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Transcript of Global Logistics & Risk Management
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Global LogisticsGlobal Logistics
&&
Risk ManagementRisk ManagementByBy
Dr Prashant GuptaDr Prashant Gupta
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GLOBAL LOGISTICS
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Definition of Global LogisticsDefinition of Global Logistics
Global LogisticsGlobal Lo
gisticsis defined as design andis defined as design andmanagement of a system that directs andmanagement of a system that directs andcontrols flow of materials into, throughcontrols flow of materials into, throughand out of the firmand out of the firm across nationalacross nationalboundariesboundaries to achieve its corporateto achieve its corporateobjectives at minimum total cost.objectives at minimum total cost.
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Global Logistics -Global Logistics - IntroductionIntroduction
Global logistics and distribution have playedGlobal logistics and distribution have playedcritical role in growth and development of worldcritical role in growth and development of worldtrade and in integration of manufacturing on atrade and in integration of manufacturing on aworldwide scale.worldwide scale.
Use of appropriate distribution channels inUse of appropriate distribution channels ininternational marets increases chances ofinternational marets increases chances ofsuccess dramatically.success dramatically.
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Global Logistics- Introduction !contd."Global Logistics- Introduction !contd."
#s firms start operating on a global basis,#s firms start operating on a global basis,logistics managers need to manage shippinglogistics managers need to manage shippingof raw materials, components, and suppliesof raw materials, components, and suppliesamong various manufacturing sites at theamong various manufacturing sites at the
most economical rates.most economical rates.
Development ofDevelopment of inter-modal transportationinter-modal trans
portationandand electronic tracing technologyelectronic traci
ng technology hashasresulted in a $uantum jump in efficiency ofresulted in a $uantum jump in efficiency oflogistic methods employed by firmslogistic methods employed by firmsworldwide.worldwide.
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Domestic Logistics Vs Global Logistics
Domestic Logistics Vs. Global Logistics
%ontrolled &nvironment Uncertain ' uncontrollable&nvironment
(ocus on )alue added*ervices
(ocus on meeting demandIn various situations
Demand is certain Demand is Uncertain
*ufficient +nowledge aret is not nown
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Issues in anaging Global LogisticsIssues in anaging Global Logistics
odes of ransportationodes of ransportation
arehousing / Inventory anagementarehousing / Inventory anagement
hird-0arty Logistics anagementhird-0arty Logistics anagement
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anaging Global Logistics -anaging Global Logistics - odesodesof ransportationof ransportation
(actors for *election of ode1(actors for *election of ode1 )alue-to-)olume 2atio)alue-to-)olume 2atio 0erishability0erishability %ost of ransportation%ost of ransportation
odes1odes1 3cean *hipping3cean *hipping
Liner *hippingLiner *hipping 4ul *hipping4ul *hipping
5 #ir (reight#ir (reight Inter-modal ransportationInter-modal ransportation
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Liner *hippingLiner *hipping
LinerLinershipping is theshipping is the serviceserviceofof
transporting goods by means of high-transporting goods by means of high-
capacity, ocean-going ships that transitcapacity, ocean-going ships that transit
regular routes on fi6ed schedules. hereregular routes on fi6ed schedules. hereare appro6imately 788are appro6imately 788 liner servicesliner servicesinin
operation today, most providing weelyoperation today, most providing weely
departures from all the ports that eachdepartures from all the ports that eachserviceservicecalls.calls.
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4ul *hipping4ul *hipping
## bulkbulkcarrier,carrier, bulkbulkfreighter, or buler is afreighter, or buler is a
merchantmerchant shipshipspecially designed tospecially designed to
transport unpacagedtransport unpacaged bulkbulkcargo, such ascargo, such as
grains, coal, ore, and cement in its cargograins, coal, ore, and cement in its cargoholds.holds.
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4ul %arrier4ul %arrier
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anaging Global Logistics-anaging Global Logistics-arehousing and Inventory anagementarehousing and Inventory anagement
9edging #gainst Inflation and &6change 2ate9edging #gainst Inflation and &6change 2ate
(luctuations.(luctuations. 4enefiting from a6 Differences.4enefiting from a6 Differences. Logistic Integration and 2ationali:ation.Logistic Integration and 2ationali:ation. &-%ommerce and Logistics.&-%ommerce and Logistics.
