Markets and Marketing: Marketing Concept

• Sustainable competitive advantage

• Identifying and delivering what the customer wants– Voice of the customer

– House of Quality

• External environments


Markets and Marketing: Marketing Concept

Social

TargetMarket


Markets and Marketing: Emerging Markets

• Demographics

• Economics

• Political Changes

• Trade Regimes



• Goods– Consumer– Manufacture

• Services– Tourism– Banking– Consulting





• Asia– India



• Asia– 4 Tigers

– China



• Europe– EU



• Europe– CIS



• Central and South America– Brazil

– Chile



• Mexico


Markets and Marketing: Marketing Environments

• Financial Forces– Foreign Exchange Markets– Currency Exchange Rate Risks– Differing

• Tariffs• Taxes• Fiscal and Monetary Policies• Inflation• Accounting Practices



• Economic Forces– GNP

– GNP per capita

– Income Distribution

– Wealth Distribution

– Personal Consumption



• Socioeconomic Forces– Total Population

– Age Distribution

– Population Density and Distribution

– Gender Balance and Roles

– Multiple Income Households



• Physical and Environmental Forces– Most basic of all forces– Topography– Climate– Geography– Location– Natural Resources



• Sociocultural Forces– Aesthetics– Attitudes and Beliefs– Religion– Material Culture– Education– Language– Societal Organizations



• Political and Legal Forces– Open or Closed

– Receptivity to Trade and Investment

– Taxation



• Political and Legal Forces– Trade Regimes

• Documentation– SED– Certificate of Origin– Export License – Import License

• Tax Preferred– Agreements– FTZ– Customs Bonded


Markets and Marketing: Marketing Issues – Entry Strategies

• Exporting– direct or indirect

– advantages

– disadvantages



• Licensing– mfr., process, trademark, know-how,

technical assistance, merchandising knowledge

– advantages

– disadvantages



• Joint Venture– equity position in foreign company

– advantages

– disadvantages



• Direct Ownership– complete ownership of foreign

subsidiary

– advantages

– disadvantages



• Countertrade– part of payment made in goods

instead of money

– types• barter

• buyback


Markets and Marketing: Marketing Issues – Mix Adaptation• Product

– Total Product Concept• Tangible, core• Tangible, related • Intangible benefit

– May Require Adaptation• Income/Discretionary• Cultural/Necessity


Markets and Marketing: Marketing Issues – Mix Adaptation

• Promotion– Communication

• Message• Sender• Encoding• Channel• Decode• Receiver• Feedback• Noise



• Promotion– Problems

• Encoding/Decoding

• Channel

• Noise



• Price– Total Landed Cost

– Cost Build Up



• Price– Sales Terms

INCO Terms

Setting the Parameters


Four Categories•E Term

–Ex Works

•C Terms

–CFR: Cost and Freight (named port of destination)

–CIF: Cost, Insurance, and Freight, (named port of destination)


Four Categories•C Terms (continued)

–CPT: Carriage Paid To (named place of destination)

–CIP: Carriage and Insurance Paid To (named place of destination)


Four Categories•D Terms

–DAF: Delivered At Frontier (named place)

–DES: Delivered Ex Ship (named port of destination)

–DEQ: Delivered Ex Quay (named port of destination)

–DDU: Delivered Duty Unpaid (named place of destination)

–DDP: Delivered Duty Paid (named place of destination)


Four Categories•F Terms

–FCA: Free Carrier (named place)

–FAS: Free Alongside Ship (named port of shipment)

–FOB: Free On Board (named port of shipment)


ApplicabilityAny Mode• EXW• FCA• CPT• CIP• DAF• DDU• DDP

Marine Only (other than RoRo)

• EXW• FAS• FOB• CFR• CIF• DES• DEQ• DDU/DDP



• Price– Getting Paid

– Cash– Open Account– Letters of Credit– Drafts



• Place• Channels of Distribution

• Entry Strategies• Other Market Considerations

• Logistics

Logistics in the Economy and Organization

Introduction and Overview


Introduction

• Economy

• Society

• Environment

• Nation


Evolution

• Definition– plan, implement, control– effective and efficient– flow and store– goods, services, related information– origin, production, consumption, disposal– conforming to customer requirements


Evolution

• Relevant to– manufacturing

– agriculture

– services

– institutions

– others


Components of Logistics

Natural Human

Financial

Physical

Info.

