GLOBAL SUPPLY CHAINS

BAExE PresentationGroup 03

Task Assigned» Global Supply Chains» Globalization’s impact on enterprise supply chain» Complexities & Risks (Identification, mitigation,

management, etc.)» Supply chain planning, execution, visibility, etc. » Business processes » Integration » Enabling Technologies » Etc.

Definition of a Supply Chain

What is a Supply Chain?» “a network of facilities and distribution options

that performs the functions of procurement of materials, transformation of these materials into intermediate and finished products, and the distribution of these finished products to customers”

» Types of transactions» Physical flows» Data flows

Information Flow» Product descriptions, specifications, and prices » Purchase order information such as quantities,

required shipment dates, and addresses » Planned and actual production, shipment, and

delivery dates/times and status against such schedules

» Technical and engineering data on products, components, and equipment

» Accounting information such as prices, discounts, allowances, and account numbers, and

» Product quality data, such as test results, performance measurements, and warranties.

Supply Chain Mesh

Impact of Globalization on Global Supply Chains

Impact of Globalization and Information Technology

» Intensified competition and the pressure to lower costs has increased

» Standardization of information technologies» Global sprawl

Global Supply Chain Risks» Volatile fuel prices» Disrupted supplies of raw materials

or parts» Increased complexity of products

or service offerings» Increases in cost of labor due to

currency fluctuations» Supplier planning/communication

issues» Changes in customer/consumer

preferences» Problems with manufacturing

capacity» Port operations and customers

delays» Service failures due to longer

supply chain lines/lead times

» Service failures caused by supply chain partners (delivery, quality)

» Geopolitical instability» Shortage of skilled resources» Reduced accuracy of

forecasting/planning» Problems with logics

capacity/complexity» Inflexible supply chain

technology» Natural disasters» Intellectual property risks from

offshore supply chain relationships

» Terrorist infiltration

Risks Categorization» Logistics Risk» The dangers associated with the physical movement of

goods and materials

» Supply & Supplier Risk» The potential disruption of raw material and

component supplies

» Cost/Commodity Risk» The risk is either failing to recognize cost-effective

opportunities or not being able to migrate when the opportunities are discovered

Risks Categorization» Capacity Risk» Relates primarily to the integrity of a company's

facilities or those of its business or outsourcing partners

» Intellectual Risk, Profitability Risk & Demand Risk» Associated with customer demand fluctuation, new

product development.

Global Supply Chain and Terrorism

Global Supply Chain and Terrorism» Use of commercial airliners as missiles» Threat Categorization» Transportation modes (air, road, rail, maritime)» Entry points (airport, border crossings, ports,

pickup/delivery points etc.)» Threat areas (passengers, employees, cargo, shippers

etc.)

Counter-Terrorism Initiatives» Container Security Initiative (Advance Shipment

Note)» Addresses the potential threat of the container itself» Considers the history of the container, not just the

contents of the container

» C-TPAT (Customs-Trade Partnership Against Terrorism)» Mechanism for companies to work with the U.S. Customs

Service» Intent is for companies to become known entities to the

Customs Service and become a more trusted importer of goods to the United States

Counter-Terrorism Initiatives» TAPA (Transported Asset Protection Association)» Unique forum that unites global manufacturers,

logistics providers, freight carriers, law enforcement agencies, and other stakeholders with the common aim of reducing losses from international supply chains

» Freight Security Requirements

Insecurity over Security» Security risk of network infiltration and

information theft» Need for an authentication solution

» Authentication Techniques» Fingerprint scanners and sensors » Facial recognition» Iris Scanning» Tongue print check in military operations» Digital Signatures and Certificates

Digital Signatures

RFID: Changing Face of Supply Chain Management

» Dynamic World» Intensive competition» Optimize Processes» for increasing efficiencies and reducing costs

» Need» End-to-end visibility: Capturing the data of

material flows at all levels of the value chain» Sense and Respond» Item-level tracking

RFID: Changing Face of Supply Chain Management

Bar Codes» Most primitive form of tagging» The information about an item can be captured

using optical barcode scanners

» Limitations» Damages» Human Interaction and need for close line of sight» Lack of Information» Speed and Scalability

Radio Frequency Identification (RFID)» e-tagging technology» Enables passive object tagging» Automatic data capture, using RF sensing as

opposed to optical sensing in the case of barcodes

Benefits of RFID» Reliable» Range» Amount of data that can be stored » Automated data capture» Total Visibility

