an overview of import supply chains

An Overview of Import Supply ChainsAn Overview of Import Supply ChainsDr. Rob LeachmanDr. Rob Leachman

Leachman & Leachman & Associates LLCAssociates LLCApril 21, 2010April 21, 2010

Elements of Asia Elements of Asia –– USA Supply ChainsUSA Supply Chains

April 21, 2010April 21, 2010 22

Asian Asian FactoriesFactories

Leachman & Associates LLC Leachman & Associates LLC Asia Asia –– USA ImportsUSA Imports

Vessel to Vessel to Port of EntryPort of Entry

Local Retail Local Retail OutletsOutlets

Import warehouses Import warehouses CrossCross--docks (optional stage)docks (optional stage)

RDCsRDCs in other Regionsin other Regions Retail Outlets in Retail Outlets in other Regionsother Regions

Retail Outlets in Retail Outlets in other Regionsother Regions

Domestic Domestic Container/TrailerContainer/Trailer

Local Retail Local Retail OutletsOutlets

Domestic Rail or Truck to Domestic Rail or Truck to other Regionsother Regions

RDCsRDCs in other Regionsin other Regions

Local Regional Distribution Local Regional Distribution Center (RDC)Center (RDC)

Local RDCLocal RDC

WhatWhat’’s in the import containers?s in the import containers?

April 21, 2010April 21, 2010 33

CommodityCommodity Percent of Total Volume Percent of Total Volume

Furniture & BeddingFurniture & Bedding 17.1%17.1%Electronics Electronics 8.3%8.3%MachineryMachinery 8.0%8.0%Toys, Games & Sporting GoodsToys, Games & Sporting Goods 7.5%7.5%ClothingClothing 6.8%6.8%Auto Parts & Motorcycles Auto Parts & Motorcycles 6.1%6.1%Plastic GoodsPlastic Goods 5.0%5.0%Steel GoodsSteel Goods 3.9%3.9%Shoes and BootsShoes and Boots 3.5%3.5%Leather Goods (Handbags)Leather Goods (Handbags) 2.4%2.4%Rubber GoodsRubber Goods 3.3%3.3%Wooden GoodsWooden Goods 2.3%2.3%All otherAll other 26.0% 26.0% Source: PIERS, WTA and PMA 2005 dataSource: PIERS, WTA and PMA 2005 data

Leachman & Associates LLC Leachman & Associates LLC Asia Asia -- USA ImportsUSA Imports

April 21, 2010April 21, 2010Leachman & Associates LLC Leachman & Associates LLC

Asia Asia -- USA ImportsUSA Imports 44

0.00%

10.00%

20.00%

30.00%

40.00%

50.00%

60.00%

70.00%

80.00%

90.00%

100.00%

0.0 ‐4.0

4.0 ‐8.0

8.0 ‐12.0

12.0 ‐16.0

16.0 ‐20.0

20.0 ‐24.0

24.0 ‐28.0

28.0 ‐32.0

32.0 ‐36.0

36.0 ‐40.0

40.0 ‐44.0

44.0 ‐48.0

48.0 ‐52.0

52.0 ‐56.0

> 56.0

Percen

tage

of Total TEU

s

Declared Value ($ per cu. ft.)

Value Distribution of 2005 Asia ‐USA Waterborne Containerized Imports

25%InexpensiveImports 50%

Moderate-valueImports

25%ExpensiveImports

Box TypesBox Types

•• Marine containerMarine container -- holds holds up to 2,700 cu. ft. of up to 2,700 cu. ft. of cargoescargoes

•• Domestic container or Domestic container or trailertrailer -- holds up to 4,000 holds up to 4,000 cu. ft. of cargoescu. ft. of cargoes

•• Transportation savings Transportation savings –– contents of 5 marine contents of 5 marine containers can fit in 3containers can fit in 3¼¼ domestic containersdomestic containers

April 21, 2010April 21, 2010 55Leachman & Associates LLC Leachman & Associates LLC

Asia Asia -- USA ImportsUSA Imports

Marine Stack TrainMarine Stack Train



Domestic Stack TrainDomestic Stack Train



Alternative Supply ChainsAlternative Supply Chains•• Push System (a.k.a. Direct shipping)Push System (a.k.a. Direct shipping)

–– ship marine boxes directly from Asian factories to ship marine boxes directly from Asian factories to RDCsRDCs

–– Offers low transportation and handling costOffers low transportation and handling cost

•• PushPush--Pull System (a.k.a. Consolidation Pull System (a.k.a. Consolidation -- Deconsolidation)Deconsolidation)–– operate import warehouses and crossoperate import warehouses and cross--docks at docks at port(sport(s) )

of entry, allocate imports and reof entry, allocate imports and re--ship to ship to RDCsRDCs in in domestic boxesdomestic boxes