Inputs

Mgmt. Actions

Plan Implement Control

Logistics Management

RM WIP FG

MKTG

Utility

Efficient

Proprietary Asset.

Outputs

Suppliers Cust.

Logistics ActivitiesCS Inventory Location O/P

Forecasting WH Pkg. MH

Traffic IS MM Support


Development of Logistics

• Trade

• Military

• Current


Current Development Issues

• Deregulation gave us– more options

– lower cost

– SCM

– headaches

– opportunities



• Competitive Pressures– Globalization

– Cost Control

– Consumer changes

– Customer changes



• IT– Computers

– Intranet and Internet

– ERP Systems

– EDI



• Channel Power– Retailers rule

– Alliances



• Channel Power– Money Matters

• ROA

• Profit leverage

• Cash Flow

• Other measures


Systems

• Concept– network

– related activities

– managing flow

– within the supply chain


Systems Concept

SupplierDC

Supplier

Supplier DC

Mfr.

Customer

Customer

Customer

Customer


Systems: Logistics in the Economy

• Major Expenditure• Facilitates Economics Transactions• Provides Utility• Employment• Taxes• And so forth


Systems: Logistics in the Firm

• Marketing

• Manufacturing

• Human Resource Management

• Finance and Accounting

• Legal


Logistics in the Firm: MarketingThe Marketing Concept

Customer Satisfaction•Suppliers•Intermediate Customers•Final Customers

Company Profit•Max. Profits•Lower Total Cost•Proprietary Asset

Integrated Effort•Product•Price•Promotion•Place


Logistics in the Firm: MarketingThe Marketing Mix

Cust.

Prod.

PlacePromo.

Price

Logistics


Systems: Total Cost ConceptCustomer Service Level•Customer Service•Parts and Service Support

OP and IS•OP•Forecast•Communication

Warehousing•Store and handle•Location

Transportation Cost•Traffic and transport

Inventory Carrying Cost•Inventory Mgmt.•Pkg.•Reverse Logistics

Lot Quantity Costs•MH•Procurement


Challenges and Opportunities

• Strategic Planning• Quality• Accounting

– Analysis– Value Added

• EVA• CVA• PVA



• Globalization• Skills

– General Management– Traffic Management– Warehousing– Inventory– Etc.



• Logistics Managers– Asset Managers

– Information Managers

• Networked Solutions


Summary and Conclusions

Customer Service

Driving Force of the Logistics System


Customer Service Defined: A Recent View

Process

Value Added

Supply Chain

Cost Effective


Customer Service Defined: A Recent View

Activity

Measure

Philosophy


Customer Service Defined: Elements

Customer Service

Transaction

Post-transaction

Pre-transaction


Customer Service Strategy

Product

Organs

Formula

Where/Who

Mfr.

Retailer

Where/Who

Hospital

Doctor


Customer Service Strategy: Follow the Money

• Capital Budgeting

• Break Even Analysis

• Other Financial Measures


Customer Service Strategy: ABC Analysis

Small Number Big Dollars

Big Number Small Dollars


Customer Service Strategy: Audits

• External Audit– What does the customer value?

– How do we rate and rank?

– How do our competitors?

– What do we do about it?


Customer Service Strategy: Audits

Audits

ExternalWhat they want

How we rate and rank

How competitors rate and rank

InternalWhat measure

How measure

Where is the data

How use

How manage

Benchmark

Customer Service


Customer Service Standards and Measures

• Must be– measurable– valid– reliable– available– effective and efficient– realistic



Customer Service

Transaction

Post-transaction

Pre-transaction



Customer Service

Transit time

Consistency

In-stock

INVENTORY

MANAGING (ONE OF) THE MOST IMPORTANT ASSET


INTRODUCTION

• INVESTMENT–20% OF TOTAL ASSETS FOR

MFR.–50% OF TOTAL ASSETS FOR

• WHOLESALERS• RETAILERS


INTRODUCTION

• MANAGE TO IMPROVE–ROA

–CASH FLOW

–PRODUCTIVITY

–CUSTOMER SERVICE


RECENT TRENDS

• PRODUCT PROLIFERATION• MARKET DISPERSION• SERVICE EXPECTATIONS• SHRINKING PLC• TIME-BASED

COMPETITION


SERVICE

• CUSTOMERS–INTERNAL–EXTERNAL

• MEASURES–FILL RATE–TIMELINESS


COSTS: TLC

• TRADEOFFS–WITHIN LOGISTICS

–WITHIN FIRM

–WITHIN SUPPLY CHAIN


COSTS: TLC

PRICE

PLACE

PROMO

PROD

OP/IS

ICC

OC

TC

WH


COSTS: TYPES• ORDERING COST

ORDER SIZE (Q)

