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MGT5062-FA18-A5-log elements-beta.docxDepartment of Extended StudiesVirtual Site

MGT5062-IU-FA18 Logistics Policy

Assignment 5 Elements of Logistics Systems- BETA

30 % of the course grade-=-=-Individual work-=-=-How submitted.*** Post your answer to the Canvas assignment box. Do NOT send to the rest of the class.

*** Unless other arrangements are made, your answers are due according to the class schedule.

***** Extensions? A5 was listed as a “maybe” for extensions. Provided that you request the extension in advance AND you will need ONLY a one-

week extension, you may assume an extension is approved. If you need more than one week, then you need to ask in advance.

Usually it is possible to include ALL of your answers in one file. That includes any memos and usually the needed backup work.

*** Be sure to label each answer with the correct question number so that the CEO (or other reader such as the grader!) can easily find the answer.

*** For essay- or narrative-type questions use MS Word or compatible. There is usually no need to go to a universal format such as PDF. But you can use PDF if you desire with no penalty.

-=-=Note: As noted earlier, the basic BMC scenario is be used throughout the course for the major assignments. Additional information is provided for each assignment as needed.-=-=-=-=-=-Copyright 2018 as adapted Dr. Paul Battaglia and Florida Institute of Technology for use ONLY in MGT5062-FA18 for the Virtual Site. Other use requires explicit written permission.

PAGE \* MERGEFORMAT 1

*** Be sure to show your work. For calculations you can use Excel or compatible; or manual and scan the pages into your answer file. Just be sure that the CEO or other reader can find and interpret the answers.

You can use basically any file name that you want EXCEPT please include your last name (a) somewhere in the file name; and (b) at the top of the first page inside each file. That helps me identify whose work I am looking at grading, etc. Example: Battaglia-5062-A5.doc

In order to help draw reasonable borders on the case, please prepare your answers primarily on the case contents and the text and other materials. That is not to say that you are limited to only the case and course materials (we are always looking for extra work or slightly different “twists” on the subject matter).

Complete your answers to the CEO’s questions in narrative-type answers (MS Word or compatible).

** Try to have all information in one file for each question.

** If you use manual calculations, then most often people scan these & paste into your document.


-=-=-

Buffalo Manufacturing Company, Inc.

The BMC saga continues. [Sad-to-say, but for our purposes the BMC saga is also drawing to a close.]

At any given time BMC's standard catalog will have about 500 different standardized molded parts. The exact number varies as the company adjusts the product line for current design trends, demand, and the like. As a reminder, BMC has a flexible manufacturing system so adjusting the product line is very easy. BMC has the ability to manufacture custom items in lots of 100 or more.

Heretofore, BMC has been involved with the US domestic market. However, an architectural design firm is in the process of designing and overseeing the construction management of a pair of buildings in Hong Kong. Some 4,300+ identical molded parts will be installed in the buildings to secure a special kind of light fixture being used.

Good news! Because of BMC’s reputation for a quality product, BMC has been contacted and invited to submit a bid on the project.

Even better news! CEO Elise Ennis calls you into her office. Small talk; weather has certainly been warm; how about those Buffalo Bills? Another building year!

Mrs. Ennis says that she appreciated your efforts at filling in with the earlier analyses. She explains the basic scenario on this possible order. Building project in Hong Kong. Possibility of a large order. Would be the first time the company would be involved with an overseas order so no real experience.

She is interested in a summary of the project; a cost estimate; and your recommendation(s), both as a logistician and separately as a management type with a strong Florida Tech background, on the overall possibility to pursue the order. Actual questions will be sent over later. She asks you to send her a memo to let her know the details, ok?

[Once again, the “ok?” is pretty much a rhetorical question, no?]

You contact Tom Smith (the architectural firm’s POC) and shortly thereafter you receive an email with the particulars that you had requested.


From: Tom Smith, Clark Architects << [email protected]>> Sent: October 29, 2018To: [you] @ BMC.comSubject: Hong Kong building project – molded partsGood talking to you today. Here is the info that we have available at the present time.#1. Require 4,300 molded parts to mount light fixtures. All of one style. WE considered three styles (A, B, and C). Style A and style B are still in active contention. As far as we can see, Style C is not going to make the cut. Decision to be made within 60 days. Need delivery in probably 5 or 6 months. I believe that Jim Smith in BMC manufacturing has the specs.#2. Ship to Hong Kong port Victoria where Clark company will take delivery before being offloaded.Regards, Tom

Well, this is the first time you had heard of Jim Smith’s involvement. So you dutifully trot over to manufacturing operations to talk to Jim.

Jim is aware of the proposal. He explains that, yes, Clark Architects had originally said that there were three designs (style A, B, and C). He rummages through his hold-box and pulls out a piece of paper with notes that he had taken.

Notes on HK building molded mountingsStyle A. Basically a cylinder 11 inches high by 11 inches in

diameter. The packing box has external dimensions of 12 x 12 x 12 inches. The package boxes cost $.60 each and weigh 1 pound. Estimated cost to manufacture is $4 each. Each fixture weighs 9 pounds.