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anaging Global Logistics-anaging Global Logistics-hird-hird-0arty !;0L" Logistics anagement0arty !;0L" Logistics anagement
he largest ;0L sector is the value-addedhe largest ;0L sector is the value-added
warehousing and distribution industry.warehousing and distribution industry.
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2egional Differences in Logistics2egional Differences in Logistics
First World merging !hird World
"n#rastructure 9ighly developed Under development Insufficient to supportadvanced logistics
$upplier %perating$tandards
9igh )ariable ypically notconsidered
"n#ormation
$ystem vailability
Generally available *upport system not
available
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%ultural Differences%ultural Differences
LanguageLanguage &6pressions, gestures, and conte6t&6pressions, gestures, and conte6t
BeliefsBeliefs, or specific values about something, or specific values about something %an differ widely from culture to culture%an differ widely from culture to culture
CustomsCustoms )ary greatly from country to country)ary greatly from country to country Important for the businessperson to adhere toImportant for the businessperson to adhere to
local customs to avoid offending anyone.local customs to avoid offending anyone.5 &6ample1 the practice of gift giving varies greatly&6ample1 the practice of gift giving varies greatly
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THE INTERLINKED
GLOBAL ECONOMY
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THE INTERLINKED GLOBAL ECONOMYTHE INTERLINKED GLOBAL ECONOMY
FR !RD GRM(! )FR !RD GRM(! ) !reaty!reaty!such as!such as (##(##oror
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THE INTERLINKED GLOBAL ECONOMYTHE INTERLINKED GLOBAL ECONOMY
*%MM%( MR,! )*%MM%( MR,! )
- "t allo.s #actors o# production /e0g01 labour1- "t allo.s #actors o# production /e0g01 labour1
capital1 goods1 people2 to move #reely bet.eencapital1 goods1 people2 to move #reely bet.een
member countries as per market conditions0member countries as per market conditions0
*%(%M"* +("%( )*%(%M"* +("%( )
- "mplies harmoni3ation o# economic policies- "mplies harmoni3ation o# economic policies
beyond a common market0beyond a common market0
- $tandardi3es monetary & #iscal policy among- $tandardi3es monetary & #iscal policy among
member countries0member countries0
00
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(ree rade =ones(ree rade =ones
# (ree rade =one !(=" is an area that is located# (ree rade =one !(=" is an area that is locatedwithin a nation !say, India", but is consideredwithin a nation !say, India", but is considered outside ofoutside ofthe customs territorythe customs territoryof the nation.of the nation.
(=s provide many cash flow and operating benefits to(=s provide many cash flow and operating benefits to:one users and include:one users and include
>. Duty Deferral and &limination>. Duty Deferral and &limination?. Lower ariff 2ates?. Lower ariff 2ates
;. Lower ariff Incidence;. Lower ariff Incidence
7. &6change 2ate 9edging7. &6change 2ate 9edging
@. Import Auota not applicable@. Import Auota not applicableIn addition to (=s, various governments have alsoIn addition to (=s, various governments have also
established Bestablished B&6port 0rocessing =ones&6port 0rocessing =onesC and BC and B*pecial*pecial&conomic =onesC&conomic =onesC
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GLOBAL S!!LY CHAIN
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CHALLENGES IN A GLOBAL ECONOMY
"ncreasing *omple4ity in %perations
"ncreased +ncertainty
Decreased *apability to control
Greater Distance
Longer Lead !ime
Decreased Market ,no.ledge
Government "nterventions like !rade restrictions and
*ustom re5uirements
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International *upply %hain anagementInternational *upply %hain anagement
Dispersed over a larger geographicalDispersed over a larger geographicalarea.area.
3ffers many more opportunities than just3ffers many more opportunities than just
the domestic supply chain.the domestic supply chain. 2is factors are also present.2is factors are also present.