–– Offers low inventory costOffers low inventory cost–– Variants: PushVariants: Push--Pull Pull -- All at San Pedro Bay, PushAll at San Pedro Bay, Push--Pull Pull --

Four Corners, PushFour Corners, Push--Pull Five CornersPull Five CornersApril 21, 2010April 21, 2010 88


Push SupplyPush Supply--Chain StrategyChain Strategy

April 21, 2010April 21, 2010 99

Potential port of entry Regional distribution center


PushPush--Pull Supply Chain Pull Supply Chain –– All at San Pedro BayAll at San Pedro Bay

April 21, 2010April 21, 2010 1010

Potential port of entry

Regional distribution

center


PushPush--Pull Supply Chain Pull Supply Chain –– Four CornersFour Corners

April 21, 2010April 21, 2010 1111

Potential port of entry Regional distribution center


April 21, 2010April 21, 2010 1212

Comparison of Supply Chain StrategiesComparison of Supply Chain Strategies

•• Push Systems offer low transportation and Push Systems offer low transportation and

handling costs, while Pushhandling costs, while Push--Pull Systems offer low Pull Systems offer low

inventory costsinventory costs

•• Each strategy suitable for different markets:Each strategy suitable for different markets:


PushPush PushPush--Pull 4 or 5 Pull 4 or 5 CornersCorners

PushPush--Pull All at Pull All at San Pedro BaySan Pedro Bay

Cheapest Imports Cheapest Imports (25% of total at (25% of total at present)present)

ModerateModerate--value value Imports (50% of Imports (50% of total)total)

Expensive Imports Expensive Imports (25% of total)(25% of total)

Who Uses What Supply ChainWho Uses What Supply Chain



PushPush PushPush--Pull 4 or 5 Pull 4 or 5 CornersCorners

PushPush--Pull All at Pull All at San Pedro BaySan Pedro Bay

NationNation--wide wide Importers of Importers of Inexpensive GoodsInexpensive Goods

Large NationLarge Nation--wide wide Importers of Importers of ModerateModerate--value value GoodsGoods

Original Equipment Original Equipment Manufacturers of Manufacturers of Expensive Goods Expensive Goods (Nation(Nation--wide sales)wide sales)

Small and Regional Small and Regional ImportersImporters

Import Mix at San Pedro BayImport Mix at San Pedro Bay

(Nation(Nation--wide, itwide, it’’s 64% Push, 36% Pushs 64% Push, 36% Push--Pull)Pull)

April 21, 2010April 21, 2010 1414

53% 53% PushPush

47% 47% Push Push -- PullPull


Import Mix at San Pedro Bay (cont.)Import Mix at San Pedro Bay (cont.)

April 21, 2010April 21, 2010 1515

InlandInland Point Intermodal (IPI) 41%(marine box leaves region

on train)

Local Region 23%Local Region 23%(imports consumed in (imports consumed in greater local region)greater local region)

TransTrans--load/Reload/Re--shipment 36% shipment 36% (imports leave region in domestic (imports leave region in domestic

containers or trailerscontainers or trailers))Leachman & Associates LLC Leachman & Associates LLC


April 21, 2010April 21, 2010 1616

8 trailers

drayed to local RDC

3 trailers

truckedout of region

54domesticcontainersdrayed to rail ramps


100 drayed to

OEMimport warehouses

100 OEM boxes ofexpensive goods

37 Trailers drayed to local RDC

14 Trailers truckedout of region

63 Domestic containers

drayed to rail ramps

18Trailers drayedto local RDC

3drayed to local

RDC (Local)

170 drayed to Big-Box

import warehouse

6 IPI (Out of

Region)

81drayed to

cross-dock

140 boxes ofinexpensive goods

(Push)

260 boxes ofmoderate-value goods(Push-Pull 5 Corners)

400 Big-Box boxes of moderate-valued

and inexpensive goods

500 boxes off-loaded from vessel containing goods ultimately sold by

Big-Box Stores, Inc.

110IPI (Out of

Region Consumption

28Domestic containers

drayed to rail ramps

7Trailers truckedout of region

A A ““BigBig--Box StoresBox Stores”” ExampleExample

30drayed to local RDC(Local Consumption

ReRe--cap of the Bigcap of the Big--Box ExampleBox Example•• Out of 500 containers for BigOut of 500 containers for Big--Box arriving on a vessel:Box arriving on a vessel:

–– 116 went IPI116 went IPI–– 33 drayed to the local RDC33 drayed to the local RDC–– 270 drayed to import warehouses270 drayed to import warehouses–– 81 drayed to cross81 drayed to cross--docksdocks

•• From the import warehouses and crossFrom the import warehouses and cross--docks:docks:–– 63 domestic trailers drayed to Big63 domestic trailers drayed to Big--BoxBox’’s local RDCs local RDC–– 24 domestic trailers trucked out of region24 domestic trailers trucked out of region–– 145 domestic containers drayed to rail ramps145 domestic containers drayed to rail ramps

•• Even if all 116 IPI boxes are handled onEven if all 116 IPI boxes are handled on--dock, the other dock, the other 384 boxes for Big384 boxes for Big--Box generate Box generate 616 truck trips 616 truck trips in the in the Basin, not counting deadheads to pick up and return Basin, not counting deadheads to pick up and return empties, and not counting distribution from the RDC!empties, and not counting distribution from the RDC!



