Download - 6 session 6_global sc cfvg 2012
Dr. RAVI SHANKARProfessor
Department of Management Studies
Indian Institute of Technology Delhi
Hauz Khas, New Delhi 110 016, India
Phone: +91-11-26596421 (O); 2659-1991(H); (0)-+91-9811033937 (m)
Fax: (+91)-(11) 26862620
Email: [email protected]
http://web.iitd.ac.in/~ravi1
SESSION#6: Basics & Beyond (CFVG: 2012)
MANAGEMENT OF GLOBAL
SUPPLY CHAINS
Supply Chain Stages
Supply Chain encompasses all activities associated with the flow
and transformation of materials and informationfrom the raw material stage through to the end user.
Supplier Manufacturer Distributor Retailer Customer
Supply Chain Illustration
Global Supply Chains
• “…designing and managing of a system that
controls the flow of materials into, through,
and out of the international corporation”
Types of Global Operations
•International distribution operations
•International suppliers
•Off-shore manufacturing operations
•Fully-integrated global supply
chains
Types of Global SC
Type of
International
Supply Chain
Inbound
LogisticsProcess
Outbound
Logistics
International
Distribution Domestic Domestic International
International
Suppliers International DomesticDomestic/
international
Offshore
Manufacturing International International Domestic
Fully Integrated
Global Supply
Chain
Domestic/
international
Domestic/
international
Domestic/
international
Example 1:
Supply
Chain for
Denim
Jeans
Example 1:
Supply
Chain for
Denim
Jeans
(Contd.)
EXAMPLE : CONTRACT FARMING
Thai agro products are in great demand in many countries.
In order to improve their global competitiveness by bringing down cost, many agro-industries in Thailand have started contract farming in the neighboring countries like Laos and Cambodia.
This is due to cheap production cost.
The selected agro products are grown in these countries in accordance with a contact with the farmers or their agents.
After harvest, the produce is shipped back to the agro industries in Thailand for processing, packaging and marketing.
Through contact farming, the cost of growing raw agro-products has gone down considerably.
Case 1: Supply Chain Evolution at Nabisco
Source: F. Keenan, “Logistics Gets a Little Respect,” Business Week (November 20, 2000), pp. 112–115.
Case 1: Supply Chain Evolution at Nabisco
(cont.)
Source: F. Keenan, “Logistics Gets a Little Respect,” Business Week (November 20, 2000), pp. 112–115.
Case 1: Supply Chain Evolution at Nabisco
(cont.)
EXAMPLE: TIPCO FOOD,
THAILANDThailand has the largest global market share of around 45% in
processed pineapple. Tipco Food is one the largest Thai exporters of this product with a
hopping figure of Baht 3.7 billion.
In 2006-07, due to weakening of US dollar ($) against most of the global currencies, including Baht,
Tipco global supply chain came under tremendous threat.
Look at these steep drops in exchange rate. It has crumbled as follows: late 2006- Baht 41 per $; early 2007 -Baht 37 per $; July 2007-Baht 33 per $.
For the same export, the revenue inflow from exports has gone down by about one fifth of its value few months back.
Most of these export-oriented supply chains have become non-competitive in global market.
As a protective measure, these export-oriented firms are focusing on local market to boost their sales.
– Reference: Bangkok Post: 4 August 2007, p B4.
CASE STUDY 2: WAL-MARTIn 1979 Kmart was one of the leading companies in the retail
industry, with 1,891 stores and average revenues per store of
$7.25 million.
At that time Wal-Mart was a small niche retailer in the South
with only 229 stores and average revenues about half those of
Kmart stores.
In 10 years Wal-Mart had transformed itself; in 1992 it had the
highest sales per square foot and the highest inventory turnover
and operating profit of any discount retailer.
Today Wal-Mart is the largest and highest profit retailer in the
World. How did Wal-Mart do it?
CASE STUDY 2: WAL-MARTThe starting point
a relentless focus on satisfying customer needs;
Wal-Mart's goal was simply to provide customers with access to
goods when and where they want them and to develop cost
structures that enable competitive pricing.
Source: Adapted from Garrison Wieland for “Wal-Mart’s Supply Chain,”Harvard Business Review 70(2; March–April 1992), pp. 60–71.
Relationship between Facilities and Functions along the Wal-Mart Supply Chain
Wal-Mart
Customers Request:
Buying detergent,
clothes, TV, …...
