INTRODUCTION

Global Manufacturing & Supply Chain ManagementSubmitted by:

1) Mohanish Shah (11237)

2) Amit Khemnani (11261)

3) Harshad Vayeda (11287)

4) Gopal Parmar ()

5) Dev Jadhav ()I .Supply Chain ManagementSupply chain management, is the active management of supply chain activities to maximize customer value and achieve a sustainable competitive advantage. It represents a conscious effort by the supply chain firms to develop and run supply chains in the most effective & efficient ways possible. Supply chain activities cover everything from product development, sourcing, production, and logistics, as well as the information systems needed to coordinate these activities.

The organizations that make up the supply chain are linked together through physical flows and information flows. Physical flows involve the transformation, movement, and storage of goods and materials. They are the most visible piece of the supply chain. But just as important are information flows. Information flows allow the various supply chain partners to coordinate their long-term plans, and to control the day-to-day flow of goods and material up and down the supply chain.

A supply chain consists of all parties involved, directly or indirectly, in fulfilling a

customer request. The supply chain not only includes the manufacturer and suppliers, but

also transporters, warehouses, retailers, and customers themselves. Within each

organization, such as manufacturer, the supply chain includes all functions involved in

receiving and filling a customer request. These functions include, but are not limited to,

new product development, marketing, operations, distribution, finance, and customer

service.

The concept of Supply Chain Management is based on two core ideas. The first is that practically every product that reaches an end user represents the cumulative effort of multiple organizations. These organizations are referred to collectively as the supply chain.

The second idea is that while supply chains have existed for a long time, most organizations have only paid attention to what was happening within their four walls. Few businesses understood, much less managed, the entire chain of activities that ultimately delivered products to the final customer. The result was disjointed and often ineffective supply chainSupply-Chain Principles/ Methodology & Solutions

Supply-Chain Principles

If supply-chain management has become top management's new "religion," then it needs

a doctrine. Andersen Consulting has stepped forward to provide the needed guidance,

espousing what it calls the "Seven Principles" of supply-chain management. When

consistently and comprehensively followed, the consulting firm says, these seven

principles bring a host of competitive advantages.

The seven principles as articulated by Andersen Consulting are as follows:

1. Segment customers based on service needs. Companies traditionally have grouped

customers by industry, product, or trade channel and then provided the same level of

service to everyone within a segment. Effective supply-chain management, by contrast,

groups customers by distinct service needs--regardless of industry--and then tailors

services to those particular segments.

2. Customise the Supply Chain Management network. In designing their Supply

Chain Management network, companies need to focus intensely on the service

requirements and profitability of the customer segments identified. The conventional

approach of creating a "monolithic" Supply Chain Management network runs counter to

successful supply-chain management.

3. Listen to signals of market demand and plan accordingly. Sales and operations

planning must span the entire chain to detect early warning signals of changing demand

in ordering patterns, customer promotions, and so forth. This demand-intensive approach

leads to more consistent forecasts and optimal resource allocation.

4. Differentiate product closer to the customer. Companies today no longer can afford

to stockpile inventory to compensate for possible forecasting errors. Instead, they need to

postpone product differentiation in the manufacturing process closer to actual consumer

demand.

5. Strategically manage the sources of supply. By working closely with their key

suppliers to reduce the overall costs of owning materials and services, supply-chain

management leaders enhance margins both for themselves and their suppliers. Beating

multiple suppliers over the head for the lowest price is out, Andersen advises. "Gain

sharing" is in.

6. Develop a supply-chain-wide technology strategy. As one of the cornerstones of

successful supply-chain management, information technology must support multiple

levels of decision making. It also should afford a clear view of the flow of products,

services, and information.

7. Adopt channel-spanning performance measures. Excellent supply-chain

measurement systems do more than just monitor internal functions. They adopt measures

that apply to every link in the supply chain. Importantly, these measurement systems

embrace both service and financial metrics, such as each account's true profitability.

The principles are not easy to implement, the Andersen consultants say, because they run

counter to ingrained functionally oriented thinking about how companies organise,

operate, and serve customers. The organisations that do persevere and build a successful

supply chain have proved convincingly that you can please customers and enjoy growth

by doing so.

Logistics:

The term, logistics, and its actions originated with the military. In the war theater, logistics applied to the process of supplying equipment and supplies to troops. Logistics as a business concept evolved in the 1950s with the increasing complexity of supplying businesses with materials and shipping out products in an increasingly globalized supply chain. Today, the business sector uses this term to describe the efficient flow and storage of goods from point of origin to the point of consumption. The supply chain is a vital part of this process, including transportation, shipping, receiving, storage, andmanagementof all these areas. Within the business sector, logistics can be applied to information, transportation, inventory, warehousing, material handling, and packaging, disposal, and security.

Business Logistics Definitions

the preeminent worldwide professional association of supply chain management professionals, defines logistics as that part of supply chain management that plans, implements, and controls the efficient, effective forward and reverse flow and storage of goods, services and related information between the point of origin and the point of consumption in order to meet customers requirements. Another short CSCMP definition is the management of inventory, at rest or in motion. The main fields within logistics include:

Procurement Logisticsis the entire process used to select suppliers and negotiate contracts for delivery of goods or services. It consists of activities such as market research, requirements planning, make or buy decisions, supplier management, ordering, and order controlling.

Production Logisticsconcerns itself with streamlining and controlling the flow through the supply chain from point of entry to the end, which is distribution logistics. Production logistics activities are related to organizational concepts, layout planning, production planning, and control.

Distribution Logistics is concerned with the delivery of finished products to the customer. It consists of order processing, warehousing, and transportation. Major sub-sectors within the industry include air, rail, water, and truck transportation, urban transit and ground passenger transportation, warehousing and storage, and motor vehicle repair. Logistics involve the integration of these sub sectors, including information, transportation, inventory, warehousing, material-handling, and packaging.

Disposal Logistics, also known as reverse logistics, stands for all operations related to the reuse of products and materials. The main function of this field is to reduce logistics cost, enhance service, and save natural resources.

As the business world grew, this definition of logistics called formanagement, leading to the development of experts called supply chain logisticians. This type of leadership encompasses the planning and management of all activities involved in sourcing, procurement, conversion, and logistics management activities. Importantly, it also includes coordination and collaboration with channel partners which can be suppliers, intermediaries, third-party service providers, and customers.

Why Logistics is Important to Company

Even small businesses deal with finding suppliers, if not with transporting merchandise to a store. Small business owners also conduct distribution logistics with inventory and warehousing. And, every small business owner can tell you about how they handle reverse logistics, with returned merchandise or refusal of services. Larger businesses may deal in all four logistic fields.

In the business environment, logistics either have an internal or external focuses (inbound or outbound). Depending upon the business involved, this part of the chain can be simple or complicated. For more complicated procedures, third parties often are hired to conduct any one of the four fields within business logistics.

