international supply chain management compiled by rulzion rattray

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International Supply Chain Management Compiled by Rulzion Rattray

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Page 1: International Supply Chain Management Compiled by Rulzion Rattray

International Supply Chain Management

Compiled by Rulzion Rattray

Page 2: 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

Page 3: International Supply Chain Management Compiled by Rulzion Rattray

Manufacturer

Retailer

Orders

DeliveryDeliveryDelivery

Orders Orders

Capacity Required

Adapted from: Houlihan, J.B. (1998) “Manufacturing Issues”, Booz Allan & Hamilton, New York.

Page 4: International Supply Chain Management Compiled by Rulzion Rattray

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

Page 5: International Supply Chain Management Compiled by Rulzion Rattray

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.

Page 6: International Supply Chain Management Compiled by Rulzion Rattray

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.

Page 7: International Supply Chain Management Compiled by Rulzion Rattray

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.

Page 8: International Supply Chain Management Compiled by Rulzion Rattray

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

Page 9: International Supply Chain Management Compiled by Rulzion Rattray

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

Page 10: International Supply Chain Management Compiled by Rulzion Rattray

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.

Page 11: International Supply Chain Management Compiled by Rulzion Rattray

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!

Page 12: International Supply Chain Management Compiled by Rulzion Rattray

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.