OR

DE

R C

OS

T


COSTS: TYPES• STOCK OUT COST

ORDER SIZE (Q)

ST

OC

K O

UT

CO

ST


COSTS: TYPES• TRANSPORT COST

ORDER SIZE (Q)TR

AN

SP

OR

T C

OS

T


COSTS: TYPES• CARRYING COST

ORDER SIZE (Q)

CA

RR

YIN

G C

OS

T



SERVE

K

ICC%

STORE

RISK



K

ICC%

WACC



ICC%

STORE PRIVATE

LEASED

PUBLIC

PLANT



SERVEICC%

INSURANCE

TAXES



ICC%

RISK

OBSOLESCENCE

SHRINKAGE

DAMAGE

RELOCATION


PROFIT: BALANCE

ORDER SIZE (Q)

CO

ST

TAC

ICC$

OC


PROFIT: ROA

TURNOVER X MARGIN EARNINGSROA


PROFIT: ROA

ASSETS AVE.

SALES

SALES

INCOME NETXROA


PROFIT: ROA

EQPMT& PLANTPROPERTY,PPE

OTHERINVENARCASHCA

WHEREPPE CA

SALESX

SALES

INCOME NETROA


RATIONALE• ECONOMIES OF SCALE: COST

–PRODUCTION–INBOUND SUPPLY–OUTBOUND DISTRIBUTION–PURCHASING–FINANCE


RATIONALE

• ECONOMIES OF SCALE: BALANCE

•UNIT COST

•HOLDING COST


RATIONALE

• SEASONALITY–DEMAND

–SUPPLY

–BOTH


RATIONALE

• SPECIALIZATION–PLANT LEVEL

–DC LEVEL

–FOCUSED FACTORY

–ASSIGNMENT


RATIONALE

• UNCERTAINTY–VARIABILITY

–WITHIN LOGISTICS

–WITHIN FIRM

–WITHIN SUPPLY CHAIN


RATIONALE• UNCERTAINTY


TYPES

• CYCLE–LOT SIZING–MANY METHODS–SOLD OR USED IN

• PRODUCTION• MARKETING


TYPES

• CYCLE–CONDITIONS OF

•CERTAINTY

•MEAN PERFORMANCE


TYPES

• CYCLE–BASIC MATH

PERCENT COSTCARRYING

UNITPER VALUE

SIZE LOTSTOCK CYCLE

WHERE

2

1

C

V

Q

CVQTACCYCLE


TYPES

• SAFETY–LEAD TIME

–DEMAND

–OTHER FACTORS


TYPES

• SAFETY–CONSTANT

–FUNCTION OF• VARIABILITY

• CUSTOMER SERVICE LEVEL


TYPES

• SAFETY–BASIC MATH


UNITPER VALUE

VAR. OF MSR. X UNITSDAILY AVE.

WHERE

C

V

SS

CVSSTAC

Q

QSAFETY


TYPES

• TRANSIT OR PIPELINE–EN-ROUTE

–DOOR-TO-DOOR

–HOW VALUE


TYPES• PIPELINE

–BASIC MATH


UNITPER VALUE

DOORTODOOR TIME TRANSIT

DEMAND ANNUAL

WHERE

365

C

V

t

D

CVtD

TACTRANSIT


OVERVIEW

• MEASURES OF EFFECTIVENESS–REDUCE COST

• BACKORDERS• EXPEDITED SHIPMENTS• TRANS-SHIPMENTS• FISH


OVERVIEW

• MEASURES OF EFFECTIVENESS–INVENTORY TURNOVER

INVESTMENT INVEN. AVE.