Third-party logistics (3PL) involves using external individuals or organizations to execute logistics activities that have traditionally been performed within an organization itself. If, for example, a company decides to export its product, it may hire a person or organization to help with distribution logistics. Today, there is a movement toward buildingfourth-party logistics(4PL), which integrates 3PL competencies and other organizations to design, build, and run comprehensive supply chain solutions. A 4PL general contractor would manage other 3PLs, truckers, forwarders, custom house agents, and others, essentially taking responsibility of a complete process for the customer.

Another specialty includeslogistics consulting services. Firms in this industry specialize in the production and distribution of goods, from the first stages of securing suppliers to the delivery of finished goods to consumers. Such firms give advice on improvements in the manufacturing process and productivity, product quality control, inventory management, packaging, order processing, the transportation of goods, and materials management and handling. In the process, these consulting firms might suggest improvements to the manufacturing process in order to use inputs better, increase productivity, or decrease the amount of excess inventory. Consulting firms in this segment of the industry also advise on the latest technology that links suppliers, producers, and customers together to streamline the manufacturing process.

Evenproject managementrequires logistics, as one vein of this science coordinates a sequence of resources to carry out projects. Typical constraints in project management include scope, time, and budget, or the same constraints involved in business logistics. The time constraint refers to the amount of time available to complete a project. The cost constraint refers to the budgeted amount available for the project. The scope constraint refers to what must be done to produce the projects end result.

A Global Reach

No matter the size of a business, the concern for logistics can help any effort utilize the supply chain more efficiently by cutting costs when appropriate and by avoiding waste of time and materials. If you are involved in logistics, you may know that this business is growing and that thecareer pathsavailable within this industry can range from clerks and order fillers to CEOs who manage multinational business supply chains.

Logistics is one of the main functions within a company, and the supply chain is a complex and sometime fragile global endeavor dependent on a network of independent, yet interconnected, moving parts. It requires professional management. Supply chain professionals order the product, build it, move it, ship it, distribute it, and drive the coordination processes with marketing, sales, engineering, manufacturing, finance, and information technology. In short, they make any business effort seem effortless.

2-GLOBAL MANUFACTURIING STRATEGIES

The success of a global manufacturing strategy depends on four key factors: (i) compatibility, (ii) configuration, (iii) coordination and (iv) control.

A. Manufacturing Compatibility

Compatibility refers to the degree of consistency between a firms foreign direct investment decisions and its competitive strategy. Cost-minimization and the drive for globalization force MNEs to pursue economies of scale in manufacturing, often by producing at low labor-cost sites. Other key variables include dependability, quality, flexibility and innovation.

B. Manufacturing Configuration

MNEs consider three basic configurations en route to developing their global manufacturing strategies. They are:

centralized manufacturing in a single country

(a global export approach)

regionalized manufacturing in the specific regions served

(a regionalized marketing and manufacturing approach)

local manufacturing in each country market served

(a multidomestic marketing and manufacturing approach).

C. Coordination and Control

Coordination represents the linking or integrating of participants all along the global supply chain into a unified system. Control embraces systems, such as organizational structure and performance measurement, which are designed to help ensure strategies are implemented, monitored and revised, when appropriate.

3)IT AND GLOBAL SCM

Information Technology (IT) and its use in organizations and across the supply chain has become a determinant of competitive advantage for many corporations. This paper focuses the usage of IT tools for Supply Chain Management (SCM). It also highlights the contribution of IT in helping to restructure the entire distribution set up to achieve higher service levels and lower inventory and lower supply chain costs.

An overview and tangible benefits of the existing IT tools that are widely deployed is also provided with focus on existing configurations considerations, available applications. The role of existing communication technologies in making IT an enabler of SCM is highlighted by addressing a range of different point and enterprise solutions in a variety of supply chain settings.

Critical IT demonstrations and implementations in SCM are discussed. Fundamental changes have occurred in today's economy. These changes alter the relationship we have with our customers, our suppliers, our business partners and our colleagues. Reflection on the evolving and emerging Information Technology trends like Software Agents, RFID, Web Services, Virtual Supply Chains, Electronic Commerce and Decision Support Systems further highlights the importance of IT in the context of increasingly global competition. The rapid adoption of the Internet for communication with allstake-holdersseems to reflect the potential of thenew-agecommunication media.

The objectives of IT in SCM areproviding information availability and visibility;enabling a single point of contact for data;allowing decisions based on total supply chain information; andenabling collaboration with partnersIT in SCM enables great opportunities, ranging from direct operational benefits to the creation of strategic advantage. It changes industry structures and even the rules of competition. IT is key in supporting companies creating strategic advantage by enabling centralized strategic- planning withday-to-daycentralized operations. Infact supply chain become moremarket-orientedbecause of IT usage.

Cisco reported savings of $500 million by restructuring its internal operations and integrating processes with suppliers and customers with the help ofweb-basedtools (Berger, 2000). TheWal-Mart& P&G experiences demonstrate how information sharing can be utilized for mutual advantage. Through sound information technologies, Wal- Mart shares point of sale information from its many retail outlet directly with P&G and other major suppliers Anderson et al (1996).

Celestica, one of the worlds largest electronic manufacturing services companies, has applied a web- based IT tool to regulate its global supply base (Shore, 2001). IT has helped Celestica to improve its responsiveness to customers, thus helping its customer, Dell to maintain its delivery promise toend-users.

CHALLENGES IN IMPLEMENTING INFORMATION TECHNOLOGY IN SUPPLY CHAIN MANAGEMENT

Any company that has undertaken the mission of implementing an integrated supply chain management strategy with the use of IT tools knows that one of the greatest challenges it faces is the significant change in internal culture that is required to make the supply chain redesign successful. It is not an easy thing, tore-conditionpeople to accept change, especially in organizations where a certain mindset has prevailed for many years. However difficult it may be to accomplish, change can be implemented successfully when directed by a strong and knowledgeable leader, who understands the tools available for achieving positive change, as well as their role in initiating and sustaining these changes.

Integrating new applications with existing and legacy systems could also pose problems. Incompatible systems at buyer and vendor facilities are another management challenge to tackle. Data sharing with diverse stakeholders like suppliers and customers, filtering and mining data generated and finding business value of the data are other issues.

Disconnected enterprise systems create data redundancy, errors and can lead to costly business inefficiencies. Poor coordination between enterprise systems leads to flawed production plans, increased supply chain pressure and poor customer service. Lack of visibility of orders, schedules and shipments can lead to costly administrative decision making processes.

EXISTING INFORMATION TECHNOLOGY TOOLS AND APPLICATIONS IN SUPPLY CHAIN MANAGEMENT

Fig 3 IT tools in SCM

Electronic Data Interchange (EDI)

Introduced in the 1970s and popularized in the 1980s, Electronic Data Interchange (EDI) technology has been widely used by firms in supply chains to facilitate transactions and information exchanges. EDI is defined as computer to computer exchange of structured data for automatic processing. EDI is used by supply chain partners to exchange essential information necessary for the effective running of their businesses. These structural links are usually set up between organizations that have a long- term trading relationship.

