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Supply Chain Management Lecture 5 – Globalisation Alexa Kirkaldy.
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Transcript of Supply Chain Management Lecture 5 – Globalisation Alexa Kirkaldy.
Supply Chain Management Lecture 5 –
Globalisation
Alexa Kirkaldy
2
Lecture 5 - Learning ObjectivesOn completion you will be able to:
• Define globalization as a phenomenon• Recognise the key drivers for change in the global economy• Explain the evolution of multinational and international logistics
strategies• Recognise sources of risk from operating globally and in particular
recognise the exchange rates risks that arise and identify methods to manage these risks
3
Definitions of Globalization• The growing integration of economies and societies
around the world (Source: World Bank http://www.worldbank.org/ )
• Globalisation offers companies opportunities to simultaneously grow revenues and decrease costs (Source: Chopra and Meindl)
• Is the convergence of trends in markets, products, consumer behaviour and society. – Tony Hines, “Supply Chain Strategies”, 2004, Elsevier, page 7
• Is a trend, the destination has not been reached
4
Drivers of GlobalisationGrowth in world tradegreater than growth in
GNP/GDP
Liberalization of trade via WTO Development of global
transport infrastructure
Information technology improves global communications
Global competition increases search for lower labour costs
RegionalisationTriads - North America, EU,
Japan/Pacific Rim
Overcapacity in many industries
% of imports and exports vs world GDP
Container movements have increased rapidly since 1981
6
Port capacity and demand is increasing
… air freight volumes continue to increase
• In 2014, airlines transported 51.3 million metric tons of goods, representing more than 35% of global trade by value but less than 1% of world trade by volume.
• Equivalent to $6.8 trillion worth of goods annually, or $18.6 billion worth of goods every day.
and are forecast to keep doing so!
http://www.airportwatch.org.uk (2015)
10
Implication of International Competition
Low High
Low
High
Trading Industries• Defence
hardware• Aerospace• Textiles and
apparel• Shipbuilding
Trading Industries• Defence
hardware• Aerospace• Textiles and
apparel• Shipbuilding
Multinational Industries• Investment
banking• Fast-food
restaurants• Management
consulting• Packaged
groceries
Multinational Industries• Investment
banking• Fast-food
restaurants• Management
consulting• Packaged
groceries
Sheltered Industries• Furniture• House building• Grocery retailing• Domestic services
Sheltered Industries• Furniture• House building• Grocery retailing• Domestic services
Global Industries• Automobiles• Consumer
electronics• Petroleum• Semiconductors
Global Industries• Automobiles• Consumer
electronics• Petroleum• Semiconductors
International investment (foreign owned assets)
Inte
rnati
on
al Tr
ad
e (
worl
d
exp
ort
)
Source: Dr Dawei Lu, MSc SCM module, WMG
Regionalisation
11
Source: OCR
Offshoring
12
Source: OCR
13
Source: OCR
14
Scenarios in 2020• Globalisation unbound
– trade barriers progressively dismounted; accelerated technological progress; integrated financial markets
• Controlled globalisation – further gradual trade liberalisation constrained by security concerns
and protectionist pressures
• Globalisation in retreat– protectionist sentiment thrives in a climate of insecurity
• Globalisation sunk – global markets disrupted, stagnant consumption; technical advances
dwindle; restrictions on trade, migration and investment
10%
65%
20%
5%
Source: Economist Intelligence Unit (2006) Foresight 2020: Economic, industry and corporate trends
Evolution of Logistics Strategies
Sourcing Manufacturing Inventory Distribution Sales
Stage 1 – Direct export
Sourcing Manufacturing Inventory Distribution Sales
Stage 2 – National warehouses
Activities in home country
Activities inEurope
Evolution of Logistics Strategies
Sourcing Manufacturing Inventory,Distribution
Sales
Stage 3 – Logistics centralisationSourcing and primary
manufacturing
Stage 4 – Postponed manufacturing
Activities in home country Activities in Europe
Inventory,Final manufacturing,
Distribution
Sales
Harrison A. and van Hoek R. “Logistics Management and Strategy”, Pearson, 2nd edition 2005, p. 115
17
Stages in Global Supply Management
• Stage one: International purchasing– Price and volume
• Stage two: Global sourcing– Supplier capabilities– Supporting market entry
• Stage three: Global supply management– SC optimisation– Risk management
Burt, D. (2010) Global Supply Management. In: Burt, D. et al. Supply management. 8th ed., London : McGraw-Hill, Ch.12, pp.276
18
Companies Reasons for Global Sourcing
To benefit from:• Lower total cost• Superior quality• Better timeliness• More advanced technology• Broader choice of suppliers• Expanded customer base
Burt, D. (2010) Global Supply Management. In: Burt, D. et al. Supply management. 8th ed., London : McGraw-Hill, Ch.12, pp.276-277
19
Problems faced by Companiesfrom Global Sourcing
• Cultural issues• Long lead times• Additional inventories• Lower quality• Social and labour problems• Higher cost of doing business• Higher opacity
Burt, D. (2010) Global Supply Management. In: Burt, D. et al. Supply management. 8th ed., London : McGraw-Hill, Ch.12, pp.277-278
20
Global Pipeline – Transport Variability
From point of origin to
port
Freight forwarding/
consolidation
Transit to country of destination
Customs clearance
Transit to
point of use
Total elapsed
time
Maximum 5 7 15 5 5 37
Average 4 3 14 2 4 32
Minimum 1 1 12 1 2 17
Christopher M., Logistics & Supply Chain Management, Pearson, 3rd edition, 2005, p. 217
Impact of Globalization on Supply Chain Networks
Risk Factors Percentage of Supply Chains Impacted
Natural disasters 35
Shortage of skilled resources 24
Geopolitical uncertainty 20
Terrorist infiltration of cargo 13
Volatility of fuel prices 37
Currency fluctuation 29
Port operations/custom delays 23
Customer/consumer preference shifts 23
Performance of supply chain partners 38
Logistics capacity/complexity 33
Forecasting/planning accuracy 30
Supplier planning/communication issues 27
Inflexible supply chain technology 21
Source: Chopra and Meindl, 5th Edition 2013, Page 156