International logistics & Global Supply Chain

Global Expansion Benefits

Earn greater return from distinctive skills, core competencies
Inimitable or difficult to imitate skills in value chain

Realize location economies (choice of FDI location)

Create multinational network of activities (global web)

Pressures for Global Integration & Local Responsiveness

Cost Reduction Pressures vs. Local Responsiveness Pressures
Differences in consumer preferences Infrastructure/practices Distribution channels Host government needs

Key Export Issue

Standardization cost reduction
AND/OR

Adaptation responding to markets.you must do both! Product Design, Pricing, Distribution and Promotion- the marketing mix.

Making Alliances Work

Selecting a suitable partner
Helps achieve strategic goals & may bring valuable expertise. Learn from partners. But the partner must be bona fide. Lots of face to face time must be spent with likely partner. Technology protection. Safeguards against opportunism. Build trust. Core competencies must be in line.

Scale of Entry
What level of resources to commit? What can you afford to commit? Strategic commitment is difficult to reverse.
Has a long term impact Means that resources cannot be used elsewhere.

Small scale entry allows learning at low risk. But small/large markets may require same level of initial resources.

Where to Locate?
Concentrate manufacturing if
Costs are best contained in one location Trade barriers are low Stable exchange rates Production technology has high fixed costs, high minimum efficient scale, flexible manufacturing format. Universal needs of product: minor consumer differences.

Where to locate?
Decentralize manufacturing if
Country environment does not affect costs. Trade barriers are high Production technology has low fixed costs, low minimum efficient scale, & does not exist in flexible manufacturing format. Product does not serve universal needs.

Make or Buy?
Make advantage
Lower costs in-house? Are specialized assets needed? Is proprietary technology needed?

Buy advantage
Strategic flexibility needed? Lower costs by buying?

In either case improved scheduling just as important.

Supply Chain Definition

Supervision of all the steps involved in moving a product, regardless of corporate, political or geographic boundaries, from raw material supply through final delivery to the ultimate user to satisfy a particular customer group is called supply chain management.

What the Supply Chain Enables

Firms can hold less inventory. Can move inventory faster through distribution channels. Firms can track products through a glass pipeline that enables suppliers and customers access to data. Greater emphasis by the firm on global outsourcing of product and distribution functions that cannot be done efficiently in-house. Greater focus on core competencies primarily around brand management. Movement towards the virtual corporation.

Innovations within the Global Supply Chain

Seamless integration of software, systems management and visibility of all parts from initial producer to final purchaser through on-line procurement. Inventory cost is a fraction of the total cost. A makeone/sell-one model Global supplier relationships are close and specific. Suppliers locate based on the needs of key customers. Replication of IT systems to allow all members to work in parallel to achieve performance standards. Flow of goods is controlled by just-in-time shipment.

Planning in the Supply Chain

Connection of business partners in ways that allow for a new degree of communication and collaboration as part of a worldwide enterprise. The ability to tightly schedule operations with little or no need for inventory. Final product development can be delayed until the last minute to respond to changes in customer orders. Web-based exchanges to link customers with suppliers for individual transactions.

Supply Chain Issues

Companies are under intense pressure from their world-wide supply chains.
Millions invested in information technologies, supply chain consultants, and new partnerships. Often there is incompatibility, security, and reliability problems between different operating systems. Being able to deliver at increased speed means that this becomes another requirement of retaining business. The speed of inventory movements magnifies mistakes. Retailers no longer keep large inventories with the promise of instant service from suppliers.

Infrastructure Issues
Efficient and exact delivery of products across countries, oceans and time zones is difficult under the best conditions.
State of the art air and ocean ports have enormous costs for locales and compete with other obvious civic needs. Much of the world infrastructure (roads, utilities, communication) is in need of substantial upgrading.

Supplier Relationships
Unreasonable pressure put on suppliers or manufacturers can upset delicate relationships. Mutual trust, shared thinking and commitment must replace fear, distrust, and arrogance if a company expects to create and maintain an efficient supply chain that dominates its markets.

Why a Supply Chain?

A Global Supply chain also provides:

Information from the retailer on daily sales of particular products to be transmitted back to the manufacturer. Influences decisions on design, sourcing, and production volumes. Offers control over processes in manufacturing, distribution, planning, financials, customer service and support. Goal is to arrive at a point where the product is made only after it is sold.

Current Supply Chain Solutions

ERP (Enterprise Resource Planning) software. (SAP, Oracle) ASP (Application Service Provider) model (Ariba, i2 Technologies, Commerce One) Beyond ASPs - E-Commerce Exchanges & B2B models. (GoCargo, Worldbid, Freightwise) Most solutions will require time, training and perhaps process reengineering to work in an optimal fashion.