The main advantages of using EDI are to enter only informative needs on the computer system once, and then it is able to speed of transaction and to reduce cost and error rates. Other benefits of EDI are Quick process to information, Better customer service, reduced paper work, increased productivity, improved tracing and expediting, Cost efficiency and improved billing. Through the use of EDI supply chain partners can overcome the distortions and exaggeration in supply and demand information by improving technologies to facilitate real time sharing of actual demand and supply information.

Although companies gain a lot of benefits from EDI, it is often the mismatch between EDIs expectations and the company's activities undertaken to achieve the desired performance. Also larger organizations are major adopters of EDI, whereas Small and Medium Enterprises (SME) often do not use EDI.

Bar coding and Scanner

Bar Codes are the representation of a number or code in a form suitable for reading by machines (Rushton et al., 2000). Bar codes are widely used throughout the supply chain to identify and track goods at all stages in the process. Bar codes are a series of different width lines that may be presented in a horizontal order, called ladder orientation, or a vertical order, called picket fence orientation. For example, goods received in a warehouse may be identified by the warehouse management system and added to stock held in the warehouse. When put away, the bar code is used to associate the storage location with thebar-codedstock, and on dispatch the stock record is amended. The use of bar codes can speed up operations significantly. On the other hand, the problems can occur if bar codes are defaced or the labels fall off in transit. The maintenance management must be applied for extending thelong-lifeperiod of this equipment.

Bar code scanners are most visible in the check out counter of super markets and hyper markets. This code specifies name of product and its manufacturer. Other applications are tracking the moving items such as components in PC assembly operations, automobiles in assembly plants.

Enterprise Resource Planning (ERP) Systems

Enterprise Resource Planning (ERP) Systems areEnterprise-wideInformation Systems used for automating all activities and functions of a business. These aretransaction-basedinformation systems that are integrated across the whole business. Basically, they allow for data capture for the whole business into a single computer package whichs give a single source for all the key business information activities, such as customer orders, inventory and financials.

In addition to the huge costs that are involved in procuring an ERP application, installation of such systems will entail widespread change within the organization. It will have implications in terms of Business Process Reengineering (BPR), changes in organizational structure, people and change management. Many companies have benefited from using this system whilst some have experienced severe problems with their application. Generally, they also require a lot of customization and training for each user.

Warehouse Management Systems

Warehouse management systems are systems that control all the traditional activities of warehouse operations. Areas covered usually include receipt of goods, allocation or recording of storage locations, replenishment of picking locations, production of picking instructions or lists, order picking, order assembly and stock rotation. Some systems are used in conjunction with radio frequency (RF) communication equipment. This equipment can be mounted onfork-lifttrucks. The warehouse management system communicates with the RF system and directs the activities of the warehouse staff (Thongchattu et al, 2007). For example, when picking that it will provide the tasks for the operative to carry out. Once the task is complete the operative updates the system and is directed to the next task. This has the advantage of updating the stock holding in real time.

There are highly sophisticated systems that control the operations of fully automated warehouses. This may include automated storage and retrieval systems (AS/RS), automated guided vehicles (AGVs), and the many other devices that are relatively common in todays modern warehouse such as, conveyors, carousels, sortation systems, etc. A number of computer models have now been developed to assist in the planning of warehouse design and configuration. These are generally very sophisticated 3D simulation models that provide a graphic, moving illustration on the computer screen of the layout of the warehouse.

Transportation Management Systems

Transportation Management Systems provide more visibility into shipments and orders. Scheduling issues are also addressed on time. Multiple transportation options can be explored as a result of earlier visibility into the supply chain. Timely communication and status reports can also be obtained. By having control on its supply chain, businesses can make efficient routing decisions.

An example of such a system is developed by Target Corporation and NTE. Initially Target was making transportation requests manually for inbound shipments. There was limited visibility for shipments and as a result of this; there were more number ofless-than-truckloads,which was notcost-effective.Implementation of the new

system resulted in target vendors submitting the relevant freight information electronically with increased speed and efficiency. The new system resulted in improved cost controls, better labour planning and reduced administrative overheads.

Inventory Management Systems

During the mid to late 1990s, retailers began implementing modern inventory management systems, made possible in large part by advances in computer and software technology. The systems work in a circular process, from purchase tracking to inventory monitoring tore-orderingand back around again.Modern inventory management systems must have the ability to track sales and available inventory, communicate with suppliers in nearreal-timeand receive and incorporate other data, such as seasonal demand. They also must be flexible, allowing for a merchant's intuition. And, they must tell a storeowner when it's time to reorder and how much to purchase.EMERGING AND NEW INFORMATION TECHNOLOGY SOLUTIONS FOR SUPPLY CHAIN MANAGEMENT

Radio Frequency Identification (RFID)

The bar code was intended to improve efficiencies in the retail space, but the bar code cannot uniquely identify the specific object such as when items are produced, the lot of the items was made and when will the items expire. RFID was able to take care of these issues.

Both RFID and Bar codes are indeed, quite similar, both beingauto-IDtechnologies, which are intended to provide item identification. The primary difference is the reading

data from the items. In bar coding, the reading device scans a printed label with optical laser or imaging technology and in RFID; the reading device scans a tag by using radio frequency signals

Figure 4 - RFID reader and tag communication flow diagram.

The tag is a microchip connected to a small antenna. The chip can capture a certain amount of data. The radio waves via which the tag and the reader communicate with each other can vary from low frequency (125 KHz) to microwave frequency (6 GHz). In the view of De Wachter and Pleysier (2004) the impact of RFID from a supply chain perspective includes: supply chain inversion, pressure on inventory, increased regulation and legislation, cost control, connectivity and visibility. Supply chain inversion concerns shifting from a push system to a pull system. Pressure on inventory is related to the use of RFID to reduce lead times of information through faster and more reliable registration and increased visibility in the supply chain. In terms of increased regulation and legislation, government regulation has led to more product information and safety requirements. RFID has been used for traceability and visibility of products.

Sofware Agents

Artificial Intelligence emerged into the paradigm of software agents with the application area ofmulti-agentsystems. A software agent is a software system, which has attributes of intelligence, autonomy, perception or acting on behalf of a user. Agents can behave autonomously or proactively. The intelligence of an agent refers to its ability of performing tasks or actions using relevant information gathered as part of differentproblem-solvingtechniques such as influencing, reasoning and application specific knowledge. Java has been the most common tool for building such intelligent agents which are increasingly becoming mobile. Most of the agent platforms available today like AgentBuilder, Aglets, Voyager, JADE, ZEUS and FIPA are implemented using this language.

Decision Support Systems

Decision Support Systems (DSS) are a specific class of computerized information systems that supports business and organizationaldecision-makingactivities. A properly- designed DSS is an interactivesoftware-basedsystem intended to help decision makers compile useful information from raw data, documents, personal

knowledge, and/or business models to identify and solve problems and make decisions.

