international supply chain management compiled by rulzion rattray
TRANSCRIPT
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International Supply Chain Management
Compiled by Rulzion Rattray
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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
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Manufacturer
Retailer
Orders
DeliveryDeliveryDelivery
Orders Orders
Capacity Required
Adapted from: Houlihan, J.B. (1998) “Manufacturing Issues”, Booz Allan & Hamilton, New York.
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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
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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.
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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.
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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.
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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
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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
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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.
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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!
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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.