Style B cone shape. Costs $5 to manufacture. For shipping the cones can be nested in packages of six per box. Padding is required so that the fixtures do not rub against each other. The external package dimensions are 12 x 12 x 48 inches. Each package costs $3 which includes the cost of the internal padding. The box itself weighs 4 pounds. The padding weighs 2 pounds. Each item weighs 9 pounds.

Style C globe shaped. Manufacturing is $6. Shipped 10 per package. Package is 12 x 12 x 90 inches. A filled box weighs 101 pounds. The package costs $3 including the internal padding.

HK uses 220-240 v. AC. The molding for the higher voltage is slightly different from the 110-120v AC version.

Miscellaneous** Manufacturing will be done in-house at the Buffalo facility.

** Any of the three given designs requires minimal changes to one of our


catalog models & can be easily accommodated with no design cost. Minimum order of any design is 100 so could even do all 3 designs as long as 100 of any style is ordered.

** As long as we know in advance, there is an extra charge of $1.35 per items for the 220-240 v AC design.

** In our catalog, a retaining clip is a standard part of the mount. So no extra charge.

** We add $1 per item for other costs just to be on the safe side.

** Needed materials are on-hand or can be arranged. Anticipate no real problems with supply nor manufacturing.

** These estimates should be good for the next 120 days.

You thank Jim and head over to the shipping section.

Sandy in shipping pretty excited to see someone from “headquarters”. Especially someone who wants to find out some details about shipping and shipping containers. You find out the following information.

[To simplify the analysis use the following itinerary/information. *** Routing --- We will not consider alternative routings of shipping to LA. For example, BMC might use rail from Buffalo to the Port of LA. Or could the use Port of NY/NJ as the export port.

*** Use truck and container from BMC warehouse to port of export.

*** Use only standard 40-foot ocean containers. Use a 40-foot container even if you could actually use a 20-foot container or some other size.] -=-=-=-=-

** Ocean shipping from the Port of Los Angeles.

** Each truck can carry one 40-foot container.

** The land rate per container from Buffalo to the Port of LA is $3.35 per mile.

** The standard distance from Buffalo ZIP code 14223 to 90731 is 2,536 miles.

** In a really exciting development, the ISO’s on freight containers were updated not too long ago. Most of the 1995 editions have been replaced by the 2013 version! Actually, the ISO has started selling the standards.


So she gives you an excerpt that she had made of the most useful information.

** Ocean rates from the Port of LA to the Port of Hong Kong are usually $425 per container.

** No extra charge for the use of the container.

** Shipping company will handle return of the container at no charge to BMC.

** Insurance cost is 2 percent of the value of the shipment ready to be loaded aboard ship in LA.

** Port charge in LA is $350/40 ft. container.

** Can assume that arrivals and departures are timely according to schedule so there will be no demurrage nor detention charges.

** Port charges in Victoria Harbor are US$250 per 40 ft. container.

** As indicated in the email, once the ship docks in Victoria Harbor (Hong Kong) the expenses are the responsibility of the buyer.

** Looks like we should use something like the ULINE.COM H-1260 pallet. Sandy burned a copy of the pages – attached. Should buy new pallets since there is not necessarily a big savings with used pallets. Need to buy the used pallets & make any needed repairs & get them cleaned/sanitized/processed for international shipping. And using new pallets has the added bene of simplifying the management and the analysis just a tad.

** Packing of the moldings into the shipping boxes is built into the general BMC warehouse facility operations so there is not an additional cost to the order.

** Loading of the pallets & shrink wrapping the pallets should be about $25 per pallet.

** Just her opinion. But this would be the first international shipment and it would probably be worthwhile to get some help from someone with experience in international processing.


From Sandy


Info from Sandy


-=-=-=

FROM SANDY

ocean container dimensions[Adapted from www-foreign-trade.com reference library]

Ocean Container DimensionsSTANDARD 20'

INSIDE LENGTHINSIDE WIDTHINSIDE HEIGHTDOOR WIDTHDOOR HEIGHTCAPACITYTARE WEIGHTMAX. CARGO

19'4"7'8"7'10"7'8"7'6"1,172 cu ft 4,916 lb47,999 lb

5.89 m2.33 m2.38 m2.33 m2.28 m33.18 cu m2,229 kg21,727 kg

STANDARD 40' HIGH CUBE 40'


39'5"7'8"7'10"7'8"7'6"2,390 ft38,160 lb59,040 lb

12.01 m2.33 m2.38 m2.33 m2.28 m67.67 m

39'5"7'8"8'10'7'8"8'5"2,694 ft8,750 lb58,450 lb

12.01 m2.33 m2.69 m2.33 m2.56 m76.28 m3,968 kg26,512


3701 kg26,780 kg

kg

OPEN TOP 20'(upgraded also available)

OPEN TOP 40'