Typical information that a decision support application might gather and present would be:

an inventory of all of your current information assets (including legacy and relational data sources, cubes, data warehouses, and data marts),comparative sales figures between one week and the next,projected revenue figures based on new product sales assumptions;the consequences of different decision alternatives, given past experience in a context that is describedIn SCM, there is always a likelihood of having disagreements among parties for a certain decision making process. This phenomenon gets worse, when the business environment becomes more competitive and turbulent. Accordingly Decision Support Systems (DSS) have been integrating in various areas like logistics, inventory management, facility design, sales analysis etc.

Baan, a leading ERP vendor unveiled an application, Baan Enterprise Decision Manager for aiding corporate decision- making. Major retailers like Walmart, Sara Lee, Roebuck have increasingly started using Collaborative Forecasting and Replenishment (CFAR) which uses DSS for jointly developing forecasts. GAF Materials Corp, the largest manufacturer ofasphalt-basedroofing materials in the US, uses afreight-managementDSS (Lee et al, 1999).

6Electronic Commerce

Electronic commerce refers to the wide range of tools and techniques utilized to conduct business in a paperless environment. Electronic commerce therefore includes electronic data interchange,e-mail,electronic fund transfers, electronic publishing, image processing, electronic bulletin boards, shared databases and magnetic/optical data capture. Companies are able to automate the process of moving documents electronically between suppliers and customers. This system provides access to customers all over the world and thus eliminates geographical limitations.

Some of theE-commerceapplications with applications in B2C (Business to Consumer) and B2B (Business to Business) space, which are changing the dynamics of Supply Chain Management include:

E-tailing:using the Internet for selling goods over the internet. The archetypale-tailingapplication is that of a bookseller such as Amazon. This company is renowned for the fact that it only sells books over the internet and doesn't even take telephone orders.

Customers of Amazon interact with its website and carry out a number of functions including:

browsing readers reviews of books;reading feature articles about books and authors similar to those found in magazines and newspapers;searching for details of a book based on information such as the author's name or the title of the book;browsing the books which are the Amazon bestsellers;ordering books using credit cards or some other similar payment method;tracking the progress of an order.e- Procurement: The term procurement is used to describe the purchase of goods and services which are not directly used in the main business of a company. For example, a car manufacturer will procure stationery for its employees or procure training courses for them to attend in order to improve their skills. Ane-procurementsystem which would automatically take the form produced by the person making the procurement, check that it satisfies all the company rules for procuring the item that is required, carry out authorisation if it is below a certain limit or send the form to someone who can carry out authorisation and then log the purchaser into the site of the supplier. He or she is then able to use this site to make the purchase, quoting an automatically generated procurement requisition number.

E-Auctions:These are sites on the web which run conventional auctions. There are two types of auction: those that are carried out in real time, where participants log in to an auction site using a browser at a specified time and bid for an article until the highest price is reached and no other bids are forthcoming. The other type of site and the most common is where an item is offered for sale and a date advertised after which no more bids are accepted. Such sites make a profit from two sources: first they usually charge a commission on the items that are sold and, second, they display adverts which are viewed by visitors to the site. The auction site will then receive some fee for displaying the advert, a further fee if a visitor clicks on an advert and it takes them to the advertiser's website and another fee if they purchase something from this site. Again, this is just an online analogue of a conventional business

4) QualitySupply Chain is all about managing the flow of materials and information among the respective stakeholders. Key elements of the above are people and processes. In-fact, Supply Chain Management (SCM) is all about managing people and processes to ensure fulfilment of customer needs and desires. Whether it is procurement, production planning, inventory management, distribution, warehousing, waste management or logistics including (reverse), it is absolutely imperative that people and process focus help achieve customer results. Thus, if SCM is all about people and processes, there cannot be any better improvement model than TQM which focuses on people and processes. The integration of TQM principles with SCM would be a significant enabler for sigma level improvements in SCM performance.

Industries related to both manufacturing and services, irrespective of size have attempted application of various TQM tools such as Six sigma, Toyota Production System, Lean Management, Taguchis method, Quality circle, Kaizens etc.. to improve efficiency and effectiveness of operational processes along with skill and capability improvement of people to ensure achievement of desired customer satisfaction. However most of the information related to TQM application reveals that it has been majorly implemented in processes such as manufacturing, new product development, etc., but very limited application in SCM processes. For eg: Logistics is an area where there are very few cases of TQM implementation (Just in Time) and has a huge potential, considering the fact that it is one of the highest carbon emitters.

While going through various literature on integration of TQM and SCM, one of the SCM Excellence Models developed by Gopal Kanji and Alfred Wong indicates the extent of TQM principles such as customer focus / goals, people based management / people involvement, factual management or data based management and culture of continuous improvement.......all of this driven by leadership resulting in business excellence in SCM processes.

Management professor Robert J. Trent developed a set of activities for applying Total Quality Management (TQM) to Purchasing activities. Expanding these to the entire Supply Chain would be as indicative below:

Identify internal supply-chain customers and establish communication linkages.

Set Performance targets with customer expectations (internal / external) alignedacross the chain.

Conduct regular performance reviews on the above targets.

Involve suppliers and employees early in product and process development / improvement.

Develop a consistent process for supplier selection or supply chain collaborative partner selection.

Reward and recognise the improvements in line with customer appreciation.

Some of my thoughts on integrating TQM with SCM is indicated in the matrix below....... the key assumption is that the performance metrics of all the processes is aligned to the overall organisational customer goal........

1. Customer First (External, Internal) Procurement - Cross Functional teams of supplier and customer will help suppliers improve performance through effective customer communication. Logistics, Planning, Distribution - Employees performing the above work need to visit customer premises to understand customer operations and implement improvements in the planning process (manufacturing, logistics, distribution) to ensure customer ontime deliveries. Formation of teams with customer representations would help in understanding customer requirements and implementing effective action plans. Environment Management - E1a. Greening effort through reduction in logistics usage and travel.E1b. Tying up with "Green" suppliers.Willingness to pay premiums to these suppliersE1c. Waste recycling to "genuine" recyclers (statutory compliance and more) and tracking the same till its final disposal.2. Continual Improvement - Culture of Continual Improvement through training of employees on use of TQM tools such as Quality Circles (famous 7 QC tools), Kaizens etc.., and belief in every employee that he "has to do things better today" than yesterday!!!3. People Involvement:3 Quality is achieved through People Involvement. It has to be everbody's responsibility (right from the Chairman to the Security Watchman), thus need a system for reward and recognition mechanism for Quality improvements as appreciated by the customer (either internal or external).3b. Training of the people involved is a "must" in various QC tools and analysis such as Pareto, fishbone /cause -effect, charts and histogram and various statistical tools. Evcen six sigma methodology training is a "must" to develop the "improvement thought process"...4. Leadership drive:4a. Institute cultural transformation among the employees through aligned and integrated Customer quality goals across various functions, facilitate training to employees to improve performance, and reward / recognition for employees on achieving customer quality goals.4b. Institute review mechanisms and train managers and leaders to ask "right" customer quality oriented questions???5. System and Process Management mindset:5a. Need to move from person based to process /system based working.5b. Need to develop both efficiency and effectiveness measures for "performance management" of the processes. For eg: Reduction in time from Purchase requisition to purchase ordering could be an efficiency measure, however number of items received ontime with zero quality defects could be an effectiveness measure.5c. Need to develop process based reviews for process improvements to reduce process variabilities and aim for "zero defect"....preferably with customer participation through cross functional teams.5d. Some SCM tools with help of technology is as indicated below: Procurement tools - E-Procurement, SAP MM, Vendor assessments and development, vendor audits etc. Planning / Scheduling Tools - SAP planning tools, I2 planning tools etc.ToC planning tools Logistics - Vehicle Requisitioning, Vehicle Tracking Systems, Vehicle Maintenance systems, Safety Systems. Warehousing and Distribution - SAP MM systems, RFID systems, Mechanised material movement systems, ToC systems such as Buffer Management, Distributor /Retailer material Tracking systems, Just in Time systems.. Environment - Statutory management of waste including buyer statutory compliance for handling, storage and disposal, Environment database mangement, Procurement of "Green" products from "Green" vendors..6. Fact based management6a. Need to build an effective data based review mechanism.the data could be numbers or subjective observations that could be used for analysisfor eg: Quality Function Deployment (QFD's) tool to ensure transfer of observed customer needs to actual information for changes........6b. One should not get into the "analysis-paralysis" mode with respect to data based management, however capturing data and further analysis to information for improvement implementation to be encouraged.

