international supply chain management compiled by rulzion rattray
TRANSCRIPT
International Supply Chain Management
Compiled by Rulzion Rattray
International Supply Chains
• Periodic Economic swings and localised protectionist policies.
• International supply chains frequently consist of many autonomous organisations.
• Informational & procedural relationships often result in dialogues that seem like arms length negotiations
Manufacturer
Retailer
Orders
DeliveryDeliveryDelivery
Orders Orders
Capacity Required
Adapted from: Houlihan, J.B. (1998) “Manufacturing Issues”, Booz Allan & Hamilton, New York.
Amplification Effects
• Demand upswing produces shortages somewhere in the supply chain, (maybe only shortages in inventory).
• Reaction; local protection, orders increase, “growth psychosis effect”.
• If there is unreliable or slow delivery local protection can result in local decisions to increase inventory
Perceived Demand
Internal vulnerability
Extend market distance Production distributions attitudes Poor information processing Inventory overhang distortions
ProductionCapacity:
Real demandApparent demand
Time
Adapted from: Houlihan, J.B. (1998) “Manufacturing Issues”, Booz Allan & Hamilton, New York.
Capacity Required:
RealApparent
Production Flywheel Effect
Shortages
Overordering
Unreliable delivery
Safety StockIncrease
Demand distortion
Vulnerability in the Organisation
LocalisedProtectioneffect
Adapted from: Houlihan, J.B. (1998) “Manufacturing Issues”, Booz Allan & Hamilton, New York.
5%120
80
40
120
80
40
120
80
40
120
80
40
10%
20%
40%
Normal level
Actual level with sales drop
Normal level for new sales volume
Evidence of decoupled Inventory planning cycles.
A 5% downturn in salesResults in a 40% downturn inManufacturing requirement
Adapted from: Houlihan, J.B. (1998) “Manufacturing Issues”, Booz Allan & Hamilton, New York.
Service Capacity & Inventory
• How can amplification effects be dealt with?
• Any service level can be achieved through Stock or Production capacity or a combination.
• Choice depends on:– Inventory holding costs– Cost of incremental capacity
Balancing the Supply Chain
• This requires a shift in control policy towards a systems perspective.
• Also requires a shift in management to one that spans the traditional boundaries of responsibility.
• Tackling blockages in information transfer particularly in international supply chains
SuppliersProcurementorders
Manufact.orders
Manufact.orders
Factoryorders
Distributionorders
Customerorders
Customerorders
Distributioninventory
Selling pointinventory
In processinventory
Raw materialinventory
1
2.5 Weeks3 Weeks
Average inbound data flow
17 working days17 working days 15 working days
Average outbound goods flow
Time Lags in the Supply ChainMarket dataAssessed for Production 6 week obsolescence
Priorities setwith no indicationof market priorities
Distortions due to inventory policies
Only placemarket demand visible
Adapted from: Houlihan, J.B. (1998) “Manufacturing Issues”, Booz Allan & Hamilton, New York.
Conclusions• International supply chains are typified by:
– poor flows of information,– Local autonomy– Incompatible operating procedures
• Integration of Supply Chains will require:– Management of data capture & flow across
functional boundaries without delay– Linked systems & shared ownership of
information.
• Increased inventory not the only answer!
References
• Houlihan, J.B. (1998) “Manufacturing Issues”, Booz Allan & Hamilton, New York.
• Christopher, M., (1995), “Logistics the Strategic Issues”, Chapman Hall, London.
• Christopher, M., (1998), “Logistics and Supply Chain Management. Strategies for Reducing Cost and Improving Service”, Financial Times Pitman Publishing, London.
• Stacey, R, (1996), Strategic Management & Organisational Dynamics, Pitman, London.
• Tayor, D. (1997),“Global Cases in Logistics and Supply Chain Management”, Thomson International Business Press, London.