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Major Reasons That Firms Expand Into Countries

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increase revenue, achieve economies of scale- reduce direct costs, advance technology, reduce firm's global tax liability, reduce market access uncertainty, enhance sustainability

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North American Operating Challenges

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open geography, extensive transportation options, limited cross border documentation

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European Operating Challenges

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relatively compact geography, numerous cultural, political, regulatory, and language situations, congested transportation infrastructure

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Pacific Rim Operating Challenges

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island based geography, relatively poor infrastructure, extensive water and air shipments to travel vast distances

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Reasons for increased uncertainty for global SC

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greater distances, longer lead times, decreased market knowledge

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Reasons for Increased Variability in Global SC

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unique customer requirements, unique documentation requirements, shifting political environments

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Reasons for Decreased Control in Global SC

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extensive use of international service firms, potential customs requirements and trade restrictions by governments

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Reasons for Decreased Visibility for Global SC

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longer transit times, longer holding times, less ability to track shipment locations

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5 major differences between domestic and international operations

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performance cycle structure, transportation, operational considerations, information systems integration, alliances

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Differences in Performance Cycle for global SC

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longer performance cycles for international operations-domestic measured in days, international measured in weeks or months longer order cycle to delivery cycle times- communication delays, financing requirements, special packaging requirements, ocean freight scheduling, slow transit times, customs clearance overall this change requires higher asset commitment- inventory in transit for longer periods

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Ways transportation is impacted by a global SC

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removal of intermodal ownership operation- reduced complexity of operation and tracking of international shipping increased carrier privatization- government owned carriers often costly and unreliable, privatization has led to increased availability of efficient carriers relaxing cabatoge restrictions of EU- increases trade efficiency major constraints on physical infrastructure capacity- significantly increasing demand on port and airport capacities, infrastructure in much of the world was built over 50 years ago

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Operational Differences in international trade

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requires multiple languages for both product and documentation- increases complexity since product is limited to a specific country or it is language customized may require unique national accommodations requires large amount of documentation

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Reasons why Info systems integration is a major challenge for global sc

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systems integration typically lags the acquisition or merger used to make the enterprise global, requires substantial capital investment, requires two system types to be integrated- ERP system and global planning system, few firms have fully integrated global info systems or capability

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4 categories of challenges faced by global operations

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demand, diversity, distance, documentation

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Reasons why alliances with carriers and specialized service providers are essential

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they provide market access, market expertise, and reduced inherent risk of global operations using them maintains contact with sc partners around the globe (retailers, wholesalers, etc)

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Reasons why low cost country sourcing is in high demand

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rationale, challenges, guidelines

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Rationale for sourcing in low cost countries

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driven by need to remain competitive- low wage rate=reduced manufacturing costs, increases in the number of possible sources to keep competitive pressures on domestic suppliers, can increase firm's exposure to state of the art product and process technologies, establishes a local presence to facilitate sales in the international country

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Challenges related to the global sourcing strategy

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identification of sources capable of producing the materials in quality and quantity required, protection of a firm's intellectual property, understanding import/export compliance issues, communications with suppliers and transportation companies, guarantee the product's security while in transit, obsolescence risk to inventory due to extended transit times

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Categories to Adjust a SC to have less risk

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make it contain "parallel paths", reduce length of supply chain, reduce variability, keep more stock, add spare capacity, increase agility, improve forecasts and planning, increase collaboration, vendor rating, manufacturing and risk

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Parallel Path In a SC

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optional routes around potential problems

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Design of Low Risk SC

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shorter and wider which allows material to move through fewer organizations and travel shorter distances

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How to reduce variability

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keep actual performance as close as possible to planned performance, on time means plus or minus four hours-this used to be a couple of days

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Keeping More Stock

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if the risk is in terms of forecasting demand we might hold more finished goods, if the risk is related to manufacturing we might hold more raw materials, there is an optimal level of inventory to hold depending on risk and consequence of an occurrence

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Adding Spare Capacity

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operational equivalent to holding safety stock, trade off the cost of providing and maintaining it and the cost of risky events

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Increasing Agility

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SC should be flexible enough to cope with unexpected events, the theme is short lead times so the organization can respond quickly to events as the happen, also may use postponement strategies, standardization, concurrent operations, cross training, and alternative suppliers

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Agility

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refers to the ability of an organization to adapt quickly to changing conditions

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Improving forecasts and planning

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move to formal quantitative forecasting, remember short term forecasts are invariably more accurate than longer term forecasts, aggregate forecasts are more accurate than disaggregated forecasts, forecasts should include and estimate of likely variation

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Increasing Collaboration

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can reduce risk by a range of tools including informal discussion through strategic alliances- Vendor Managed Inventory (VMI), collaborative planning, forecasting and replenishment (CPFR) and synchronized material movement

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Vendor Rating

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organizations should positively evaluate potential suppliers and choose the ones that give the least risk

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Manufacturing and Risk

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4 basic types of manufacturing, organizations should adopt the most appropriate type of operation, different products and different customers may require more than one strategy

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Make to Stock

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manufacturer keeps stocks of finished goods so that customer demand can be met immediately, most responsive approach, also riskiest, subject to variability in forecasting or rapid changes in consumer tastes wants or needs

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Finish to Order

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the basis of postponement, keep stocks of common modules, sub assemblies or semi finished goods, problem is that there is a slower response time to customers

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Make to Order

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only manufacture products to meet specific customer orders, enables you to meet more varied demand with lower inventory levels, has the risk of slow delivery, positive steps that can be taken include: use of common components, flexible automation, shorter lead times for materials from supplier

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Design to Order

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this is the most flexible manufacturing, longest lead time, tends to be limited to small quantities of unique products, risks include variable demand and high cost production and can be reduced by shorter lead times, offering variations on range of generic products, using common designs, and collaboration with customers

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4 types of manufacturing

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make to stock, finish to order, make to order, design to order

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Considering the Make or Buy Decision

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some factors suggest outsourcing is the best option, included among these are: economies of scale, specialization, and expertise, problem is that makes organizations increasingly reliant on suppliers especially those supplying critical materials, loss of control inevitably raises risk, methods of mitigation include: keeping some in house capacity on reserve, specify service and performance guarantees

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Binding Contracts

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employ legally binding contracts that specify obligation of each party, if something goes wrong there is no confusion about responsibility, the problem is that it is difficult to draw up such contracts

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Use Insurance

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does not maintain the sc but offers compensation if something goes wrong, there is an argument that insurance discourages other responses to risk, a firm that will be compensated for disruptions may put less effort into avoiding them, even with insurance there is often disagreement about responsibility and compensation

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Resilient Supply Chain

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one that is less vulnerable to risks, generally achieved by normal practices of good logistics management

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Supply Chain Integration

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when incidents are not analyzed from a broad (system-wide) perspective, there is often failure to identify root causes of problems and/or underlying weaknesses in supply chain design, look for the simplest solution

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Principles of Designing A Resilient Supply Chain

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1) start within the organization- get your house in order before collaborating with supply chain partners 2) take strategic view 3) understand the concept of supply chain risk 4) consider risk in the design- be aware of efficiency goals that increase vulnerability to risk, balance resiliency and normal measures of efficiency 5) the chain is only as strong as its weakest link- use parallel paths when possible 6) look for collaboration 7) prevention is better than cure- better to avoid harm than look for compensation after it has occurred 8) create agility 9) have emergency procedures

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Physical Features of Resilient Supply Chains

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design is matched to demand, incorporate parallel paths, shorter supply chains, share of the sc- complex chains have larger change and disruption, higher stock levels, spare capacity, agility, downstream decoupling

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Decoupling Point

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the most upstream point in the sc where final consumer demand actually penetrates, downstream of this point all operations are controlled by final customer demand, upstream of this point all operations are controlled by forecasts and plans, it is the point at which postponement can most easily be arranged- generic stocks are held upstream and customized stocks downstream, the best policy is to move this point as far down stream as possible- this reduces the amount of stock and makes response time faster and reduces variability, places greater emphasis on actual demand rather forecast demand- Bullwhip effect

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Relationships within a Resilient Supply Chain

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collaboration, confidence in partners, visibility, process convergence, high velocity

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2 Options for higher velocity

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1) making existing operations faster and more efficient by simplifying work, using more efficient equipment, more skilled people, parallel operations, standard tasks and synchronized schedules 2) remove unnecessary operations- analyze current processes and remove any that do not add value from a customer's perspective

BMGT478C: Challenges of Operating in Multiple Countries – Flashcards

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