Supply Chain is interdependent on various functions and diverse people involvement and hence TQM integration can only be possible with collaborative effort of all the participants of SCM to ensure effective customer oriented quality based improvement across the entire network. Thus training of all supply chain participants in Customer oriented quality management and improvement in an organisationally aligned and integrated manner is highly essential. This is more of a mindset change from just work to improving work in a process centric mannerQUALITY STANDARDSThe ISO 9000 family addresses various aspects of quality management and contains some of ISOs best known standards. The standards provide guidance and tools for companies and organizations who want to ensure that their products and services consistently meet customers requirements, and that quality is consistently improved.

There are many standards in the ISO 9000 family, including:

ISO 9001:2008 - sets out the requirements of a quality management system

ISO 9000:2005 - covers the basic concepts and language

ISO 9004:2009 - focuses on how to make a quality management system more efficient and effective

ISO 19011:2011 - sets out guidance on internal and external audits of quality management systems.

ISO 9001:2008

ISO 9001:2008 sets out the criteria for a quality management system and is the only standard in the family that can be certified to (although this is not a requirement). It can be used by any organization, large or small, regardless of its field of activity. In fact ISO 9001:2008 is implemented by over one million companies and organizations in over 170 countries.

Quality Management Principles

The standard is based on a number of quality management principles including a strong customer focus, the motivation and implication of top management, the process approach and continual improvement. These principles are explained in more detail in the pdfQuality Management Principles. Using ISO 9001:2008 helps ensure that customers get consistent, good quality products and services, which in turn brings many business benefits.

Audits

Checking that the system works is a vital part of ISO 9001:2008. An organization must perform internal audits to check how its quality management system is working. An organization may decide to invite an independent certification body to verify that it is in conformity to the standard, but there is no requirement for this. Alternatively, it might invite its clients to audit the quality system for themselves. Read more aboutcertification to management system standards.5)SUPPLIER NETWORKS

Sourcing is the path a firm pursues in obtaining materials, components and final products either from within or outside of the organization and from both domestic and foreign locations. Global sourcing represents the first step in the process of global materials management (logistics) (see Figures 17.7, 17.8). Firms pursue global sourcing strategies in order to reduce costs, improve quality, increase their exposure to worldwide technology, improve the delivery-of-supplies process, strengthen the reliability of supply, gain access to strategic materials, establish a presence in a foreign market, satisfy offset requirements and/or react to competitors offshore sourcing practices. The three major configurations that have emerged for global sourcing are: (i) vertical integration (ii) outsourcing through industrial clusters, and (iii) other outsourcing.D. Make or Buy Decision

In determining whether to make or buy, MNEs should focus on making those parts and performing those processes critical to a product and in which they have a distinctive advantage. Other things can potentially be outsourced.

E. Supplier Relations

When an MNE decides to outsource rather than integrate vertically, it must determine the nature and extent of its involvement with suppliers.

F. Purchasing Function [See Figure 17.9]

Global progression in the purchasing function includes four phases:

Domestic purchasing only

Foreign buying based on need

Foreign buying as a part of procurement strategy

Integration of global procurement strategy

The last phase is reached when a firm realizes the benefits from the integration and coordination of purchasing on a global basis. At this point, the MNE may once again be faced with the centralization vs. decentralization dilemma. Global sourcing options include:

assigning domestic buyers international purchasing duties

using foreign subsidiaries or business agents

establishing international purchasing offices

assigning the responsibility for global sourcing to a specific business unit or units

integrating and coordinating sourcing on a worldwide basis.

E-sourcing, i.e., the use of the Internet in the purchasing process is rapidly growing in popularity.

6)INVENTORY MANAGEMENT1. Inventory Management

INTRODUCTIONInventory is the stock of any item or resource used in an organization. An inventory system is the set of policies and controls that monitor levels of inventory and determine what levels should be maintained, when stock should be replenished, and how large orders should be.

By convention, manufacturing inventory generally refers to items that contribute to

or become part of a firms product output. Manufacturing inventory is typically classified into raw materials, finished products, component parts, supplies , and work-in-process.In distribution, inventory is classified as in-transit , meaning that it is being moved

in the system, and warehouse , which is inventory in a warehouse or distribution center. Retail sites carry inventory for immediate sale to customers. In services, inventory generally refers to the tangible goods to be sold and the supplies necessary to administer the service.

P U R P O S E S O F I N V E N T O R Y

All firms (including JIT operations) keep a supply of inventory for the following reasons:

1. To maintain independence of operations- A supply of materials at a work center allows that center flexibility in operations. For example, because there are costs for making each new production setup, this inventory allows management to reduce the number of setups. Independence of workstations is desirable on assembly lines as well. The time that it takes to do identical operations will naturally vary from one unit to the next. Therefore, it is desirable to have a cushion of several parts within the workstation so that shorter performance times can compensate for longer performance times. This way the average output can be fairly stable.

2. To meet variation in product demand- If the demand for the product is known precisely, it may be possible (though not necessarily economical) to produce the product to exactly meet the demand. Usually, however, demand is not completely known, and a safety or buffer stock must be maintained to absorb variation.

3. To allow flexibility in production scheduling- A stock of inventory relieves the pressure on the production system to get the goods out. This causes longer lead

times, which permit production planning for smoother flow and lower-cost operation through larger lot-size production. High setup costs, for example, favor producing a larger number of units once the setup has been made.

I N V E N T O R Y C O S T S

In making any decision that affects inventory size, the following costs must be considered:

1. Holding (or carrying) costs- This broad category includes the costs for storage facilities, handling, insurance, pilferage, breakage, obsolescence, depreciation, taxes, and the opportunity cost of capital. Obviously, high holding costs tend to favor low inventory levels and frequent replenishment.