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International *upply %hainsInternational *upply %hains "nternational Distribution $ystems"nternational Distribution $ystems
anufacturing still occurs domestically, but distribution andanufacturing still occurs domestically, but distribution andtypically some mareting tae place overseas.typically some mareting tae place overseas.
"nternational $uppliers"nternational $uppliers 2aw materials and components are furnished by foreign2aw materials and components are furnished by foreign
suppliers.suppliers.
(inal assembly is performed domestically.(inal assembly is performed domestically. In some cases, the final product is then shipped to foreignIn some cases, the final product is then shipped to foreign
marets.marets.
%##shore Manu#acturing%##shore Manu#acturing 0roduct is typically sourced and manufactured in a single foreign0roduct is typically sourced and manufactured in a single foreign
location.location. *hipped bac to domestic warehouses for sale and distribution.*hipped bac to domestic warehouses for sale and distribution.
Fully "ntegrated Global $upply *hainFully "ntegrated Global $upply *hain 0roducts are supplied, manufactured, and distributed from0roducts are supplied, manufactured, and distributed from
various facilities located throughout the world.various facilities located throughout the world.
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(orces toward Globali:ation(orces toward Globali:ation
Global aret (orcesGlobal aret (orces echnological (orcesechnological (orces
Global %ost (orcesGlobal %ost (orces
0olitical and &conomic (orces0olitical and &conomic (orces
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Global aret (orcesGlobal aret (orces 0ressures created by foreign competitors, as0ressures created by foreign competitors, as
well as opportunities created by foreignwell as opportunities created by foreign
customers.customers.
0resence of foreign competitors in home0resence of foreign competitors in home
marets can affect their business significantly.marets can affect their business significantly. uch of the demand growth available touch of the demand growth available to
companies is in foreign and emerging marets.companies is in foreign and emerging marets.
Increasing demand for products throughout theIncreasing demand for products throughout theworld through global proliferation of information.world through global proliferation of information.
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Global aret (orcesGlobal aret (orces 0articular marets often serve to drive0articular marets often serve to drive
technological advances in some areas.technological advances in some areas. %ompanies forced to develop and%ompanies forced to develop and
enhance leading-edge technologies andenhance leading-edge technologies and
products.products. *uch products can be used to increase or*uch products can be used to increase or
maintain maret position in other areas ormaintain maret position in other areas or
regions where the marets are not asregions where the marets are not ascompetitive.competitive.
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echnological (orcesechnological (orces 2elated to products2elated to products
)arious subcomponents and technologies)arious subcomponents and technologiesavailable in different regions and locations.available in different regions and locations.
*uccessful firms need to use these resources*uccessful firms need to use these resources$uicly and effectively.$uicly and effectively.
Locate research, design, and production facilitiesLocate research, design, and production facilitiesclose to these regions.close to these regions. (re$uently collaborate, resulting in location of(re$uently collaborate, resulting in location of
joint facilities close to one of the partners.joint facilities close to one of the partners.
Global location of research-and-developmentGlobal location of research-and-developmentfacilities driven by two main reasons1facilities driven by two main reasons1 #s product cycles shrin, locate research facilities#s product cycles shrin, locate research facilities
close to manufacturing facilities.close to manufacturing facilities. *pecific technical e6pertise may be available in certain*pecific technical e6pertise may be available in certain
areas or regionsareas or regions
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Global %ost (orcesGlobal %ost (orces 3ften dictate global location decisions.3ften dictate global location decisions. %heaper labor is sufficient justification for%heaper labor is sufficient justification for
overseas manufacturing.overseas manufacturing. In some cases, %ost of cheaper unsilled laborIn some cases, %ost of cheaper unsilled labor
more than offset by the increase in other costsmore than offset by the increase in other costsassociated with operating facilities in remoteassociated with operating facilities in remotelocations.locations.
3ther global cost forces have become more3ther global cost forces have become moresignificant.significant. %heaper%heaper skilled laborskilled labor is drawing an increasing numberis drawing an increasing number
of companies overseas.of companies overseas.