Wal-Mart
Stores
Wal-Mart
or third-party
distribution
centers
Procter & Gamble
Plastic ProducerFabric Producer
Da-Fa Clothing, Inc. (China)
SONY Factory (Malaysia)
Electronics Components Producer
Chemical Producer
Zipper Producer
Thread Producer
Plastic Producer
Case 2: Global Supply Chain Example of WalGlobal Supply Chain Example of Wal--MartMart
CASE STUDY 2: WAL-MART (contd..)
The key to achieving this goal was to make the
way the company replenishes inventory the
centerpiece of its strategy.
This was done by using a logistics technique known
as cross-docking.
In this strategy, goods are continuously delivered to
Wal-Mart's warehouses from where they are
dispatched to stores without ever sitting in inventory.
CASE STUDY 2: WAL-MART (contd..)This strategy reduced Wal-Mart's cost of sales
significantly and made possible to offer everyday
low prices to their customers.- Stalk et. al, Harvard Business Review (1992)
SCM Software
• Enterprise Resource Planning (ERP)
– software that integrates components of a
company by sharing and organizing
information and data
– SAP was first ERP software
– mySAP.com
• web enabled modules that allow collaboration
between companies along the supply chain
Linking Supply Chain with SAP
Suppliers IC Mfg
PC Board
Subassembly
Suppliers
FAT
US DCs
Europe
DCs
Far East
DCs
Suppliers
Suppliers
Retailer
Retailer
Retailer
Case 3: Hewlett & Packard (HP)
FAT = Final assembly & test
IC Mfg = Integrated circuit manufacturing
PC Board = Printed circuit board
DCs = Distribution Centers
Consumers
Consumers
Consumers
Similar is Dell
Customers order
computers on-line
Dell
Assembly
Plant
Monitors by SONY (Mexico)
Keyboards by Acer (Taiwan)
CPU by Intel (USA)
Other components
Five core principles of
Supply Chain
Management?
Summary: Five Core Principles in Global SCM
•Connectivity
•Collaboration
•Synchronization
This principle deals with the connectivity network of supply chain partners. Connectivity can be strategic in dealing withplanned linkage information integration and network architecture.
Collaboration allows a closer integrationof the supply chain partners by integrating,planning, forecasting and over all decision making processes across organization boundaries. True collaboration in an ongoing investment in the extended supply
chain network.
Synchronization between vendors, manufacturing, salesand marketing, finance, customers, and third parties is an integral part of supply chain development. When finely developed interface within the firms are between the firm and its partners are seamless, frictionless and transparent.
Five Core Principles(Continued)
•Leverage
•ScalabilityScalability as it is used here, refers to the ability of the firm to develop a set of supply chain processes that canbe easily duplicated with additional suppliers, customers, and 3PL’s. The Principle of Scalability requires a balance between customization and scalability.
The Principle of Leverage simply suggests that the firm cluster and focus their assets on high payout opportunities with core suppliers, customers, and Third Party Logistics (3PL’s).
Trends in Global Supply Chain Management
• Collaborative Product Development: – Example All Major Auto Companies
• Virtual Manufacturing and Supply Chain Management
• Demand signal closest to supplier and accurate– Point-of-sales (POS) data capture and transmission and
now RFID in each piece of product eliminating the need for line of sight scanning
Achieving the 21st Century Supply Chain: Seven areas of
opportunity
1Use of low cost
sources
3Focused
manufacturingstrategies
5Globally aligned
operations
6Built in agility “the
Virtual SupplyChain”
2Creative use of
strategic partnershipsOEMs, Outsourcing,
sub contracting 7Industry wide
solutions
4Distribution,
logisticOptimisation
Multiple Channels
THE ‘GOAL’ IS TO CREATE A CUSTOMER DRIVEN AGILE BORDERLESS SUPPLY CHAIN THAT IS BASED ON LOWEST COST ECONOMICS
Challenges for Global Supply Chains - Six key questions
6. How closely should
suppliers be integrated?
1. What should the customer
interface look like?
2. Should the supply chain be
geared to responsiveness or efficiency?
3. How critical are
new products?
4. What economies of
scale are driving the
supply chain?
5. Where should the
supply chain be decoupled?
Buying
structure
Customer base
Time frame
The “Customer Insight”
challenge
Thank You