2. Setup (or production change) costs- To make each different product involves

obtaining the necessary materials, arranging specific equipment setups, filling out

the required papers, appropriately charging time and materials, and moving out the

previous stock of material. If there were no costs or loss of time in changing from one product to another, many small lots would be produced. This would reduce inventory levels, with a resulting savings in cost. One challenge today is to try to reduce these setup costs to permit smaller lot sizes. (This is the goal of a JIT system.)3. Ordering costs- These costs refer to the managerial and clerical costs to prepare

the purchase or production order. Ordering costs include all the details, such as

counting items and calculating order quantities. The costs associated with maintaining the system needed to track orders are also included in ordering costs.

4. Shortage costs- When the stock of an item is depleted, an order for that item must either wait until the stock is replenished or be canceled. When the demand is not met and the order is canceled, this is referred to as a stock out. A backorder is when the order is held and filled at a later date when the inventory for the item is replenished. There is a trade-off between carrying stock to satisfy demand and the costs resulting from stock outs and backorders. This balance is sometimes difficult to obtain because it may not be possible to estimate lost profits, the effects of lost customers, or lateness penalties. Frequently, the assumed shortage cost is little more than a guess, although it is usually possible to specify a range of such costs.

2. Transportation Networks

INTRODUCTION

Today, more than ever, transportation executives are focused on driving efficiencies within their supply chains. According to the Council of Supply Chain Management Professionals (CSCMP), transportation costs accounted for 4.7 percent of sales in 2008. Total logistics costs including carrying costs, warehousing and administration were 9.3 percent of sales for the average U.S. company in 2008. Beginning in early 2008, shippers sought rate reductions from transportation suppliers in an over-capacity marketplace. Carriers from parcel, truckload and steamship lines have been discounting rates to maintain market share. While these market pressures have yielded substantial rate decreases, many of these rate concessions have left providers operating with negative margins. In many cases, the rate decreases have been so steep that carriers would have been operating at a loss even during more robust economic conditions. Given these circumstances, it could be argued that all of the efforts made negotiating freight rates will have to be duplicated on the back side of the recession when transportation costs increase by double digits a potentially net zero cost effect with no real sustainable options to drive cost out of the supply chain and address real inefficiencies. History has shown that most cost exposures are exchanged back and forth between the customer and the transportation providers based on the current market dynamics. ADVANTAGESOne of the most effective measures for reducing costs and exposing supply chain inefficiencies is the use of Transportation Management Systems (TMS). TMS processes and technology should be the foundation of supply chain success. These platforms are typically designed, modeled and implemented on long-term savings rather than immediate cost avoidance. This inherent characteristic adds stability, reliability and transportation process cost controls. Key components of a successful TMS solution include connectivity, optimization, transparency and collaboration. A successful TMS solution is one that accounts for all of the supply chain stakeholders

and makes decisions based on specific constraints or desired outcomes. These decisions need to be supported by leading-edge technology, experienced professionals and an extensive global network. The results need to be focused on cost reductions and service improvement. Reduced transportation expenditures are by far the largest benefit of a TMS application, but benefits such as service level improvements, increased market share due to customer service process improvements and inventory reduction processes should not be overlooked. CHALLENGESCapital Constraints- Many companies struggle with capital constraints. They find themselves stuck between a need for more efficient processes and

the lack of capital to invest in the desired improvements.

Lack of Resources and Expertise- Many TMS implementations come with a host of upfront and ongoing requirements that are necessary to gain and maintain the desired functionality. These requirements include technology investment, maintenance fees and IT staff for ongoing development and troubleshooting.Scalability- Off-the-shelf solutions can be too expensive for small to

mid-size shippers. The costs of implementing and operating them may exceed the transportation savings or lower the ROI of the project below a minimum threshold. Many large enterprise clients may have complexities across their operating divisions that require customized solutions. A

one-size-fits-all model simply cant adapt to all of these variables. SOLUTIONSCapital Constraints- Engage a provider who can deliver a solution that aligns savings and project returns with the financial commitment from your organization. A good provider will leverage their expertise to capitalize on low hanging fruit Which is often enough to offset many project costs.

These immediate improvements can lower the upfront investment by

the customer and reduce overall capital requirements.Lack of Resources and Expertise- Consider a provider that incorporates the IT resources, development, troubleshooting and start up as part of their solution. Such providers are often identified as hosted TMS providers. This model allows the provider to centralize the IT resources and apply them towards multiple customers. This lowers the total cost to the end user and provides on demand resources instead of having idle in house resources awaiting the next need.Scalability- Smaller shippers should engage providers with a flexible model that can be scaled down to match the size of the customers operations.

These solutions often come in the form of transaction based pricing

or low cost standardized solutions. For the large enterprise clients, consider a provider whose model can be customized to meet the specific requirements of the business. A flexible platform that can reach across divisions, integrate multiple legacy processes and systems, plus deliver outcomes tailored to

each operation will deliver the best possible results.

Case Study

Samsonites Global Supply Chain

IntroductionSamsonite Corporation was originally established in 1910 as the 'Shwayder Trunk Manufacturing Company'. Jesse Shwayder started with the production of trunks, with a wooden frame and leather side panels, under the trade name 'Samson'. The company name was changed to 'Shwayder Brothers Inc.' in 1931 and to 'Samsonite', along with the trade name, in 1965 (Samsonite, 1992).

During the second World War, Samsonite was required to work for the war industry and produce boxes for grenades, bombs and ammunition, which gave the company an opportunity to get familiar with metals such as magnesium and aluminium. This set the stage for Samsonite's growth to the top of the luggage sector. Samsonite introduced the magnesium suitcases in 1956 and the resistant ABS (acrylic butadiene styrene) suitcases in 1958. In 1962 Samsonite became a trend-setter in the business market when its classical attach case was introduced. When the petrochemical industry introduced plastic materials, certain metal parts were replaced by plastics, although many of today's suitcases still have a magnesium frame. Samsonite was not only the first company to use such new materials, it also introduced new production techniques, such as injection moulding. Samsonite's entry into the international market began in Canada in 1956 with a plant in Stratford, Ontario. Seven years later, in 1963, Samsonite participated in a joint venture in Mexico originally with the Perez Alonso family, and presently with Vitro S.A. In 1964, Samsonite signed a licensing agreement with Ace Luggage Company, Japan's leading luggage manufacturer.

In 1965 Samsonite started exporting suitcases to the European continent, because it did not want to incur high fixed costs, given the limited potential market at that time. However, the new concept of hard-side suitcases andattach cases caught on well in Europe. As the cost of transportation is substantial for hard-side suitcases ("transporting air"), Samsonite decided rather quickly to start with the production and assembly of hard-side suitcases in Europe itself. It invested in production facilities rather than in licensing due to the novelty of the products (Davidson and McFetridge, 1982).Belgium was chosen as the home base for the European market because of its central location and the investment incentives that were granted at that time. The production and assembly of hard-side suitcases was launched in 1966 in Oudenaarde (Belgium) in a disused textile factory with second-hand machinery.