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0olitical and &conomic (orces0olitical and &conomic (orces
&6change 2ate (luctuation&6change 2ate (luctuation 2egional rade #greements2egional rade #greements ariff *ystemariff *ystem
rade 0rotection echanismsrade 0rotection echanisms ore *ubtle 2egulationsore *ubtle 2egulations
Local content re$uirementsLocal content re$uirements )oluntary e6port restrictions)oluntary e6port restrictions Government procurement policiesGovernment procurement policies
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". !ER#ORMANCE CYCLE LENGTH". !ER#ORMANCE CYCLE LENGTH
%ommunication Delays%ommunication Delays
(inancing 2e$uirements(inancing 2e$uirements
*pecial 0acaging*pecial 0acaging 3cean (reight *cheduling3cean (reight *cheduling
Long ransportation imeLong ransportation ime %ustoms %learance Delays%ustoms %learance Delays
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$. O!ERATIONAL #ACTORS$. O!ERATIONAL #ACTORS
Language Differences.Language Differences. %ustomi:ation !e.g. %omputer".%ustomi:ation !e.g. %omputer".
Difference in performance features, power supply /Difference in performance features, power supply /
safety characteristics from customer to customer.safety characteristics from customer to customer. ultinational Documentation for each country passingultinational Documentation for each country passing
through.through.
%hange in Inventory anagement from customer to%hange in Inventory anagement from customer tocustomer.customer.
%omple6ity of International ransport.%omple6ity of International ransport.
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%. SYSTEM INTEGRATION%. SYSTEM INTEGRATION
Lac of 2esponsiveness / (le6ibility.Lac of 2esponsiveness / (le6ibility.
0oor in - country %oordination.0oor in - country %oordination.
#bility to 2oute 3rders#bility to 2oute 3rders
anage Inventory 2e$uirement by &DIanage Inventory 2e$uirement by &DI
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&. INTERNATIONAL ALLIANCES&. INTERNATIONAL ALLIANCES
#dvantages of #lliances1#dvantages of #lliances1
2educe inherent ris in global operations 2educe inherent ris in global operations
0rovide maret access / e6pertise 0rovide maret access / e6pertise
*peciali:ed services *peciali:ed services 2educes re$uirement of retailers, wholesalers, 2educes re$uirement of retailers, wholesalers,
suppliers, service providerssuppliers, service providers
Disadvantages of #lliances1Disadvantages of #lliances1
ime %onsuming ime %onsuming
%ostly %ostly
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Ris' Ma(ageme(t
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2is anagement2is anagement 3utsourcing and offshoring3utsourcing and offshoring imply that the supplyimply that the supply
chain is geographically more diverse and hencechain is geographically more diverse and hencemore e6posed to various riss.more e6posed to various riss.
2ecent trends toward cost reduction, lean2ecent trends toward cost reduction, lean
manufacturing and just-in-time imply that in amanufacturing and just-in-time imply that in a
progressive supply chain,progressive supply chain, low inventory levelslow inventory levels areare
maintainedmaintained.. In the event of an unforeseen disaster, adherence to thisIn the event of an unforeseen disaster, adherence to this
type of strategy could result in a shutdown of productiontype of strategy could result in a shutdown of production
lines because of lac of raw material or parts inventory.lines because of lac of raw material or parts inventory.
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*ources of 2iss*ources of 2iss
Risk $ources and their *haracteristics
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(actors Impacting &6posure to 2iss(actors Impacting &6posure to 2iss
%ustomer 2eactions%ustomer 2eactions
%ompetitor 2eactions%ompetitor 2eactions
*upplier 2eactions*upplier 2eactions
Government 2eactionsGovernment 2eactions
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anaging the Unnown-Unnownanaging the Unnown-Unnown
>.>. Invest inInvest in redundancy.redundancy.
?.?. IncreaseIncrease velocityvelocityin sensing andin sensing and
responding.responding.
;.;. %reate an%reate an adaptiveadaptivesupply chainsupply chain
community.community.
