mTT PROJECT FINAL DELIVERABLES December 11, 2012 Brooke Commander Emese Kardhordo Rebecca Lytle Grace Thorpe Executive Summary With MyTeamTriumph (mTT) being a non-profit organization with limited time and financial sources, they rely on logistics to find a solution that either gives them cost savings or allows them to provide each chapter with more chairs. Currently the high cost of the chairs, decentralized purchasing and transportation only allows each chapter to buy five new chairs every two years. By finding a reliable chair manufacturer (maximum cost of $300/chair) in Mexico City, mTT will either have approximately $14,000 in cost savings every two years, or by spending the same amount as they are currently they would be able to provide a total of 8 chairs every two years for each chapters or by spending the same amount of money as they are currently, they could provide eight new chairs every two years for each chapter. Our team researched to see if there is a specific alternative international location that is best for the procurement of the chairs to be more financially feasible without significantly increasing the risk. Another important aspect to consider is the feasibility of the solution regarding the capabilities, the knowledge, and the available time of volunteers working for mTT. Our strategy includes researching the qualitative and quantitative data for three locations; Nairobi, Kenya, Manila, Philippines and Mexico City, Mexico. We have decided to import 70 chairs because mTT estimates five chairs needed per chapter every two years. This would capitalize on economies of scale and weight and reduce the number of shipments each year that mTT would need to replenish their stocks. We compiled our quantitative and qualitative research into a portfolio analysis. We determined the two most important qualitative factors to consider are the country risk rating and the ease of doing business with the country. Our quantitative information was acquired through quotes obtained from various shippers and analyzed in Excel spreadsheets to compare the shipping costs per chair. * Nairobi, Kenya has an extremely risky economy because of the corrupted government and the high probability of corporate default. Nairobi was also ranked very low when it comes to ease of doing business at 109/183. The Nairobi quotes were also really high; ranging from $5,000 - $36,466, which will not give mTT enough financial incentive to source from such an unstable country as Kenya. Manila, Philippines has qualitative flaws as well, therefore our team decided against sourcing from the Philippines because of the low rating and the high cost of transportation in our portfolio analysis. Mexico City, Mexico is geographically closest and had by far the least expensive quotes out of the three outsourcing options. The NAFTA agreement between U.S. and Mexico eliminates importing duties and tariffs. Mexico is also ranked much higher than Manila or Nairobi based on ease of doing business. The quote obtained from Mexico includes transportation to all 14 chapters of mTT and an estimate includes all handling fees. We calculated downhill logistics for the Manila and Nairobi imports to compare the quotes. The downhill logistics we used came from a variety of shippers via Quote-4-Freight.com, recommended to us by Lexy. When compared to UPS quotes, using a variety of trucking companies proved to be more cost effective. ** Mexico City is the only option for mTT to consider if they decide that international outsourcing is feasible for them. Since the break-even price is $470***, our final recommendation is to source 70 Freedom Chairs from Mexico City, if the cost of manufacturing a chair is less than $300. We decided that this is a reasonable amount considering the complexity