SALESITO


OVERVIEW

• MEASURES OF EFFECTIVENESS–FILL RATE

–ORDER ACCURACY

–TIMELINESS


DEMAND PATTERNS

• PULL–POSTPONE

–MAKE-TO-ORDER

–MASS CUSTOMIZATION

VERSUS


DEMAND PATTERNS

• PUSH–SPECULATE–MAKE TO INVENTORY–MASS

• PRODUCTION• DISTRIBUTION


CLASSIFICATION

• PARETO–NATURAL SETS–“80 – 20”–ABC

• CRITICAL VALUE ANALYSIS


BASIC Q-MODEL

• CERTAINTY

• BALANCE–ORDERING COST

–INVENTORY CARRYING COST


BASIC Q-MODEL• DETERMINING Q (CYCLE)

UNITPER VALUE


DEMAND NNUAL

COSTORDERING

2

V

C

AD

P

WHERECV

PDQ


BASIC Q-MODEL• DETERMINING Q (CYCLE)

CVQICC

Q

DOC

WHERE

ICCOCTAC

2

1

P

$


BASIC Q-MODEL

• INTENSIVE ADMINISTRATIVE

• PERPETUAL INVENTORY

• HIGH COST

• “A-ITEMS”


BASIC P-MODEL

• FIXED PERIOD

• VARIABLE Q


BASIC P-MODEL

• LOW ADMINISTRATION

• KEY IS P

• “C” ITEMS

ORGANIZING LOGISTICS

COMPETING WITH SUPPLY CHAINS


INTRODUCTION• FOCUS

–1990s• QUALITY• CUSTOMER SERVICE

–2000• SUPPLY CHAIN MANAGEMENT • SPEED


INTRODUCTION

• BARRIERS TO CHANGE– CORPORATE CULTURE– VISION– EMPLOYEE OWNERSHIP OF “Q”– SENIOR COMMITMENT– MANAGEMENT PROCESS– TRAINING AND EDUCATING


INTRODUCTION

• ENVIRONMENTAL FACTORS– INCREASING EXPECTATIONS

• CUSTOMERS• STOCKHOLDERS• MANAGERS

– ECONOMIC– REGULATORY


IMPORTANCE

•SALES SERVICE•CHANNELS•POST SALE

•MFR.•PURCHASING•TRAFFIC•WAREHOUSE

•IS•BUDGET•INVENTORY•DP

CEO

MARKETING PRODUCTION FINANCE

RE

SP

ON

SIB

ILIT

IES


IMPORTANCE

•LARGE INV.•SMALL FREQ. PROD. RUNS•DECENT. WH•LARGE ASSORTMENT

•LARGE INFREQ. PROD. RUNS•PLANT WH•FEWER PRODUCTS

•SMALL INV.

•CENTRAL. WH

CEO


OB

JEC

TIV

ES


IMPORTANCE

•RAPID OP•FLEX. RETURN POLICY•FAST TRANSPORT•EXPEDITED SHIPMENTS

•INEXP OP•RIGID RETURN POLICY•LOW PRICE TRANSPORT•FEW EXCEPTIONS

CEO


OB

JEC

TIV

ES


TYPES OF STRUCTURES

• DEVELOPMENT OF STRUCTURES–DIVISIONS

• PRODUCT• CUSTOMER• GEOGRAPHY• FUNCTION


TYPES OF STRUCTURES• DEVELOPMENT OF STRUCTURES

– MATRIXMARKETING PRODUCTION FINANCE

A

C

B


Source: Benchmarking Partners

TYPES OF STRUCTURES• DEVELOPMENT OF STRUCTURES

– HOLLOW CORPORATION

http://www.benchmarking.com/


TYPES OF STRUCTURES

• GENERAL LOGISTICS STRATEGIES–PROCESS-BASED

•BROAD GROUP OF ACTIVITIES•SUPPLY CHAINS•VALUE CHAINS


TYPES OF STRUCTURES• GENERAL LOGISTICS

STRATEGIES–CHANNEL-BASED

• PERFORM JOINTLY• ACROSS AND WITH

–MANUFACTURER–WHOLESALER–RETAILER


TYPES OF STRUCTURES

• LOGISTICS COORDINATION–STRATEGIC VS. OPERATIONAL–CENTRALIZED VS.

DECENTRALIZED–LINE VS. STAFF–OTHER


TYPES OF STRUCTURES

• LOGISTICS COORDINATION–OTHER: AS FUNCTION

CEO

FIN./ACCT.MKTG.MFR.ENGIN.

HRM. LOG.


TYPES OF STRUCTURES

• LOGISTICS COORDINATION–OTHER: AS PROGRAM

CEO

FIN./ACCT.

MKTG.MFR.ENGIN.

HRM.

LOG.


TYPES OF STRUCTURES• LOGISTICS COORDINATION

– OTHER: AS MATRIX

MKTG. PROD.