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>. 2edundancy>. 2edundancy
2espond to unforeseen events.2espond to unforeseen events. %areful analysis of supply chain trade-offs.%areful analysis of supply chain trade-offs. &6ample1&6ample1
# U.*. E based %onsumer 0acaged Goods# U.*. E based %onsumer 0acaged Goods
!%0G" %ompany with 78 facilities over the world!%0G" %ompany with 78 facilities over the world Initial analysis for reduction of cost by F78 aInitial analysis for reduction of cost by F78 a
yearyear5 shut down > of its e6isting manufacturing facilitiesshut down > of its e6isting manufacturing facilities
5 leave ?; plants operatingleave ?; plants operating5 satisfy maret demand all over the world.satisfy maret demand all over the world.
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Decision of %0G %ompany was 2isyDecision of %0G %ompany was 2isy
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%0G %ompany-rade-3ffs%0G %ompany-rade-3ffs
*ost !rade;o##s in $upply *hain Design
%0G # l i f h d 3ff%0G # l i f th d 3ff
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%0G-#nalysis of the rade-3ffs%0G-#nalysis of the rade-3ffs
%losing > plants and leaving ?; open will%losing > plants and leaving ?; open will
minimi:e supply chain costs.minimi:e supply chain costs.
otal cost function is $uite flat around theotal cost function is $uite flat around the
optimal strategy.optimal strategy.
Increasing the number of open plants fromIncreasing the number of open plants from
?; to ;8 facilities?; to ;8 facilities increases total cost by less than F?.@increases total cost by less than F?.@ increases redundancy significantly.increases redundancy significantly.
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?. *ensing and 2esponding?. *ensing and 2esponding
*peed in sensing and responding can*peed in sensing and responding can
help the firm overcome une6pected supplyhelp the firm overcome une6pected supply
problems.problems.
(ailure to sense could lead to1(ailure to sense could lead to1 (ailure to respond to changes in the supply(ailure to respond to changes in the supply
chain.chain. %an force a company to e6it a specific%an force a company to e6it a specific
maret.maret.
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*ensing and 2esponding &6ample*ensing and 2esponding &6ample
Different responses ofDifferent responses of
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*ensing and 2esponding &6ample*ensing and 2esponding &6ample
&ricssons&ricssonse6perience was $uite differente6perience was $uite different oo 7 wees for the news to reach the upperoo 7 wees for the news to reach the upper
management.management. 2eali:ed five wees after the fire regarding severity of2eali:ed five wees after the fire regarding severity of
the situation.the situation. 4y that time, the alternative supply of chips was4y that time, the alternative supply of chips wasalready taen by .JK4 loss to &ricsson %ell 0hone Division in ?888 (orced the company to e6it the cell phone maret(orced the company to e6it the cell phone maret
; #d t bilit; #d t bilit
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;. #daptability;. #daptability
he most difficult ris management methodhe most difficult ris management method
to implement effectively.to implement effectively.
2e$uires all supply chain elements to share2e$uires all supply chain elements to share
the same culture, wor towards the samethe same culture, wor towards the same
objectives and benefit from financial gains.objectives and benefit from financial gains.
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#daptability &6ample-oyota#daptability &6ample-oyota
In >, #isin *eii, the sole supplier of KM ofIn >, #isin *eii, the sole supplier of KM ofbrae fluid proportioning valves !0-valves" usedbrae fluid proportioning valves !0-valves" usedbyby oyotaoyota..
Ine6pensive part !about F each" but importantIne6pensive part !about F each" but important
in the assembly of any car.in the assembly of any car. *aturday, (ebruary >, >1(ire stopped #isins*aturday, (ebruary >, >1(ire stopped #isins
main factory in the industrial area of +ariya.main factory in the industrial area of +ariya. wo wees to restart the productionwo wees to restart the production
*i6 months for complete recovery*i6 months for complete recovery oyota producing close to >@,@88 vehicles peroyota producing close to >@,@88 vehicles per
day.day. NI meant only ?-; days of inventory supplyNI meant only ?-; days of inventory supply
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2ecovery &ffort by oyota2ecovery &ffort by oyota
4lueprints of valves were distributed among all oyotas4lueprints of valves were distributed among all oyotassuppliers.suppliers. &ngineers from #isin and oyota relocated to suppliers&ngineers from #isin and oyota relocated to suppliers
facilities.facilities. 3ther manufacturers lie 4rother were also brought in.3ther manufacturers lie 4rother were also brought in. &6isting machinery adapted to build the valves according&6isting machinery adapted to build the valves according
to original specifications.to original specifications.