of the logistics and outsourcing as well as it leaves room for unforeseeable cost. The first step, if mTT decides to select our recommendation, is to contact Brian Warkentine from Aeronet to finalize the details of the transportation. *For all countries see Appendix: Country and Business Risk Assessment and Appendix: Quotes **Research: USA - Importing into the U.S. Research Findings and USA – Domestic Logistics ***Table: Transportation Costs & Costs per Chair Comparison Mexico International transportation cost Philippines $4,678.91 Kenya USA $6,540 $5,000 $3,570 $3,570 $550 $1,885 $2,000 Total transportation and import cost $5,228.91 $12,175 $10,570 Total transportation and import cost/unit $74.69 $173.92 $151 $46.61 n/a n/a n/a $499 $32,963.79 $26,017.7 $27,622.7 $470.91 $371.68 $394.61 cInclu Domestic (U.S.) transportation cost Total additional cost Cost of chair (Maximum) Cost of 70 chairs (Maximum) Cost of a chair Total Unit Cost Total Cost for 70 chairs $545.61 lower than $38,192.7 lower than $38,192.7 lower than $38,192.7 $38,192.7 Appendix: Quotes Mexico City, Mexico Destination Mexico City to Miami, FL Miami, FL to Ada, MI Quote 5832.77 2203.5 Cost/Box 83.33 31.48 Dallas/Fort Worth, TX to All 14 Chapters 4678.91 66.84 $4678.91 $66.84 Sum of Best Quote Manila, Philippines Destination Manila, Philippines to Long Beach, CA Manila, Philippines to Long Beach, CA Quote 28760 Cost/Chair 410.86 6540 690 50 40 150 Sum of Shipping Charges 385 220 350 $8425 Best Quote 70 Boxes Shipper 70 FedEx Notes Air Cargo $410 per box BAF (Bunker Adjustment Factor Fee) per BL AMS (Automated Manifest System Fee) per BL ISF (Intermodal Fuel Surcharge Fee) Manila Charges (Docs, B L, TLX, Customs, Users Fee) – Per Shipment Trucking ex MNL-Muntinlupa-MNL per ED ED/CPRS Advances Fee Arrastre/Wharfage Fee $120.36 70 Quote 13913.26 30601.02 13913.26 Cost/Box 556.53 1224.04 556.53 Nairobi to U.S. 36466.92 520.96 5000 1315 3570.2 9885.2 70 Aeronet Denver Notes Ocean Truck 70 FCL Ocean FOB Nairobi, Kenya Destination Nairobi to Ada, MI Mombasa to Ada, MI Nairobi to Long Beach, CA Mombasa to Long Beach, CA Costs to Import 20' Container Domestic Transportation to Chapters Sum of Container Quote Boxes Shipper 70 Global Carribean 70 Estes Express Lines Boxes 25 25 25 Shipper Fed Ex Fed Ex Fed Ex 70 UPS 70 World Class Shipping 141.22 Notes 70 20' Container Best Quotes Origin Destination Quote Cost/Chair Shipper Notes Mombasa, Kenya Mexico City, Mexico Long Beach, CA U.S. Chapters (14) $5,000 $71.43 $4,678.91 $66.84 World Class Shippers Aeronet 20' container FCL?? Ships to all chapters Cheapest quote Manila, Philippines Phoenix, AZ Long Beach, CA U.S. Chapters (14) $8,425 Ocean Cargo FCL Various Companies U.S. domestic logistics only $120.36 $3,207.10 $45.82 Appendix: Country and Business Risk Assessment GDP per capita Population Country Risk Ratings Mexico $14,564 113,423,000 A4 Kenya $1,651 40,513,000 C Philippines $3,969 93,261,000 B USA $47,153 309,349,000 A2 Business Risk Rating A4 C B A1 53 4.36 (#53) 109 3.75 (#106) 136 4.23 (#65) 4 5.47 (#7) Ease of doing business* Global Competitiveness Report *out of 183 (2012) ** out of 144 Country Risk classification since 1999 o Mexico – 4 3 2 3 o Kenya – 6 o Philippines - 3 4 Country Risk explanation A2 A4 B C Political/economic situation Good Somewhat shaky Uncertain Very uncertain Business environment Stable and efficient Volatile Occasionally difficult Many troublesome weaknesses Corporate default probability Low Still acceptable on average Appreciable High Business Risk Rating Explanation Business environment Corporate financial information is available and reliable Sometimes not readily available/not efficient Debt collection Institutional Framework Intercompany transactions efficient Good quality run smoothly Not