The various wholesalers in European countries were supplied either through wholly owned marketing and sales affiliates, as in France (1966) and Germany (1967), or through exclusive distributors (see Figure 3.). Traditional marketing literature based the integration of distribution channels on production cost, i.e. integration will take place when fixed costs can be spread over a large volume of business (Rosenbloom, 1987). Transaction cost analysis states that the firm will internalise activities that it is able to perform at lower cost and will rely on the market for activities in which other providers have an advantage. For instance, high-volume fast-food outlets in concentrated locations, which are easy to monitor, tend to be owned and operated by the firm, while small, dispersed outlets are franchised (Brickley and Dark, 1987). The objective is to minimise the sum of transaction and production costs in making forward integration decisions (Williamson, 1985).For Samsonite, this meant setting up wholly owned sales and marketing affiliates in familiar, large markets such as France and Germany, and using exclusive distributors in unfamiliar, limited markets such as Spain and Italy. Samsonite's decentralised "supply chain" (1965-1974)

In 1973, the production range in Europe was expanded into soft-side luggage by the take-over of a local Belgian firm Oda, located in Torhout, in order to quickly address the growing demand for soft-side luggage. In order to meet the growing demand for hard-side luggage, the production of hard-side suitcases was expanded by establishing a new plant in Oudenaarde in 1975.

The centralised distribution system

In 1975 Samsonite also decided to change the organisation of its distribution system and to jockey the wholesale activity out of its supply chain and to supply the Samsonite products directly to its retail dealers in the different European countries from one central warehouse. The factory warehouses and the warehouses in the different European countries were closed down and one central warehouse was established in Oudenaarde (Belgium) to serve the total European market. This reorganisation meant that products were transported from the different factories directly to the central warehouse, stored there and shipped to all its retailers upon request.

Samsonite's Centralized Supply Chain (1975-mid 1980s)

In the new system, each retail dealer in Europe could place his order directly to Samsonite either through a salesman or with a simple telephone call to the local office in his country that forwarded the order to the distribution centre. Samsonite invested heavily in information systems in order to manage its time-based European distribution network, because lead time is very much dependent upon an efficient administration. The salesmen and local offices transmit the orders to the central warehousing and dispatching company via modem, where a supercomputer processes the orders of retailers from the different European countries to the warehouse and the truck drivers who take care of the delivery of the orders to the retail dealers in the various countries. The pooling of the orders originating from each local office allowed Samsonite to circumvent customs formalities for each separate retail order, to cut down on delivery time and to assure the supply to all its retail dealers within 48 hours. The local office was billed at transfer prices in local currency for the centralised order. The retailers, which constituted the centralised order,

were billed for their part through the local office. As such, Samsonite was able not only to minimise the administrative burden of customs formalities, but also to centralise its currency exposure, to allow for better hedging operations, and to communicate directly with local retailers.This centralised distribution system also allowed Samsonite to improve on its operating profit margin with 25 to 30 percent, and to strengthen its brand through improved marketing and advertising. This logistical system created a real competitive edge for Samsonite as compared to other companies in the sector and strongly contributed to its continuous commercial success. In a way, Samsonite had set up a distribution system that somehow prefigured the Single European Market of 1992 in the particular area of its operations.

The Internationalization of the Production Network

Samsonites products can generally be divided into two categories: hard-side and soft-side products. In 1995, hard-side products represented 48 percent of its sales, while soft-side products accounted for 22 percent. Attach cases and travel bags, that generally fall in the soft-side category, represented the remaining 30 percent of sales.

Hard-side products

The sources of the competitive advantage for its hard-side products are based on extensive Research & Development (R&D), and its experience with difficult production processes of its high technological and capital intensive products. In order to take full advantage and protect these firm-specific advantages, Samsonite also perceives it to be in its best interest to internalize the production of these hard-side products within its organisation. As the cost of transportation is substantial for hard-side suitcases, the location of the production facilities close to the warehousing and dispatching company in Oudenaarde (Belgium) is essential in a centralised distribution system. When Samsonite decided in 1984 to set up a second production plant in Hnin-Beaumont (France) for the production of hard-side luggage to avoid depending upon a single plant (Oudenaarde, Belgium) for the production of its hard-side suitcases, a major locational advantage of this new location in Northern France was the limited distance to the central warehousing and dispatching company in Oudenaarde (Belgium). Also the granted investment incentives played an important role. In order to sustain its competitive advantages, Samsonite was forced to almost constantly invest in modern, productive, efficient and flexible industrial infrastructure in order to respond to the ever changing market needs. Samsonite invested quite heavily in R&D of new products and purchased new machinery for the expansion of the production facilities in Oudenaarde. The production capacity and the employment in the French plant in Hnin-Beaumont was doubled over the years.

Soft-side products

The production process for soft-side products does not require as extensive R&D or high technological and capital intensive production technology as for the hard-side luggage. Soft-side luggage is comparable to products in the textile industry, where the cost of skilled labour represents a higher proportion of the standard cost instead of capital and technology. Samsonite acquired the Belgian soft-side luggage producer Oda in 1973 in

order to enter the growing soft-side luggage market. However, as there were -apart from the brand name - only limited internalisation advantages, Samsonite decided to supply the different European markets through licensees, such as in Italy and Spain. As the European unification programme progressed, Samsonite wanted to take advantage of the growing locational advantages of this integrated market and impose its European distribution network on its soft-side products as well. It decided to expand through investment in its soft-side production lines in European countries with lower wage levels.

The Samsonite Corporation therefore set up a majority (60%) joint venture (JV) with the Italian family business Saturn in 1985, which had been its licensee for Italy until then. The company's name was changed to Samsonite Italy with its headquarters in Milan (Italy) and the production facilities in Porto Ceresio (Italy) at the Swiss border. Samsonite's presence in Italy also ensured a close contact with world-famous Italian designers. The entry of Spain and Portugal into the European Community (EC) in 1986

provided the necessary incentives for Samsonite to get a strong foothold on the Iberian peninsula and the Canary Islands. At the request of the Spanish government the Samsonite Corporation acquired its former Spanish licensee and state owned enterprise Industrias Tauro, the largest producer of suitcases in Spain, in 1985. The name of the company was changed to Samsonite Espaa and the production was started in Madrid.

Samsonite also wanted to improve on the quality of the products and implement its own production processes. The plants were therefore equipped with state-of-the-art CAD-CAM installations. Also its World Class Manufacturing (WCM) method, i.e., each product being produced and assembled from start to finish by autonomous cells of about a dozen employees, was implemented. Samsonite later built a new and larger production plant in Saltrio (Italy) to replace the old factory in Porto Ceresio (Italy). And in Spain a new production unit in Tres Cantos near Madrid was added to the existing plant in Madrid.