聽 19'4"7'7"7'8"7'6"7'2"1,136 ft5,280 lb47,620 lb

5.89 m2.31 m2.33 m2.28 m2.18 m32.16 m2,394 kg21,600 kg

聽 39'5"7'8"7'8"7'8"7'5"2,350 ft8,490 lb58,710 lb

12.01 m2.33 m2.33 m2.33 m2.26 m66.54 m3,850 kg26,630 kg

聽聽 REEFER 20' REEFER 40'



聽 17'8"7'5"7'5"7'5"7'3"1,000 ft鲁7,040 lb45,760 lb

5.38 m2.26 m2.26 m2.26 m2.20 m28.31 m鲁3,193 kg20,756 kg

聽 37'8"7'5"7'2"7'5"7'0"2,040 ft鲁10,780 lb56,276 lb

11.48 m2.26 m2.18 m2.26 m2.13 m57.76 m鲁4,889 kg25,526 kg

聽聽 FLAT RACK 20' FLAT RACK 40'

INSIDE LENGTHINSIDE WIDTHINSIDE HEIGHTTARE WEIGHTMAX. CARGO

聽 18'5"7'3"7'4"5,578 lb47,333 lb

5.61 m2.20 m2.23 m2,530 kg21,469 kg

聽 39'7"6'10"6'5"12,081 lb85,800 lb

12.06 m2.08 m1.95 m5,479 kg38,918 kg


聽聽FLAT RACK

COLLAPSIBLE 20'

FLAT RACKCOLLAPSIBLE

40'


聽 18'6"7'3"7'4"6,061 lb61,117 lb

5.63 m2.20 m2.23 m2,749 kg27,722 kg

聽 39'7"6'10"6'5"12,787 lb85,800 lb

12.06 m2.08 m1.95 m5,800 kg38,918 kg

聽聽 PLATFORM 20' PLATFORM 40'



聽 19'11"8'0"7'4"6,061 lb52,896 lb

6.07 m2.43 m2.23 m2,749 kg23,993 kg

聽 40'0"8'0"6'5"12,783 lb66,397 lb

12.19 m2.43 m1.95 m5,798 kg

=-=-=

When you get back to your desk --- as promised – you find a note from the CEO.

[Your name] Thanks for stopping by today. This order might be a good opportunity for BMC. As I understand it style C is not under consideration any longer. So concentrate on styles A & B. Here are the questions I need the answers to. Send me a memo as soon as you canElise

[Q1. Any other information (e.g., assumptions, facts, considerations) that you think we should know when making the decision? [Hint: consider doing this after you do the other answers!]

Q2. How many style A moldings can be loaded into a standard 40-foot ocean container? How many containers will we need?

Q3. How many style B moldings can be loaded into a standard 40-foot ocean container? How many containers will we need?

Q4. For style A, what is the estimated total cost to BMC of filling the order up to the port of importation? [Hint: Besides the obvious manufacturing and shipping costs, are there any other costs that we should consider?]

Q5. For style B, what is the estimated total cost to BMC of filling the order up to the port of importation? [Hint: Besides the obvious manufacturing and shipping costs, are there any other costs that we should consider?]

-=-=-=-=

Q6. I was told that there are five basic transportation modes. Comment on the suitability of each to be considered for this order.


Q7. Can this situation be considered intermodal transportation (whatever that means)? Briefly describe how the situation would (or would not) meet the definition of intermodal transportation.

Q8. Briefly describe the “terms of sale” code that might be applied to this case. Explain the rationale for your selection.

Q9. What trade specialists might be used to help us make the decision and/or the shipment? Briefly explain how/why the specialists could help us.

Q10. In the paper today I see that the current exchange rate is USD 1.00 = HKD 7.8412. But I know that exchange rates change all of the time.

*** As the seller, are there any precautions that we should take to help mitigate the risk of a change in the exchange rate? What is the best action that we could take?

*** Assume that BMC has taken the best action to mitigate the results of a change in exchange rates. So BMC will get a “pure” impact of a change in the exchange rate. If the exchange rate changes to HKD 7.9600 when the payment is due, what is the likely impact (a) on BMC; and (b) on the purchaser?

Q11. Your recommendations, BOTH as a logistician & overall manager, on whether BMC should pursue this order. [Hint: BOTH certainly suggests that there are TWO answers, yes? The answers may be the same; close; somewhat different; or even opposites! The answer may depend on which “hat” you have on.]

Q12. Briefly, one recommended policy for BMC to adopt to help support any decision the CEO might make on increasing international trade?


Hint 1: In your memo to the CEO, be sure to answer the questions in an easy-to-find-the-answer format. For example, in my experience we do not normally tell the CEO that the answer is in the spreadsheet at attachment A and leave it at that. For a short or precise answer, then include the answer in the narrative.

Hint 2: As academic work please remember to include in-text references and a reference list. Even in the “real world” it is a very good idea to have your backup ready in case you are asked a question on your work: “where did you get that information?”, “how did you compute that?”, etc.

In case you are wondering, that is an actual rate on 10/31/2018 from Bloomberg.com. Using 4 (or even 5 or 6 decimals) is pretty standard for exchange rates. For some currencies might even need more than 6 decimals per USD. For our work, use 4 decimals.

-=-=-=-

The CEO awaits your analysis.


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