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)ehicle 0roduction / 0-)alves Inventory)ehicle 0roduction / 0-)alves Inventory
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oyota-3utcomeoyota-3utcome
#ccident initially cost1#ccident initially cost1 .K4 Oen !FJ@" to #isin.K4 Oen !FJ@" to #isin >J84 Oen !or F>.;4" to oyota>J84 Oen !or F>.;4" to oyota
Damage reduced to ;84 Oen !F?@8" withDamage reduced to ;84 Oen !F?@8" with
e6tra shifts and overtime.e6tra shifts and overtime.
oyota issued a F>88 toen ofoyota issued a F>88 toen of
appreciation to their providers as a gift forappreciation to their providers as a gift for
their collaboration.their collaboration.
*i l * i d #d t bilit*i l * i d #d t bilit
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*ingle *ourcing and #daptability*ingle *ourcing and #daptability *ingle sourcing is risy*ingle sourcing is risy
#chieves economies of scale.#chieves economies of scale. 9igh $uality parts at a low cost.9igh $uality parts at a low cost.
NI mode of operation builds a culture of1NI mode of operation builds a culture of1 oring with low inventories.oring with low inventories.#bility to identify and fi6 problem $uicly.#bility to identify and fi6 problem $uicly. &ntire supply chain was stopped once the fire&ntire supply chain was stopped once the fire
occurred.occurred. 0rompted every company in the chain to react0rompted every company in the chain to react
to the challenge.to the challenge.
*t t i f i Gl b l 2i *t t i f i Gl b l 2i
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*trategies for anaging Global 2iss -*trategies for anaging Global 2iss -*peculative *trategy*peculative *trategy
# company bets on a# company bets on a single scenario.single scenario. *pectacular results if the scenario is reali:ed*pectacular results if the scenario is reali:ed Dismal ones, otherwise.Dismal ones, otherwise.
&6ample&6ample Late >8s and early >K8sLate >8s and early >K8s Napanese automaers bet that e6change rateNapanese automaers bet that e6change rate
benefits, rising productivity would offset higherbenefits, rising productivity would offset higher
labor costs.labor costs. 9ad to build plants overseas later when this9ad to build plants overseas later when this
e$uation changed.e$uation changed.
*t t i f i Gl b l 2i *trategies for anaging Global 2iss
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ultiple (acilitiesultiple (acilities-Losses in part of the-Losses in part of thesupply chain will be offset by gains insupply chain will be offset by gains in
another part.another part.
&6ample1&6ample1 ultiple )olswagen plants in different countries.ultiple )olswagen plants in different countries. %ertain plants more profitable at times than%ertain plants more profitable at times than
othersothers ove production between plants to beove production between plants to be
successful overall.successful overall.
*trategies for anaging Global 2iss-*trategies for anaging Global 2iss-9edge *trategy9edge *trategy
*trategies for anaging Global 2iss*trategies for anaging Global 2iss
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#llows a company to tae advantage of#llows a company to tae advantage of differentdifferentscenarios.scenarios.
