global logistics & risk management

7/23/2019 Global Logistics & Risk Management

1/65

Global LogisticsGlobal Logistics

&&

Risk ManagementRisk ManagementByBy

Dr Prashant GuptaDr Prashant Gupta


2/65

GLOBAL LOGISTICS


3/65

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.


4/65

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.


5/65

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.


6/65

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


7/65

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


8/65

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


9/65

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.


10/65

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.


11/65

4ul %arrier4ul %arrier


12/65

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.


13/65

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.


14/65

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


15/65

%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


16/65

THE INTERLINKED

GLOBAL ECONOMY


17/65

THE INTERLINKED GLOBAL ECONOMYTHE INTERLINKED GLOBAL ECONOMY

FR !RD GRM(! )FR !RD GRM(! ) !reaty!reaty!such as!such as (##(##oror


18/65

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


19/65

(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


20/65

GLOBAL S!!LY CHAIN


21/65

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


22/65

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.


23/65

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.


24/65

(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


25/65

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.


26/65

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.


27/65

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


28/65

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.


29/65

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


30/65


31/65

". !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


32/65

$. O!ERATIONAL #ACTORS$. 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.


33/65

%. 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


34/65

&. 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


35/65

Ris' Ma(ageme(t


36/65

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.


37/65

*ources of 2iss*ources of 2iss

Risk $ources and their *haracteristics


38/65

(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


39/65

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.


40/65

>. 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.


41/65

Decision of %0G %ompany was 2isyDecision of %0G %ompany was 2isy


42/65

%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


43/65

%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.


44/65

?. *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.


45/65

*ensing and 2esponding &6ample*ensing and 2esponding &6ample

Different responses ofDifferent responses of


46/65

*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


47/65

;. #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.


48/65

#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


49/65

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.


50/65

)ehicle 0roduction / 0-)alves Inventory)ehicle 0roduction / 0-)alves Inventory


51/65

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


52/65

*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


53/65

*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


54/65

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


55/65

#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


56/65

#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


57/65

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.



58/65

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.


I i I t ti l * l %h i


59/65

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



60/65


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


61/65

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.


Local #utonomy vs %entral %ontrolLocal #utonomy vs %entral %ontrol


62/65

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.



63/65

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.



64/65

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


0 f & t ti d & l ti0 f & t ti d & l ti


65/65

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

global logistics & risk management

Documents