Tools and Techniques to address the challenges of global supply chains

1. Leading global excellence in procurement and supply
Tools and techniques to address the challenges
of global supply chains
This podcast gives an overview of the tools and techniques to address the challenges of global
supply chains.
This section looks at some methods that can be used to analyse the global supply chain.
Benchmarking is the measuring of products, processes and practices against those of different
internal business units, competitors, and industry leaders, organisations in other sectors or
recognised standards.
Organisations pursue benchmarking in order to understand how suppliers and customers view
the organisation compared to others in the industry. Benchmarking is also used to identify
opportunities for future change in order to improve performance. It can also help them see how
the rest of the industry is performing and compare supply chain performance with others in the
industry. They can also learn where to invest and focus effort in order to get the best outcome
and value from operations.
There are four main types of benchmarking: internal benchmarking, competitor benchmarking,
functional benchmarking, and generic benchmarking.
For successful benchmarking to happen, other organisations in the industry must be willing to
share information, or collaborate so that the industry improves in quality performance.
Benchmarking should be continuous, regularly comparing quantitative metrics and qualitative
information.
Benchmarking can be divided into five main stages.
1. Planning or identifying what to benchmark, the critical success factors (CSFs), the process
for benchmarking, and the performance measures, known as KPIs.
2. Searching for appropriate benchmarking partners to ensure that the information given is
relevant to the purpose of benchmarking and potential improvement.
3. Understanding and documenting the benchmarking partner’s processes, performance and
practice.
4. Analysing to identify the gaps in performance and finding the causes of the performance
gaps. And,
5. Adapting the organisation’s activities to implement improved performance.
Determining the metrics of performance is about knowing what to measure and choosing the
variables that are most relevant to the activities of the organisation.

2. Leading global excellence in procurement and supply
Measuring systems makes an important contribution to strategic success in supply
management. In procurement, measures revolve around efficiency and effectiveness. Efficiency
is how quickly something gets done, while effectiveness measures delivery and contribution to
strategy.
Determining metrics of performance therefore revolves around the time taken and the quality
of deliveries made. In supply chains, for example, efficiency is important when buying high-
volume, low-value items, where the time of delivery is more important. Conversely, when buying
more sophisticated items, efficiency measures are emphasised as metrics to determine the
performance of a supplier.
Metrics to measure the performance of suppliers should be flexible, focusing on the strategic
needs of the organisation, as well as being aligned with the skills, competencies and capabilities
of the organisation.
In order to be objective, the performance metrics should work two ways; measuring both the
supplier and the organisation as a customer, with the intention of finding out how both can
improve to create better supplier relationships.
Measures can be categorised into different functions: inputs, processes and outputs.
Common types of measurement include:
• Quantity, for example, sales increased to 50 in a day
• Quality, which is not easily quantifiable, but can be indicated by a range, for example, a
20% increase in customer satisfaction
• Cost, which is represented by currency, such as cost of production and the price of a
product, and
• Time, which relates to the meeting of deadlines and delivery periods. It is usually
expressed in hours, days, months or years.
The product life cycle has a number of recognised stages, typically including: development,
launch, or introduction, growth, maturity, decline and withdrawal. We’ll consider each of these in
turn.
At the development stage the product idea is conceptualised, tested, developed and
manufactured, so it is ready for launch.
At the launch, or introduction stage, the new product is introduced to the market. There are two
pricing options at launch – skimming pricing strategy or penetration pricing. Skimming sets the
price high with a view to recuperating research and development costs. This will only be
successful if the new product has a market leading functionality, or a strong brand following.
With penetration pricing the price is set low for the launch to attract customers. Over time, once
market share is building, the price can be increased.
In the growth stage, early adopters influence the early majority to buy, which causes rapid sales
growth. At this stage, new competitors get into the market to challenge the pioneer of the