Designed with multiple suppliers and e6cessDesigned with multiple suppliers and e6cessmanufacturing capacity in different countriesmanufacturing capacity in different countries
(actories designed to be fle6ible(actories designed to be fle6ible 0roducts can be moved at minimal cost from location0roducts can be moved at minimal cost from location
to locationto location (actors to consider1(actors to consider1
Is there enough variability in the system to justify theIs there enough variability in the system to justify theuse of fle6ible strategiesHuse of fle6ible strategiesH
Do the benefits of spreading production over variousDo the benefits of spreading production over variousfacilities justify the costsHfacilities justify the costsH
Does the company have the appropriate coordinationDoes the company have the appropriate coordinationand management mechanisms in placeHand management mechanisms in placeH
*trategies for anaging Global 2iss-*trategies for anaging Global 2iss-(le6ible *trategy(le6ible *trategy
#pproaches to (le6ible *trategy#pproaches to (le6ible *trategy
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#pproaches to (le6ible *trategy#pproaches to (le6ible *trategy
Production $hi#tingProduction $hi#ting
(le6ible factories and e6cess capacity'suppliers(le6ible factories and e6cess capacity'suppliers *hift production from region to region*hift production from region to region "n#ormation $haring"n#ormation $haring
Larger presence in many regions and maretsLarger presence in many regions and maretsincreases availability of informationincreases availability of information
%an be used to anticipate maret changes ' find new%an be used to anticipate maret changes ' find newopportunitiesopportunities
Global *oordinationGlobal *oordination ultiple worldwide facilities allows greater maretultiple worldwide facilities allows greater maret
leverageleverage Increased leverage limited by international laws 'Increased leverage limited by international laws 'political pressurespolitical pressures
Political LeveragePolitical Leverage 9igher political leverage in overseas operations with9igher political leverage in overseas operations with
global operationsglobal operations
Gl b l I t tiGlobal Integration
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Global IntegrationGlobal Integration
Product DevelopmentProduct Development Design products that can be modified easily for majorDesign products that can be modified easily for major
marets.marets. 0roducts can be easily manufactured in various facilities.0roducts can be easily manufactured in various facilities. ay be possible to design a base product or productsay be possible to design a base product or products
that can be more easily adapted to several differentthat can be more easily adapted to several different
marets.marets. #n international design team may be helpful.#n international design team may be helpful.
PurchasingPurchasing anagement teams should purchase important materialsanagement teams should purchase important materials
from many vendors around the world.from many vendors around the world. Auality and delivery options from suppliers have to beAuality and delivery options from suppliers have to be
compatible.compatible. Aualified team should compare pricing of variousAualified team should compare pricing of various
suppliers.suppliers. *ufficient suppliers re$uired in different regions to ensure*ufficient suppliers re$uired in different regions to ensure
fle6ibility.fle6ibility.
Global IntegrationGlobal Integration
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ProductionProduction &6cess capacity and plants in several regions are essential.&6cess capacity and plants in several regions are essential.
&ffective communications systems must be in place.&ffective communications systems must be in place. %entrali:ed management is essential.%entrali:ed management is essential. Inter-factory communication needs to be established.Inter-factory communication needs to be established. %entrali:ed management should mae each factory aware of%entrali:ed management should mae each factory aware of
the system status.the system status.
Demand ManagementDemand Management *etting mareting and sales plans based on projected demand*etting mareting and sales plans based on projected demandand available product.and available product.
9as to have at least some centrali:ed component.9as to have at least some centrali:ed component. *ensitive, maret-based information best supplied by analysts*ensitive, maret-based information best supplied by analysts
in each region.in each region.
%ommunication is critical.%ommunication is critical. %rder Ful#illment%rder Ful#illment
%entrali:ed system.%entrali:ed system. 2egional customers must be able to receive deliveries from the2egional customers must be able to receive deliveries from the
global supply chain with the same efficiency as they do fromglobal supply chain with the same efficiency as they do from
local or regionally based supply chains.local or regionally based supply chains.
Global IntegrationGlobal Integration
I i I t ti l * l %h i
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Issues in International *upply %hainIssues in International *upply %hain
anagementanagement
International vs 2egional 0roductsInternational vs 2egional 0roducts
Local #utonomy vs %entral %ontrolLocal #utonomy vs %entral %ontrol
iscellaneous Dangersiscellaneous Dangers
International vs 2egional 0roductsInternational vs 2egional 0roducts
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International vs 2egional 0roductsInternational vs 2egional 0roducts
Region;speci#ic ProductsRegion;speci#ic Products *ome products have to be designed and*ome products have to be designed and
manufactured specifically for certain regions.manufactured specifically for certain regions. &6ample1 #utomobile designs&6ample1 #utomobile designs
5 9onda #ccord has two basic body styles9onda #ccord has two basic body styles a smaller body style tailored to &uropean and Napanesea smaller body style tailored to &uropean and Napanese
tastestastes
a larger body style catering to #merican tastesa larger body style catering to #merican tastes
5
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Global 0roductsGlobal 0roducts ruly global, i.e. no modification necessary for globalruly global, i.e. no modification necessary for global
sales.sales.5 %oca-%ola%oca-%ola
5 Levis jeansLevis jeans
5 Lu6ury brands such as %oach and GucciLu6ury brands such as %oach and Gucci
*ome depend on very specific regional manufacturing*ome depend on very specific regional manufacturing
and bottling facilities and distribution networs.and bottling facilities and distribution networs. 3thers are essentially distributed and sold in the3thers are essentially distributed and sold in the
same way throughout the world.same way throughout the world.
