Global Supply Chain Devan Howe OM 345 Boise State University May 3, 2002
“We are moving toward a global economy. One way of approaching that is to pull the covers over your head. Another is to say: It may be more complicated - but that’s the world I am going to live in, I might as well be good at it.” (Phil Condit, CEO of Boeing, November 1999)
Presentation Overview Global supply chain defined Topic explanation Surrounding issues Real world example Exercise Summary
Global Supply Chain • An integrated process where several business entities such as suppliers, manufacturers, distributors, and retailers work together to plan, coordinate and control materials, parts, and finished goods from suppliers to customers. One or more of these business entities operate in different countries.
Brainstorming How can a global supply chain be used in your organization?
Advantages of Global Supply Chains • Reduced total costs • Inventory reduction • Improved fulfillment cycle time • Reduce cycle time • Increased forecast accuracy • Productivity increase • Improved capacity • Expand international connections • Increase intellectual assets • Delivery improvement
Potential Global Supply Chain Obstacles • Inefficient transportation and distribution systems • Market instability • Language Barriers • Customs • Political turmoil • Trade imbalances • Export surges and recessions
Combating Obstacles • Join nation groups • Be innovative • Be flexible • Research • New technology • Vertically integrate • Form consortiums
Classical Logistic Issues • Facility Locations • Sourcing • Distribution
Costs • Local labor rates • Local space costs • International freight tariffs • Currency exchange rates
Customs Duty • Duty rates differ by commodity and level of assembly • Duty drawback • Impact of GATT: Changes over time • Transfer pricing • Duty Suspension
Taxes on Corporate Income • Different markups by country • Tax havens and not havens • Make vs. buy effect
Offset Trade and Local Content • Local content requirement for government purchases • Content for preferential duty rates • Offset trade requirements
Export Regulations • Export licenses • Denied parties list
Time • Lead time • Cycle time • Transit time • Export license approval cycle • Customs clearance
Different Types of Global Supply Chain Models • Own and manage your own infrastructure • Use strategic alliances • Partner with an asset-based third-party • Partnership with a global integrator of logistics services
Pro Maximum control Con Heavy costs Own and Manage Your Own Infrastructure
Pro Convenience Large areas covered Con Unreliable alliance-prone Use Strategic Alliances
Pro Operational standards Uniform identity and marketing strength Dedicated mgmt structure Con Ignorance of complex customs regulations Lack of connections Local economic downturns Partner With An Asset-Based Third-Party
Pro Customer friendly In-country knowledge True information systems integration Uniform standards Con Limited use Less control Partnership With a Global Integrator of Logistics
Example – Digital Equipment Corporation Implemented a global supply chain model and… • Reduced plants from 33 to 12 • Manufacturing costs decreased by $500 million • Logistics cost decreased by more than $300 million • Reduced service facilities from 34 to 17
Annual cost reductions of more than $80 million • Physical assets reduced by $34 million • Inventory reduced by $74 million • Increased unit reduction by 500 percent • Increased revenue
Exercise • Discuss current firm problems and how the implementation of an effective global supply chain model can help correct them. • What model best fits your firm? Why?
Summary of Global Supply Chains • Advantages include reduced costs, delivery performance, inventory reduction, forecast accuracy, cycle-time, productivity, capacity, service, international connections • Overcomes a variety of international obstacles • Selecting and implementing a global supply chain model is effective when combined with flexibility
Bibliography “Coordinating Global Distribution: A Customer-Intimate Approach.” . 2002. <scm.ittoolbox.com> (08 May 2002) “Global Business Issues.” . 2002. www.gsca.com/globusis.htm (08 May 2002) “A View of Globalization From the Top.” www.theglobalist.com/nor/readlips/archive/archive_series.stml (08 May 2002)
Bibliography, cont. Russell, S. Roberta and Taylor, W. Bernard. Operations Management: Third Edition. Upper Saddle River, New Jersey: Prentice Hall, 2001.