LO

GIS

TIC

S

ENGIN. FIN. HRM.

PR

OJE

CT


TYPES OF STRUCTURES• COMMITTEES

AD HOC STANDING

TASK

LO

W

LE

VE

L O

F A

UT

ON

OM

Y

WORK

ON-GOINGH

IGH

TEMP

LEGTH OF ASSIGNMENT


PLANNING

• MISSION• VISION• GOALS• OBJECTIVES• TACTICAL PLANS


DEVELOPING ORGANIZATION

• CORPORATE OBJECTIVES

• CORPORATE STRUCTURE

• FUNCTIONAL RESPONSIBILITIES

• MANAGEMENT STYLE


DEVELOPING ORGANIZATION

• FLEXIBILITY

• DECISION SUPPORT SYSTEMS

• HUMAN RESOURCE CONSIDERATIONS


MEASURING PERFORMANCE

• BUDGET–COST-TO-SALES–COST-TO-TOTAL COST–ROA

• PRODUCTIVITY• QUALITY

CONTROLLING LOGISTICS

ENHANCING SYSTEM PERFORMANCE


INTRODUCTION

• INCREASING IMPORTANCE – EXTERNAL ENVIRONMENTS

– PRODUCT LIFE CYCLE

– COST OF DOING BUSINESS

– COMPRESSION• COST

• REVENUE

• TIME


INTRODUCTION

• POTENTIAL TO IMPROVE –PRODUCTIVITY

–COST

–CASH FLOW

–SERVICE

–ROA


COST

• IMPORTANCE OF DATA –MANAGE SYSTEMS–MINIMIZE SYSTEM

CONFLICTS–INNOVATIONS

• ACTIVITY BASED MANAGEMENT

• ACTIVITY BASED COSTING


COST

• TOTAL COST ANALYSIS–RUDIMENTS

•SYSTEMS ANALYSIS

•COST TRADE-OFFS

•SUB-OPTIMIZATION


COST• TOTAL COST ANALYSIS

–RUDIMENTSPROD.

PROMO.PRICE

PLACE

TRANS.

WH

OP/IS

LOT

ICC

LO

GIS

TIC

SM

AR

KE

TIN

G


COST

• TOTAL COST ANALYSIS–DATA NEEDS

•CONTRIBUTION–PRODUCT

–TERRITORY

–CUSTOMER

–SALESPERSON


COST


•CUSTOMER SERVICE LEVEL–RESPONSIVENESS

–REVENUE

–COST

–PROFIT


COST


•NODES–NUMBER

–LOCATION

–ASSIGNMENT


COST


•TRANSPORT–MODES

–CARRIERS


COST


•OTHER–PACKAGING

–MATERIALS HANDLING

–OP/IT/IS

–CHANNELS



– CONTROLLING ACTIVITIES• NEED COST DATA• NEED OPERATING DATA• QUESTIONS

– WHAT SHOULD COSTS BE?– WHAT IS GOOD PERFORMANCE?– ARE ASSET LEVELS REASONABLE?– OTHER?



– CURRENT SYSTEMS• DIFFERENT AUDIENCES• HISTORICAL RECORDS• COMMON AND INDIRECT COSTS• NATURAL ACCOUNTS• IGNORE CONTRIBUTION• MASK FIXED COSTS



–CURRENT SYSTEMSSUPPLIESUTIL. EQPT. CLER.MGMT.

OH POOL

PROD. A PROD. B PROD. C PROD. D


COST• PROBLEM SOLVING

CONTROL

THROUGH

STANDARD COST

BUDGETS

PRODUCTIVITY

SPC

ABC/ABM



– STANDARD COST• NORM• GENERATED BY

– ACCOUNTING– ENGINEERING

• MANAGE– VARIANCES– EXCEPTIONS



– BUDGETS• OPERATING

– MASTER– FLEXIBLE– VARIANCES

» INEFFECTIVE» INEFFICIENT» COST» PRICE



– PRODUCTIVITY• GENERAL

INPUT

OUTPUTPY



– PRODUCTIVITY• WAREHOUSE

HOURS LABOR DIRECT

SHIPPED ORDERS

SHIPPED ORDERS AVE.