International vs 2egional 0roductsInternational vs 2egional 0roducts
Local #utonomy vs %entral %ontrolLocal #utonomy vs %entral %ontrol
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Local #utonomy vs. %entral %ontrolLocal #utonomy vs. %entral %ontrol
%entrali:ed control can be important%entrali:ed control can be important 9owever, in many cases it maes sense to9owever, in many cases it maes sense toallow local autonomy in the supply chain.allow local autonomy in the supply chain.
Important to temper !change" e6pectationsImportant to temper !change" e6pectations
for regional business depending on thefor regional business depending on thecharacteristics of the region involved.characteristics of the region involved. 9owever, temptation to follow local9owever, temptation to follow local
conventional wisdom may cause someconventional wisdom may cause some
opportunities of a global supply chain to beopportunities of a global supply chain to bemissed.missed.
iscellaneous Dangersiscellaneous Dangers
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iscellaneous Dangersiscellaneous Dangers any potential dangers that firms must face asany potential dangers that firms must face as
they e6pand their supply chains globally1they e6pand their supply chains globally1 &6change rate fluctuations&6change rate fluctuations #dminister offshore facilities, especially in less-#dminister offshore facilities, especially in less-
developed countries.developed countries. 0romise of cheap labor masing threat of reduced0romise of cheap labor masing threat of reduced
productivityproductivity
5 &6pensive training may be re$uired but it may not be&6pensive training may be re$uired but it may not beenoughenough
Local collaboration in the global supply chain.Local collaboration in the global supply chain.%ollaborators can ultimately become competitors.%ollaborators can ultimately become competitors.
9itachi, which used to manufacture under license from9itachi, which used to manufacture under license fromotorola, now maes its own microprocessors.otorola, now maes its own microprocessors. oshiba, which manufactured copiers for ;, is now aoshiba, which manufactured copiers for ;, is now a
major supplier of copiers under the oshiba brandmajor supplier of copiers under the oshiba brandname.name.
iscellaneous Dangersiscellaneous Dangers
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Dangers with foreign governments.Dangers with foreign governments.#ccess to %hinas huge marets resulting in#ccess to %hinas huge marets resulting in
many companies handing over criticalmany companies handing over criticalmanufacturing and engineering e6pertise tomanufacturing and engineering e6pertise tothe %hinese government or to %hinesethe %hinese government or to %hinese
partners.partners. hen these companies become competitorshen these companies become competitors
5 ould overseas firms be able to competeould overseas firms be able to competesuccessfully in the %hinese maretH orsuccessfully in the %hinese maretH or
5 ould they lose this opportunity as %hineseould they lose this opportunity as %hinesecompanies begin to compete on the world stageHcompanies begin to compete on the world stageH
iscellaneous Dangersiscellaneous Dangers
0 f & t ti d & l ti0 f & t ti d & l ti
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0erformance &6pectation and &valuation0erformance &6pectation and &valuation
3perating standards in (irst orld nations3perating standards in (irst orld nations
uniformly high.uniformly high.
3perating standards vary greatly in emerging3perating standards vary greatly in emerging
nations1nations1
2esearch and negotiations re$uired2esearch and negotiations re$uired Governments usually play a large roleGovernments usually play a large role
In the hird orld, traditional performanceIn the hird orld, traditional performance
measures have no meaning1measures have no meaning1 *hortages are common*hortages are common %ustomer service measures used in the est are%ustomer service measures used in the est are
irrelevant. # firm has little control on the timing andirrelevant. # firm has little control on the timing and
il bilit f i ta ailabilit of in entor