always efficient Shortcomings A1 good A4 acceptable B Mediocre Vary widely Can be difficult Troublesome weaknesses C Difficult Often unavailable/unreliable Unpredictable Many troublesome weaknesses May run into difficulties Run appreciable risks in the unstable, largely inefficient environments Run major risks in the difficult environments Appendix: Risk Assessment Nairobi Low Low Probability of Occurrence Probability of Occurrence High High Manila Low High Consequences Consequences Key Key Road Conditions Islamic Rebellion Economic Climate Poor Logistics Weather Government Corruption High Mexico City Low Probability of Occurrence Low Low Consequences Key Issues with Customs Payment Delays Drugs and Smuggling High High Appendix: Contacts Name Company Contact Way of Transport To: Comments Cost Itzy Acosta Global Caribbean (998) 889-2036 logistica@guillesa.com Ocean Miami, FL Quote attached $5,832.77 Estes Express Line (800) 624-7882 ex. 2269 Truck B2b, 10 business days $2,203.50 Aeronet (303) 741-8996 Bwarkentine@aeronet.com Truck Ada, MI 5-7 business days, Doorto-door $3,382.52 Truck Dalla/Fort Worth 6-10 business days, excludes US import duty and/or taxes, distributes to all 14 chapters from DFW All 70 chairs, 2,100 lbs. $4,678.91 Brian Warkentine N/A UPS 1 (800) 782-7892 www.ups.com Air and Ground Ada, MI $36,466.92 N/A FedEx 1 (800) 463-3339 www.fedex.com Air and Ground Ada, MI or Long Beach, CA Only 25 chairs per shipment $13,913.26 N/A Manila Forwarder 1 (800) 210-1019 www.manilaforwarder.com Air and Ground Los Angeles, CA Includes CoD fee through FedEx, All 70 chairs $28,760.00 Jomar Espinosa JRC Logistics, LLC (632) 828-8507 jomar@jrcsaipan.com operations@jrcsaipan.com Ocean Long Beach, CA FCL of 40' container $6,540.00 William Shaw III World Class Shipping (516) 568-8861 ex. 216 Ocean billjr@worldclassshipping.com Long Beach, CA From Port of Mombassa $5,000.00 Research: USA - Importing into the U.S. Research Findings From Duty Calculator.com Wheelchairs are duty free, in rare cases – state sales taxes may be collected o Very little tax/duty rates for crutches/wheelchairs ($2-4) o Duty rates vary from 0% - 37.5% with the average duty rate being 5.63% Merchandise Processing Fee (MPF) is charged on formal and informal entries: o MPF on formal entries (for imported goods valued over $2000) is set at 0.3464% of the value of the goods with a minimum charge of $25 and a maximum of $485 Quote for Mexico to U.S.: o Total Customs Value = $500 o Duty = $0 o Merchandize Processing Fee = $121.24 o Internal Revenue Tax = $0 Import Facts from the Bureau of Labor Statistics All Imports: Import prices rose for the 3rd consecutive month in October (2.8% total) o Driven by higher fuel prices Imports Excluding Fuel o Price index rose 0.5% over the past two months. Import prices have been rising over the past 12 months o Rising prices for finished goods over the year more than offset lower prices for nonfuel industrial supplies and materials, and foods, feeds and beverages. Cost to Import (US$ per Container) from The World Bank “Cost measures the fees levied on a 20’ container in U.S. dollars. All the fees associated with completing the procedures to export or import the goods are included. These include costs for documents, administrative fees for customs clearance and technical control, customs broker fees, terminal handling charges and inland transport. The cost measure does not include tariffs or trade taxes. Only official costs are recorded” 2007-2011: $1,315 Research: USA - Domestic Logistics for Chapter Chair Distribution from Long Beach, California Quote Port of Long Beach, CA to Roseville, CA $153.18 Cost/ Chair $30.64 Chairs Day Class Carrier 5 Total Lbs 150 1 250 Best Overnight Port of Long Beach to Phoenix, AZ Phoenix, AZ to Oro Valley, AZ Phoenix, AZ to Boulder, CO $391.74 $6.03 65 1950 1 250 $175.82 $35.16 5 150 1 250 Dependable Highway Express USF Reddaway $183.82 $36.76 5 150 N/A 250 UPS Freigt LTL Phoenix, AZ to Lake Charles, LA Lake Charles, LA to Jacksonville, NC Lake Charles, LA to Tampa, FL $355.68 $23.71 15 450 3 250 Central Freight Line $178.50 $35.70 5 150 2 250 $177.08 $35.42 5 150 2 250 SouthEastern Freight Lines Inc SouthEastern Freight Lines Inc Phoenix, AZ to Naperville, IL Naperville, IL to Green Bay, WI $791.96 $22.63 35 1050 N/A 250 UPS Freight LTL $179.82 $35.96 5 150 2 250 Yellow Transportation Inc Naperville, IL to Grand Rapids, MI Grand Rapids, MI to Ann Arbor, MI Grand Rapids, MI to Ada, MI $229.14 $15.28 15 450 1 250 Estes Express $182.48 $36.50 5 150 1 250 SAIA $173.16 $34.63 5 150 1 250 UPS Freight LTL Naperville, IL to Worthington, OH Worthington, OH to Buzzards Bay, MA $208.01 $20.80 10 300 1 250 Estes Express $189.81 $37.96 5 150 N/A 250 UPS Freight LTL Sum of Shipping Charges $3,570.2 0 $51.00 70 2100 Research: Manila Air Shipment from Manila to Los Angeles: Personal Effects Only Los Angeles $9.25* / lb Outside Los Angeles $9.25* / lb Electronics and Commercial Items $10.25 / lb $10.25 / lb Delivery Fee $5 COD via UPS/FedEx Ocean Shipment from Manila to Long Beach (email from Jomar Espinosa): “Dear Grace, GUD Morning to you today!!! Per your request, please find below our Best FCL Rates for your shipment ex Manila to Long Beach, CA for your perusal evaluation. Commodity : General Cargo (NON HAZMAT) Volume : FCL 1x40'GP & Airfreight - FCL Ocean Freight FOB Manila to Long Beach US$6540.00 per 40'GP - BAF Fee 690.00 per 40'GP - AMS Fee 50.00 per BL - ISF Fee 40.00 per BL - Manila Charges US$150.00 per Shipment (Docs/BL/TLX/CUSTOMS USERS FEE) - Trucking ex MNL-Muntinlupa-MNL US$385.00 per 40'GP - ED/CPRS Advances Fee 220.00 per ED - Arrastre/Wharfage Fee 350.00 per 40'GP - Los Angeles Charges to Follow. Schedule: Every Thursday 12:00N JRC/CFS and Sail Every Monday T/T 40 Days DESTINATIONCOMMODITYCARRIERROUTING ex-MNLTRANSIT TIMEWEIGHT 100 KGS200 KGS500 KGS1000 UPFSSC FEE Los Angeles (LAX)General CargoQFSYD/LAX3-4 days4.353.603.452.90 - FSSC Fee US$1.15 per KGS - AMS Fee US$50.00 per Filing - ISF Fee US$50.00 per HAWB - Docs & Customs Clearance MNL US$75.00 - Cartage Fee 0.15 per KG - ED/CPRS Fee 220.00 per ED Hope all above will suffice your requirements. Thank you and look forward to serving you soon. Best Regards, Jomar R. Espinosa Director, International Global Account JRC Logistics (Phils) International, Inc. - Branch Office GUAM JRC Logistics, LLC - WHQ Office JRC Maritime Services/JRC Logistics, LLC JRC Logistics, Inc./JRC Logistics (Saipan), Inc. Innovative People Redefining Services 11-B Saint Andrew Street, Don Bosco Village, Better Living Subdivision, Paranaque City, 1711 Manila-Philippines Tel: (632) 823-3008, 330-5228, 806-2276 Fax: (632) 794-3376 Direct Line#: (632) 828-8507 Mobile Phone#: (0915) 352-8918, (0917) 883-0263 E-mail: jomar@jrcsaipan.com Alternate E-mail: operations@jrcsaipan.com Skype ID: jomar.jrcgum Website: www.jrcsaipan.com "We Work For Today & Invest for Tomorrow" ROUND THE CLOCK ~~~~~ AROUND THE WORLD Very Important Notice: Please be informed that Philippine Bureau of Customs has implemented the E2M (Electronic to Mobile) Electronic Manifest System effective June 16, 2011. It is imperative for us to receive your full sets of Documents and pre-alert/pre-advise in a timely manner prior your shipment departure. Failure to do so will result to a huge penalty amounting to USD 950.00/HAWB & HBL.” Research: Mexico Statistics Location – closest to the U.S. out of all options Trade Agreement – NAFTA Infrastructure – Roads and Rails are far not as well developed as in the US Economy - Trade - NAFTA (Free Trade