3. Leading global excellence in procurement and supply
product. To avoid direct competition, competitors may start to differentiate products to develop
new market segments.
A product reaches maturity when high numbers of people are buying the product at least once.
Organisations will actively differentiate through product development to offer different models.
The intense competition makes management keep the price of the product as low as possible.
This is the most profitable stage.
According to the product life cycle, markets begin to decline as new markets emerge. At this
stage, the market may perceive the product as old or outdated and it may no longer be in
demand. The manufacturers who continue manufacturing and the users at this stage are known
as laggards.
To avoid decline, organisations come up with strategies to extend their maturity stage by
boosting sales. This is achieved through product development to differentiate between the
products, find new users, and develop new uses for the products. Organisations that have
survived declining markets without being pushed out usually adopt a ‘milking’ strategy, where
they take up the market share left by competitors.
Ultimately, when products are no longer financially viable, they should be withdrawn. The
product life cycle tool is useful to help the organisation to maintain a balanced product
portfolio. So, as some products are withdrawn, others are being launched.
This brings us to the end of the section on the methods to analyse the global supply chain.
Now answer these questions to check your understanding. Pause the podcast to write down
your answers.
1. Write down three reasons why organisations use benchmarking.
2. Why should performance metrics be two-way?
3. What activity is an organisation likely to engage in during the maturity stage of the product
life cycle?
This section looks at some of the regulatory influences on the global supply chain.
Taxation is the primary source of revenue for a majority of countries in the world. One of the
common sources of taxation opportunities is international trade. The rates imposed also help to
control the entry and exit of products to and from a country. For example, a higher tariff on a
given product makes it domestically expensive. When imported products are more expensive,
the domestic products gain a cost advantage in the market. Therefore, governments can use
this strategy as a way of controlling the performance of the domestic industries. On the other
hand, export duties make local products more expensive to international buyers.
A duty and a tariff are two different types of tax. A tariff is levied on imports and exports in
general, while duty is levied on specific types of goods and services. Essentially, tariffs are
applied on the goods themselves at the point of import or export. Duties are paid by the buyer
(often a consumer). Tariffs and duties are very simple: all businesses have to pay the same tax
amount to import or export products.

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Regulations, such as licences seek to control trade without charging money. However, licensing
may favour some businesses over others. For example, an organisation with better capabilities
to meet required standards may have an easier time meeting the requirements for acquiring
licences.
Modern slavery is the act of recruiting, sheltering and transporting a person for compelled
labour or sexual exploitation through the use of coercion, fraud or force. While modern slavery
is illegal in every country in the world, it still occurs in every country in the world, and can occur
in any industry.
Most governments across the world are putting measures in place to prevent modern slavery.
For example, in Australia laws in 2018 were designed to stop trafficking and forced labour,
compelling large companies to report annually on the measures they are taking to combat
modern slavery in their supply chains.
Organisations most often come into contact with modern slavery when there are complex
global supply chains. One of the most important challenges for procurement professionals is to
ensure that their supply chains do not unwittingly involve exploitative labour, and that they are,
as far as possible, ‘slavery proof’. Organisations can undertake supply chain mapping to improve
the transparency of the actions of suppliers at tier 2 and tier 3 of their supply chain.
Procurement professionals have critical influence over, and visibility of, supply chain decision-
making, especially over the level of due diligence, how suppliers and tenders are evaluated and
assessed, and in establishing business systems to deal with risk.
Procurement professionals can address modern slavery in supply chains through the ‘Three Ps’:
• Putting into place policies to prevent, detect and eradicate modern slavery within their
own operations and the operations of suppliers and business partners
• Establishing processes to identify vulnerabilities, and
• Planning for situations where corrective action is needed.
This brings us to the end of the section on the regulatory influences on the global supply chain.
Now answer these questions to check your understanding. Pause the podcast to write down
your answers.
1. Why do governments charge duties and tariffs?
2. What is another method that can be used to control trade?
3. What are the ‘Three Ps’?
This is the end of this podcast. You should now be able to:
• Assess methods to analyse the global supply chain, and
• Evaluate the regulatory influences on the global supply chain.