Issues and Concerns with RFID» Technical concerns» Cost» Integration» Standards» Consumer concerns

Automatic Identification (Auto-ID)

Auto-ID» Smart Tag» Combination of EPCs & RFID

» Low cost» Open-standard based

» EPC: Electronic Product Code» 96-bit code» Uniquely identified» PML: Product Markup Language»Open-standard language like XML

Auto-ID Technology

RFID EPC PML

AutoID vs. RFID» RFID» Expensive» Proprietary» Integration Issues

» Auto-ID» Low Cost» Adoption of a standard

code

Sarbanes-Oxley Act and Global Supply Chain

Sarbanes-Oxley Act 2002» Corporate financial scandals of Enron

» "to protect investors by improving the accuracy and reliability of corporate disclosures made in agreement to the securities laws"

Implications on Supply Chain» Inventory and Fixed Asset Reconciliation» Material Transfers» Segregation of Duties in the Procure-to-pay

Process» Viable SCM Processes» Vital information for the CFO or chief compliance

officer» Vendor Managed Inventories » Long Term Purchase Agreements » Lease Agreements » Letters of Intent

How to manage impact of SOX on Supply Chain

» Communicate all Business units on frequent basis» Information technology » Visibility» From purchase orders to delivery orders » Operations, inventories and other assets

Supply Chain Automation

Challenges to Supply Chain Automation» Wider scope -> more player involved» Technology disparity within intensified» Systems not integrated» Flexibility» Cost optimization

Supply Chain Reality

Challenge: Adapting to technological change

» Cloud Computing is a computing paradigm in which tasks are assigned to a combination of connections, software, and services accessed over a network

» The ultimate form of globalization

Automating the Cloud» Advantages» lower-cost labour pools» IT services without the infrastructure investment» off-site operational efficiency» CapEx

» Disadvantages» A loss of infrastructure visibility» Degree of blind faith

Next-Generation IT Automation» CMDB (Configuration Management Database)» A federated metadata repository

» Universally connect any business function to the IT components, processes, and infrastructure

Supply Chain Integration

Supply Chain Integration» Event-driven Economy» Demand –realized > Demand-satisfied» Instantaneous» Any direction, any system» Exchanging Information isn’t enough

» B2B Application Integration vs. Supply Chain Integration

Integration Issues» Traditionally» Intra-organization

» Integrate external systems» Impossible to get all member organizations to agree

on a set of standards

» Need» Layers and layers of middleware

Integration Issues» Solution» Agree on a single communications standard» Common communications mechanism and

middleware approach

Middleware» Move information and shared business logic

between applications» Hide complexities of the source and target

systems» APIs

» Middleware Models» Pub/Sub» Request/Response

Electronic Data Interchange (EDI)» Want to communicate?» Common vocabulary» Universally understood» Messages structured in a standardized way» Interpreted and acted on

» Exchange of electronic files in a standard format» Easily processed» Automated without human intervention

EDI vs. Paper Exchange

Sample EDI File

eXtensible Markup Language (XML)» Human-readable information-exchange standard» Encapsulates both data and metadata

» Sample XML File

EDI vs. XML» EDI» Huge Expense» Proprietary» Inability to adapt

changes» Batch-oriented

» XML» Efficient approach» Less Expensive

<bill> <to>ABC Inc.</to>

<duns id="1234567 /> </bill>

Service-oriented Integration» Web Services» Applications with business or process functionality» Standardized XML interface» Interoperability between disparate applications

» Service Oriented Architecture (SOA)» Standards and infrastructure

Integration Standards» Underlying Problem» Lack of universally accepted and implemented

standards» Reduces opportunities for cost savings» Duplication of effort» Maintenance of redundant systems» Investment in inefficient processes

Standards» EDI Standards» ANSI X12» Edifact

» UCCnet for Retail Supply Chains» RosettaNet for High-tech Manufacturing» VDA for Automobiles» SWIFT for Financial Transactions

Strategic Supply Chains» Shift from selling a product to offering a service» Dynamic and resourceful» Strategic collaboration between two organizations

or business units» End-of-life handling of products» Minimize the physical material flow but maximize

information flow from the order to the delivery cycle

Appendices» RFID Case Study» U.S. Army Achieves Real-Time Visibility of Supply

Trucks Traveling in the Middle East

» Supply Chain Integration Case Study» Invoice Payment Authorization

» Case Study» Supply Chain Innovator, the Li & Fung Virtual

Enterprise