Agreement) - Exported $300 billion of goods (#2 road vehicles/transportation equipment 17.8%) - 80% of exports to U.S. - Transportation - #79 (out of 139) in overall quality and competitiveness of infrastructure assets (National Infrastructure Plan – will improve coverage, quality, competitiveness) - Land transportation – One of the most effective in Latin America (356,000 km of paved roads) – Density – one of the lowest – 3 major private companies operate 27,000 km railroad network - Sea ports - Boom in investments since 1993 that privatized the port system - Ports: Manzanillo, Veracruz, Altamira Trade Statistics Global Exports in 2008 by Mexico Exports To Market Value: 272,933 (millions) Trade Value Share Growth (thousands) (%) (% 5yr) 226,874,481 83.12 36.23 * Canada 6,691,393 2.45 140.62 * Germany 4,814,149 1.76 150.49 * United States Top Products Exported in 2008 by Mexico Product Market Value: 977,206 (millions) Trade Value Share Growth (thousands) (%) (% 5yr) 2709 - Crude Oil 88,833,545 9.09 325.23 8703 - Passenger Vehicles 45,577,805 4.66 239.80 8708 - Motor Vehicle Parts 22,611,254 2.31 191.15 Risk Assessment Advantages - NAFTA - Exports - #1 to U.S. by trade value and share (83%) - #2 in Passenger vehicles & #3 in Motor Vehicle Parts by trade value and share - Continued growth - should continue to grow because of rising demand in the U.S. (80% of Mexican exports go to the U.S.) - Relatively good financial situation - Strength: moderate foreign debt, healthy banking sector, favorable demographics, Disadvantages - Payment experience remains close to the world average - Payment delays are above average - No changes in payment behavior is expected - Slow pace of reforms and persistent insecurity - Risk while transporting - Drug trafficking - Smuggle goods/people - Weaknesses: dependence on USA for exports, socio-political obstacles to structural reforms, business environment weakened by bureaucracy, insecurity Quotes Value of merchandise $21,000 Locations used From: Mexico City, 06000 To: Headquarters - 6749 East Fulton Suite B230 Ada, MI 49301 or Miami, Florida final decision: to DFW then to all 14 chapters Additional costs ~ $550 - US Customs = $250 - Customs Broker Fee (Further more accurate research will be done) - Import fee - Customs processing fee of 8/10th of 1% of the assessed CIF value - Duty = 0 Mexican customs authority will determine (and charge) is figured by applying the corresponding tariff to the CIF (cost of the product + insurance + freight) value of the product – However: Wheelchairs are duty free (see: Research USA Imports) - IVA Added Value Tax (IVA) on goods and services 11% = estimated to be $300 Documents needed - Certificate of Origin: The NAFTA Agreement requires that, in addition to the product having a sticker or marking showing its origin (as is always required of imported products to and from Mexico, the U.S., Canada and many other countries). A source for NAFTA facts is to call telephone (202) 482-4464 and request they send you documents 5000 and 5001 (they can fax them or mail them I believe). People contacted Name Itzy Acosta Susie Wilkinson* Brian Warkentine Company Contact Way of transport Ocean Global Caribbean Estes Express Lines Aeronet 998.886.2036 logistica@guillesa.com 800.624.7881-2269 Aeronet 303.741.8996 BWarkentine@aeronet. com Truck To: Comments Cost Miami, FL Quote attached B2B, 10 business days 956.712.3349 New contact: Brian Warkentine 5-7 days Door2door 6-10 days excludes US import duty and/or taxes No business $ 5,832.77 Truck 303.741.8996 swilkinson@aeronet.net Truck Raza Minhas* Larry Bailey* Houg LLC 303 298 3916 Truck Big Red Brokerage 303.920.1181 Truck Heather Cavanaugh* Air, Ground & Sea Freight All Kinds Charles M Schayer & Co. 303.367.2222 303.289.5433 303.399.5160 Ada, MI