SHIPPED ORDERS

RECEIVED ORDERS

SHIPPED ORDERS

W

W

W

P

P

P



– PRODUCTIVITY• TRANSPORT

COST TRANSPORT TOTAL

NDESTINATIO TO SHIPMENTS


SERVED STOPS


SHIPPED MILES-TON

T

T

T

P

P

P



– SPC – P-CHART

p

p

p

zspLCL

zspUCL

n

pps

p

)1(

Size SampleSamples ofNumber

Defects ofNumber Total


COST• CORPORATE MIS

– TRANSACTION LEVEL DATA– SOURCE DOCUMENTS

• PURCHASE ORDER• SALES ORDER• PICK ORDER• BILL OF LADING• INVOICE• OTHER



SUPER. OFFICE UTIL. SUPPLY EQPT.

PROD. A PROD. B PROD. C PROD. D

RECEIVEPUT

AWAYSET UP PPP&S



– NEED• CONTRIBUTION REPORTING

• SEGMENT REPORTING

• ERP

• IT/IS

• KBM


Logistics Intermediaries

Type text

Type

text

Type text

Type text Type text

Type textType text


Introduction: Ex/Im Transaction

Source Port YouPortSource

Customs Customs

D-t-PContract

P-t-DContract

P-t-PContract

Bill of

Lading

Commercial Contract




D-t-PContract

P-t-DContract

P-t-PContract

Bill of

Lading

Bill of Lading Evidence of Contract Evidence of Receipt Evidence of Title (order form)




D-t-PContract

P-t-DContract

P-t-PContract

Bill of

Lading

Bill of Lading Whoever issues is the carrier Watch who issues

varies by mode varies by contract



Source YouSource

Commercial Contract

Payment Terms Sales Terms



Source YouSource

Commercial Contract

Payment Terms Cash Open Account Drafts and L/C Forfeiting



Source You

Commercial Contract

Sales Terms: INCO Terms E Term(s) C Terms D Terms F Terms


Introduction: Pro Forma InvoiceMaritime Example

Term Costs Time Variation Party PriceEXW FAS FOB CFR CIF DES DEQ DDU DDP Total


Freight Forwarders: Distinctions

importing exporting

mode regulations capacity

Most basic distinction is between:


Freight Forwarders: Distinctions

importing: CHB exporting: FF

Most basic distinction is between:


Freight Forwarders: Services

logistics documentation routing rating estimates finance

L/C drafts

"Basic" Services include:


Freight Forwarders: Services

customs appraisement rates entries duties

insurance COGSA Montreal coverage

"Basic" Services include:


Evaluating Forwarders

Overseas representation Financial status History Marketsgeographicproduct

Competence Competitiveness


NVO's: What

Non-vessel operating common carriers Billed asforwardersindependent consolidatorscollection agent for carriers


NVO's: What

Can beshippercarrierconsignee

In any casearose through 50 mile ruleunregulated for the most part


NVO's: What is at Stake Increasing role in international trade Traditional rolesconsolidation servicestariff services

Emerging clout in service contractsHapag in the Atlanticthen the TACAAPL in the Pacificnow the ANERA and the TWRA?


NVO's: What is at Stake

80 percent of cargo is controlled by 20 percent of shippers (CL)

20 percent of NVO control 80 percent of LCL traffic

20 percent of world market in consumer goods is at stake


NVO's: Types

Independent Forwarder-based Mega-carriers Niche operators Trucking companies Shipper-affiliated Air freight consolidators


The Role of Maritime Transport

A Review of Marine Options


Liners: Operating Characteristics

International maritime common carriers

Fixed schedules Fixed routes Fixed termini


Liners: Services

ContainersFEUTEUDryReferOther

Ro/Ro Other


Liners: Affiliation

• Conference

• Non-Conference

• Discussion Groups


Liners: Pricing Factors• Stowability• Density• Handling• Liability• Value• Traffic lane balance• Market conditions• Commercial relationships


Liners: Pricing Mechanisms

• Tariffs

• Service Contracts


Liners: Pricing Mechanisms• Service Contracts

– Contract Checklist• Introductory Clause• Replacement• Scope of Work• Period• Compensation• Payment terms• Quantities• Force Majeure• Default



– Name– Volume (total and minimum)– Type of container utilized– Loading port(s)– Discharge port(s)– Service Requirements

• Frequency• Boxes/sailing• Weekly, monthly, etc.