Capacity and CongestionCapacity and Congestion

•• Port terminals, rail terminals, freeways, rail lines, Port terminals, rail terminals, freeways, rail lines, warehouseswarehouses

–– As more volume is added to a given capacity, As more volume is added to a given capacity,

congestion grows and container flow times stretch congestion grows and container flow times stretch

outout

–– How much they stretch out is a function of How much they stretch out is a function of variabilityvariability



Capacity and Congestion (cont.)Capacity and Congestion (cont.)

•• Port terminals are especially sensitivePort terminals are especially sensitive

–– Drays are mostly controlled by consigneesDrays are mostly controlled by consignees

–– Some importers have negotiated a lot of free timeSome importers have negotiated a lot of free time



Policy ImplicationsPolicy Implications

•• To serve large importers well, the whole To serve large importers well, the whole portfolio of landside services is needed: IPI, portfolio of landside services is needed: IPI, crosscross--docks, import warehouses, domesticdocks, import warehouses, domestic-- container rail rampscontainer rail ramps

•• There is an awful lot of local trucking for PushThere is an awful lot of local trucking for Push-- Pull imports (1.6 trips per imported box)Pull imports (1.6 trips per imported box)



Policy Implications (cont.)Policy Implications (cont.)

•• At present, nationAt present, nation--wide, Push is 64% and Pushwide, Push is 64% and Push-- Pull is 36% (resulting in them being about Pull is 36% (resulting in them being about equal at San Pedro Bay)equal at San Pedro Bay)

•• But what happens after interest rates rise? But what happens after interest rates rise? After the Asian currencies are reAfter the Asian currencies are re--valued? After valued? After the market shares of the large, nationthe market shares of the large, nation--wide wide retailers increase?retailers increase?





0.00%

10.00%

20.00%

30.00%

40.00%

50.00%

60.00%

70.00%

80.00%

90.00%

100.00%

0.0 ‐4.0

4.0 ‐8.0

8.0 ‐12.0

12.0 ‐16.0

16.0 ‐20.0

20.0 ‐24.0

24.0 ‐28.0

28.0 ‐32.0

32.0 ‐36.0

36.0 ‐40.0

40.0 ‐44.0

44.0 ‐48.0

48.0 ‐52.0

52.0 ‐56.0

> 56.0

Percen

tage

of Total TEU

s


Value Distribution of 2005 Asia ‐USA Waterborne Containerized Imports

25%InexpensiveImports 50%

Moderate-valueImports

25%ExpensiveImports

0.00%

10.00%

20.00%

30.00%

40.00%

50.00%

60.00%

70.00%

80.00%

90.00%

100.00%

0.0 ‐4.0

4.0 ‐8.0

8.0 ‐12.0

12.0 ‐16.0

16.0 ‐20.0

20.0 ‐24.0

24.0 ‐28.0

28.0 ‐32.0

32.0 ‐36.0

36.0 ‐40.0

40.0 ‐44.0

44.0 ‐48.0

48.0 ‐52.0

52.0 ‐56.0

> 56.0

Percen

tage

of Total TEU

s


Value Distribution of Asia ‐ USA Containerized Imports, 2005 Actual vs. After 15% Increase in Values



19%InexpensiveImports

49%Moderate-valueImports

32%ExpensiveImports


•• At present, nationAt present, nation--wide, Push is 64% and Pushwide, Push is 64% and Push-- Pull is 36% (resulting in them being about Pull is 36% (resulting in them being about equal at San Pedro Bay)equal at San Pedro Bay)

•• But what happens after interest rates rise? But what happens after interest rates rise? After the Asian currencies are reAfter the Asian currencies are re--valued? After valued? After the market shares of the large, nationthe market shares of the large, nation--wide wide retailers increase?retailers increase?–– More PushMore Push--Pull!Pull!




•• Local trucking is going to rise faster than Local trucking is going to rise faster than imports rise, if:imports rise, if:–– More PushMore Push--PullPull–– New warehouses are located further awayNew warehouses are located further away

•• Should we take facilities location as a given? Should we take facilities location as a given? •• Or should we try to promote reOr should we try to promote re--engineering of engineering of

the supply chains for more efficiency?the supply chains for more efficiency?–– More in the policy discussion More in the policy discussion ……



an overview of import supply chains

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