Dallas/ Fort Worth DFW Ada, MI $ 2,203.50 $3,382.52 $4,678.91 No business inconsistent New contact: Pete? Could not reach her Ask for Ober Could not reach *People recommended by Dean Smith Best Truck Quote: Good Morning Emese, I found the most cost effective way via truck, from Mexico City to Michigan Door to Door cost would be $3,382.52, excludes US import duty and/or taxes, approximate transit time 5-7 days depending on time of availability. Bst Rgs, Brian Warkentine (TR) International Operations Aeronet Denver 9034 E. Easter Pl #106 Centennial, CO 80112 Telephone: (303) 741-8996 or (800) 472-8890 Fax: (303) 770-6039 bwarkentine@aeronet.com Best Ocean Quote: Works cited "Air Cargo Shipment ." Manila Forwarder. N.p.. Web. 7 Dec 2012. <http://manilaforwarder.com/rates_aircargo.html>. Bank, The World. Cost to Import (U.S.$ per Container). 2012. 2012 1 November <http://data.worldbank.org/indicator/IC.IMP.COST.CD>. Barrientos, Miguel, and Claudia Sorio. "Kenya Economy Profile 2012." Index Mundi - Country Facts. WordPress, 19 July 2012. Web. Oct. 2012. <http://www.indexmundi.com/kenya/economy_profile.html>. "Cost to export in Kenya." TRADING ECONOMICS. N.p., 2011. Web. Oct. 2012. <http://www.tradingeconomics.com/kenya/cost-to-export-us-dollar-per-container-wbdata.html>. "Doing Business in Kenya." Export.gov - Helping U.S. Companies Export. International Trade Administration, 27 May 2011. Web. Oct. 2012. <http://export.gov/kenya/doingbusinessinkenya/index.asp>. Espinosa, Jomar. "My Team Triumph - LAX (Global MAX Network - New Inquiry from Quote Request Page). Freight, Quote 4. Freight Shipping Quotes. 2012. 15 November 2012 <http://quote-4freight.com/>. "Import/Export." Global Carribean . N.p., n.d. Web. 7 Nov 2012. <http://www.globalcaribbean.com/html_en/freight_forwarding/import_export.php>. "International Trade and Supporting Global Enforcement Effort." Kenya Revenue Authority. Kenya Revenue Authority, 2008. Web. Oct. 2012. <http://www.kra.go.ke/index.php/customs-services/international-trade>. Koopman, Arjen. "Corruption In Kenya: The Facts." Kenya Advisor – The Independent Kenya Travel Guide. N.p., n.d. Web. Oct. 2012. <http://www.kenya-advisor.com/corruption-inkenya.html>. "Mexico." Coface. N.p.. Web. 25 Nov 2012. <http://www.coface.com/CofacePortal/COM_en_EN/pages/home/risks_home/business_c limate/climate_file/Mexico?extraUid=572169>. "Mexico: Risk Assessment." globalEDGE. N.p.. Web. 13 Nov 2012. <http://globaledge.msu.edu/Countries/Mexico/risk >. "Mexico: Trade Statistics." globalEDGE. N.p.. Web. 13 Nov 2012. <http://globaledge.msu.edu/Countries/Mexico/tradestats>. "Nairobi." Encyclopedia.com. Junior Worldmark Encyclopedia of World Cities, 2000. Web. Oct. 2012. <http://www.encyclopedia.com/topic/Nairobi.aspx>. Nielsen, Rolf. "2012 Local Charges Tariff." Letter. 2012. Maersk Kenya Limited, n.d. Web. Oct. 2012. http://www.maerskline.com/localfile/?path=/africa/kenya/files/2011_Local_Charges>. "Philippines." Coface. N.p.. Web. 7 Dec 2012. <http://www.coface.com/CofacePortal/COM_en_EN/pages/home/risks_home/business_c limate/climate_file/Philippines?extraUid=572193>. "Philippines: Risk Assessment." globalEDGE. N.p.. Web. 7 Dec 2012. <http://globaledge.msu.edu/Countries/Philippines/risk>. Pike, John. "Mombasa." GlobalSecurity.org - Reliable Security Information. N.p., 1 Oct. 2012. Web. Oct. 2012. <http://www.globalsecurity.org/military/facility/mombassa.htm>. Shaw, William. "World Class Shipping Ocean Freight Quote." Telephone interview. 05 Nov. 2012. Statistics, Bureau of Labor. Economic News Release - U.S. Import and Export Price Indexes. 9 November 2012. 10 November 2012 <http://www.bls.gov/news.release/ximpim.nr0.htm>. UPS. Calculate Time and Cost . 2012. 11 November 2012 <https://wwwapps.ups.com/ctc/request?loc=en_US&WT.svl=PNRO_L1>.