– Seasonality– Rates

• All-in• Exclusive

– Advanced booking– Demurrage/Detention– Transloading– Force Majeure– Arbitration– Liquidated Damages


Tramps: Operating Characteristics

• International maritime contract carriers

• Variable schedule

• Variable route

• Variable termini

• Primarily bulk commodities

• Vessel owners leasing to liners


Tramps: Services

• General Bulk– Grain– Cement– Ore

• Specialized– LNG– Car– OBO

Options In International Air Transportation

Speed . . . Cost . . Service


Introduction

• Air is an increasingly viable option for many shippers

• Varies depending upon – Shipment

• documents• small package• emergency• scheduled


Introduction

– Cargo• value

• customer

• characteristics


Industry Structure

• Structure differs significantly from maritime

• Differs in– Aircraft operators– Intermediaries

• More Choices . . . But simpler . . . Sometimes


Industry Structure: Aircraft Operators

• Combination Carriers

• Cargo Carriers

• Integrated Carriers


Industry Structure: Aircraft Operators - Combination Carriers• Provide significant amount of lift

in nearly all markets• Combination of

– Passenger– Freight

• Derive majority of bottom line revenue from passenger


Industry Structure: Aircraft Operators - Combination CarriersAircraft Options• Belly-hold in passenger aircraft• Combi-aircraft

– QC– main deck – below deck

• Freighters


Industry Structure: Aircraft Operators - Cargo Carriers

• Provide significant amount of lift in some markets

• Provide one or more services– courier– small package– airfreight

• scheduled• charter

• Derive all revenue from cargo


Industry Structure: Aircraft Operators - Integrated Carriers

• Provide significant amount of lift– Packages and, or documents carried

– Aircraft operations

• Provide one or more services– Courier

– Small package

– Airfreight

• Derive all revenue from cargo


Industry Structure: Aircraft Operators - Integrated Carriers

Look for• “Value added services”

– Distribution– Customs– Sort/Assort– Repack– Banking and finance


Price and Service Options

• Differ by – Service description– Service Extension

• Door-to-door• Port-to-port• Port-to-door

– Negotiability of rates and services


Price and Service Options

• Price versus Cost

• Everything may be negotiable

• Negotiating strategies– Forwarder-based

– Integrator-based


Price and Service Options: General Observations

• Structure of Rates – Piece Rate

• Preference• IATA

– Forwarder consolidated rate• Committed volume• Market rate

– Forwarder wholesale rate from carrier– Direct carrier rate– Carrier cost


Regulatory Environment

• Not quite as deregulated as domestic

• But, getting there– Safety versus Economics

– Domestic versus International Framework

• Relief is on the way . . . almost


Analyzing the Airfreight Option

• Comparing– Rates– Time– Inventory

• Cycle• Pipeline• Safety



• Can be used for any system combination

• Available commercially

• Can develop in-house



Base Data• Cost per unit• Forecast units• Transit time (door-to-door)• Rates per unit• Carrying cost percent

– pipeline– cycle



Calculations

• Unit days of pipeline inventory

• Annual freight cost

• ROI = (Annual freight cost savings) (Pipeline investment)

• Payback = (Pipeline investment) Annual freight cost savings

Options in Land Transportation


Introduction

• Two perspectives– Inland portion of international

transportation• door-to-port

• port-to-door

– Primary means of transportation


NAFTA Considerations

• Market Overview

• Logistics Considerations– Warehousing

– Trucking

– Rail


NAFTA Considerations: Market Overview

• Do not forget Canadians

• For Mexico

• For U.S.


NAFTA Considerations: Logistics

• Trucking– Domestic

– Trans-border

– International

• Rail


NAFTA Considerations: Logistics - Trucking

Types– Domestic

– Trans-border

– International



• Domestic– Current

– Proposed

• No how, no way, never



• Trans-border– Current

– Proposed

• But when?



• Trans-border: Current– Lack of reciprocity

– Distinguish between• Companies

• Drivers

• Equipment



• Trans-border: Proposed– Reciprocity

– Distinguish between• Companies

• Drivers

• Equipment



• International– Time-phased

– Note “country of origin” differences


NAFTA Considerations: Logistics - Rail

Types

• Rail-to-rail

• Piggyback

• Intermodal/Stacktrain



Gateways

• Laredo

• Nogales

• El Paso

• Eagle Pass



Changes• Privatization

– Northeast– Northwest

• Mergers– UP/SP– BN/ATSF

Documents

November 10, 2000Changing Paradigm: Global Systems1 BUENOS DIAS