Global supply chain management

A global supply chain is made up of the interrelated organizations, resources, and processes that create and deliver products and services to end customers. In the instance of global supply chains, it is extended around the world
Any company that uses parts and services from another factory overseas faces issues with global supply chain management

1. Global supply chain management Presented by : A Raj Shravanthi

2. What is a Supply Chain? Supply chains are linkages of partially discrete, yet interdependent entities that collectively transform raw materials into finished products. Supply chains connect the functions of inbound activities (such as purchasing) with outbound activities (such as logistics and “place” activities).

3. What is Global Supply Chain? A global supply chain is made up of the interrelated organizations, resources, and processes that create and deliver products and services to end customers. In the instance of global supply chains, it is extended around the world Any company that uses parts and services from another factory overseas faces issues with global supply chain management

4. Belfast Carburetors and distributors Treforest Spark plug insulators Leamington Foundry production of engine components Dagenham Final assembly Bordeaux Transmissions Enfield Instruments, fuel and water gauges, plugs Basildon Radiators, water pump assembly, engine components Genk Body panels, road wheels Wülfrath Transmission parts, engine components Saarlouis Final assembly Cologne Die-cast transaxle casings, gear and engine components Valencia Final assembly Ford Example

5. Forces Driving Globalization Global Market Forces Technological Forces Global Cost Forces Political and Economic Forces

6. Global Market Forces Foreign competition in local markets Growth in foreign demand Domestic consumption from 40% to <30% of world consumption since 1970 Foreign sales fuel growth Global presence as a defensive tool Nestle’s and Kellogg’s Presence in state-of-the-art markets Japan -- consumer electronics Germany -- machine tools US: Sport Utility Vehicle’s

7. Technological Forces Diffusion of knowledge Many high tech components developed overseas Need close relationships with foreign suppliers For example, Canon has 80% of laser engines Technology sharing/collaborations Access to technology/markets Global location of R&D facilities Close to production (as cycles get shorter) Close to expertise (Indian programmers?)

8. Global Cost Forces Low labor cost Diminishing importance (Costs underestimated, benefits overestimated) Other cost priorities Integrated supplier infrastructure (as suppliers become more involved in design) Skilled labor Capital intensive facilities tax breaks joint ventures price breaks cost sharing

9. Political and Economic Forces Exchange rate fluctuations and operating flexibility Regional trade agreements (Europe, North America, Pacific Rim) Value of being in a country in one of these regions Implications for supply network design Reevaluation of foreign facilities (Production processes designed to avoid tariffs)

10. Political and Economic Forces Trade protection mechanisms Tariffs Quotas Voluntary export restrictions Japanese automakers in US Local content requirements TI/Intel factories in Europe Japanese automakers in the EU Health/environmental regulations Japanese refused to import US skis for many years (different snow) Government procurement policies Up to 50% advantage for American companies on US Defense contracts

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12. Global Supply Chain Inventory management Physical distribution transportation Order placement Corporation Suppliers Customers Order processing transportation storage Materials management Inventory management Physical distribution Storage Forward and reverse flows of information, products and funds

13. Global Supply Chain System Components International distribution systems : Manufacturing(domestically ), Distribution (overseas )   International suppliers : Raw materials and Components(foreign suppliers), Final assembly/ Manufacturing(domestically) Offshore manufacturing : Product is sourced & manufactured in a single foreign location, Shipped back to domestic warehouses for sale and distribution. Fully integrated global supply chain : Products are supplied, manufactured and distributed from factories located throughout the world In a truly global supply chain, it may appear that the supply chain was designed without regard to national boundaries. The true value of a global supply chain is realized by taking advantage of these national boundaries

14. Types of International Sourcing Strategy A company procures major components in-house by procuring them domestically A company procures major components from its foreign subsidiary A company buys major components from independent suppliers at home A company buys major components from independent suppliers internationally Source: Kotabe (2000)

15. Competencies Needed for Efficient Global SCM Positioning The selection of strategic and structural approaches to guide global operations Integration The establishment of what to do and how to do it creatively Agility The achievement and retention of global competitiveness and global customer success Measurement The internal and external monitoring of global operations Source: Michigan State University (1995)

16. Global SCM Factors Costs Local labor rates International freight tariffs Currency exchange rates Customs Duty Duty rates differ by commodity and level of assembly Impact of GATT/WTO: Changes over time Source: Global Supply Chain Associates (GSCA) 1999

17. Global SCM Factors Continued Export Regulations Denied parties list Export licenses Time Lead time Cycle time Transit time Export license approval cycle Customs clearance

18. Global SCM Factors Continued Taxes on Corporate Income Different markups by country Make vs. buy effect Offset Trade and Local Content Local content requirement for government purchases Content for preferential duty rates

19. Substantial geographical distances Forecasting problems/difficulties in foreign markets Fluctuations in exchange rates for different currencies Demand for great variety of products Inadequate infrastructures such as labor skills, availability of supply Supplier quality Lack of local process equipments and technologies Inadequate transportation facilities and Inadequate telecommunication facilities Areas to be considered while moving from domestic to International supply chain

20. Advantages The main reason for any business to exist is to increase sales and profits. When you go global, then the likelihood of increasing sales goes up as you open up your market to consumers all over the world. This allows businesses to reduce dependence on their local and national economies. With the number of Internet users on the rise, global businesses are able to do business at all hours of the day with consumers from every point on the globe . The potential for expansion for businesses increase as they enter into more markets . Lower supply chain costs , reduced cycle time & Enhance speed and efficiency Competitive advantage Untapped markets

21. Disadvantages Heavy investment of time, money, and resources needed to implement and overlook the supply chain. Inefficient and undersized transportation and distribution systems Market instability Integrating the supply chain and choosing the correct suppliers is much more difficult than one can imagine. Not only do companies have to strongly consider price and quality, but they also have to make sure that all the organizations are willing to cooperate to benefit the group. Managerial styles, objectives, and goals must have a strategic fit between all companies involved and power must be evenly distributed throughout the supply chain. 

22. When entering the global market, businesses need to be aware that the gains may not be seen in the short term. It may be many years before they start reaping the rewards of their efforts. Hire additional staff to help launch their companies in the global markets they expand into. Companies usually have to modify their products and packaging to suit the local culture, preferences and language of the new market. Travel expenses are sure to increase for the administrative staff, as (travel all over the world to oversee their business outlets)

23. Global SCM Example : Large Computer Company Goals Reduce cost Improve ROA Simplify the worldwide supply chain Source: Global Supply Chain Associates (GSCA) 1999

24. Objectives Redesign the entire worldwide supply chain Determine how many plants and where they should be located Determine what process technologies should be in each plant Specify the loading on each plant and the service area

25. Global Supply Chain Structure Before Reorganization Source: Global Supply Chain Associates (GSCA) 1999

26. Redesigned Global Supply Chain Recommended plant closings and re-tooling Reduced number of facilities from 33 plants to 12 plants Created three relatively self-contained customer-oriented supply zones: Americas, Europe, Pacific Rim Estimated benefits: Reduced manufacturing / logistics cost by $375 Mil. annually Improved Corporate ROA by 3.2 points Source: Global Supply Chain Associates (GSCA) 1999

27. Global Supply Chain Structure After Reorganization Source: Global Supply Chain Associates (GSCA) 1999

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