Subcontracting

Although it is more economical to relocate labour intensive production, i.e. soft-side luggage in countries with low wages, it does not necessarily mean that the production has to be organised within the Samsonite group. Because of the limited internalisation advantages (low transaction costs), Samsonite engaged in outside sourcing for the production of its low-end softside product lines. It first subcontracted companies in South-Korea and Taiwan in 1979 and 1980. However, the contracts were terminated in the 1980s as both companies had fallen victim to the same rigorous policy of cost efficiency, that had first won them the contract. The increase of the labour costs in the Asian Newly Industrialising Countries and the difficulties with the foreign exchange management obliged Samsonite to put an end to its subcontracting operations in Taiwan and South Korea.

Instead, Samsonite prospected Central and Eastern Europe as early as 1985. It contacted the Hungarian producer of luggage Palota and signed a cooperation agreement in 1987 to produce and supply low-end soft-side luggage for Samsonite. Although the Hungarian company was a leading luggage manufacturer in the local market, it was not at all internationally competitive because of its lack of advanced technology and the low quality of its products.Although subcontracting arrangements linking purchaser to producer are in theory purely market based (pricing mechanism), in practice there is often an input from the purchaser to ensure that quality standards meet specifications and often advice on methods of production is given (Buckley, Pass and Prescott, 1990). Samsonite set up a separate department to cover the market needs and to source outside the regular Samsonite production facilities. This department also supplied management support (hierarchal mechanism) to the suppliers in order to attain the required quality levels and to fit these activities within Samsonite's centralised European distribution system.

As the Hungarian company Palota proved to be an efficient subcontractor, Samsonite decided to enter into a majority (60 percent) joint venture with its partner in 1989 in order to upgrade the product and production technology, and introduce new logistics and accounting systems (increased internalization advantages). Initially Samsonite contributed the necessary capital and technology to the new venture, while the local partners contribution consisted of land, buildings, and the workforce. The company was renamedSamsonite Hungaria with the plant for the production of soft-side luggage

located in Szekszrd (Hungary) and its headquarters in Budapest.

In 1991, when Samsonite decided to increase its Hungarian production by upgrading its level of technology and adding new production lines, the local company was forced to sell its share to the Belgian partner because it could no longer finance its part in the new investment initiatives. In 1995 Samsonite Hungaria again enlarged its factory in Szekszrd by investing almost US$2 million in buildings and US$ 150,000 in machinery, which resulted in an increase of production in Szekszrd by 20 percent. The main reason for Samsonite to participate in the Hungarian production plant was to create a low cost supply basis. The increase of the labour costs in Western Europe forced the company to seek new production sites for its labour intensive soft-side products. Samsonite's major locational advantage in Hungary was its low production costs, which were on average only about one tenth of the West European level. Even after adjustment for the higher

inflation in most CEE countries, wage rates are substantially lower in Eastern Europe.

After the fall of the Iron Curtain, Samsonite wanted to intensify its cooperation with Central and Eastern Europe, as these countries represented not only a low cost supply basis but also a growing consumer potential. Samsonite subsequently signed co-operation agreements for outsourcing with companies in Bulgaria (1989), the Czech Republic (1991), Slovenia and the Russian Federation (1994), and acquired another production affiliate with which it was already familiar through its existing Hungarian venture - in

Slovakia (1997). The motivations of Samsonite Europe in building up a supply network in CEE have to be seen within the context of European economic integration and the changing locational advantages within the strategic setting of the company as it is increasingly facing the globalization of the world economy.

Samsonite was also one of the first Western companies to open a store in the Goem shopping centre at the Red Square in Moscow. Besides, the company developed a dealer network with more than 500 companies in the former East bloc countries, such as Croatia, Poland, Bulgaria, Hungary, Romania, the Czech Republic, the Russian Federation, Romania, the Baltic States, and the

Ukraine. The turnover realised by these CEE dealers represented 7.5 percent

of the total European sales in 1994.

Given the growing globalisation, Samsonite Europe not only focused its attention on the former East bloc countries, but also decided to engage in some subcontracting in China and Vietnam. The Vietnamese subcontractor had formerly been Samsonites subcontractor in South Korea. He had closed his production plant in South Korea to start up again in Vietnam, illustrating the volatile wage conditions on a global and regional level. The company tries to select different third-party suppliers to take advantage of changes in manufacturing conditions, payment terms, exchange rates and shipping costs. Samsonite has therefore implemented a centralised and coordinated system of all outsourcing of finished products on a global level. The company wants to achieve maximum advantage from its purchasing leverage by aggregating orders from the company's different locations and by better planning and timing its requirements and purchases. On the whole, subcontractors provide Samsonite Europe not only with finished soft-side products, but also with semi-finished soft-side parts which are used in Samsonites own factories. Samsonite, as the world-wide market leader in the luggage sector, produced and sold approximately 5.3 million pieces of luggage in Europe in 1994. The manufacturing activity was carried out either in wholly owned plants in Europe or through subcontractors. Outsourcing represented approximately 20 percent of total production in 1994. Since the last few years, the CEE countries have become the main basis of outsourcing for Samsonite due to their locational advantages such as its geographical proximity, low labour costs and favourable exchange rates.3. The wholly-owned production plants still produced the bulk of the Samsonite soft-side and especially hard-side products. The outsourcing for hard-side products is very limited and consists only of certain components, such as wheels for suitcases, from some Czech suppliers. Table 1 indicates the yearly production of Samsonite products in units for the various production facilities. Samsonite's global supply chain (1996)Samsonites Global Supply Chain System

Sourcing by Samsonite Europe in 1994

Conclusion

The headquarters of Samsonite Europe were established in Oudenaarde (Belgium) back in 1966. Samsonite rationalised its European distribution system as early as 1975, which somehow prefigured the European single market in the particular area of its operations. Oudenaarde served as the hub of the cross-border value-adding network of Samsonite in Europe, as it assumed not only the core production activities of hard-side luggage and took care of the logistics and warehousing for the Pan-European distribution system, but also did all of the research and development activities in Europe. Managing the flow of goods had become an exact and exacting exercise, justifying the investment Samsonite made in its computer systems needed to manage the supply chain and to track and trace consignments en route or in the warehouse.

Samsonite's policy to get its products to the retailers as cost effectively as possible, led to the development of its production activities by means of international acquisitions, joint ventures, strategic alliances, licensing and outsourcing agreements. It implemented a policy of transferring the production of labour intensive product lines, as it was more economical to relocate and subcontract production to low wage countries. Samsonite was

also forced to almost constantly invest in modern, productive, efficient and flexible industrial infrastructure in Europe. The regional integration allowed further rationalisation of manufacturing and distribution by breaking down internal barriers. Samsonite focused on manufacturing through specialization in its different plants in order to realise large production volumes to achieve substantial economies of scale. Samsonite's drive for efficiency and economies of scale and scope, and its search for low-wage-cost production led to the development of its international supply chain. As a concept, supply chain management is central to corporate operations and a potential source of competitive advantage through management of relationships and operational co-ordination from supplier to customer. The supply chain has become a vital strategic focus for the organisation: delivering quality products to customers quickly, responsively and efficiently. For Samsonite, supply chain management became one of its main competitive advantages in the global economy as it was able to reduce costs substantially and strengthen its brand through improved marketing and advertising.